JAYANTILAL INVESTMENTS, MUMBAI V. ITO WD 25(3)(2), MUMBAI

ITA 5151/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78880 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: I
• Next Hearing Date: 30-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 22-06-2010
• Court: TRIBUNAL
• Department Lawyers: JKTLP DH LS SHRI PITAMBAR DAS
• Assessee Lawyers: RAHUL R SARDA
• Keywords: Business income; Period of limitation
• Section: 194C; 145; 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH , MUMBAI JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL; DS LE{K JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL; DS LE{K JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL; DS LE{K JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL; DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER VK;DJ VIHY LA[;K /ITA NO.5151/MUM/2010 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2007-08 M/S JAYANTILAL INVESTMENTS, 101, BALAJI ARCADE, OPP. CENTRAL BANK OF INDIA, S.V. ROAD, KANDIVALI (EAST) MUMBAI 400 067. VS. INCOME TAX OFFICER WARD 25(3)(2), C-11/306, PRATAYKSHA KAR BHAVAN, BANDRA (EAST) MUMBAI 400 050. PAN:- AAAFJ1402D APPELLANT RESPONDENT VK;DJ VIHY LA[;K /ITA NO.5629/MUM/2010 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2007-08 INCOME TAX OFFICER WARD 25(3)(2), C-11, ROOM NO. 306, PRATAYKSHA KAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (EAST), MUMBAI 400 051. VS. M/S JAYANTILAL INVESTMENTS, 101, BALAJI ARCADE, OPP. CENTRAL BANK OF INDIA, S.V. ROAD, KANDIVALI (EAST) MUMBAI 400 067. PAN:- AAAFJ1402D APPELLANT RESPONDENT ASSESSEE BY/ FU/KKZFJRH DH VKSJ LS SHRI. K. SHIVARAM & SHRI RAHUL R. SARDA REVENUE BY/ JKTLP DH VKSJ LS SHRI PITAMBAR DAS ORDER PER VIJAY PAL RAO, JM THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 26.4.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSE E HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL. DATE OF HEARING 30.04.2014 DATE OF PRONOUNCEMENT 09.05.2014 M/S JAYANTILAL INVESTMENTS 2 [1] ON THE FACTS AND IN LAW, LEARNED CIT(A) HAS E RRED IN MAKNG ADDITIONOF RS. 30,79,922/- AS ESTIMATED PROFIT FOR WORK-IN-PROGRESS FOR CONSTRUCTION OF KUBER PROJECT. [2] ON THE FACTS AND IN LAW, LEARNED CIT(A) HAS ERR ED IN CONCLUDING THAT THE APPELLANT IS LIABLE TO DEDUCT TDS LU/S. 19 4 C ON FLATS TO BE ALLOTED TO THE PURCHASERS WHOM THE CONTRACTOR HAS E NTERED INTO AGREEMENT TO SELL TO RECOVER THE CONTRACT CHARGES, WHEN THE SAID CONTRACTOR IN THE RETURN OF INCOME FILED BY THEM HA VE DECLARED INCOME FROM SALE OF SAID FLATS AND APPROPRIATE TAX WAS PAID BY THEM BEFORE FILING OF THEIR RETURN OF INCOME FOR AS SESSMENT YEAR 2007-08. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LD. CIT(A) ERRED IN STATING THAT THE PROJECT UNDERTAKEN BY THE ASSESSEE CANNOT BE TREATED AS COMPLETED IN THE AY 2007-08 IN - SPITE OF THE FACT THAT THE 85% OF THE WORK WAS COMPLETED, SUBSTANTIAL ADVANCES WERE RECEIVED BY THE ASSESSEE AND THE CONTRACTOR HAS HAN DED OVER THE POSSESSION OF THE FLATS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE PROFIT OF THE PROJE CT TO RS. RS.30,79,922/- AS AGAINST THE PROFIT DETERMINED BY THE AO RS. 91,59,8 57/- WITHOUT APPRECIATING THE FACT THAT THAT THE AMOUNTS RECEIVE D FROM THE CUSTOMERS OFTEN SHOWN AS ADVANCES IN THE BOOKS OF THE BUILDER S ARE NOT ADVANCES IN THE REAL SENSE AND PERIODICAL PAYMENTS OR INSTALLME NTS FROM THE CUSTOMERS RECEIVED CORRESPONDS WITH THE PERCENTAGE OF WORK COMPLETED AND HENCE, THESE ARE NOT ADVANCES BUT TRADE RECEIPT S AND HAVE TO TAXED AS SUCH. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,41,5 6,250/- MADE U/S 40(A)(IA) WITHOUT APPRECIATING THE FACT THAT THE WO RD 'AMOUNT PAYABLE' USED IN SECTION 40(A)(IA) SHOULD BE CONSTRUED AS 'A MOUNT LIABLE' OR 'AMOUNT ALLOCATED' OR 'AMOUNT ACCRUED' OR AMOUNT BI LLED' AND NOT AS AMOUNTS OUTSTANDING AS HELD BY THE CIT(A). 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,41,5 6,250/- MADE U/S 40(A)(IA) WITHOUT APPRECIATING THE INTENT OF THE LE GISLATURE. M/S JAYANTILAL INVESTMENTS 3 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,41,5 6,250/- MADE U/S 40(A)(IA) WITHOUT APPRECIATING THAT FACT THAT WHERE THE PHRASEOLOGY OF A PARTICULAR SECTION OF THE STATUTE TAKES WITHIN ITS SWEEP THE TRANSACTION WHICH IS TAXABLE, IT IS NOT FOR THE COURT TO STRAIN AND STRESS THE LANGUAGE OF THE SECTION SO AS TO ENABLE THE TAXPAYER TO ESCAPE THE TAX. 3. THE ISSUE INVOLVED IN GROUND NO. 1 IN ASSESSEES APPEAL AND GROUND NO. 1 AND 2 IN REVENUES APPEAL IS COMMON AND REGAR DING ESTIMATION OF PROFIT ON WORK IN PROGRESS FOR CONSTRUCTION OF KU BER PROJECT. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF BUILDERS AND DEVELOPERS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS OFFERED 15% OF THE ADDITION TO WORK IN PROGRESS AS PROFIT FROM PROJECT NAMELY KUBER PROJECT. THE AO NOTED THAT THE ASSES SEE WAS DEVELOPING THIS PROJECT AT BORASA PADA, NEAR KAMLA VIHAR SPORT S CLUB, KANDIVALI (WEST) MUMBAI 67, FOR WHICH THE ASSESSEE ENTERED INTO A CONTRACT DATED 30.03.2001 WITH M/S CLASSIC CONSTRUCTION COMPANY FO R CONSTRUCTION OF THE BUILDINGS EXCLUDING AMENITIES @ RS. 650 PER SQ. FT. AS PER THE ABOVE AGREEMENT, THE COST OF CONSTUCTION OF THE BUILDING WAS DETERMINED AT RS. 2,41,56,250/- WHICH WAS PAYABLE TO M/S CLASSIC CONS TRUCTION COMPANY. THE CONSTRUCTION WAS TO BE COMPLETED WITHIN A PERI OD OF 18 MONTHS WITH A GRACE PERIOD OF 3 MONTHS. SINCE THE ASSESSEE COUL D NOT PAY LTHE CONSIDERATION IN CASH TO M/S CLASSIC CONSTRUCTION COMPANY, IT AGREED TO ALLOT 27 FLATS ADMEASURING 12,846 SQ. FT. TO M/S C LASSIC CONSTRUCTION COMPANY VIDE AGREEMENT DATED 25.01.2005. THE AO NOT ICED THAT M/S CLASSIC CONSTRUCTION COMPANY COMPLETED 95% OF THE W ORK UPTO 11.09.2007. THE AO FOUND THAT M/S CLASSIC CONSTRUC TION COMPANY IN ITS RETURN OF INCOME HAS STATED THAT 85% OF CONSTRUCTI ON WORK PERTAINING TO KUBER PROJECT WAS COMPLETED AND IT OFFERED SALE OF FLATS WHICH WERE ALLOTED TO IT IN LIEU OF CONTRACT CHARGES IN TERMS OF AGREEMENT DATED 25.01.2005. THE AO NOTED THAT THE ASSESSEE HAS NOT ADMITTED ANY SALES M/S JAYANTILAL INVESTMENTS 4 FOR THIS KUBER PROJECT EVEN THOUGH ADVANCES TO THE EXTENT OF RS. 87,26,125/- WAS RECEIVED AGAINST THE BOOKINGS OF FL ATS. AS THE PROJECT WAS COMPLETE TO THE EXTENT OF 85% , THE AO WAS OF T HE VIEW THAT THE PROJECT IS COMPLETED AND THE PROFIT SHOULD BE BROUG HT TO TAX. THE ASSESSEE SUBMITTED BEFORE THE AO THAT IT IS FOLLOWI NG PROJECT COMPLETION METHOD AND THE EXACT PROFIT WILL BE QUANITIFIED WHE N THE PROJECT IS COMPLETED AND UNTIL SUCH TIME, 15% OF THE WORK-IN-P ROGRESS IS OFFERED AS INCOME ON ESTIMATE BASIS. IT WAS CONTENDED THAT THE SALE IS COMPLETED ONLY WHEN THE POSSESSION OF THE FLAT ARE HANDED OVE R TO THE PROSPECTIVE BUYERS AND THE PROFIT IS ESTIMATED ON THE BASIS OF CLOSING STOCK/WORK-IN- PROGRESS AS ON 31.03.2007. THE AO DID NOT ACCEPT TH E CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE IS FOLLOWI NG THE PROJECT COMPLETION METHOD TO DEFER THE TAX LIABILITY INDEFI NITELY AND EVADE THE PAYMENT OF TAXES BY MANUFACTURING LOSES IN FUTURE. HE, THEREFORE, APPLIED SECTION 145 ON THE GROUND THAT THE ASSESSEE HAS TO FOLLOW EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING AND UNDER THE MERCA NTILE SYSTEM, THE ACTIVITIES CARRIED ON BY THE ASSESSEE MUST YIELD PR OFIT OR LOSS EVEN THOUGH SUCH ACTIVITY IS PART OF THE WHOLE ACTIVITY COMPRI SING SEVERAL SMALL ACTIVITIES SPREAD OVER A NUMBER OF YEARS. THE AO RE LIED UPON THE VARIOUS DECISIONS AND HELD THAT EVEN IN THE CASE OF PROJECT COMPLETION METHOD THE REVENUE HAS TO BE RECOGNIZED WHEN THE CONTRACT IS S UBSTANTIALLY COMPLETED AND IN THE CASE OF THE ASSESSEE, MORE THA N 80% OF THE WORK IS COMPLETED AND, THEREFORE, THE AO TREATED THE PROJEC T AS COMPLETED DURING THIS YEAR. THE AO WORKED OUT THE PROFIT FROM THE K UBER PROJECT BY TAKING INTO CONSIDERATION THE SALE PROCEEDS RECEIVED BY TH E ASSESSEEE OF RS. 28,16,125/-, AND RS. 2,41,56,250/- BEING THE FLATS ALLOTED TO M/S CLASSIC CONSTRUCTION COMPANY. THUS THE TOTAL SALES PROCEEDS TILL 31.03.2007 WAS WORKED OUT AT RS. 3,28,82,375/- WHICH IS 52% OF THE TOTAL SALE FROM THE PROJECT. ACCORDINGLY THE AO HAS TAKEN THE COST OF P ROJECT AGAINST THE SALE M/S JAYANTILAL INVESTMENTS 5 AS 52.34% OF THE TOTAL PROJECT COST AMOUNTING TO RS . 2,22,12,855/-. FINALLY THE NET PROFIT OF THE YEAR WAS WORKED OUT BY THE AO AT RS. 95,57,165/- AS AGAINST THE INCOEM OFFERED BY THE ASSESSEE AT RS. 3 ,97,308/-. THUS THE NET ADDITION OF RS. 91,59,857/- WAS MADE BY THE AO. 4. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEF ORE CIT(A) AND CONTENDED THAT THE ASSESSEE IS REGULARLY FOLLOWING THE PERCENTAGE COMPLETION METHOD OF ACCOUNTING IN WHICH 15% OF THE WORK-IN-PROGRESS INCREASED DURING THE YEAR IS ESTIMATED AS GROSS PRO FIT IN THE PROFIT AND LOSS ACCOUNT AND WHEN THE PROJECT IS COMPLETED, THE ACTU AL PROFIT IS DETERMINED. IT WAS FURTHER SUBMITTED THAT THIS METH OD WAS ACCEPTED BY THE DEPARTMENT IN THE EARLIER YEARS EVEN WHILE COMPLETI NG THE ASSESSMENT U/S 143(3). THE CIT(A) ACCEPTED THE PLEA OF THE ASSESSE E REGARDING PERCENTAGE COMPLETION METHOD AND ESTIMATION OF INCO ME AT 15% OF THE INCREASE IN WORK-IN-PROGRESS. HOWEVER, THE CIT(A) W AS OF THE VIEW THAT THE CONSIDERATION OF RS. 2,41,56,250/- PAID TO M/S CLASSIC CONSTRUCTION COMPANY BY ALLOTING 27 FLATS SHALL BE PART OF WORK- IN-PROGRESS. ACCORDINGLY, THE CIT(A) DIRECTED THE AO TO ESTIMATE 15% GROSS PROFIT ON 85% OF THE AGREED CONTRACT WORK, AS THE WORK CARRIE D OUT DURING THE YEAR IS 85% FOR WHICH FLATS WERE TAKEN OVER BY M/S CLASS IC CONSTRUCTION COMPANY. ACCORDINGLY, THE GROSS PROFIT TO BE ADDED IN THE HANDS OF THE ASSESSEE AT 15% OF 85% OF RS. 2,41,56,250/- WHICH A MOUNTS TO RS. 30,79,922/-. HENCE CIT(A) HAS RESTRICTED THE ADDITI ON TO RS. 30,79,922/-. MADE BY THE AO AS AGAINST RS. RS. 91,59,857/-. 5. BOTH ASSESSEE AS WELL AS REVENUE ARE AGGRIEVED W ITH THE ORDER OF CIT(A) AND CHALLENGED THE SAME IN THE RESPECTIVE A PPEALS. 6. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DOUBT THAT THE ASSESSEE IS M/S JAYANTILAL INVESTMENTS 6 FOLLOWING THE PERCENTAGE COMPLETION METHOD FOR REC OGNIZING THE REVENUE FROM THE PROJECT IN QUESTION NAMELY KUBER PROJECT . THIS METHOD OF ACCOUNTING HAS BEEN ACCEPTED BY THE AO SINCE BEGINN ING AND PARTICULARLY FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 WHICH W ERE COMPLETED U/S 143(3). IT IS NOT THE CASE AS PROJECTED BY THE AO T HAT THE ASSESSEE IS FOLLOWING THE PROJECT COMPLETION METHOD BUT THE ASS ESSEE IS OFFERING THE INCOME ON ESTIMATED BASIS AT 15% OF THE INCREASE IN WORK-IN-PROGRESS. THEREFORE, THERE IS NO INDEFINITE DEFERMENT OF PAYM ENT OF TAX EVEN WHEN THE PROJECT IS COMPLETED 85% DURING THE YEAR. THE A O RELIED UPON THE DECISIONS WHERE IT WAS FOUND THAT EVEN AFTER COMPLE TION OF THE PROJECT UP TO 95%, THE ASSESSEE DID NOT OFFER THE INCOME ON TH E GROUND THAT THE ASSESSEE IS FOLLOWING THE PROJECT COMPLETION METHOD OF ACCOUNTING. IN THOSE CASES IT WAS HELD THAT WHEN THE PROJECT IS SU BSTANTIALLY COMPLETED THE ASSESSEE SHOULD NOT DEFER THE PAYMENT OF TAX AS THE SUBSTANTIAL PART OF THE PROJECT WAS ALREADY BOOKED AND THE ASSESSEE RECEIVED ADVANCES AGAINST THE BOOKINGS. IN THE CASE IN HAND THE ASSES SEE HAS BEEN CONSISTENTLY FOLLOWING THE PERCENTAGE COMPLETION ME THOD AND, THEREFORE, ONCE THE SAME WAS ACCEPTED IN THE EARLIER YEARS THE N IN THE ABSENCE OF ANY MATERIAL OR CIRCUMSTANCES BROUGHT ON REOCRD TO SHOW THAT THIS METHOD OF ACCOUNTING HAS RESULTED IN UNDERSTATEMENT OF INC OME WITH THE MOTIVE TO AVOID THE TAX, THE AO CANNOT APPLY DIFFERENT METHOD OF ACCOUNTING. FURTHER THERE IS NO CHANGE IN THE METHOD OF ACCOUN TING BY THE ASSESSEE AND, THEREFORE, IN THE ABSENCE OF ANY MATERIAL TO S HOW THAT BY FOLLOWING THIS METHOD OF PERCENTAGE COMPLETION, THE ASSESSEE HAS UNDERSTATED THE INCOME. ACCORDINGLY WE DO NOT FIND ANY REASON TO I NTERFERE WITH THE FINDING OF CIT(A) ON THE ISSUE OF ESTIMATION OF PRO FIT ON THE INCREASED WORK-IN-PROGRESS. M/S JAYANTILAL INVESTMENTS 7 7. AS REGARDS THE GRIEVANCE OF THE ASSESSEE WITH RE SPECT OF THE 85% OF RS. 2,41,56,250/- TO BE INCLUDED IN THE WORK IN PRO GRESS FOR THE PURPOSE OF ESTIMATING THE PROFIT AT 15%, WE NOTE THAT AS PER T HE ORIGINAL AGREEMENT THE COST OF CONSTRUCTION OF THE PROJECT EXCLUDING T HE AMENITIES WAS DETERMINED BETWEEN THE PARTIES AT RS. 2,41,56,250/- WHICH WAS TO BE PAID AT THE VARIOUS STAGES OF THE COMPLETION OF CONSTRUC TION. HOWEVER THE ASSESSEE COULD NOT PAY THE SAID CONSIDERATION IN CA SH TO M/S CLASSIC CONSTRUCTION COMPANY AND SUBSEQUENTLY BOTH THE PART IES AGREED UPON THAT INSTEAD OF PAYMENT IN CASH THE ASSESSEE WOULD ALLOT 27 FLATS ADMEASURING 12,846 SQ. FT TO M/S CLASSIC CONSTRUCTI ON COMPANY AS PER THE MOU/AGREEMENT DATED 25.01.2005. WE FIND THAT M/ S CLASSIC CONSTRUCTION COMPANY HAS RECOGNIZED THESE 27 FLATS AS ITS CLOSING STOCK IN THIS YEAR AND ALSO SOLD THE SAME IN THE SUBSEQUE NT YEARS. THUS THERE IS NO DISPUTE THAT THESE FLATS WERE TRANSFERRED DURIN G THE YEAR AND THE TRANSFER IS IN LIEU OF THE PAYMENT OF RS. 2,41,56, 250/-. THE ASSESSEE ADMITTED THAT 85% OF THE PROJECT WAS COMPLETED DURI NG THE YEAR WHICH WAS ALSO ACCEPTED BY M/S CLASSIC CONSTRUCTION COMPA NY. THEREFORE, IN VIEW OF THE ADMITTED POSISTION OF ALLOTMENT OF FLAT S AS CONSIDERATION FOR CONSTRUCTION COST, THE AMOUNT OF RS. 2,41,56,250/- HAS RIGHTLY BEEN CONSIDERED AS COST OF CONSTRUCTION AND, THEREFORE, THE SAME WOULD BE PART OF WORK-IN-PROGRESS FOR THE PURPOSE OF ESTIMATING T HE PROFIT FOR THE YEAR UNDER CONSIDERATION. THE CIT(A) HAS DIRECTED THE AO TO CONSIDER ONLY 85% OF THE SAID AMOUNT AS INCREASE IN THE WORK-IN-P ROGRESS ON THE REASON THAT THE PROJECT WAS COMPLETED ONLY UPTO 85% DURIN G THE YEAR. THEREFORE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE FINDI NG OF CIT(A) IN DIRECTING THE AO TO ESTIMATE THE PROFIT ON 85%, RS. 2,41,56,250/- BEING THE PART OF THE WORK-IN-PROGRESS DURING THE YEAR. ACCORDINGLY THE O RDER OF CIT(A) ON THIS ISSUE IS CONFIRMED. M/S JAYANTILAL INVESTMENTS 8 8. GROUND NO. 3 AND 4 OF REVENUES APPEAL IS REGARD ING DELETION OF ADDITION MADE U/S 40(A)(IA). THE AO WAS OF THE VIEW THAT SINCE THE ASSESSEE WAS LIABLE TO PAY RS. 2,41,56,250/- TOWARD S COST OF CONSTRUCTION TO M/S CLASSIC CONSTRUCTION COMPANY WHICH WAS PAID BY ALLOTING 27 FLATS EQUIVALENT TO 12,846 SQ. FT. CARPET AREA FOR WHICH THE ASSESSEE WAS LIABLE TO DEDUCT TAX U/S 194C AND SINCE THE ASSESSEE HAS N OT DEDUCTED TDS, THEREFORE, THE SAME AMOUNT IS NOT ALLOWABLE U/S 40( A)(IA). 9. ON APPEAL, THE ASSESSEE HAS TAKEN VARIOUS PLEA A ND ARGUMENTS BEFORE THE CIT(A) AND SUBMITTED THAT TDS IS NOT DED UCTIBLE IN RESPECT OF ALLOTMENT OF 27 FLATS TO M/S CLASSIC CONSTRUCTION C OMPANY. THE CIT(A) HAS NOT ACCEPTED THE CONTENTIONS RAISED BY THE ASSE SSEE. HOWEVER THE CIT(A) HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE SAID AMOUNT WAS NO MORE PAYABLE AND, THEREFORE, THE PROVISIONS OF SECITON 40(A)(IA) IS NOT APPLICABLE. IT WAS NOTED THAT THE ALLOTMENT OF FLATS TO M/S CLASSIC CONSTRUCTION COMPANY IS NOT ROUTED THROUGH BOOKS OF ACCOUNTS AND NOTHING IS REMAINING PAYABLE AS PER THE BOOKS OF AC COUNTS OF THE ASSESSEE. THUS THE CIT(A) HELD THAT THE PROVISIONS OF SECTION 40(A) IS NOT APPLICABLE AS THE FLATS HAVE ALREADY BEEN HANDED OV ER TO M/S CLASSIC CONSTRUCTION COMPANY AND THE SAME HAS TO BE TREATED AS PAID DURING THE YEAR BY WAY OF ALLOTMENT OF FLATS. 10. BEFORE US, THE LD. DR HAS SUBMITTED THAT THE CI T(A) HAS COMMITED AN ERROR WHILE DECIDING THE ISSUE AS THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE IN ALL THE CASES WHERE EITHER PAYMENT IS MADE OR IS PAYABLE. HE HAS RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDARKHAN N. TUNVAR (357 ITR 312) AND SUBMITTED THAT THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE C ASE OF ACIT VS MARLYN SHIPPING AND TRNASPORTS 16 ITR (TRIB) 1 HAS BEEN RE VERSED BY THE M/S JAYANTILAL INVESTMENTS 9 HONBLE GUJARAT HIGH COURT, THEREFORE, THE ORDER OF CIT(A) QUA THIS ISSUE IS NOT SUSTAINABLE. HE HAS FURTHER SUBMITTED THAT A SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE KOLKATA HIGH COURT IN THE CASE OF CIT VS. MOHD. ZAKIR HUSAIN MONDOL, ACCORDINGLY THE PROVISIONS OF SECTION 40(A)(IA) IS APPLICABLE IN THE CASE OF THE ASSESSEE. 11. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE H AS SUBMITTED THAT THERE ARE CONTRARY DECISIONS ON THIS ISSUE AND DECI SION IN THE CASE OF CIT VS. M/S VICTOR SHIPPING SERVICES (P) LTD OF HONBLE ALLAHABAD HIGH COURT IS IN FAVOUR OF THE ASSESSEE WHICH HAS BEEN FOLLOWE D BY THE CHENNAI BENCHES OF THIS TRIBUNAL IN THE CASE OF ESKAY DESIG NS IN ITA NO. 1951/2012 VIDE ORDER DATED 9.12.2013. HE HAS SUBMI TTED THAT THE TRIBUNAL HAS HELD THAT WHEN THERE ARE DECISION AGAI NST AS WELL AS IN FAVOUR OF THE ASSESSEE THEN IN VIEW OF THE DECISION S OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LT D. (88 ITR 192), THE DECISION WHICH IS IN FAVOUR OF THE ASSESSEE SHOULD BE FOLLOWED. APART FROM THIS LD. AR OF THE ASSESSEE HAS FILED AN APPLICATIO N UNDER RULE 27 AND SUBMITTED THAT THE APPEAL OF THE REVENUE ON THIS IS SUE IS NOT MAINTAINABLE IN VIEW OF THE VARIOUS GROUNDS TAKEN BY THE ASSESSE E BEFORE THE CIT(A) WHICH WERE REJECTED BY THE CIT(A) WHILE DECIDING TH IS ISSUE. THUS THE LD. AR HAS SUBMITTED THAT THE PROVISIONS OF SECTION 40( A)(IA) IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE AS THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE IN THE PROFIT & LOSS ACCOUNT IN RESPECT OF THE SAID AMOUNT OF RS. 2.41 CRORES TOWARDS COST OF CONSTRUCTION PAYABL E TO M/S CLASSIC CONSTRUCTION COMPANY AND PAID BY WAY OF ALLOTTING 2 7 FLATS. 12. THE NEXT CONTENTION OF THE LD. AR IS THAT WHEN THE TAX IS ALREADY RECOVERED FROM THE RECIPIENTS OF THE AMOUNT NAMELY M/S CLASSIC CONSTRUCTION COMPANY WHO HAS PAID THE TAX ON THE IN COME EARNED ON M/S JAYANTILAL INVESTMENTS 10 THIS RECEIPT THEN THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE. HE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P.) LTD.VS. CIT ( 293 ITR 226) AND SUBMITTED THAT WHEN THERE IS NO LOSS OF REVENUE AS THE RECIPIENT HAS ALREADY PAID TAX THEN THE ASSESSEE CANNOT BE HELD L IABLE TO DEDUCT TAX. THE NEXT CONTENTION OF THE LD. AR IS THAT SECTION 1 94C IS APPLICABLE ONLY WHEN ANY SUM IS PAID BY WAY OF CASH OR CHEQUE OR AN Y OTHER MODE WHICH DOES NOT INCLUDE PAYMENT IN KIND AND, THEREFORE, NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA). THE LD. AR THEN CONTENDED THAT THE PAYMENT TO M/S CLASSIC CONSTRUCTION COMPANY IS AS PER THE TERMS OF AGREEMENT AND, THEREFORE, IT WAS NOT A PAYMENT MADE TO THE CONTRAC TOR BUT IT WAS A PAYMENT TO A PARTNER UNDER THE DEVELOPMENT AGREEMEN T. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. FIRST WE WILL DEAL WITH THE QUE STION OF DISALLOWABILITY U/S 40(A)(IA) IN THE CASE WHEN THE EXPENDITURE IS A LREADY PAID AND IS NO MORE PAYABLE. THE CIT(A) HAS GRANTED THE RELIEF TO THE ASSESSEE ON THIS ISSUE BY FOLLOWING THE DECISION OF HYDERABAD BENCHE S OF THIS TRIBUNAL IN THE CASE OF TEJA CONSTRUCTION VS. ACIT (36 DTR 220) AS WELL AS JAIPUR BENCHES OF THIS TRIBUNAL IN THE CASE OF JAIPUR VID YUT VITRAN NIGAM LTD. VS. CIT (226 DTR 79). IT IS PERTINENT TO NOTE THAT THERE WERE DIVERGENT VIEWS OF DIFFERENT BENCHES OF THIS TRIBUNAL ON THIS ISSUE AND, THEREFORE, SEPCIAL BENCH WAS CONSTITURED IN THE CASE OF MARLYN SHIPPING AND TRANSPORTS VS. ACIT 16 ITR (TRIB)(1), WHEREIN THE M AJORITY VIEW HAS APPROVED THE VIEW OF HYDERABAD BENCHES OF THIS TRIB UNAL IN THE CASE OF TEJA CONSTRUCTION VS. ACIT (SUPRA). HOWEVER SUBSEQU ENT TO THE SPECIAL BENCH DECISION, THE ISSUE HAS BEEN CONSIDERED BY TH E VARIOUS HIGH COURTS. THE HONBLE ALLAHABAD HIGH COURT IN THE CA SE OF CIT VS. VICTOR M/S JAYANTILAL INVESTMENTS 11 SHIPPING SERVICES (P) LTD., APPROVED THE VIEW OF S PECIAL BENCH IN THE CASE OF MARLYN SHIPPING & TRANSPORTS (SUPRA) WHEREA S THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATES HAS HELD THAT THE ORDER OF SPECIAL BENCH IN THE CA SE OF MARLYN SHIPPING AND TRANSPORTS (SUPRA) IS NOT ACCEPTABLE. THIS VIEW WAS AGAIN REAFFIRMED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF M OHD. ZAKIR HUSSAIN MONDOL. FURTHER IN THE LATEST DECISION OF HONBLE H IGH COURT OF GUJARAT IN THE CASE OF CIT VS. SIKANDARKHAN N. TUNVAR (SUPRA) IN A DETAILED DECISION HAS REVERSED THE DECISION OF SPECIAL BENCH IN THE C ASE OF MARLYN SHIPPING AND TRANSPORTERS (SUPRA). THE HONBLE GUJA RAT HIGH COURT IN THE SAID CASE OF CIT VS. SIKANDARKHAN N. TUNVAR (SU PRA) HAS EXTENSIVELY DISCUSSED THE MAJORITY AS WELL AS MINORITY VIEW OF THE SPECIAL BENCH IN THE CASE OF MARLYN SHIPPING AND TRANSPORTS (SUPRA) AND ALSO ANALYZED THE RELEVANT PROVISIONS OF THE ACT AS WELL AS VARIO US DECISIONS ON THE INTEPRETATION OF FISCAL STATUTE IN PARA 22 TO 38 AS UNDER:- 22. FOR THE PURPOSE OF THE SAID SECTION, WE ARE ALSO O F THE OPINION THAT THE TERMS 'PAYABLE' AND 'PAID' ARE NOT SYNONYMOUS. WORD 'PAID' HAS BEEN DEFINED IN SECTION 43(2) OF THE ACT TO MEAN ACTUALLY PAID O R INCURRED ACCORDING TO THE METHOD OF ACCOUNTING, UPON THE BASIS OF WHICH PROFI TS AND GAINS ARE COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION'. SUCH DEFINITION IS APPLICABLE FOR THE PURPOSE OF SECTIONS 28 TO 41 UNL ESS THE CONTEXT OTHERWISE REQUIRES. IN CONTRAST, TERM 'PAYABLE' HAS NOT BEEN DEFINED. THE WORD 'PAYABLE' HAS BEEN DESCRIBED IN WEBSTER'S THIRD NEW INTERNATI ONAL UNABRIDGED DICTIONARY AS REQUIRING TO BE PAID: CAPABLE OF BEIN G PAID: SPECIFYING PAYMENT TO A PARTICULAR PAYEE AT A SPECIFIED TIME OR OCCASION OR ANY SPECIFIED MANNER. IN THE CONTEXT OF SECTION 40(A)(IA), THE WORD 'PAYABLE ' WOULD NOT INCLUDE 'PAID'. IN OTHER WORDS, THEREFORE, AN AMOUNT WHICH IS ALREADY PAID OVER CEASES TO BE PAYABLE AND CONVERSELY WHAT IS PAYABLE CANNOT BE ON E THAT IS ALREADY PAID. WHEN AS RIGHTLY POINTED OUT BY COUNSEL MR. HEMANI, THE ACT USES TERMS 'PAID' AND 'PAYABLE' AT DIFFERENT PLACES IN DIFFERENT CONT EXT DIFFERENTLY, FOR THE PURPOSE OF SECTION 40(A)(IA) OF THE ACT, TERM 'PAYABLE' CAN NOT BE SEEN TO BE INCLUDING THE EXPRESSION 'PAID'. THE TERM 'PAID' AND 'PAYABLE ' IN THE CONTEXT OF SECTION 40(A)(IA) ARE NOT USED INTERCHANGABLY. IN THE CASE OF BIRLA CEMENT WORKS V. STATE OF RAJASTHAN AIR 1994 SC 2393, THE A PEX COURT OBSERVED THAT 'THE WORD PAYABLE IS A DESCRIPTIVE WORD, WHICH ORDI NARILY MEANS THAT WHICH MUST BE PAID OR IS DUE OR MAY BE PAID BUT ITS CORRE CT MEANING CAN ONLY BE DETERMINED IF THE CONTEXT IN WHICH IT IS USED IS KE PT IN VIEW. THE WORD HAS BEEN M/S JAYANTILAL INVESTMENTS 12 FREQUENTLY UNDERSTOOD TO MEAN THAT WHICH MAY, CAN O R SHOULD BE PAID AND IS HELD EQUIVALENT TO 'DUE'. 23. DESPITE THIS NARROW INTERPRETATION OF SECTION 40(A )(IA), THE QUESTION STILL SURVIVES IF THE TRIBUNAL IN CASE OF MERILYN SHIPPIN G & TRANSPORTS (SUPRA) WAS ACCURATE IN ITS OPINION. IN THIS CONTEXT, WE WOULD LIKE TO EXAMINE TWO ASPECTS. FIRSTLY, WHAT WOULD BE THE CORRECT INTERPRETATION O F THE SAID PROVISION. SECONDLY, WHETHER OUR SUCH UNDERSTANDING OF THE LANGUAGE USED BY THE LEGISLATURE SHOULD WAVER ON THE PREMISE THAT AS PROPOUNDED BY THE TRIB UNAL, THIS WAS A CASE OF CONSCIOUS OMISSION ON PART OF THE PARLIAMENT. BOTH THESE ASPECTS WE WOULD ADDRESS ONE AFTER ANOTHER. IF ONE LOOKS CLOSELY TO THE PROVISION, IN QUESTION, ADVERSE CONSEQUENCES OF NOT BEING ABLE TO CLAIM DED UCTION ON CERTAIN PAYMENTS IRRESPECTIVE OF THE PROVISIONS CONTAINED I N SECTIONS 30 TO 38 OF THE ACT WOULD FLOW IF THE FOLLOWING REQUIREMENTS ARE SA TISFIED: (A) THERE IS INTEREST, COMMISSION OR BROKERAGE, RENT, R OYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUBCONTRACTOR BEING RESIDENT FOR CA RRYING OUT ANY WORK. (B) THESE AMOUNTS ARE SUCH ON WHICH TAX IS DEDUCTIBLE A T SOURCE UNDER CHAPTER XVII-B. (C) SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION H AS NOT BEEN PAID ON OR BEFORE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SEC TION 39. FOR THE PURPOSE OF CURRENT DISCUSSION REFERENCE TO THE PROVISO IS NOT NECESSARY. 24. WHAT THIS SUB-SECTION, THEREFORE, REQUIRES IS THAT THERE SHOULD BE AN AMOUNT PAYABLE IN THE NATURE DESCRIBED ABOVE, WHICH IS SUCH ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B BUT SUCH TAX HAS NOT BEEN DEDUCTED OR IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THIS P ROVISION NOWHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE MUST REMAIN SO PAY ABLE THROUGHOUT DURING THE YEAR. TO REITERATE THE PROVISION HAS CERTAIN ST RICT AND STRINGENT REQUIREMENTS BEFORE THE UNPLEASANT CONSEQUENCES ENVISAGED THEREI N CAN BE APPLIED. WE ARE PREPARED TO AND WE ARE DUTY BOUND TO INTERPRET SUCH REQUIREMENTS STRICTLY. SUCH REQUIREMENTS, HOWEVER, CANNOT BE ENLARGED BY ANY AD DITION OR SUBTRACTION OF WORDS NOT USED BY THE LEGISLATURE. THE TERM USED IS INTEREST, COMMISSION, BROKERAGE ETC. IS PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY WORK. THE LANGU AGE USED IS NOT THAT SUCH AMOUNT MUST CONTINUE TO REMAIN PAYABLE TILL THE END OF THE ACCOUNTING YEAR. ANY SUCH INTERPRETATION WOULD REQUIRE READING WORDS WHICH THE LEGISLATURE HAS NOT USED. NO SUCH INTERPRETATION WOULD EVEN OTHERWI SE BE JUSTIFIED BECAUSE IN OUR OPINION, THE LEGISLATURE COULD NOT HAVE INTENDE D TO BRING ABOUT ANY SUCH DISTINCTION NOR THE LANGUAGE USED IN THE SECTION BR INGS ABOUT ANY SUCH MEANING. IF THE INTERPRETATION AS ADVANCED BY THE A SSESSEES IS ACCEPTED, IT WOULD LEAD TO A SITUATION WHERE THE ASSESSEE WHO TH OUGH WAS REQUIRED TO DEDUCT THE TAX AT SOURCE BUT NO SUCH DEDUCTION WAS MADE OR MORE FLAGRANTLY DEDUCTION THOUGH MADE IS NOT PAID TO THE GOVERNMENT , WOULD ESCAPE THE CONSEQUENCE ONLY BECAUSE THE AMOUNT WAS ALREADY PAI D OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOTHER ASSESSEE WHO WOU LD OTHERWISE BE IN SIMILAR SITUATION BUT IN WHOSE CASE THE AMOUNT REMAINED PAY ABLE TILL THE END OF THE YEAR. WE SIMPLY DO NOT SEE ANY LOGIC WHY THE LEGISL ATURE WOULD HAVE DESIRED TO BRING ABOUT SUCH IRRECONCILABLE AND DIVERSE CONSEQU ENCES. WE HASTEN TO ADD M/S JAYANTILAL INVESTMENTS 13 THAT THIS IS NOT THE PRIME BASIS ON WHICH WE HAVE A DOPTED THE INTERPRETATION WHICH WE HAVE GIVEN. IF THE LANGUAGE USED BY THE PA RLIAMENT CONVEYED SUCH A MEANING, WE WOULD NOT HAVE HESITATED IN ADOPTING SU CH AN INTERPRETATION. WE ONLY HIGHLIGHT THAT WE WOULD NOT READILY ACCEPT THA T THE LEGISLATURE DESIRED TO BRING ABOUT AN INCONGRUOUS AND SEEMINGLY IRRECONCIL ABLE CONSEQUENCES. THE DECISION OF THE SUPREME COURT IN THE CASE OF ASHOKB HAI CHIMANBHAI (SUPRA), WOULD NOT ALTER THIS SITUATION. THE SAID DECISION, OF COURSE, RECOGNIZES THE CONCEPT OF ASCERTAINING THE PROFIT AND LOSS FROM TH E BUSINESS OR PROFESSION WITH REFERENCE TO A CERTAIN PERIOD I.E. THE ACCOUNTING Y EAR. IN THIS CONTEXT, LAST DATE OF SUCH ACCOUNTING PERIOD WOULD ASSUME CONSIDERABLE SIGNIFICANCE. HOWEVER, THIS DECISION NOWHERE INDICATES THAT THE EVENTS WHI CH TAKE PLACE DURING THE ACCOUNTING PERIOD SHOULD BE IGNORED AND THE ASCERTA INMENT OF FULFILLING A CERTAIN CONDITION PROVIDED UNDER THE STATUTE MUST BE JUDGED WITH REFERENCE TO LAST DATE OF THE ACCOUNTING PERIOD. PARTICULARLY, IN THE CONT EXT OF REQUIREMENTS OF SECTION 40(A)(IA) OF THE ACT, WE SEE NO WARRANT IN THE SAID DECISION OF THE SUPREME COURT TO APPLY THE TEST OF PAYABILITY ONLY AS ON 31 ST MARCH OF THE YEAR UNDER CONSIDERATION. MERELY BECAUSE, ACCOUNTS ARE CLOSED ON THAT DATE AND THE COMPUTATION OF PROFIT AND LOSS IS TO BE JUDGED WITH REFERENCE TO SUCH DATE, DOES NOT MEAN THAT WHETHER AN AMOUNT IS PAYABLE OR NOT M UST BE ASCERTAINED ON THE STRENGTH OF THE POSITION EMERGING ON 31ST MARCH. 25. THIS BRINGS US TO THE SECOND ASPECT OF THIS DISCUS SION, NAMELY, WHETHER THIS IS A CASE OF CONSCIOUS OMISSION AND THEREFORE, THE LEGISLATURE MUST BE SEEN TO HAVE DELIBERATELY BROUGHT ABOUT A CERTAIN SITUATION WHICH DOES NOT REQUIRE ANY FURTHER INTERPRETATION. THIS IS THE FUNDAMENTAL ARG UMENT OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA) TO AD OPT A PARTICULAR VIEW. 26. WHILE INTERPRETING A STATUTORY PROVISION THE COURT S HAVE OFTEN APPLIED HYDEN'S RULE OR THE MISCHIEF RULE AND ASCERTAINED W HAT WAS THE POSITION BEFORE THE AMENDMENT, WHAT THE AMENDMENT SOUGHT TO REMEDY AND WHAT WAS THE EFFECT OF THE CHANGES. 27. IN THE CASE OF BENGAL IMMUNITY CO. LTD. V. STATE O F BIHAR AIR 1955 SC 661, THE APEX COURT REFERRED TO THE FAMOUS ENGLISH DECIS ION IN HYDEN'S CASE WHEREIN WHILE ADOPTING RESTRICTIVE OR ENLARGING INT ERPRETATION, IT WAS OBSERVED THAT FOUR THINGS ARE TO BE CONSIDERED, (1) WHAT WAS THE COMMON LAW BEFORE MAKING OF THE ACT (2) WHAT WAS THE MISCHIEF AND DEF ECT IN WHICH THE COMMON LAW DID NOT PROVIDE. (3) WHAT REMEDY THE PARLIAMENT HAD RESOLVED AND ADOPTED TO CURE THE DISEASE AND (4) TRUE REASON OF THE REME DY. 28. IN SUCH CONTEXT, THE POSITION PREVAILING PRIOR TO THE AMENDMENT INTRODUCED IN SECTION 40(A) WOULD CERTAINLY BE A RELEVANT FACT OR. HOWEVER, THE PROCEEDINGS IN THE PARLIAMENT, ITS DEBATES AND EVEN THE SPEECHE S MADE BY THE PROPOSER OF A BILL ARE ORDINARILY NOT CONSIDERED AS RELEVANT OR SAFE TOOLS FOR INTERPRETATION OF A STATUTE. IN THE CASE OF ASWINI KUMAR GHOSE V. ARA BINDA BOSE AIR 1952 SC 369 IN A CONSTITUTION BENCH DECISION OF (CORAM: PAT ANJALI SASTRI, C.J.), OBSERVED THAT:- '33...IT WAS URGED THAT ACCEPTANCE OR REJECTION OF AMENDMENTS TO A BILL IN THE COURSE OF PARLIAMENTARY PROCEEDINGS FORMS PART OF THE PRE-ENACTMENT HISTORY OF A STATUTE AND AS SUCH MIGHT THROW VALUAB LE LIGHT ON THE INTENTION OF THE LEGISLATURE WHEN THE LANGUAGE USED IN THE ST ATUE ADMITTED OF MORE THAN ONE CONSTRUCTION. WE ARE UNABLE TO ASSENT TO T HIS PREPOSITION. M/S JAYANTILAL INVESTMENTS 14 THE REASON WHY A PARTICULAR AMENDMENT WAS PROPOSED OR ACCEPTED OR REJECTED IS OFTEN A MATTER OF CONTROVERSY, AS IT HA PPENED TO BE IN THIS CASE, AND WITHOUT THE SPEECHES BEARING UPON THE MOTION, I T CANNOT BE ASCERTAINED WITH ANY REASONABLE DEGREE OF CERTAINTY . AND WHERE THE LEGISLATURE HAPPENS TO BE BICAMERAL, THE SECOND CHA MBER MAY OR MAY NOT HAVE KNOWN OF SUCH REASON WHEN IT DEALT WITH THE ME ASURE. WE HOLD ACCORDINGLY THAT ALL THE THREE FORMS OF EXTRINSIC A ID SOUGHT TO BE RESORTED TO BY THE PARTIES IN THE CASE MUST BE EXCLUDED FROM CO NSIDERATION IN ASCERTAINING THE TRUE OBJECT AND INTENTION OF THE L EGISLATURE' 29. IN YET ANOTHER CONSTITUTION BENCH JUDGMENT IN THE C ASE OF A.K. GOPALAN V. STATE OF MADRAS AIR 1950 SC 27, IT WAS O BSERVED AS UNDER:- '17........ THE RESULT APPEARS TO BE THAT WHILE IT IS NOT PROPER TO TAKE INTO CONSIDERATION THE INDIVIDUAL OPINIONS OF MEMBERS OF PARLIAMENT OR CONVENTION TO CONSTRUE THE MEANING OF THE PARTICULA R CLAUSE, WHEN A QUESTION IS RAISED WHETHER A CERTAIN PHRASE OR EXPR ESSION WAS UP FOR CONSIDERATION AT ALL OR NOT, A REFERENCE TO THE DEB ATES MAY BE PERMITTED.' 30. IN THE CASE OF EXPRESS NEWSPAPER (P.) LTD. V. THE U NION OF INDIA AIR 1958 SC 578, N.H. BHAGWATI, J., OBSERVED AS UNDER:- '173. WE DO NOT PROPOSE TO ENTER INTO ANY ELABORATE DISCUSSION ON THE QUESTION WHETHER IT WOULD BE COMPETENT TO US IN ARR IVING AT A PROPER CONSTRUCTION OF THE EXPRESSION 'FIXING RATES OF WAG ES' TO LOOK INTO THE STATEMENT OF OBJECTS AND REASONS ATTACHED TO THE BI LL NO.13 OF 1955 AS INTRODUCED IN THE RAJYA SABHA OR THE CIRCUMSTANCES UNDER WHICH THE WORD 'MINIMUM' CAME TO BE DELETED FROM THE PROVISIONS OF THE BILL RELATING TO RATES OF WAGES AND THE WAGE BOARD AND THE FACT OF S UCH DELETION WHEN THE ACT CAME TO BE PASSED IN ITS PRESENT FORM. THERE IS A CONSENSUS OF OPINION THAT THESE ARE NOT AIDS TO THE CONSTRUCTION OF THE TERMS OF THE STATUTE WHICH HAVE OF COURSE TO BE GIVEN THEIR PLAIN AND GRAMMATI CAL MEANING (SEE: ASHVINI KUMAR GHOSH V. ARABINDA BOSE, 1953 SC R 1:(AIR 1952 SC 369) (Z24) AND PROVAT KUMAR KAR V. WILLIAM TREVELYA N CURTIEZ PARKER, AIR 1950 CAL 116 (Z25). IT IS ONLY WHEN THE TERMS OF TH E STATUTE ARE AMBIGUOUS OR VAGUE THAT RESORT MAY BE HAD TO THEM FOR THE PUR POSE OF ARRIVING AT THE TRUE INTENTION OF THE LEGISLATURE.' 31. IT CAN THUS BE SEEN THAT THE DEBATES IN THE PARLIA MENT ARE ORDINARILY NOT CONSIDERED AS THE AIDS FOR INTERPRETATION OF THE UL TIMATE PROVISION WHICH MAY BE BROUGHT INTO THE STATUTE. THE DEBATES AT BEST INDIC ATE THE OPINION OF THE INDIVIDUAL MEMBERS AND ARE ORDINARILY NOT RELIED UP ON FOR INTERPRETING THE PROVISIONS, PARTICULARLY WHEN THE PROVISIONS ARE PL AIN. WE ARE CONSCIOUS THAT DEPARTURE IS MADE IN TWO EXCEPTIONAL CASES, NAMELY, THE DEBATES IN THE CONSTITUENT ASSEMBLY AND IN CASE OF FINANCE MINISTE R'S SPEECH EXPLAINING THE REASON FOR INTRODUCTION OF A CERTAIN PROVISION. THE REASON WHY A CERTAIN LANGUAGE WAS USED IN A DRAFT BILL AND WHY THE PROVI SION ULTIMATELY ENACTED CARRIED A DIFFERENT EXPRESSION CANNOT BE GATHERED F ROM MERE COMPARISON OF THE TWO SETS OF PROVISIONS. THERE MAY BE VARIETY OF REA SONS WHY THE ULTIMATE PROVISION MAY VARY FROM THE ORIGINAL DRAFT. IN THE PARLIAMENTARY SYSTEM, TWO HOUSES SEPARATELY DEBATE THE LEGISLATIONS UNDER CON SIDERATION. IT WOULD ALL THE MORE BE UNSAFE TO REFER TO OR RELY UPON THE DRAFTS, AMENDMENTS, DEBATES ETC FOR INTERPRETATION OF A STATUTORY PROVISION WHEN THE LA NGUAGE USED IS NOT CAPABLE OF M/S JAYANTILAL INVESTMENTS 15 SEVERAL MEANINGS. IN THE PRESENT CASE THE TRIBUNAL IN CASE OF MERILYN SHIPPING & TRANSPORTS V. ACIT (SUPRA) FELL IN A SERIOUS ERRO R IN MERELY COMPARING THE LANGUAGE USED IN THE DRAFT BILL AND FINAL ENACTMENT TO ASSIGN A PARTICULAR MEANING TO THE STATUTORY PROVISION. 32. IT IS, OF COURSE, TRUE THAT THE COURTS IN INDIA HA VE BEEN APPLYING THE PRINCIPLE OF DELIBERATE OR CONSCIOUS OMISSION. SUCH PRINCIPLE IS APPLIED MAINLY WHEN AN EXISTING PROVISION IS AMENDED AND A CHANGE IS BROUG HT ABOUT. WHILE INTERPRETING SUCH AN AMENDED PROVISION, THE COURTS WOULD IMMEDIATELY INQUIRE WHAT WAS THE STATUTORY PROVISION BEFORE AND WHAT CH ANGES THE LEGISLATURE BROUGHT ABOUT AND COMPARE THE EFFECT OF THE TWO. TH E OTHER OCCASION FOR APPLYING THE PRINCIPLE, WE NOTICE FROM VARIOUS DECI SIONS OF THE SUPREME COURT, HAS BEEN WHEN THE LANGUAGE OF THE LEGISLATURE IS CO MPARED WITH SOME OTHER ANALOGOUS STATUTE OR OTHER PROVISIONS OF THE SAME S TATUTE OR WITH EXPRESSION WHICH COULD APPARENTLY OR OBVIOUSLY BEEN USED IF TH E LEGISLATURE HAD DIFFERENT INTENTION IN MIND, WHILE FRAMING THE PROVISION. WE MAY REFER TO SOME OF SUCH DECISIONS PRESENTLY. IN THE CASE OF BHUWALKA STEEL INDUSTRIES LTD. V. BOMBAY IRON & STEEL LABOUR BOARD [2010] 2 SCC 273, THE APE X COURT OBSERVED AS UNDER: 'THE OMISSION OF THE WORDS AS PROPOSED EARLIER FROM THE FINAL DEFINITION IS A DELIBERATE AND CONSCIOUS ACT ON THE PART OF THE LEG ISLATURE, ONLY WITH THE OBJECTIVE TO PROVIDE PROTECTION TO ALL THE LABOURER S OR WORKERS, WHO WERE THE MANUAL WORKERS AND WERE ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMENT. THEREFORE, THERE WAS A SPECIFIC ACT ON THE PART OF THE LEGISLATURE TO ENLARGE THE SCOPE OF THE DEFINITION AND ONCE WE ACCEPT THIS, ALL THE ARGUMENTS REGARDING THE OBJECTS AND REASONS , THE COMMITTEE REPORTS, THE LEGISLATIVE HISTORY BEING CONTRARY TO THE EXPRESS LANGUAGE, ARE RELEGATED TO THE BACKGROUND AND ARE LIABLE TO BE IG NORED.' 33. IN THE CASE OF AGRICULTURAL PRODUCE MARKET COMMITT EE V. CIT AIR 2008 SC (SUPPL) 566, THE SUPREME COURT NOTICED THAT PRIOR T O FINANCE ACT, 2002, THE INCOME TAX ACT DID NOT CONTAIN THE DEFINITION OF WO RDS 'LOCAL AUTHORITY'. THE WORD CAME TO BE DEFINED FOR THE FIRST TIME BY THE F INANCE ACT OF 2002 BY EXPLANATION/ DEFINITION CLAUSE TO SECTION 10(20) OF THE ACT. IT WAS FURTHER NOTICED THAT THERE WERE SIGNIFICANT DIFFERENCE IN THE DEFIN ITION OF TERM 'LOCAL AUTHORITY' CONTAINED UNDER SECTION 3(31) OF THE GENERAL CLAUSE S ACT, 1987 AS COMPARED TO THE DEFINITION CLAUSE INSERTED IN SECTION 10(20) OF THE INCOME TAX ACT, 1961 VIDE FINANCE ACT, OF 2002. IN THIS CONTEXT IT WAS O BSERVED THAT:- '27. CERTAIN GLARING FEATURES CAN BE DECIPHERED FRO M THE ABOVE COMPARATIVE CHART. UNDER SECTION 3(31) OF THE GENER AL CLAUSES ACT, 1897, 'LOCAL AUTHORITY' WAS DEFINED TO MEAN ' A MUNICIPAL COMMITTEE, DISTRICT BOARD, BODY OF PORT COMMISSIONERS OR OTHER AUTHORIT Y LEGALLY ENTITLED TO THE CONTROL OR MANAGEMENT OF A MUNICIPAL OR LOCAL FUND. THE WORDS 'OTHER AUTHORITY' IN SECTION 3(31) OF THE 1897 ACT HAS BEE N OMITTED BY PARLIAMENT IN THE EXPLANATION/ DEFINITION CLAUSE INSERTED IN S ECTION 10(20) OF THE 1961 ACT VIDE FINANCE ACT, 2002. THEREFORE, IN OUR VIEW, IT WOULD NOT BE CORRECT TO SAY THAT THE ENTIRE DEFINITION OF THE WORD 'LOCA L AUTHORITY' IS BODILY LIFTED FROM SECTION 3(31) OF THE 1897 ACT AND INCORPORATED , BY PARLIAMENT, IN THE SAID EXPLANATION TO SECTION 10(20) OF THE 1961 ACT. THIS DELIBERATE OMISSION IS IMPORTANT.' M/S JAYANTILAL INVESTMENTS 16 34. THE APEX COURT IN THE CASE OF GREATER BOMBAY CO-OP ERATIVE BANK LTD. V. UNITED YARN TEX. (P.) LTD. AIR 2007 SC 1584 , IN THE CONTEXT OF QUESTION WHETHER THE COOPERATIVE BANKS TRANSACTING BUSINESS OF BANKING FALL WITHIN THE MEANING OF 'BANKING COMPANY' DEFINED IN THE BANKING REGULATION ACT, 1949, OBSERVED AS UNDER: '59. THE RDB ACT WAS PASSED IN 1993 WHEN PARLIAMENT HAD BEFORE IT THE PROVISIONS OF THE BR ACT AS AMENDED BY ACT NO.23 OF 1965 BY ADDITION OF SOME MORE CLAUSES IN SECTION 56 OF THE ACT. THE PAR LIAMENT WAS FULLY AWARE THAT THE PROVISIONS OF THE BR ACT APPLY TO CO -OPERATIVE SOCIETIES AS THEY APPLY TO BANKING COMPANIES. THE PARLIAMENT WAS ALSO AWARE THAT THE DEFINITION OF 'BANKING COMPANY' IN SECTION 5(C) HAD NOT BEEN ALTERED BY ACT NO.23 OF 1965 AND IT WAS KEPT INTACT, AND IN FACT A DDITIONAL DEFINITIONS WERE ADDED BY SECTION 56(C). 'CO-OPERATIVE BANK' WAS SEP ARATELY DEFINED BY THE NEWLY INSERTED CLAUSE (CCI) AND 'PRIMARY CO-OPERATI VE BANK' WAS SIMILARLY SEPARATELY DEFINED BY CLAUSE (CCV). THE PARLIAMENT WAS SIMPLY ASSIGNING A MEANING TO WORDS; IT WAS NOT INCORPORATING OR EVEN REFERRING TO THE SUBSTANTIVE PROVISIONS OF THE BR ACT. THE MEANING O F 'BANKING COMPANY' MUST, THEREFORE, NECESSARILY BE STRICTLY CONFINED T O THE WORDS USED IN SECTION 5(C) OF THE BR ACT. IT WOULD HAVE BEEN THE EASIEST THING FOR PARLIAMENT TO SAY THAT 'BANKING COMPANY' SHALL MEAN 'BANKING COMPANY' AS DEFINED IN SECTION 5(C) AND SHALL INCLUDE 'CO-OPERA TIVE BANK' AS DEFINED IN SECTION 5(CCI) AND 'PRIMARY CO-OPERATIVE BANK' AS D EFINED IN SECTION 5(CCV). HOWEVER, THE PARLIAMENT DID NOT DO SO. THERE WAS TH US A CONSCIOUS EXCLUSION AND DELIBERATE COMMISSION OF CO-OPERATIVE BANKS FROM THE PURVIEW OF THE RDB ACT. THE REASON FOR EXCLUDING CO OPERATIVE BANKS SEEMS TO BE THAT CO-OPERATIVE BANKS HAVE COMPREHENS IVE, SELF-CONTAINED AND LESS EXPENSIVE REMEDIES AVAILABLE TO THEM UNDER THE STATE CO- OPERATIVE SOCIETIES ACTS OF THE STATES CONCERNED, W HILE OTHER BANKS AND FINANCIAL INSTITUTIONS DID NOT HAVE SUCH SPEEDY REM EDIES AND THEY HAD TO FILE SUITS IN CIVIL COURTS.' 35. IN THE CASE OF NATIONAL MINERAL DEVELOPMENT CORPN. LTD. V. STATE OF M.P AIR 2004 SC 2456, THE APEX COURT OBSERVED AS UN DER:- '29. THE PARLIAMENT KNOWING IT FULL WELL THAT THE I RON ORE SHALL HAVE TO UNDERGO A PROCESS LEADING TO EMERGENCE OF LUMPS, FI NES, CONCENTRATES AND SLIMES CHOSE TO MAKE PROVISION FOR QUANTIFICATION O F ROYALTY ONLY BY REFERENCE TO THE QUANTITY OF LUMPS, FINES AND CONCE NTRATES. IT LEFT SLIMES OUT OF CONSIDERATION. NOTHING PREVENTED THE PARLIAMENT FROM EITHER PROVIDING FOR THE QUANTITY OF IRON ORE AS SUCH AS THE BASIS F OR QUANTIFICATION OF ROYALTY. IT CHOSE TO MAKE PROVISION FOR THE QUANTIFICATION B EING AWAITED UNTIL THE EMERGENCE OF LUMPS, FINES AND CONCENTRATES. HAVING DONE SO THE PARLIAMENT HAS NOT SAID 'FINES INCLUDING SLIMES'. T HOUGH 'SLIMES' ARE NOT 'FINES' THE PARLIAMENT COULD HAVE ASSIGNED AN ARTIF ICIAL OR EXTENDED MEANING TO 'FINES' FOR THE PURPOSE OF LEVY OF ROYAL TY WHICH IT HAS CHOSEN NOT TO DO. IT IS CLEARLY SUGGESTIVE OF ITS INTENTION NO T TO TAKE INTO CONSIDERATION 'SLIMES' FOR QUANTIFYING THE AMOUNT OF ROYALTY. THI S DELIBERATE OMISSION OF PARLIAMENT CANNOT BE MADE GOOD BY INTERPRETATIVE PR OCESS SO AS TO CHARGE ROYALTY ON 'SLIMES' BY READING SECTION 9 OF THE ACT DIVORCED FROM THE PROVISIONS OF THE SECOND SCHEDULE. EVEN IF SLIMES W ERE TO BE HELD LIABLE TO M/S JAYANTILAL INVESTMENTS 17 CHARGE OF ROYALTY, THE QUESTION WOULD STILL HAVE RE MAINED AT WHAT RATE AND ON WHAT QUANTITY WHICH QUESTIONS CANNOT BE ANSWERED BY SECTION 9.' 36. IN THE CASE OF GOPAL SARDAR V. KARUNA SARDAR AIR 20 04 SC 3068, THE APEX COURT IN THE THE CONTEXT OF LIMITATION WITHIN WHICH RIGHT OF PREEMPTION MUST BE EXERCISED AND WHETHER IN THE CONTEXT OF THE RELEVAN T PROVISIONS CONTAINED IN WEST BENGAL LAND REFORMS AND LIMITATION ACT, 1963 A PPLIED OR NOT, OBSERVED AS UNDER:- '8....PRIOR TO 15-2-1971, AN APPLICATION UNDER SECT ION 8 WAS REQUIRED TO BE MADE TO THE 'REVENUE OFFICER SPECIFICALLY EMPOWERED BY THE STATE GOVERNMENT IN THIS BEHALF.' THIS PHRASE WAS SUBSTIT UTED BY THE PHRASE 'MUNSIF HAVING TERRITORIAL JURISDICTION' BY THE AFO REMENTIONED AMENDMENT. EVEN AFTER THIS AMENDMENT WHEN AN APPLICATION IS RE QUIRED TO BE MADE TO SECTION 8 OF THE ACT EITHER TO APPLY SECTION 5 OF T HE LIMITATION ACT OR ITS PRINCIPLES SO AS TO ENABLE A PARTY TO MAKE AN APPLI CATION AFTER THE EXPIRY OF THE PERIOD OF LIMITATION PRESCRIBED ON SHOWING SUFF ICIENT CAUSE FOR NOT MAKING AN APPLICATION WITHIN TIME. THE ACT IS OF 19 55 AND FOR ALL THESE YEARS, NO PROVISION IS MADE UNDER SECTION 8 OF THE ACT PROVIDING FOR CONDONATION OF DELAY. THUS, WHEN SECTION 5 OF THE L IMITATION ACT IS NOT MADE APPLICABLE TO THE PROCEEDINGS UNDER SECTION 8 OF THE ACT UNLIKE TO THE OTHER PROCEEDINGS UNDER THE ACT, AS ALREADY STATED ABOVE, IT IS APPROPRIATE TO CONSTRUE THAT THE PERIOD OF LIMITATION PRESCRIBE D UNDER SECTION 8 OF THE ACT SPECIFICALLY AND EXPRESSLY GOVERNS AN APPLICATI ON TO BE MADE UNDER THE SAID SECTION AND NOT THE PERIOD PRESCRIBED UNDER AR TICLE 137 OF THE LIMITATION ACT.' 37. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERROR IN APPLYING THE PRINCIPLE OF CONSCIOUS OMISSION IN THE PRESENT CASE. FIRSTLY, AS ALREADY OBSERVED, WE HAVE SERIOUS DOUBT WHETHER SUCH PRINCIPLE CAN BE APPLIED BY COMPARING THE DRAFT PRESENTED IN PARLIAMENT AND ULTIMATE LEGISLATION WH ICH MAY BE PASSED. SECONDLY, THE STATUTORY PROVISION IS AMPLY CLEAR. 38. IN THE RESULT, WE ARE OF THE OPINION THAT SECTION 4 0(A) (IA) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31ST MA RCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE Y EAR. OF COURSE, AS LONG AS THE OTHER REQUIREMENTS OF THE SAID PROVISION EXIST. IN THAT CONTEXT, IN OUR OPINION THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL I N THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS (SURPA), DOES NOT LAY DOWN CO RRECT LAW. 14. THUS IT IS CLEAR THAT THE HONBLE HIGH COURT OF GUJARAT HAS DISCUSSED THE ISSUE IN DETAIL AND ARRIVED TO THE CONCLUSION T HAT THE TRIBUNAL IN THE CASE OF MARLYN SHIPPING AND TRANSPORTS (SUPRA) HAS COMMITTED AN ERROR IN APPLYING THE PRINCIPLES OF CONCIOUS OMISSION. THOU GH THERE ARE DIVERGENT VIEWS OF HONBLE ALLAHABAD HIGH COURT AS AGAINST TH E VIEW OF HONBLE CALCUTTA HIGH COURT AS WELL AS HONBLE GUJARAT HIG H COURT, HOWEVER IN THE SITUATION WHERE THERE ARE DIVERGENT VIEWS OF HO NBLE HIGH COURTS ON A M/S JAYANTILAL INVESTMENTS 18 ISSUE, THE DECISION WHICH LAID DOWN THE PRINCIPLE O F LAW MORE ELABORATELY AND ACCURATELY SHOULD BE GIVEN MORE WEIGHT BY CONSI DERING THE RATIONAL AND LOGIC THEREOF. IN THE ABSENCE OF ANY DIRECT DEC ISION OF THE JURISDICTIONAL HIGH COURT ON THE POINT THE TRIBUNAL THOUGH HAS NO AUTHORITY TO DISTINGUISH THE DECISIONS OF HONBLE HIGH COURTS , HOWEVER, IN SUCH A SITUATION, THE DECISION WHICH HAS LAID DOWN THE PRN CIPLE OF LAW MORE ELABORATELY AND LOGICALLY SHOULD BE FOLLOWED. IN TH IS RESPECT THE FULL BENCH DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN TH E CASE OF USHODAYA ENTERPRISES LTD VS. COMMISSIONER OF COMMERCIAL TAX (111 STC 711) DATED 24 TH MARCH 1998 IS RELEVANT. THE HONBLE HIGH COURT HA S OBSERVED IN PARA 12 AND 13 AS UNDER:- 12. WE MAY ALSO NOTICE A FULL BENCH DECISION OF TH E PUNJAB & HARYANA HIGH COURT IN INDO SWISS TIME LIMITED V. UMRAO, IN WHICH THE MAJO RITY JUDGES TOOK THE VIEW SIMILAR TO THE ONE EXPRESSED BY JAGANNATHA SHETTY, 3. IT WA S OBSERVED : 'WHEN JUDGMENTS OF THE SUPERIOR COURT ARE OF CO-EQUAL BENCHES AND THER EFORE OF MATCHING AUTHORITY, THEN THEIR WEIGHT INEVITABLY MUST BE CONSIDERED BY THE R ATIONALE AND THE LOGIC THEREOF AND NOT BY THE MERE FORTUITOUS CIRCUMSTANCES OF THE TIM E AND DATE ON WHICH THEY WERE RENDERED. .... ON PRINCIPLE IT APPEARS TO ME THAT T HE HIGH COURT MUST FOLLOW THE JUDGMENT WHICH APPEARS TO IT TO LAY DOWN THE LAW MO RE ELABORATELY AND ACCURATELY. THE MERE INCIDENCE OF TIME WHETHER THE JUDGMENTS OF CO- EQUAL BENCHES OF THE SUPERIOR COURT ARE EARLIER OR LATER IS A CONSIDERATION WHICH APPEARS TO ME AS HARDLY RELEVANT.' 13. EXHORTING US TO ADOPT THE VIEW TAKEN BY MOST OF THE HIGH COURTS AND TO GIVE EFFECT TO THE LATER DECISION OF THE SUPREME COURT IN SAIT RIKHAJI CASE (SUPRA), THE LEARNED COUNSEL FOR THE APPELLANT, IN AN APPARENT BID TO WA RD OFF THE POSSIBLE ARGUMENT BASED ON THE PRINCIPLE OF 'PER INCURIAM' HAS RELIED ON TH E FOLLOWING OBSERVATIONS OF THE ALLAHABAD FULL BENCH IN GOPAL KRISHNA V. 5TH ADDITI ONAL DISTRICT JUDGE, KANPUR, : 'TO US, IT APPEARS THAT IT IS ONLY IN CASES OF DECI SION OF CONCURRENT COURTS THAT THE DOCTRINE OF PER INCURIAM CAN BE APPLIED. THUS, THE LAW DECLARED BY THE SUPREME COURT CANNOT BE IGNORED ON THAT BASIS. A FAILURE TO CITE AUTHORITY OF THE EARLIER DECISION OF THE SUPREME COURT BEFORE IT IS NOT SUFFICIENT TO RENDER ITS LATTER DECISION PER INCURIAM. OVERRULING A SIMILAR ARGUMENT MADE IN AMBIKA PRASAD MISRA V. STATE OF U.P., AIR 1980 SC 1762, KRISHNA IYER, J., AGREED WITH THE FOL LOWING OBSERVATIONS MADE IN SALMOND 'JURISPRUDENCE' PAGE 215 (11TH EDITION) : ' A DECISION DOES NOT LOSE ITS AUTHORITY MERELY BECAUSE IT WAS BADLY ARGUED. INADEQUATELY CONSIDERED AND FALLACIOUSLY MEASURED' 15. SINCE THE DECISION IN THE CASE OF CIT VS. SIKAN DARKHAN N. TUNVAR (SUPRA) IS THE LATEST DECISION ON THE POINT AND IN OUR VIEW HAS LAID DOWN M/S JAYANTILAL INVESTMENTS 19 THE LAW MORE ELABORATELY AFTER DISCUSSING THE DECIS ION OF SPECIAL BENCH IN THE CASE OF MARLYN SHIPPING & TRANSPORTS (SUPRA) AS WELL AS THE PROVISIONS OF THE ACT, THEREFORE, BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE WHEREBY THE CLAIM OF THE ASSESSEE WAS ACCEPTED. 16. NOW WE WILL DEAL WITH THE VARIOUS CONTENTIONS R AISED BY THE ASSESSEE UNDER RULE 27 OF THE INCOME TAX APPELLATE TRIBUNAL RULES. 17. THE FIRST OBJECTION RAISED BY THE ASSESSEE AGAI NST THE APPLICABILITY OF SECTION 40(A)(IA) IS THAT THE ASSESSEE HAS NOT CLAI MED ANY EXPENDITURE IN THE PROFIT & LOSS ACCOUNT IN RESPECT OF THE SAID AM OUNT OF RS. 2.41 CRORES. WE HAVE CONFIRMED THE VIEW OF THE CIT(A) THAT THE S AID AMOUNT WOULD BE PART OF THE WORK-IN-PROGRESS FOR THE PURPOSE OF COM PUTATION OF THE PROFITS AND FURTHER THERE IS NO DISPUTE THAT THE SAID AMOUN T REPRESENTS THE COST OF CONSTRUCTION OF THE PROJECT IN QUESTION AS AGREED B ETWEEN THE PARTIES. THEREFORE, MERELY BECAUSE THE ASSESSEE HAS NOT SHOW N THIS AMOUNT IN THE PROFIT & LOSS ACCOUNT AS THE INCOME OFFERED BY THE ASSESSEEE IS ONLY AN ESTIMATED INCOME ON THE INCREASED WORK-IN-PROGRE SS WOULD NOT ALLOW THE ASSESSEE TO CIRCUMVENT THE PROVISIONS OF SECTIO N 40(A)(IA) ONCE THE SAID AMOUNT IS FOUND TO BE THE PART OF WORK-IN-PROG RESS BEING AN EXPENDITURE INCURRED ON PROJECT. ACCORDINLGY THE P AYMENT OF THE SAID EXPENDITURE WITHOUT DEDUCTION OF TAX WOULD ATTRACT THE PROVISIONS OF SECTION 40(A)(IA). HENCE, THIS CONTENTION OF THE AS SESSEE IS BEREFT OF MERITS. 18. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE RECIPIENT OF THE AMOUNT HAS ALREADY PAID THE TAX ON THE SAID INCOME AND, THEREFORE, NO DISALLOWANCE CAN BE MADE INRESPECT OF THE SAID AMOU NT U/S 40(A)(IA). M/S JAYANTILAL INVESTMENTS 20 RELIANCE HAS BEEN PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P.) LTD.V S. CIT (SUPRA). AT THE OUTSET IT IS TO BE NOTED THAT THE DECISION IN T HE CASE OF HINDUSTAN COCA COLA BEVERAGE (P.) LTD.VS. CIT (SUPRA) IS ON THE IS SUE OF TREATING THE ASSESSEEE IN DEFAULT IN RESPECT OF SUCH TAX WHICH W AS NOT DEDUCTED AS PER THE PROVISIONS OF CHAPTER XVII OF THE INCOME TA X ACT. THEREFORE, THE ISSUE BEFORE THE HONBLE SUPREME COURT WAS ONLY THE LIABILITY OF THE PAYER U/S 201 BEING AN ASSESSEE IN DEFAULT AND IN CASE TH E RECIPIENT OF THE AMOUNT HAS ALREADY PAID THE TAX THEN THE QUESTION O F DEFAULT OF TAX DOES NOT ARISE U/S 201. ON THE CONTRARY FOR THE PURPOSE OF SECTION 40(A)(IA) THE PAYMENT OF TAX BY THE RECIPIENT IS NOT AT ALL RELEV ANT. WHAT IS RELEVANT IS THE TAXABILITY OF THE AMOUNT PAID BY THE ASSESSEE I N THE HANDS OF THE RECIPIENT AND TO ENSURE THE DEDUCTION OF TAX AT SOU RCE, THE PROVISIONS OF SECTION 40(A)(IA) HAS BEEN BROUGHT ON THE STATUTE A S A MEASURE OF BETTER COMPLIANCE. THEREFORE, ONCE THE ASSESSEE FAILED TO DEDUCT TAX ON THE AMOUNT PAID, WHICH IS AN EXPENDITURE IN THE HANDS O F THE ASSESSEE, THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE. 19. THE NEXT CONTENTION OF THE ASSESSEE IS THAT SEC TION 194C IS NOT APPLICABLE BECAUSE THE SUM PAID IN ITS CASE IS NOT BY WAY OF CASH OR CHEQUE AND ALSO DOES NOT FALL UNDER THE TERM ANY O THER MODE AS USED IN SECTION 194C. IF THIS CONTENTION OF THE ASSESSEE IS ACCEPTED THEN ANYBODY CAN CIRCUMVENT THE PROVISIONS OF SECTION 40(A)(IA) BY MAKING THE PAYMENT OTHER THAN IN CASH, CHEQUE OR DRAFT. IN OUR VIEW AN Y OTHER MODE PRESCRIBED U/S 194C COVERS ALL MODE OF PAYMENTS AND , THEREFORE, WHERE THE PAYMENT IS IN CASH, CHEQUE OR DRAFT OR IN KIND THE ASSESSEE IS UNDER OBLIGATION TO DEDUCT TAX IF IT SATISFIES THE CONDIT IONS OF SECTION 194C. THUS WE DECLINE TO ACCEPT THIS CONTENTION OF THE ASSESSE E. M/S JAYANTILAL INVESTMENTS 21 20. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE PAYMENT MADE AS PER THE DEVELOPMENT AGREEMENT AND IT WAS NOT A PAYM ENT MADE TO THE CONTRACTOR. THERE IS NO DISPUTE THAT THE PAYMENT MA DE BY THE ASSESSEE IS TOWARDS THE COST OF CONSTRUCTION OF THE PROJECT AND THE SAME IS RECOGNIZED BY THE RECIPIENT AS ITS INCOME. EVEN UNDER THE TERM S OF THE CONTRACT, IT IS A CLEAR CASE OF PAYMENT MADE TO M/S CLASSIC CONSTRUCT ION COMPANY FOR THE CONTRACT OF CONSTRUCTION OF THE PROJECT EXCLUDING A MENITIES. THE PARTIES ARE NOT THE PARTNERS IN THE PROJECT BUT THE ASSESSEE AL ONE IS THE OWNER OF THE PROJECT AND THE AGREEMENT WITH M/S CLASSIC CONSTRUC TION COMPANY IS ONLY FOR CONSTRUCTION OF FLATS AND NOT FOR SHARING OF TH E INCOME FROM THE PROJECT. THEREFORE, THE OBJECTIONS RAISED BY THE ASSESSEE UN DER RULE 27 ARE NOT ACCEPTABLE IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND ACCORDINLGY REJECTED. 21. AS WE HAVE ALREADY SET ASIDE THE ORDER OF THE C IT(A) IN DELETING THE DISALLOWANCE, CONSEQUENTLY THE ORDER OF THE AO QUA THIS ISSUE IS RESTORED. 22. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISS ED AND APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 09 -05-2014 SD/- SD/- (RAJENDRA) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 09 -05-2014 SKS SR. P.S, M/S JAYANTILAL INVESTMENTS 22 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, CITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI