DCIT, Chandigarh V. M/s Ind Swift Ltd., Chandigarh

ITA 631/CHANDI/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6991 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-01-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 25-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Keywords: Gift; Depreciation; Business expenditure; Search and seizure; Earning of tax free income; Question of law; Bad and doubtful debts; Non passing of speaking order; Right to appeal; Revenue expenditure; Capital expenditure
• Section: 115JB; 80IB; 56; 12; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.531/CHD/2014 ASSESSMENT YEAR: 2008-09 M/S IND SWIFT LTD. VS. THE ADDL. CIT PLOT NO. 781, INDUSTRIAL AREA RANGE I PHASE II CHANDIGARH CHANDIGARH PAN NO. AAACI6100L ITA NO.631/CHD/2014 ASSESSMENT YEAR: 2008-09 THE DCIT VS. M/S IND SWIFT LTD. CENTRAL CIRCLE II 781, INDUSTRIAL AREA CHANDIGARH PHASE II, CHANDIGARH (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. T.N. SINGLA REVENUE BY : SH. RAVI SARANGAL DATE OF HEARING : 03/07/2017 DATE OF PRONOUNCEMENT : 11/08/2017 ORDER PER B.R.R. KUMAR A.M. THESE CROSS APPEALS HAS BEEN FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE COMMON ORDER OF LD. CIT(A), CHANDIGARH DT. 21/03/2014. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF LEARNED C.I.T. (APPEALS) IS BAD, AGAINST THE FACTS & LAW. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS WRONGLY CONFIRMED THE DISALLOWANCE OF SEED MARKETING EXPENS ES AMOUNTING TO RS2,21,20,823/-. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS WRONGLY CONFIRMED THE DISALLOWANCE OF EXPENSES AMOUNTING TO RS. 15,59,261/- U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS WRONGLY CONFIRMED THE DISALLOWANCE OF SOFTWARE EXPENSES OF RS.7,31,354/-. 2 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS WRONGLY CONFIRMED THE DISALLOWANCE OF DEDUCTION U/S 80IB ON OTHER INCOME AMOUNTING TO RS. 2,07,67,638/- RELATED TO BUSINESS OF THE ASSESSEE. 6. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS WRONGLY CONFIRMED THE DISALLOWANCES OF LIABILITIES AMOUNTIN G TO RS.41,32,947/- WHILE CALCULATING TAX PAYABLE U/S 115JB. 7. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D OR WITHDRAW ANY GROUND OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OFF. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE EXPENSES UNDER THE HEADS DIRECTORS SALARY, SEED MARKETING EXPENDITURE AND R & D EXPENSES SHOUL D BE ALLOCATED IN SALES RATIO RATHER THAT PROFIT RATIO EVEN THOUGH THE ASSE SSING OFFICER HAD REALLOCATED THESE EXPENSES AFTER OBSERVING THE SHORTCOMINGS IN THE ACCOUNTS DRAWN UP BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE EVEN THOUGH THE ASSESSING OFFICER HAS ONLY MADE THE ADJUSTMENT AS PER EXPLANA TION (1)(F) OF SECTION 115JB OF THE INCOME TAX ACT, 1961. 4. FIRSTLY WE SHALL DEAL WITH THE APPEAL OF THE ASS ESSEE RELATING TO ITA NO. 531/CHD/2014. 5. GROUND NO. 2: IS AGAINST THE DISALLOWANCE OF SEED MARKETING EXPEN SES AMOUNTING TO RS. 2,21,20,823/-. 6. BRIEF FACTS OF THE ISSUE ARE THAT THE APPELLANT HAD CLAIMED EXPENDITURE OF RS. 6,61,10,339/- ON ACCOUNT OF 'SEED MARKETING EXP ENSES' IN THE COMPUTATION OF INCOME. THE ASSESSING OFFICER NOTICED THAT THE APPE LLANT HAD DEBITED AN AMOUNT OF RS. 4,39,89,516/- ON ACCOUNT OF 'SEED MAR KETING EXPENSES' TO THE PROFIT AND LOSS ACCOUNT, WHICH WAS ADDED BACK TO TH E COMPUTATION OF INCOME. THE ASSESSING OFFICER QUESTIONED THE APPELLANT ABOU T THE CLAIM OF RS. 6,61,10,339/- ON ACCOUNT OF SEED MARKETING EXPENSES AND THE APPELLANT HAD SUBMITTED THAT THE SAID EXPENSES WERE INCURRED ON D AY TO DAY ADMINISTRATION OF NEW BRANCHES AND THE SAME HAD BEEN DEBITED TO THE P ROFIT & LOSS ACCOUNT UNDER THE HEAD 'SEED MARKETING EXPENSES'. THE APPEL LANT HAD RELIED UPON THE JUDGEMENTS OF HON'BLE ITAT, CHANDIGARH IN THE CASE OF M/S GLAXO SMITHKLINE CONSUMER HEALTHCARE LTD. (112 TTJ 94), OF HON'BLE D ELHI HIGH COURT IN THE CASE OF JAI PARABOLIC SPRINGS LTD (172 TAXMAN 258) AND OF H ON'BLE GUJARAT HIGH COURT IN THE CASE OF M/S CORE HEALTH CARE LTD. (14 DTR 332). THE ASSESSING OFFICER HAS ELABORATELY DISCUSSED THESE JUDGEMENTS IN THE ASSES SMENT ORDER AND HAS 3 INFERRED THAT NONE OF THESE JUDGEMENTS ARE APPLICAB LE TO THE ISSUE IN QUESTION IN THE CASE OF THE APPELLANT. THE AMOUNT HAS BEEN DISA LLOWED BY THE ASSESSING OFFICER BY FOLLOWING THE DECISION OF HON'BLE ITAT, AHMEDABAD IN THE CASE OF M/S AMTREX APPLIANCES LTD. (94 TTJ 396). 7. DURING THE COURSE OF PROCEEDINGS BEFORE THE LD. CIT(A) , THE LD. COUNSEL FOR THE APPELLANT HAS RELIED UPON SAME JUDGMENTS AS WERE QUOTED BEFORE THE ASSESSING OFFICER. 8. LD. CIT(A) HAD CONSIDERED THE SUBMISSION OF THE LD. COUNSEL AND UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOU NT OF 'SEED MARKETING EXPENSES' OF RS. 6,61,10,339/- . THE NET EFFECT OF DISALLOWANCE ON ACCOUNT OF 'SEED MARKETING EXPENSES' IS OF RS. 2,21,20,823/- . 9. BEFORE US THE LD. AR SUBMITTED THAT THIS MATTER HAS BEEN COVERED IN THE ASSESSEES OWN CASE IN THE EARLIER APPEALS FOR THE ASSESSMENT YEAR 2005-06 IN ITA NOS. 530/CHD/2014 AND 511/CHD/2009 AND 428/CHD/2011 . THE ISSUE WAS ADJUDICATED VIDE PARA NO. 10 TO 13 IN ITA NO. 530/C HD/2014, THE RELEVANT PARA OF THE ORDER IS EXTRACTED HEREUNDER: '10 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT ALLOWABILITY OF EXPENDITURE DOES NOT DEPEND ON THE PROVISION OF THE IT ACT, 196 1 AND OTHER PRINCIPLES LAID DOWN UNDER THIS ACT BY VARIOUS JUDICIAL PRONOUNCEME NTS AND IT DOES NOT DEPEND ON ITEMS WHICH HAS BEEN TREATED BY A PARTICULAR ASS ESSEE. REFERENCE MAY BE MADE TO SATLUJ COTTON MILLS LTD V CIT. 116 ITR 1 (S .C). WHAT IS REQUIRED FOR LIABILITY OF EXPENDITURE IS TO BE SEEN WHETHER THE NATURE OF EXPENDITURE IS OF REVENUE OR CAPITAL. THIS ISSUE CAME UP BEFORE THE HON'BLE DELHI HIGH COURT IN CASE OF CIT V JAI PARABOLIC SPR INGS LTD (SUPRA). IN THAT CASE THE ASSESSEE FILED RETURN OF INCOME DECLARING A NET LOS S AT RS. 440,,36,000/- FOR THE ASSESSMENT YEAR 1990-91. THE LOSS WAS COMPUTED AT R S. 427,63,353/- INTER ALIA BY MAKING SEVERAL ADDITIONS AND DISALLOWANCES. THE ASS ESSEE INCURRED AN EXPENDITURE OF RS. 19,48,125/- AS EXPENDITURE ON AC COUNT OF CUSTOMER INTRODUCTION CHARGES WHICH WERE DEBITED AS 'DEFERRE D REVENUE EXPENSES' IN THE BALANCE SHEET. -THE EXPENDITURE WAS WRITTEN OFF OVE R A PERIOD OF FIVE YEARS STARTING FROM THE ASSESSMENT YEAR 1 990-91 AND ACCO RDINGLY THE ASSESSEE CLAIMED REDUCTION OF RS. 389,625/- IN THE RETURN. THE CLAIM WAS ALLOWED BY THE ASSESSING OFFICER. IN APPEAL BEFORE THE LD. CIT(A) THE ASSESS EE CLAIMED AN ADDITIONAL GROUND THAT THE ENTIRE DEFERRED REVENUE EXPENSES WE RE DEDUCTIBLE IN THE ASSESSMENT YEAR IN APPEAL. THE APPEAL WAS ALLOWED T HE TRIBUNAL RESTORED THE MATTER TO THE ASSESSING OFFICER. THE ASSESSING OFFI CER ALLOWED ONLY A REDUCTION OF RS. 389,625/- AND DISALLOWED THE CLAIM OF RS. 1 5,5 8,500/- ON THE GROUND THAT THIS WAS NOT CLAIMED BY THE ASSESSEE IN ITS RETURN OF IN COME IN THE ASSESSMENT YEAR 1990-91. THE LD. CIT(A) HELD THAT THE ASSESSING OFF ICER ERRED IN DISALLOWING THE EXPENDITURE ON THE SOLD GROUND THAT NO CLAIM FOR DE DUCTION OF THE AMOUNT WAS MADE IN THE RETURN OF INCOME. THIS ORDER WAS CONFI RMED BY THE TRIBUNAL. ON ABOVE FACTS IT WAS HELD BY THE HON'BLE COURT AS UNDER: 4 'HELD, DISMISSING THE APPEAL THAT THERE WAS NO PROH IBITION ON THE POWERS OF THE TRIBUNAL TO ENTERTAIN AN ADDITIONAL GROUND WHICH AC CORDING TO THE TRIBUNAL AROSE IN THE MATTER AND FOR THE JUST DECISION OF THE CASE . THERE WAS NO INFIRMITY IN THE ORDER OF THE TRIBUNAL.' SIMILAR VIEW WAS TAKEN BY HON'BLE MADRAS HIGH COURT IN CASE OF CIT V.. SAKTHI SOYAS LTD (SUPRA) AND HON'BLE GUJARAT HIGH COURT IN CASE OF DCIT V. CORE HEALTHCARE LTD (SUPRA) 13 IDENTICAL ISSUE HAD ARISEN BEFORE THE CHANDIGARH BENCH OF THE TRIBUNAL IN CASE OF GLAXO SMITH KLINE CONSUMER HEALTHCARE LTD V. ACIT (SUPRA) AND HEAD NOTE OF THE DECISION READS AS UNDER: 'BUSINESS EXPENDITURE - CAPITAL OR REVENUE EXPENDIT URE -PROMOTIONAL AND TRADE MARKETING EXPENSES - THESE EXPENSES WERE INCURRED B Y THE ASSESSEE ON EXISTING PRODUCTS WHICH INCLUDED COST OF PRESENTATION ITEMS, GIFTS, ETC. GIVEN TO CUSTOMERS, EXPENDITURE ON ADVERTISEMENT, ETC. - THIS IS IN ACT UALITY DISCOUNT IN-KIND ALLOWED TO THE CUSTOMERS AND EXPENDITURE ON ADVERTISEMENT OF E XISTING PRODUCTS - EVEN IF IT IS CONCEDED THAT SUCH EXPENDITURE RESULTS IN ENDURING BENEFIT TO THE ASSESSEE THE ENDURING BENEFIT IS NOT IN THE CAPITAL FIELD BUT IS IN THE REVENUE FIELD - THEREFORE PROMOTION AND TRADE MARKETING EXPENSES ARE ALLOWABL E AS REVENUE EXPENDITURE.' THEREFORE IT IS CLEAR THAT ONCE THE NATURE OF EXPEN DITURE IS REVENUE THEN SAME HAS TO BE ALLOWED EVEN IF SAME HAS NOT BEEN CLAIMED FUL LY IN THE BOOKS OF ACCOUNT. THEREFORE WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER THAT THESE EXPENSES SHOULD BE ALLOWED ON PRINCIPLE. HOWEVER, SINCE NATURE OF EXPENDITURE HAS NOT BEEN EXAMINED DURING ASSESSMENT PROCEEDINGS AND THE SAME REQUIRES EXAMINATION FOR WHICH THE LD. COUNSEL HAD NO OBJECTION. ACCORDINGLY WE SET ASIDE THE ORDER OF THE CIT(A) AN D DIRECT THE ASSESSING OFFICER TO ALLOW THESE EXPENSES AFTER VERIFYING THE GENUINE NESS AND NATURE OF THE SAME. THEREFORE FOLLOWING ABOVE PARAS WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMI T THE SAME TO THE FILE OF AO WITH A DIRECTION TO EXAMINE THE GENUINENESS AND NAT URE OF THE EXPENDITURE AND THEN ALLOW THE SAME IF THE SAME ARE GENUINE AND ARE OF REVENUE NATURE. 10. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 11. GROUND OF APPEAL NO. 3 IS AGAINST THE DISALLOWA NCE OF RS. 15,59,261/- U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'ACT). 12. BRIEF FACTS OF THE ISSUE ARE THAT THE APPELLANT HAD NOT DEDUCTED TAX AT SOURCE ON PAYMENT OF INTEREST OF RS. 15,59,261/- ON VEHICLE LOANS AND SO THE ASSESSING OFFICER DISALLOWED THIS AMOUNT U/S 40(A)( IA) OF THE ACT. 13. DURING THE COURSE OF PROCEEDINGS BEFORE THE CIT (A), THE LD, COUNSEL FOR THE APPELLANT HAS SUBMITTED THAT THE DISALLOWANCE W AS WRONGLY MADE, SINCE THE IMPUGNED AMOUNT HAD ALREADY BEEN PAID. IT HAS ALSO BEEN CONTENDED THAT THE DEDUCTION OF TAX WAS NOT POSSIBLE, SINCE FIXED EMIS HAD TO BE DEPOSITED WITH THE COMPANIES. THE CIT(A) HAS CONFIRMED THE ADDITION. 14. LD. DR FOR THE REVENUE WAS HEARD 5 15. THIS MATTER HAS BEEN COVERED IN THE ASSESSEES OWN CASE IN THE EARLIER APPEALS FOR THE ASSESSMENT YEAR 2005-06 IN ITA NOS. 530/CHD/2014 AND 511/CHD/2009 AND 428/CHD/2011. THE ISSUE WAS ADJUDI CATED VIDE PARA NO. 10 TO 13 IN ITA NO. 530/CHD/2014, 28 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. WE FIND THAT HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V. SIKANDARKHAN N . TUNVAR & ORS, SUPRA) HAS HELD THAT PROVISIONS OF SECTION 40A(IA) ARE APPLICABLE W HERE THE AMOUNT HAS BEEN PAID OR REMAIN PAYABLE. IN CONTRAST HON'BLE ALLAHA BAD HIGH COURT IN CASE OF CIT V. VECTOR SHIPPING SERVICES (P) LTD (SUPRA), HAS FO LLOWED THE DECISION OF SPECIAL BENCH IN CASE OF MERILIN SHIPPING & TRANSPORT V ADD L CIT, 136 ITD 23 (VISAKHAPATNAM)(SB). BOTH THESE DECISIONS WERE CONS IDERED BY US IN CASE OF HI TECH FOODS V ITO (SUPRA) AND IT WAS OBSERVED AT PAR A 22 TO 27 AS UNDER: 22 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AN D FIND THAT THE DECISION OF SPECIAL BENCH HAS BEEN SPECIFICALLY OVER RULED B Y HON'BLE GUJARAT HIGH COURT BY DISCUSSING THE ISSUE IN DETAIL IN CASE OF CIT V. SIKANDARKHAN N TUNWAR AND OTHERS (SUPRA). WE FURTHER FIND THAT IN CASE OF CIT V. VECTOR SHIPPING SERVICES, THE ISSUE WAS DIFFERENT. IN THAT CASE THE QUESTION POS ED BEFORE THE HON'BLE HIGH COURT READS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE HON'BLE ITAT HAS RIGHTLY CONFIRMED THE ORDER OF THE LD. CIT(A) AND T HEREBY DELETING THE DISALLOWANCE OF RS. 1,17,68,621/- MADE BY THE ASSES SING OFFICER U/S 40(A)(IA) OF THE IT ACT BY IGNORING THE FACT THAT THE COMPANY M/ S MERCATOR LINES LTD. HAD PERFORMED SHIP MANAGEMENT WORK ON BEHALF OF THE ASS ESSEE M/S VECTOR SHIPPING SERVICES (P) LTD AND THERE WAS A MEMORANDUM OF UNDE RTAKING SIGNED BETWEEN BOTH THE COMPANIES AND A S PER THE DEFINITION OF ME MORANDUM OF UNDERTAKING, IT INCLUDED CONTRACT ALSO. IN THAT CASE SOME EXPENSES WERE DISALLOWED U/S 40(A )(IA) BECAUSE NOT TAX WAS DEDUCTED. ON APPEAL THE TRIBUNAL FOUND THAT THE LD . CIT(A) HAS ALREADY GIVEN A FINDING THAT MERCATOR LINES LTD. HAD DEDUCTED THE T DS ON SALARY PAID ON BEHALF OF THE ASSESSEE. UNDER SUCH CIRCUMSTANCES THE ASSESSE E WAS NOT REQUIRED TO DEDUCT THE TDS ON REIMBURSEMENT ON SALARY BEING MADE BY IT TO M/S MERCATOR LINES LTD. 23 HON'BLE HIGH COURT HAS CONFIRMED THE DECISION OF THE TRIBUNAL. THUS IT IS CLEAR THAT HON'BLE ALLAHABAD HIGH COURT WAS NEITHER REQUIRED NOR HAS GIVEN DETAIL REASONS FOR APPROVING THE DECISION OF SPECIA L BENCH WHEREAS HON'BLE GUJARAT HIGH COURT HAS AFTER DETAILED DISCUSSION, O VER RULED THE DECISION OF SPECIAL BENCH. 24 IN CASE OF SIKANDARKHAN N TUNWAR (SUPRA) THE ASS ESSEE WAS ENGAGED IN THE BUSINESS OF TRANSPORT CONTRACTOR AND COMMISSION AGENT. DURING THE SCRUTINY ASSESSMENT IT WAS NOTICED BY THE ASSESSING OFFICER THAT EXPENDITURE IN THE NATURE OF PAYMENT MADE BY THE ASSESSEE TO ITS SUB-CONTRAC TORS TO THE TUNE OF RS. 8.74 CRORES. SINCE THE ASSESSEE HAD ADMITTEDLY NOT DEDU CTED THE TAX FROM SUCH PAYMENTS AND INDIVIDUAL PAYMENTS TO TRANSPORTERS EX CEEDED LIMIT OF RS. 20,000/- FOR A SINGLE TRIP AND AGGREGATED OVER RS. 50,000/- IN THE YEAR THOUGH THE ASSESSEE HAD OBTAINED FORM NO. 15-I FROM SUCH SUB-CONTRACTOR S BUT THE SAME WERE NOT FURNISHED ALONG WITH THE PARTICULARS IN FORM 15-J T O THE CIT BEFORE DUE DATE AND THEREFORE, THE EXPENDITURE ON ACCOUNT OF PAYMENT TO SUB-CONTRACTORS WAS DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT. 25. ON APPEAL THE LD. CIT(A) CONFIRMED THIS ORDER. 26 WHEN THE MATTER TRAVELED TO THE TRIBUNAL THE APP EAL OF THE ASSESSEE WAS ALLOWED BY RELYING ON THE DECISION OF MERILYN SHIPP ING TRANSPORTERS V. ACIT (SUPRA). THE TRIBUNAL HELD THAT THE WORD PAYABLE USED IN SECTION 40(A)()IA) WOULD MAKE PROVISION APPLICABLE ONLY IN RESPECT OF EXPENDITURE PAYABLE ON 31 ST MARCH OF A PARTICULAR YEAR AND SUCH PROVISION CANNO T BE INVOKED TO DISALLOW THE AMOUNTS WHICH HAS ALREADY BEEN PAID DURING THE YEAR THOUGH THE TAX MAY NOT 6 HAVE BEEN DEDUCTED AT SOURCE. FOLLOWING SPECIFIC Q UESTION WAS POSED BEFORE THE HON'BLE HIGH COURT: IN ALL THESE APPEALS THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH IN THE CASE OF M/S MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA) AND DELETED THE DISALLOWANCE ON THIS LIMITED GROUND. AS IN THE PRE SENT CASE, OTHER MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA) GROUNDS OF CO NTROVERSY BETWEEN THE PARTIES WITH RESPECT TO ALLOWABILITY OR OTHERWISE OF SUCH E XPENDITURE WAS NOT EXAMINED BY THE TRIBUNAL. FOR THE PURPOSE OF THESE APPEALS, THEREFORE, WE FRAME FOLLOWING SUBSTANTIAL QUESTION OF LAW: 1 WHETHER DISALLOWANCE U/S 40(A)(IA) OF THE I.T AC T COULD BE MADE ONLY IN RESPECT OF SUCH AMOUNTS WHICH ARE PAYABLE AS ON 31 ST MACH OF THE YEAR UNDER CONSIDERATION? 2 WHETHER DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA) LAYS DOWN CORRECT LAW? 27 HON'BLE GUJARAT HIGH COURT AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES REFERRED TO THE PROVISION OF CHAPTER XVII A OF THE ACT DEALING WITH THE TAX DEDUCTION PROVISIONS. AFTER THIS REFERENCE WAS MAD E TO SECTION 40(A)(IA) THROUGH WHICH IT WAS PROVIDED THAT TAX HAS NOT BEEN DEDUCTE D ON CERTAIN PAYMENTS AND THE SAME WILL NOT BE ALLOWABLE. THE HON'BLE HIGH C OURT DISCUSSED THE IMPLEMENTATIONS OF THIS PROVISION AND DECISION OF S PECIAL BENCH IN CASE OF MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA) AND OBSERVED AND HELD AS UNDER: 17. IN PLAIN TERMS SECTION 40(A)(IA) PROVIDES THAT IN CASE OF ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PR OFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNT S PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY WORK ON WHICH T AX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION H AS NOT BEEN PAID BEFORE THE DUE DATE, SUCH AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSI NESS OR PROFESSION IRRESPECTIVE OF THE PROVISIONS CONTAINED IN SECTION S 30 TO 38 OF THE ACT. PROVISO TO SECTION 40(A)(IA), HOWEVER, ENABLES THE ASSESSEE TO TAKE SUCH DEDUCTION IN SUBSEQUENT YEAR, IF TAX IS DEDUCTED IN SUCH YEAR OR THOUGH DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION(1) OF SECTION 139 OF THE ACT. 18. IN SUCH CONTEXT, THEREFORE, THE QUESTION ARISES WHETHER UNDER SECTION 40(A)(IA) OF THE ACT DISALLOWANCE OF THE EXPENDITURE PAYMENT OF WHICH, THOUGH REQUIRED DEDUCTION OF TAX AT SOURCE HAS NOT BEEN MADE WOULD BE CONFINED ONLY TO THOSE CASES WHERE THE AMOUNT REMAINS PAYABLE TILL THE END OF THE PREVIOUS YEAR OR WOULD INCLUDE ALL AMOUNTS WHICH BECAME PAYABLE DURI NG THE ENTIRE PREVIOUS YEAR. 19. DECISION IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) WAS RENDERED BY THE SPECIAL BENCH BY A SPLIT OPINION. L EARNED ACCOUNTANT MEMBER WHO WAS IN MINORITY, PLACED HEAVY RELIANCE ON A DEC ISION OF MADRAS HIGH COURT IN THE CASE OF TUBE INVESTMENTS OF INDIA LTD. AND ANOTHER VS. ASSI STANT COMMISSIONER OF INCOME-TAX (TDS) AND OTHERS REPORTED IN [2010] 325 ITR 610 (MAD) . LEARNED JUDGE DID NOTICE THAT THE HIGH COURT IN SUCH CASE W AS CONCERNED WITH THE VIRES OF THE STATUTORY PROVISION BUT FOUND SOME OF THE OB SERVATIONS MADE BY THE COURT IN THE PROCESS USEFUL AND APPLICABLE. LEARNED JUDGE REJECTED THE THEORY OF NARROW INTERPRETATION OF TERM PAYABLE AND OBSERVED AS UNDER: 12.4 IN OUR CONSIDERED OPINION, THERE IS NO AMBIGUI TY IN THE SECTION AND TERM PAYABLE CANNOT BE ASCRIBED NARROW INTERPRETATI ON AS CONTENDED BY ASSESSEE. HAD THE INTENTIONS OF THE LEGISLATURE WERE TO DISALLOW ONLY ITEMS OUTSTANDING AS ON 31 ST MARCH, THEN THE TERM PAYABLE WOULD HAVE BEEN QUALIFIED BY THE PHRASE AS OUTSTANDING ON 31 ST MARCH. HOWEVER, NO SUCH QUALIFICATION IS THERE IN THE SECTION AND, THE REFORE, THE SAME CANNOT BE READ INTO THE SECTION AS CONTENDED BY THE ASSESS EE. 7 20. ON THE OTHER HAND, LEARNED JUDICIAL MEMBER SPEA KING FOR MAJORITY ADOPTED A STRICTER INTERPRETATION. HEAVY RELIANCE WAS PLACED ON THE FINANCE BILL OF 2004, WHICH INCLUDED THE DRAFT OF THE AMENDMENT IN SECTIO N 40 AND THE ULTIMATE AMENDMENT WHICH ACTUALLY WAS PASSED BY THE PARLIAME NT. IT WAS OBSERVED THAT FROM THE COMPARISON BETWEEN THE PROPOSED AND THE EN ACTED PROVISION IT CAN BE SEEN THAT THE LEGISLATURE HAS REPLACED TH E WORDS AMOUNTS CREDITED OR PAID WITH THE WORD PAYABLE IN THE ENACTMENT. ON SUCH BAS IS, IT WAS HELD THAT THIS IS A CASE OF CONSCIOUS OMISSION AND WHEN THE LANGUAGE WAS CLEAR THE INTENTION OF THE LEGISLATURE HAD TO BE GATHERED FROM LANGUAGE US ED. IN THEIR OPINION THE PROVISION WOULD APPLY ONLY TO AMOUNTS WHICH ARE PAY ABLE AT THE END OF THE YEAR. HAVING SAID SO, CURIOUSLY, IT WAS OBSERVED THAT THE PROVISO TO SECTION 40(A)(IA) OF THE ACT LAYS DOWN THAT EARLIER YEAR S PROVISION CAN BE ALLOWED IN SUBSEQUENT YEARS ONLY IF TDS IS DEDUCTED AND DEPOSITED AND, TH EREFORE, REVENUE S FEAR IS UNFOUNDED AS THE PROVISION OF SECTION 40(A)(IA) OF THE ACT COVERS THE SITUATION. 21. IN THE PRESENT CASE, WE HAVE NO HESITATION IN A CCEPTING THE CONTENTION THAT THE PROVISION MUST BE CONSTRUED STRICTLY. THIS BEIN G A PROVISION WHICH CREATES AN ARTIFICIAL CHARGE ON AN AMOUNT WHICH IS OTHERWISE N OT AN INCOME OF THE ASSESSEE, CANNOT BE LIBERALLY CONSTRUED. UNDOUBTEDLY IF THE L ANGUAGE OF THE SECTION IS PLAIN, IT MUST BE GIVEN ITS TRUE MEANING IRRESPECTIVE OF T HE CONSEQUENCES. WE HAVE NOTICED THAT THE PROVISION MAKES DISALLOWANCE OF AN EXPENDITURE WHICH HAS OTHERWISE BEEN INCURRED AND IS ELIGIBLE FOR DEDUCTI ON, ON THE GROUND THAT THOUGH TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE IT WAS NO T DEDUCTED OR IF DEDUCTED, HAD NOT BEEN DEPOSITED BEFORE THE DUE DATE. BY ANY INTENDMENT OR LIBERAL CONSTRUCTION OF SUCH PROVISION, THE LIABILITY CANNO T BE FASTENED IF THE PLAIN MEANING OF THE SECTION DOES NOT SO PERMIT. 22. FOR THE PURPOSE OF THE SAID SECTION, WE ARE ALS O OF 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 OR I NCURRED 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 PRO FESSION . 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 DE FINED. THE WORD PAYABLE HAS BEEN DESCRIBED IN WEBSTER S THIRD NEW INTERNATIO NAL 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 ALREA DY 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, TH E ACT USES TERMS PAID AND PAYABLE AT DIFFERENT PLACES IN DIFFERENT CONTEX T DIFFERENTLY, FOR THE PURPOSE OF SECTION 40(A)(IA) OF THE ACT, TERM PAYABLE CANNO T BE SEEN TO BE INCLUDING THE EXPRESSION PAID . THE TERM PAID AND PAYABLE IN T HE CONTEXT OF SECTION 40(A)(IA) ARE NOT USED INTERCHANGABLY. IN T HE CASE OF BIRLA CEMENT WORKS AND ANOTHER VS. STATE OF RAJASTHAN AND ANOTHER REPORTED IN AIR 1994(SC) 2393 , THE APEX COURT OBSERVED THAT THE WORD PAYABLE IS A DESC RIPTIVE WORD, WHICH ORDINARILY MEANS THAT WHICH MUST BE PAID OR IS DUE OR MAY BE PAID BUT ITS CORRECT MEANING CAN ONLY BE DETERMINED IF THE CONTEXT IN WH ICH IT IS USED IS KEPT IN VIEW. THE WORD HAS BEEN FREQUENTLY UNDERSTOOD TO MEAN THA T WHICH MAY, CAN OR SHOULD BE PAID AND IS HELD EQUIVALENT T O DUE . 23. DESPITE THIS NARROW INTERPRETATION OF SECTION 4 0(A)(IA), THE QUESTION STILL SURVIVES IF THE TRIBUNAL IN CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (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 SATISF IED:- 8 (A) THERE IS INTEREST, COMMISSION OR BROKERAGE, REN T, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR BEING RESIDENT FOR C ARRYING OUT ANY WORK. (B) THESE AMOUNTS ARE SUCH ON WHICH TAX IS DEDUCTIB LE AT SOURCE UNDER CHAPTER XVII-B. (C)SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTIO N HAS 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 T HAT THERE SHOULD BE AN `AMOUNT PAYABLE IN THE NATURE DESCRIBED ABOVE, WHICH IS SUC H 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 PROVISI ON NO-WHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE MUST REMAIN SO PAYABLE THRO UGHOUT DURING THE YEAR. TO REITERATE THE PROVISION HAS CERTAIN STRICT AND STRI NGENT REQUIREMENTS BEFORE THE UNPLEASANT CONSEQUENCES ENVISAGED THEREIN CAN BE AP PLIED. WE ARE PREPARED TO AND WE ARE DUTY BOUND TO INTERPRET SUCH REQUIREM ENTS 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 O R 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 WHI CH THE LEGISLATURE HAS NOT USED. NO SUCH INTERPRETATION WOULD EVEN OTHERWISE B E JUSTIFIED BECAUSE IN OUR OPINION, THE LEGISLATURE COULD NOT HAVE INTENDED 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 ASSESSEES IS ACCEPTED, IT WOULD LEAD TO A SITUATION WHERE THE ASSESSEE WHO THOUGH WAS REQUIRE D TO DEDUCT THE TAX AT SOURCE BUT NO SUCH DEDUCTION WAS MADE OR MORE FLAGR ANTLY DEDUCTION THOUGH MADE IS NOT PAID TO THE GOVERNMENT, WOULD ESCAPE TH E CONSEQUENCE ONLY BECAUSE THE AMOUNT WAS ALREADY PAID OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOTHER ASSESSEE WHO WOULD OTHERWISE BE IN SIMILAR SITUATION BUT IN WHOSE CASE THE AMOUNT REMAINED PAYABLE TILL THE END OF THE YEAR. WE SIMPLY DO NOT SEE ANY LOGIC WHY THE LEGISLATURE WOULD HAVE DE SIRED TO BRING ABOUT SUCH IRRECONCILABLE AND DIVERSE CONSEQUENCES. WE HASTEN TO ADD THAT THIS IS NOT THE PRIME BASIS ON WHICH WE HAVE ADOPTED THE INTERPRETA TION WHICH WE HAVE GIVEN. IF THE LANGUAGE USED BY THE PARLIAMENT CONVEYED SUC H A MEANING, WE WOULD NOT HAVE HESITATED IN ADOPTING SUCH AN INTERPRETATION. WE ONLY HIGHLIGHT THAT WE WOULD NOT READILY ACCEPT THAT THE LEGISLATURE DESIR ED TO BRING ABOUT AN INCONGRUOUS AND SEEMINGLY IRRECONCILABLE CONSEQUENC ES. THE DECISION OF THE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, GUJARAT VS. ASHOKBHAI CHIMANBHAI (SUPRA), WOULD NOT ALTER THIS SITUATION. THE SAID D ECISION, OF COURSE, RECOGNIZES THE CONCEPT OF ASCERTAINING THE PROFIT AND LOSS FROM THE BUSINESS OR PROFESSION WITH REFERENCE TO A CERTAIN PERIOD I.E. THE ACCOUNTING YEAR. IN THIS CONTEXT, LAST DATE OF SUCH ACCOUNTING PERIO D WOULD ASSUME CONSIDERABLE SIGNIFICANCE. HOWEVER, THIS DECISION NOWHERE INDICA TES THAT THE EVENTS WHICH TAKE PLACE DURING THE ACCOUNTING PERIOD SHOULD BE IGNORE D AND THE ASCERTAINMENT OF FULFILLING A CERTAIN CONDITION PROVIDED UNDER THE S TATUTE MUST BE JUDGED WITH REFERENCE TO LAST DATE OF THE ACCOUNTING PERIOD. PA RTICULARLY, IN THE CONTEXT OF REQUIREMENTS OF SECTION 40(A)(IA) OF THE ACT, WE SE E 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 BECAU SE, 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 MUST BE ASCERTAINED ON THE STRENGTH OF THE POSITION EMERGIN G ON 31 ST MARCH. 25. THIS BRINGS US TO THE SECOND ASPECT OF THIS DIS CUSSION, NAMELY, WHETHER THIS IS A CASE OF CONSCIOUS OMISSION AND THEREFORE, THE LEGIS LATURE MUST BE SEEN TO HAVE DELIBERATELY BROUGHT ABOUT A CERTAIN SITUATION WHIC H DOES NOT REQUIRE ANY FURTHER 9 INTERPRETATION. THIS IS THE FUNDAMENTAL ARGUMENT OF THE TRIBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT(SUPRA) TO ADOPT A PARTICULAR VIEW. 26. WHILE INTERPRET ING A STATUTORY PROVISION THE COURTS HAVE OFTEN APP LIED HYDEN S RULE OR THE MISCHIEF RULE AND ASCERTAINED WHAT 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. VS. STATE OF BIHAR AND OTH ERS REPORTED IN AIR 1955 SC 661 , THE APEX COURT REFERRED TO THE FAMOUS ENGLISH DEC ISION IN HYDEN S CASE WHEREIN WHILE ADOPTING RESTRICTIVE OR E NLARGING INTERPRETATION, 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 MISCH IEF AND DEFECT IN WHICH THE COMMON LAW DID NOT PROVIDE. (3) WHAT REMEDY THE PAR LIAMENT HAD RESOLVED AND ADOPTED TO CURE THE DISEASE AND (4) TRUE REASON OF THE REMEDY. 28. IN SUCH CONTEXT, THE POSITION PREVAILING PRIOR TO THE AMENDMENT INTRODUCED IN SECTION 40(A) WOULD CERTAINLY BE A RELEVANT FACTOR. HOWEVER, THE PROCEEDINGS IN THE PARLIAMENT, ITS DEBATES AND EVEN THE SPEECHES M ADE BY THE PROPOSER OF A BILL ARE ORDINARILY NOT CONSIDERED AS RELEVANT OR S AFE TOOLS FOR INTERPRETATION OF A STATUTE. IN THE CASE OF ASWINI KUMAR GHOSE AND ANOTHER VS. ARABINDA BOSE AN D ANOTHER REPORTED IN A.I.R. 1952 SC 369 IN A CONSTITUTION BENCH DECISION OF (CORAM: PATANJALI SASTRI, C.J.) , OBSERVED THAT:- 33. &..IT WAS URGED THAT ACCEPTANCE OR REJECTION OF AMENDMENTS TO A BILL IN THE COURSE OF PARLIAMENTARY PROCEEDING S FORMS PART OF THE PRE-ENACTMENT HISTORY OF A STATUTE AND AS SUCH MIGHT THROW VALUABLE LIGHT ON THE INTENTION OF THE LEGISLATURE WHEN THE LANGUAGE USED IN THE STATUE ADMITTED OF MORE THAN O NE CONSTRUCTION. WE ARE UNABLE TO ASSENT TO THIS PREPO SITION. THE REASON WHY A PARTICULAR AMENDMENT WAS PROPOSED OR ACCEPTED OR REJECTED IS OFTEN A MATTER OF CONTROVER SY, AS IT HAPPENED TO BE IN THIS CASE, AND WITHOUT THE SPEECH ES BEARING UPON THE MOTION, IT CANNOT BE ASCERTAINED WITH ANY REASONABLE DEGREE OF CERTAINTY. AND WHERE THE LEGISLATURE HAPP ENS TO BE BICAMERAL, THE SECOND CHAMBER MAY OR MAY NOT HAVE K NOWN OF SUCH REASON WHEN IT DEALT WITH THE MEASURE. WE HOLD ACCORDINGLY THAT ALL THE THREE FORMS OF EXTRINSIC AID SOUGHT TO BE RESORTED TO BY THE PARTIES IN THE CASE MUS BE EXCLUDED FROM CONSID ERATION IN ASCERTAINING THE TRUE OBJECT AND INTENTION OF THE L EGISLATURE. 29. IN YET ANOTHER CONSTITUTION BENCH JUDGMENT IN T HE CASE OF A.K.GOPALAN VS. STATE OF MADRAS REPORTED IN AIR 1950 SC 27 , IT WAS OBSERVED AS UNDER:- 17.....THE RESULT APPEARS TO BE THAT WHILE IT IS N OT PROPER TO TAKE INTO CONSIDERATION THE INDIVIDUAL OPINIONS OF MEMBERS OF PARLIAMENT OR CONVENTION TO CONSTRUE THE MEANING OF THE PARTICULAR CLAUSE, WHEN A QUESTION I S RAISED WHETHER A CERTAIN PHRASE OR EXPRESSION WAS UP FOR CONSIDERATION AT AL L OR NOT, A REFERENCE TO THE DEBATES MAY BE PERMITTED. 30. IN THE CASE OF EXPRESS NEWSPAPER (PRIVATE) LTD. AND ANOTHER VS. THE UNION OF INDIA AND OTHERS REPORTED IN 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 ARRIVING AT A PROPER CONSTRUCTION OF THE EXPRESSION FIXING RATES OF WAGES TO LOOK INTO THE S TATEMENT OF OBJECTS AND REASONS ATTACHED TO THE BILL NO.13 OF 1955 AS INTRO DUCED 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 WAG ES AND THE WAGE BOARD AND THE FACT OF SUCH DELETION WHEN THE ACT CAME TO BE PASSE D IN ITS PRESENT FORM. THERE IS 10 A CONSENSUS OF OPINION THAT THESE ARE NOT AIDS TO T HE CONSTRUCTION OF THE TERMS OF THE STATUTE WHICH HAVE OF COURSE TO BE GIVEN THEIR PLAIN AND GRAMMATICAL 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 THE STATUTE ARE AMBIGUOUS OR VAGUE THAT RESORT MAY BE HAD TO THEM FOR THE PURPOSE OF ARRIVI NG AT THE TRUE INTENTION OF THE LEGISLATURE. 31. IT CAN THUS BE SEEN THAT THE DEBATES IN THE PARLIAMENT 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 PROVISION ULTI MATELY ENACTED CARRIED A DIFFERENT EXPRESSION CANNOT BE GATHERED FROM MERE C OMPARISON OF THE TWO SETS OF PROVISIONS. THERE MAY BE VARIETY OF REASONS WHY THE ULTIMATE PROVISION MAY VARY FROM THE ORIGINAL DRAFT. IN THE PARLIAMENTARY SYSTE M, TWO HOUSES SEPARATELY DEBATE THE LEGISLATIONS UNDER CONSIDERATION. IT WOU LD ALL THE MORE BE UNSAFE TO REFER TO OR RELY UPON THE DRAFTS, AMENDMENTS, DEBAT ES ETC FOR INTERPRETATION OF A STATUTORY PROVISION WHEN THE LANGUAGE USED IS NOT C APABLE OF SEVERAL MEANINGS. IN THE PRESENT CASE THE TRIBUNAL IN CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) FELL IN A SERIOUS ERROR IN MERELY COMPARING THE LANGUAGE USED IN THE DRAFT BILL AND FINAL ENACTMENT TO ASSIGN A PARTICUL AR MEANING TO THE STATUTORY PROVISION. 32. IT IS, OF COURSE, TRUE THAT THE COURTS IN INDIA HAVE 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 IMMEDIA TELY INQUIRE WHAT WAS THE STATUTORY PROVISION BEFORE AND WHAT CHANGES THE LEG ISLATURE BROUGHT ABOUT AND COMPARE THE EFFECT OF THE TWO. THE OTHER OCCASION F OR APPLYING THE PRINCIPLE, WE NOTICE FROM VARIOUS DECISIONS OF THE SUPREME COURT, HAS BEEN WHEN THE LANGUAGE OF THE LEGISLATURE IS COMPARED WITH SOME O THER ANALOGOUS STATUTE OR OTHER PROVISIONS OF THE SAME STATUTE OR WITH EXPRES SION WHICH COULD APPARENTLY OR OBVIOUSLY BEEN USED IF THE LEGISLATURE HAD DIFFEREN T INTENTION IN MIND, WHILE FRAMING THE PROVISION. WE MAY REFER TO SOME OF SUCH DECISIONS PRESENTLY. IN THE CASE OF BHUWALKA STEEL INDUSTRIES LTD. VS. BOMBAY IRON AND STEEL LABOUR BOARD REPORTED IN AIR 2010 (SUPPL.) 122 , THE APEX 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 ENGAGE D IN ANY SCHEDULED EMPLOYMENT. THEREFORE, THERE WAS A SPECIF IC ACT ON THE PART OF THE LEGISLATURE TO ENLARGE THE SCOPE OF THE DEFINIT ION AND ONCE WE ACCEPT THIS, ALL THE ARGUMENTS REGARDING THE OBJECTS AND R EASONS, 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 COMMITTEE, NARELA, DELH I VS. COMMISSIONER OF INCOME TAX AND ANR. REPORTED IN AIR 2008 SC(SUPPLEMENT) 566 , THE SUPREME COURT NOTICED THAT PRIOR TO FINANCE ACT , 2002, THE INCOME TAX ACT DID NOT CONTAIN THE DEFINITION OF WORDS LOCAL AUTHO RITY . THE WORD CAME TO BE DEFINED FOR THE FIRST TIME BY THE FINANCE ACT OF 20 02 BY EXPLANATION/ DEFINITION CLAUSE TO SECTION 10(20) OF THE ACT. IT WAS FURTHER NOTICED THAT THERE WERE SIGNIFICANT DIFFERENCE IN THE DEFINITION OF TERM LO CAL AUTHORITY CONTAINED UNDER SECTION 3(31) OF THE GENERAL CLAUSES ACT, 1987 AS C OMPARED 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 OBSERVED THAT:- 11 27. CERTAIN GLARING FEATURES CAN BE DECIPHERED FROM THE ABOVE COMPARATIVE CHART. UNDER SECTION 3(31) OF THE GENER AL CLAUSES ACT, 1897, LOCAL AUTHORITY WAS DEFINED TO MEAN A M UNICIPAL COMMITTEE, DISTRICT BOARD, BODY OF PORT COMMISSIONE RS OR OTHER AUTHORITY LEGALLY ENTITLED TO THE CONTROL OR MANAGE MENT OF A MUNICIPAL OR LOCAL FUND. THE WORDS OTHER AUTHORITY IN SECTION 3(31) OF THE 1897 ACT HAS BEEN OMITTED BY PARLIAMEN T IN THE EXPLANATION/ DEFINITION CLAUSE INSERTED IN SECTION 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 WO RD LOCAL AUTHORITY IS BODILY LIFTED FROM SECTION 3(31) OF TH E 1897 ACT AND INCORPORATED, BY PARLIAMENT, IN THE SAID EXPLANATIO N TO SECTION 10(20) OF THE 1961 ACT. THIS DELIBERATE OMISSION IS IMPORTANT. 34. THE APEX COURT IN THE CASE OF GREATER BOMBAY CO-OPERATIVE BANK LTD. VS. M/S. UNITED YARN TEX.PVT.LTD & ORS. REPORTED IN 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 TH E 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) H AD NOT BEEN ALTERED BY ACT NO.23 OF 1965 AND IT WAS KEPT INTACT , AND IN FACT ADDITIONAL DEFINITIONS WERE ADDED BY SECTION 56(C). CO- OPERATIVE BANK WAS SEPARATELY DEFINED BY THE NEWLY INSERTED CLAUSE (CC I) AND PRIMARY CO- OPERATIVE 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 OF BANKING COMPANY MUST, THEREFORE, NEC ESSARILY BE STRICTLY CONFINED TO 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 SE CTION 5(C) AND SHALL INCLUDE CO- OPERATIVE BANK AS DEFINED IN SECTION 5(CCI) AND PRIMARY CO- OPERATIVE BANK AS DEFINED IN SECTION 5(CCV). HOWEVE R, THE PARLIAMENT DID NOT DO SO. THERE WAS THUS A CONSCIOU S EXCLUSION AND DELIBERATE COMMISSION OF CO-OPERATIVE BANKS FROM TH E PURVIEW OF THE RDB ACT. THE REASON FOR EXCLUDING CO-OPERATIVE BANKS SEEMS TO BE THAT CO- OPERATIVE BANKS HAVE COMPREHENSIVE, SELF-CONTAINED AND LESS EXPENSIVE REMEDIES AVAILABLE TO THEM UNDER THE STATE CO-OPERA TIVE SOCIETIES ACTS OF THE STATES CONCERNED, WHILE OTHER BANKS AND FINA NCIAL INSTITUTIONS DID NOT HAVE SUCH SPEEDY REMEDIES AND THEY HAD TO FILE SUITS IN CIVIL COURTS. 35. IN THE CASE OF NATIONAL MINERAL DEVELOPMENT CORPORATION LTD. VS. S TATE OF M.P AND ANOTHER REPORTED IN AIR 2004 SC 2456 , THE APEX COURT OBSERVED AS UNDER:- 29. THE PARLIAMENT KNOWING IT FULL WELL THAT THE IR ON ORE SHALL HAVE TO UNDERGO A PROCESS LEADING TO EMERGENCE OF LUMPS, FI NES, CONCENTRATES AND SLIMES CHOSE TO MAKE PROVISION FOR QUANTIFICATI ON OF ROYALTY ONLY BY REFERENCE TO THE QUANTITY OF LUMPS, FINES AND CONCE NTRATES. IT LEFT SLIMES OUT OF CONSIDERATION. NOTHING PREVENTED THE PARLIAM ENT FROM EITHER PROVIDING FOR THE QUANTITY OF IRON ORE AS SUCH AS T HE BASIS FOR QUANTIFICATION OF ROYALTY. IT CHOSE TO MAKE PROVISION FOR THE QUAN TIFICATION BEING AWAITED UNTIL THE EMERGENCE OF LUMPS, FINES AND CONCENTRATE S. HAVING DONE SO THE PARLIAMENT HAS NOT SAID FINES INCLUDI NG SLIMES . THOUGH SLIMES ARE NOT FINES THE PARLIAMENT COULD HAVE ASSIGNED AN ARTIFIC IAL OR EXTENDED MEANING TO FINES FOR THE PURPOSE OF LEVY OF ROYALTY WHICH IT HAS CHOSEN NOT TO DO. IT IS CLEARLY SUGGESTIVE OF ITS INTENTIO N NOT TO TAKE INTO CONSIDE RATION SLIMES FOR QUANTIFYING THE AMOUNT OF ROYALTY . THIS DELIBERATE OMISSION OF PARLIAMENT CANNOT BE MADE GO OD BY INTERPRETATIVE 12 PROCESS SO AS TO CHARGE ROYALTY ON SLIMES BY READIN G SECTION 9 OF THE ACT DIVORCED FROM THE PROVISIONS OF THE SECOND SCHE DULE. EVEN IF SLIMES WERE TO BE HELD LIABLE TO CHARGE OF ROYALTY, THE QU ESTION WOULD STILL HAVE REMAINED AT WHAT RATE AND ON WHAT QUANTITY WHICH QU ESTIONS CANNOT BE ANSWERED BY SECTION 9. 36. IN THE CASE OF GOPAL SARDAR, VS. KARUNA SARDAR REPORTED IN AIR 2004 SC 3068 , THE APEX COURT IN THE THE CONTEXT OF LIMITATION WIT HIN WHICH RIGHT OF PREEMPTION MUST BE EXERCISED AND WHETHER IN THE CONTEXT OF THE RELEVANT PROVISIONS CONTAINED IN WEST BENGAL LAND REFORMS AND LIMITATIO N ACT, 1963 APPLIED OR NOT, OBSERVED AS UNDER:- 8....PRIOR TO 15-2-1971, AN APPLICATION UNDER SECTI ON 8 WAS REQUIRED TO BE MADE TO THE REVENUE OFFICER SPECIFICALLY EMPOWERED BY THE STATE GOVERNMENT IN THIS BEHALF. THIS PHRASE WAS SUBSTITU TED BY THE PHRASE MUNSIF HAVING TERRITORIAL JURISDICTI ON BY THE AFOREMENTIONED AMENDMENT. EVEN AFTER THIS AMENDMENT WHEN AN APPLIC ATION IS REQUIRED TO BE MADE TO SECTION 8 OF THE ACT EITHER TO APPLY SECTION 5 OF THE LIMITATION ACT OR ITS PRINCIPLES SO AS TO ENABLE A PARTY TO MAKE AN APPLICATION AFTER THE EXPIRY OF THE PERIOD OF LIMIT ATION PRESCRIBED ON SHOWING SUFFICIENT CAUSE FOR NOT MAKING AN APPLICAT ION WITHIN TIME. THE ACT IS OF 1955 AND FOR ALL THESE YEARS, NO PROVISIO N IS MADE UNDER SECTION 8 OF THE ACT PROVIDING FOR CONDONATION OF DELAY. THUS , WHEN SECTION 5 OF THE LIMITATION ACT IS NOT MADE APPLICABLE TO THE PROCEE DINGS UNDER SECTION 8 OF THE ACT UNLIKE TO THE OTHER PROCEEDINGS UNDER TH E ACT, AS ALREADY STATED ABOVE, IT IS APPROPRIATE TO CONSTRUE THAT THE PERIO D OF LIMITATION PRESCRIBED UNDER SECTION 8 OF THE ACT SPECIFICALLY AND EXPRESS LY GOVERNS AN APPLICATION TO BE MADE UNDER THE SAID SECTION AND N OT THE PERIOD PRESCRIBED UNDER ARTICLE 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 SECTI ON 40(A)(IA) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31 TH MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. OF C OURSE, AS LONG AS THE OTHER REQUIREMENTS OF THE SAID PROVISION EXIST. IN THAT C ONTEXT, IN OUR OPINION THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SURPA), DOES NOT LAY DOWN CORRECT LAW. 39. WE ANSWER THE QUESTIONS AS UNDER:- QUESTION (1) IN THE NEGATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEES. QUESTION (2) ALSO IN THE NEGATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEES. THUS IT IS CLEAR THAT HON'BLE GUJARAT HIGH COURT HA S CONSIDERED ALL ASPECTS OF THE ISSUES RAISED IN THE DECISION OF SPECIAL BENCH IN C ASE OF MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA). WE FURTHER FIND THAT THAT EVEN HON'BLE CALCUTTA HIGH COURT HAS OVERRULED THIS DECISION IN CASE OF CIT VS . CRESENT EXPORT SYNDICATE. MOREOVER CHANDIGARH BENCH OF THE TRIBUNAL CONSISTE NTLY HAS BEEN FOLLOWING THE DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF C IT V. SIKANDARKHAN N TUNWAR AND OTHERS (SUPRA) AS WELL AS THE DECISION OF HON' BLE CALCUTTA HIGH COURT IN CASE OF CIT VS. CRESENT EXPORT SYNDICATE (SUPRA). 25 NOW THE QUESTION ARISES WHETHER DISMISSAL OF SLP BY HON'BLE SUPREME COURT IN CASE OF CIT V. VECTOR SHIPPING SERVICES ( P) LTD (SUPRA) WOULD CHANGE THE ABOVE LEGAL POSITION. WE ARE AFRAID THE ANSWER IS NO. THE HON'BLE SUPREME 13 COURT HAD ITSELF CONSIDERED THE ISSUE IN CASE OF V .M. SALGAOCAR AND BROS. PVT LTD V. CIT, 243 ITR 383. IT WAS OBSERVED BY THE COURT ON THIS ISSUE AS UNDER: DIFFERENT CONSIDERATIONS APPLY WHEN A SPECIAL LEA VE PETITION UNDER ARTICLE 136 OF THE CONSTITUTION IS SIMPLY DISMISSED BY SAYING DISMISSED, AND AN APPEAL PROVIDED UNDER ARTICLE 133 IS DISMISSED ALSO WITH T HE WORDS THE APPEAL IS DISMISSED. IN THE FORMER CASE IT HAS BEEN LAID DOW N BY THIS COURT THAT WHEN A SPECIAL LEAVE PETITION IS DISMISSED THIS COURT DOES NOT COMMENT ON THE CORRECTNESS OR OTHERWISE OF THE ORDER FROM WHICH LEAVE TO APPEA L IS SOUGHT. BUT WHAT THE COURT MEANS IS THAT IT DOES NOT CONSIDER IT TO BE A FIT C ASE FOR EXERCISE OF ITS JURISDICTION UNDER ARTICLE 136 OF THE CONSTITUTION. THAT CERTAIN LY COULD NOT BE SO WHEN AN APPEAL IS DISMISSED THOUGH BY A NON-SPEAKING ORDER. HERE THE DOCTRINE OF MERGER APPLIES. IN THAT CASE, THE SUPREME COURT UPHOLDS TH E DECISION OF THE HIGH COURT OR THE TRIBUNAL FROM WHICH THE APPEAL IS PROVIDED UNDE R CLAUSE (3) OF ARTICLE 133. THIS DOCTRINE OF MERGER DOES NOT APPLY IN THE CASE OF DI SMISSAL OF A SPECIAL LEAVE PETITION UNDER ARTICLE 136. WHEN AN APPEAL IS DISMI SSED THE ORDER OF THE HIGH COURT IS MERGED WITH THAT OF THE SUPREME COURT. WE QUOTE THE FOLLOWING PARAGRAPH FROM THE JUDGMENT OF THIS COURT IN THE CA SE OF SUPREME COURT EMPLOYEES WELFARE ASSOCIATION V. UNION OF INDIA, A IR 1990 HON'BLE SUPREME COURT 334; [1989] 4 SCC 187 (AT PAGE 344 OF AIR 199 0 S.C): 22. IT HAS BEEN ALREADY NOTICE THAT THE SPECIAL LE AVE PETITION FILED ON BEHALF OF THE UNION OF INDIA AGAINST THE SAID JUDGMENTS OF TH E DELHI HIGH COURT WERE SUMMARILY DISMISSED BY THIS COURT. IT IS NOW A WELL SETTLED PRINCIPLE OF LAW THAT WHEN A SPECIAL LEAVE PETITION IS SUMMARILY DISMISSE D UNDER ARTICLE 136 OF THE CONSTITUTION, BY SUCH DISMISSAL THIS COURT DOES NOT LAY DOWN ANY LAW, AS ENVISAGED BY ARTICLE 141 OF THE CONSTITUTION, AS CONTENDED BY THE LEARNED ATTORNEY-GENERAL. IN INDIAN OIL CORPORATION LTD. V. STATE OF BIHAR [1 987] 167 ITR 897; [1986] 4 SCC 146; AIR 1986 HON'BLE SUPREME COURT 1780, IT HAS BEEN HE LD BY THIS COURT THAT THE DISMISSAL OF A SPECIAL LEAVE PETITION IN LIMINE BY A NON-SPEAKING ORDER DOES NOT JUSTIFY ANY INFERENCE THAT, BY NECESSARY IMPLICATIO N, THE CONTENTIONS RAISED IN THE SPECIAL LEAVE PETITION ON THE MERITS OF THE CASE HA VE BEEN REJECTED BY THE SUPREME COURT. IT HAS BEEN FURTHER HELD THAT THE EF FECT OF A NON-SPEAKING ORDER OF DISMISSAL OF A SPECIAL LEAVE PETITION WITHOUT ANYTH ING MORE INDICATING THE GROUNDS OR REASONS OF ITS DISMISSAL MUST, BY NECESSARY IMPL ICATION, BE TAKEN TO BE THAT THE SUPREME COURT HAD DECIDED ONLY THAT IT WAS NOT A FI T CASE WHERE SPECIAL LEAVE SHOULD BE GRANTED. IN UNION OF INDIA V. ALL INDIA S ERVICES PENSIONERS ASSOCIATION [1988] 2 SCC 580; AIR 1988 HON'BLE SUPREME COURT 50 1, THIS COURT HAS GIVEN REASONS FOR DISMISSING THE SPECIAL LEAVE PETITION. WHEN SUCH REASONS ARE GIVEN, THE DECISION BECOMES ONE WHICH ATTRACTS ARTICLE 141 OF THE CONSTITUTION WHICH PROVIDES THAT THE LAW DECLARED BY THE SUPREME COURT SHALL BE BINDING ON ALL THE COURTS WITHIN THE TERRITORY OF INDIA. IT, THEREFORE , FOLLOWS THAT WHEN NO REASON IS GIVEN, BUT A SPECIAL LEAVE PETITION IS DISMISSED SI MPLICITER, IT CANNOT BE SAID THAT THERE HAS BEEN A DECLARATION OF LAW BY THIS COURT U NDER ARTICLE 141 OF THE CONSTITUTION. IT WAS, THEREFORE, CONTENDED THAT ONCE THIS COURT I N CIVIL APPEAL NO. 424 OF 1999, HAS DISMISSED THE APPEAL IT HAS UPHELD THE ORDER OF THE HIGH COURT IN THE CASE OF THE ASSESSMENT YEAR 1980-81 AND IT CANNOT TAKE A DI FFERENT VIEW FOR THE ASSESSMENT YEAR 1979-80. THERE APPEARS TO BE SUBSTA NCE IN THE SUBMISSION OF THE ASSESSEE. FROM ABOVE IT BECOMES CLEAR THAT AFTER AN SLP IS DI SMISSED IN LIMINE OR SIMPLICTOR AS SUCH THEN IT CANNOT BE SAID THAT THE HON'BLE SUP REME COURT HAS COMMENTED ON THE MERITS OF THE ISSUE. IT IS A SIMPLE CASE OF REJECTION OF PRAYER FOR ENTERTAINING THE SLP. THE SAME VIEW WAS TAKEN BY THE HON'BLE SU PREME COURT AGAIN IN CASE OF KUNHAYAMMED AND OTHERS V STATE OF KERALA AND ANO THER, 245 ITR 360 (S.C). HEAD NOTE READS AS UNDER: ARTICLE 136 OF THE CONSTITUTION OF INDIA CONFERS A SPECIAL JURISDICTION ON THE SUPREME COURT WHICH IS SWEEPING IN NATURE. IT IS A RESIDUARY POWER IN THE SENSE THAT IT CONFERS AN APPELLATE JURISDICTION ON THE SU PREME COURT SUBJECT TO SPECIAL LEAVE BEING GRANTED IN SUCH MATTERS AS MAY NOT BE C OVERED BY THE PRECEDING ARTICLES. EVEN IN THE FIELD COVERED BY THE PRECEDIN G ARTICLES, JURISDICTION CONFERRED BY ARTICLE 136 IS AVAILABLE TO BE EXERCISED IN AN A PPROPRIATE CASE. IT IS AN 14 UNTRAMMELED RESERVOIR OF POWER INCAPABLE OF BEING C ONFINED TO DEFINITIONAL BOUNDS; THE DISCRETION CONFERRED ON THE SUPREME COU RT BEING SUBJECTED TO ONLY ONE LIMITATION, THAT IS, THE WISDOM AND GOOD SENSE OR SENSE OF JUSTICE OF THE JUDGES. NO RIGHT OF APPEAL IS CONFERRED UPON ANY PA RTY; ONLY A DISCRETION IS VESTED IN THE SUPREME COURT TO INTERFERE BY GRANTING LEAVE TO AN APPLICANT TO ENTER IN ITS APPELLATE JURISDICTION NOT OPEN OTHERWISE AND AS OF RIGHT. THE JURISDICTION CONFERRED BY ARTICLE 136 IS DIVISI BLE INTO TWO STAGES; THE FIRST STAGE IS UP TO THE DISPOSAL OF THE PRAYER FOR SPECIAL LEAVE TO APPEAL; THE SECOND STAGE COMMENCES IF AND WHEN THE LEAVE TO APPEAL IS GRANTE D AND THE PETITION FOR SPECIAL LEAVE TO APPEAL IS CONVERTED INTO AN APPEAL . WHILE HEARING THE PETITION FOR SPECIAL LEAVE TO APP EAL, THE SUPREME COURT IS CALLED UPON TO SEE WHETHER THE PETITIONER SHOULD BE GRANTED SUCH LEAVE OR NOT. WHILE HEARING SUCH PETITION THE SUPREME COURT DOES NOT EXERCISE ITS APPELLATE JURISDICTION; IT MERELY EXERCISES ITS DISCRETIONARY JURISDICTION TO GRANT OR NOT TO GRANT LEAVE TO APPEAL IF THE PETITION SEEKING GRANT OF SPECIAL LEAVE IS D ISMISSED, IT IS AN EXPRESSION OF OPINION BY THE SUPREME COURT THAT A CASE FOR INVOKI NG THE APPELLATE JURISDICTION OF THE COURT WAS NOT MADE OUT. AN ORDER REFUSING SPECIAL LEAVE TO APPEAL MAY BE BY A NON SPEAKING ORDER OR BY A SPEAKING ORDER. IN EITHER CASE IT DOES NOT ATTRAC T THE DOCTRINE OF MERGER. AN ORDER REFUSING SPECIAL LEAVE TO APPEAL DOES NOT STA ND SUBSTITUTED IN THE PLACE OF THE ORDER UNDER CHALLENGE. ALL THAT IT MEANS IS THA T THE SUPREME COURT WAS NOT INCLINED TO EXERCISE ITS DISCRETION SO AS TO ALLOW THE APPEAL BEING FILED. WHATEVER BE THE PHRASEOLOGY EMPLOYED IN THE ORDER OF DISMISS AL, IF IT IS A NON-SPEAKING ORDER, I.E., IT DOES NOT ASSIGN REASONS FOR DISMISS ING THE SPECIAL LEAVE PETITION, IT WOULD NEITHER ATTRACT THE DOCTRINE OF MERGER SO AS TO STAND SUBSTITUTED IN THE PLACE OF THE ORDER PUT IN ISSUE BEFORE IT, NOR BE A DECLARATION OF LAW BY THE SUPREME COURT UNDER ARTICLE 141 OF THE CONSTITUTION FOR THERE IS NO LAW WHICH HAS BEEN DECLARED. IF THE ORDER REFUSING SPECIAL LEAVE TO APPEAL IS A SPEAKING ORDER, I.E., IT GIVES REASONS FOR REFUSING THE GRANT OF LEAVE, THEN THE O RDER HAS TWO IMPLICATIONS. FIRSTLY, THE STATEMENT OF LAW CONTAINED IN THE ORDER IS A DE CLARATION OF LAW BY THE SUPREME COURT WITHIN THE MEANING OF ARTICLE 141 WHI CH WILL OBVIOUSLY BE BINDING ON ALL COURTS AND TRIBUNALS IN INDIA AND CERTAINLY THE PARTIES THERETO. SECONDLY, OTHER THAN THE DECLARATION OF LAW, WHATEVER IS STAT ED IN THE ORDER ARE THE FINDINGS RECORDED BY THE SUPREME COURT WHICH WOULD BE BINDIN G ON THE PARTIES AND THE COURT, TRIBUNAL OR AUTHORITY WHOSE ORDER WAS UNDER CHALLENGE, IN ANY PROCEEDINGS SUBSEQUENT THERETO, ON THE PRINCIPLE OF JUDICIAL DI SCIPLINE, THE SUPREME COURT BEING THE APEX COURT OF THE COUNTRY. THE DECLARATIO N OF LAW WILL BE GOVERNED BY ARTICLE 141 BUT, THE CASE NOT BEING ONE WHERE LEAVE IS GRANTED, THE DOCTRINE OF MERGER DOS NOT APPLY. FROM ABOVE IT BECOMES CLEAR THAT IF AN SLP IS DISMI SSED THEN IT CANNOT BE SAID THAT THE HON'BLE SUPREME COURT HAS LAID DOWN ANY L AW. NOW IN THE PRESENT CASE THE SLP IN CASE OF CIT V VECTOR SHIPPING SERVICES ( SUPRA) FOLLOWING ORDER HAS BEEN PASSED BY THE HON'BLE SUPREME COURT : HEARD MR. MUKUL ROHTAGI, LD. ATTORNEY GENERAL, FOR THE PETITIONER DELAY IN FILING AND REFILLING SPECIAL LEAVE PETITION IS CONDONEDSPE CIAL LEAVE PETITION IS DISMISSED THEREFORE IT IS A CASE OF SIMPLE DISMISSAL OF SLP A ND CANNOT BE SAID TO HAVE LAID DOWN ANY LAW. IN VIEW OF THIS DISCUSSION AND THE EA RLIER DISCUSSION WE HAVE PREFERRED TO FOLLOW THE DECISION OF HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V. SIKANDARKHAN N. TUNVAR & ORS, (SUPRA) INSTEAD THE D ECISION OF HON'BLE ALLAHABAD HIGH COURT IN CASE OF CIT V VECTOR SHIPPING SERVICE S (SUPRA), WE DECIDE THIS ISSUE AGAINST THE ASSESSEE AND CONFIRM THE ORDER OF LD. C IT(A). 16. FOLLOWING THE ABOVE WE DECIDE THIS ISSUE AGAINS T THE ASSESSEE. 15 17. GROUND NO. 4 IS AGAINST THE DISALLOWANCE OF SOF TWARE EXPENSES AMOUNTING TO RS. 7,31,354/-. 18. BRIEF FACTS OF THE ISSUE ARE THAT THE APPELLANT HAD DEBITED AN AMOUNT OF RS. 10,44,792/- TO THE PROFIT & LOSS ACCOUNT UNDER THE HEAD 'MISCELLANEOUS EXPENDITURE WRITTEN OFF ON ACCOUNT OF SOFTWARE DEVE LOPMENT EXPENSES. THE ASSESSING OFFICER HAS TREATED THE EXPENDITURE AS CA PITAL EXPENDITURE AND ALLOWED DEPRECIATION @ 60%, RESULTING INTO ADDITION OF RS. 7,31,354/-. 19. DURING THE COURSE OF PROCEEDINGS BEFORE THE CIT (A), THE LD. COUNSEL FOR THE APPELLANT SUBMITTED THAT THESE EXPENSES ARE OF REVENUE NATURE, SINCE THE SOFTWARES HAVE SHORT LIFE OF 2-3 YEARS. 20. LD. CIT(A) CONFIRMED THE ADDITION AND DIRECTED TO ALLOW DEPRECIATION @ 60% . 21. BEFORE US THE LD. AR PRAYED THAT THE SOFTWARE E XPENSES HAVING SHORT LIFE OF 2 TO 3 YEARS SHOULD BE TREATED AS REVENUE EXPENDITU RE AND BE ALLOWED. 22. ON THE FACT OF THE ISSUE AFTER THE INTRODUCTION OF NEW APPENDIX-1 APPLICABLE FROM AY 2006-07 ONWARDS THE SOFTWARE DEV ELOPMENT EXPENSES HAVE TO BE TREATED AS CAPITAL EXPENDITURE AND DEPRECIATI ON OF 60% IS ALLOWABLE. SINCE IT IS A MATTER OF FACTUAL ISSUE NO INTERFEREN CE IS CALLED IN THE ORDER OF THE LD. CIT(A). 23. GROUND NO. 5 DEALS WITH DISALLOWANCE OF DEDUCTI ON UNDER SECTION 80IB OF THE ACT. 24. BRIEF FACTS OF THE ISSUE ARE THAT, IN ALL, THE APPELLANT HAD EIGHT UNITS, OUT OF WHICH DEDUCTION U/S 80IB WAS CLAIMED IN PARWANOO UN IT II & JAMMU UNIT AND U/S 80IC IN BADDI UNIT III. THE APPELLANT HAD ALLOCAT ED THE EXPENSES IN SALES RATIO OF VARIOUS UNITS. THE ASSESSING OFFICER REALLOCATED TH E EXPENSES ON THE PROFIT RATIO AND RECOMPUTED DEDUCTION TO BE ALLOWED U/S 80IB/ 80 IC. FINALLY, HE DISALLOWED THE EXCESS DEDUCTION CLAIMED U/S 80IB/ 80IC OF RS. 14,10,12,246/-. 25. THE ASSESSING OFFICER ALSO NOTICED THAT THE APP ELLANT HAD CLAIMED DEDUCTION U/S 80IB/ 80IC ON OTHER INCOMES OF RS. 2, 07,67,638/-. HE DISALLOWED THE CLAIM OF DEDUCTION U/S 80IB/ 80IC ON THIS INCOME. 16 26. DURING THE COURSE OF PROCEEDINGS BEFORE THE CIT (A), THE LD. COUNSEL FOR THE APPELLANT SUBMITTED THAT THE ASSESSING OFFICER HAS WRONGLY ALLOCATED THE EXPENSES ON PROFIT RATIO BASIS.IT HAS, INTER-ALIA, BEEN SUBMITTED THAT THE ISSUE OF ALLOCATION OF EXPENSES HAS BEEN DECIDED IN FAVOUR O F THE APPELLANT IN A.Y. 2007- 08. 27. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE P ARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. 28. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB ON OTHER INCOME OF RS. 2,07,67,638/-, THE LD. COUNSEL HAS SUBMITTED AS UND ER: 'THE LEARNED ASSESSING OFFICER HAS WRONGLY DISALLOW ED DEDUCTION U/S 80IB ON OTHER INCOMES AMOUNTING TO RS.2,07,67,638/- OUT OF WHICH MAJOR PART IS RELATED TO THE BUSINESS OF THE ASSESSEE. THE ASSESSEE HAS EARNED THIS INCOME F ROM THE BUSINESS ITSELF AND HENCE DEDUCTION U/S 80IB SHOULD BE ALLOWABLE AS THESE INC OME ARE DERIVED FROM ELIGIBLE BUSINESS. THE SALARY IN LIEU OF NOTICE IS RS.80,243/- WHICH W AS RECEIVED FROM THE WORKERS WHO LEFT THE JOB DURING THE YEAR FOR THE EXCESS EXPENDITURE INCU RRED FOR THEM. THEN . THERE IS INCOME FROM INSURANCE CLAIMS AGAINST LOSS OF RAW MATERIAL OF RS . 1,67,16,005/- WHICH RELATES TO THE BUSINESS OF THE ASSESSEE. THERE IS ALSO INTEREST RE CEIVED FROM RELATED PARTIES AMOUNTING TO RS.10,61,968/-. THERE IS INTEREST INCOME FROM FDR O F RS.53,472/- WHICH WERE GIVEN AS GUARANTEE FOR L.C. AND OTHER BANK FACILITIES AND HE NCE ARE FOR THE BUSINESS OF THE ASSESSEE, THERE IS ALSO AN INCOME DIVIDEND OF RS.L 1,56,404/- INCLUDED IN OTHER INCOME WHICH IS ALREADY AN EXEMPT INCOME U/S 10(34).' 29. THIS MATTER HAS BEEN DEALT IN THE CASE OF THE A SSESSEE IN THE AY 2006-07 AND HONBLE ITAT CHANDIGARH VIDE ORDER DT. 10/11/20 09 IN ITA NO. 729/CHD/2009 WHEREIN IT WAS ADJUDICATED THAT THE EXPENSES WERE T O BE ATTRACTED ON THE BASIS OF SALES RATIO WHICH IS AN ACCEPTABLE ACCOUNTING ST ANDARD APPLICABLE TO COMPUTATION OF INCOME OF VARIOUS UNITS. RESPECTFULL Y FOLLOWING THE EARLIER DECISION OF HONBLE ITAT ON THE ISSUE IT IS HELD TH AT IMPUGNED EXPENSES HAVE TO BE ALLOCATE IN THE SALE RATIO AND AO IS DIRECTED AC CORDINGLY. 30. REGARDING DISALLOWANCE OF DEDUCTION U/S 80IB/80 IC ON OTHER INCOMES, IT IS SEEN THAT THE OTHER INCOMES RELATE TO DIVIDEND, INT EREST ON FDRS GIVEN AS GUARANTEE, INTEREST RECEIVED FROM RELATED PARTIES, INSURANCE -CLAIMS AND SALARY OF THE WORKERS WHO LEFT THE JOB. NONE OF THESE INCO MES RELATE TO MANUFACTURE OR PRODUCTION OF INDUSTRIAL UNDERTAKING AND SO DEDUCTI ON U/S 80IB/80IC ON THESE OTHER INCOMES IS NOT ALLOWABLE IN VIEW OF JUDGEMENT OF HON'BLE SUPREME COURT IN THE CASE OF M/S PANDIAN CHEMICALS LTD (262 ITR 2 78), SINCE FOR ALLOWABILITY OF DEDUCTION U/S 80IB/ 80IC, THE IMMEDIATE SOURCE OF I NCOME SHOULD BE MANUFACTURING OR PRODUCTION AND IT SHOULD HAVE DIRE CT NEXUS WITH THE INDUSTRIAL UNDERTAKING. DURING THE YEAR THE ASSESSEE HAS ALSO RECEIVED INSURANCE CLAIM OF 17 RS. 1,67,16,005/-. KEEPING IN VIEW THE JUDGMENT OF M/S PANDIAN CHEMICALS LTD (262 ITR 278), WE RESTORE THIS MATTER TO THE FILE O F THE ASSESSING OFFICER TO EXAMINE AND ALLOW IF THE OTHER INCOME HAS A DIRECT NEXUS W ITH THE MANUFACTURE OR PRODUCTION OF THE INDUSTRIAL UNDERTAKING. 31. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. 32. GROUND NO. 6 RELATES TO CONFIRMING OF THE DISAL LOWANCES OF LIABILITIES OF RS. 41,32,947/- FOR CALCULATION UNDER SECTION 115JB. 33. DURING THE YEAR THE ASSESSING OFFICER HAS ADDED BACK AN AMOUNT OF RS. 41,32,957/- FOR CALCULATION OF THE BOOK PROFITS UND ER SECTION 115JB OF INCOME TAX ACT. THIS AMOUNT CONSISTS OF FOLLOWING: PROVISIONS FOR BAD DEBTS RS. 20,32,95/ GRATUITY PAYABLE RS. 1,00,000/- PROVISION FOR LEAVE ENCASHMENT RS. 20,00,000/- TOTAL RS. 41,32,957/- 34. LD. CIT(A) UPHELD THE ADDITION. 35. BEFORE US THE ASSESSEE ARGUED THAT THERE WERE A CTUAL BAD DEBTS WRITTEN OFF OF RS. 20,32,957/- IN P& L ACCOUNT AND ASSESSIN G OFFICER WRONGLY ADDED BACK THIS AMOUNT. HE FURTHER SUBMITTED THAT GRATUITY OF RS. 1.00 LACS HAS ALREADY BEEN PAID TO LIC AND LEAVE ENCASHMENT OF RS. 518946/- HA S ALREADY BEEN PAID. 36. IN VIEW OF THE JUDGEMENT IN THE CASE OF M/S BEA RDSELL LTD. THESE AMOUNTS HAVE TO BE CONSIDERED WHILE COMPUTING THE TAX LIABI LITY UNDER SECTION 115JB. THE MATTER IS BEING REFERRED BACK TO ASSESSING OFFICER TO VERIFY THE EXACT AMOUNTS ALREADY PAID AND PROVISIONS MADE. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO GI VE BENEFIT OF PAYMENTS MADE WHILE COMPUTING THE PROFITS UNDER SECTION 115J B. 37. THIS GROUND IS TREATED AS ALLOWED FOR STATISTIC AL PURPOSES. 38. NOW WE SHALL DEAL WITH THE APPEAL OF THE REVENU E IN ITA NO. 631/CHD/2014. 18 39. THE GROUND NO. 1 OF THE APPEAL HAS ALREADY BEEN DEALT IN RELATION TO THE GROUND NO. 5 OF THE ASSESSEES APPEAL WHEREIN THE P RINCIPLE WAS LAID TO APPORTION THE EXPENDITURE IN THE RATIO OF SALES. 40. THE GROUND NO. 2 OF THE APPEAL HAS ALREADY BEEN DEALT IN RELATION TO THE GROUND NO. 6 OF THE ASSESSEES APPEAL WHEREIN THE M ATTER WAS SENT BACK TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATION AND V ERIFICATION. 41. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED WHEREAS THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (B.R.R.KU MAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11/08/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR