DCIT, CHENNAI V. Shriram Capital Ltd., CHENNAI

ITA 729/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8805 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 24-03-2016
• Court: TRIBUNAL
• Department Lawyers: DR U ANJANEYALU
• Assessee Lawyers: R SIVARAMAN
• Section: 14A; 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.326/MDS/2016 / ASSESSMENT YEAR : 2012-13 M/S SHRIRAM CAPITAL LTD MOOKAMBIKA COMPLEX NO.4, LADY DESIKA ROAD MYLAPORE, CHENNAI 600004 VS. THE D Y. COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE 6(1) CHENNAI [PAN AABCS 2726 B] ( &' / APPELLANT) ( ()&' /RESPONDENT) ./ I.T.A.NO.729 & 730/MDS/2016 / ASSESSMENT YEAR : 2012-13 & 2009-10 THE DY. COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE 6(1) CHENNAI VS. M/S SHRIRAM CAPITAL LTD MOOKAMBIKA COMPLEX NO.4, LADY DESIKA ROAD MYLAPORE, CHENNAI 600004 ( &' / APPELLANT) ( ()&' /RESPONDENT) ASSESSEE BY : SHRI R. SIVARAMAN, ADVOCATE DEPARTMENT BY : DR. U. ANJANEYALU, CIT / DATE OF HEARING : 31 - 5 - 2016 / DATE OF PRONOUNCEMENT : 05 - 08 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER BOTH THE ASSESSEE AND REVENUE FILED APPEALS FOR ASSESSMENT YEAR 2012-13 AND THE REVENUE ALSO FILED APPEAL FOR ASSESSMENT YEAR ITA NO.326, 729 & 730/16 :- 2 -: 2009-10 AGAINST THE RESPECTIVE ORDERS OF THE COMMIS SIONER OF INCOME TAX (APPEALS)-15, CHENNAI, ALL DATED 24.9.2015. SIN CE COMMON ISSUE ARISES FOR CONSIDERATION IN ALL THE APPEALS, WE HEA RD THEM TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. LET US FIRST TAKE UP ASSESSEES APPEAL I.T.A.NO. 326/MDS/2016 FOR ASSESSMENT YEAR 2012-13. 3. SHRI R. SIVARAMAN, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSES SEE HAS RECEIVED ` 17,10,42,083/- AS DIVIDEND INCOME. THE ASSESSEE H AS ALSO DISALLOWED EXPENDITURE OF ` 8,000/- WHICH WAS INCURRED FOR EARNING THE EXEMPTE D INCOME U/S 14A OF THE ACT. HOWEVER, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE ITSELF DISALLOWED A SUM OF ` 8,000/- U/S 14A OF THE ACT, THEREFORE, DISALLOWANCE HAS TO BE COMPUTED U/S 14A R.W.R 8D. THE ASSESSING OFFICER HAS ALSO PLACED HIS RELIANCE ON T HE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF MAXOPP INVESTMENT L TD VS CIT, 15 TAXMANN.COM 390. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE HAS NOT INVESTED THE MONEY FOR THE PURPOSE OF EARNING THE E XEMPTED INCOME. THE INVESTMENTS WERE MADE FOR ACQUIRING THE SHARES OF THE SUBSIDIARY COMPANIES WITH AN INTENTION TO CONSOLIDATE ITS LONG TERM SOLVENCY REQUIREMENTS, THEREFORE, SEC. 14A IS NOT AT ALL AP PLICABLE. ACCORDING TO THE LD. COUNSEL, SINCE THE INVESTMENTS WERE MADE IN THE SUBSIDIARY ITA NO.326, 729 & 730/16 :- 3 -: COMPANIES FOR ACQUIRING CONTROLLING INTEREST OVER T HE SUBSIDIARY COMPANIES, THE SAME CANNOT BE DISALLOWED BY APPLYIN G SEC. 14A OF THE ACT. 4. ON THE CONTRARY, DR. U. ANJANEYALU, LD. DEPARTMENTA L REPRESENTATIVE SUBMITTED THAT THE ASSESSEE CLAIMS T HAT THE INVESTMENTS WERE MADE IN SUBSIDIARY COMPANIES FOR A CQUIRING CONTROLLING INTEREST. THE ASSESSEE ALSO CLAIMED B EFORE THE ASSESSING OFFICER THAT THE INVESTMENTS WERE MADE TO CONSOLIDA TE LONG TERM BUSINESS NEEDS AND TO COMPLY WITH THE STATUTORY REQ UIREMENTS. AFTER GOING THROUGH THE ORDER OF THE ASSESSING OFFICER, T HE LD. DR POINTED OUT THAT EVEN THOUGH THE ASSESSEE CLAIMED THAT INV ESTMENTS WERE MADE IN SHRIRAM TRANSPORT FINANCE COMPANY LTD AND S HRIRAM CITY UNION FINANCE LTD, WHETHER THE ENTIRE INVESTMENT OF ` 1509.4741 CRORES WAS INVESTED ONLY IN THESE TWO COMPANIES OR OTHER COMPANIES IS NOT KNOWN. THE LD. DR FURTHER SUBMITTED THAT AFTER THE INVESTMENTS WHETHER THE ASSESSEE WAS ABLE TO ACQUIRE THE CONTR OLLING INTEREST OVER THE SO CALLED SUBSIDIARY COMPANIES IS ALSO NOT EXAM INED BY THE ASSESSING OFFICER. REFERRING TO THE ORDER OF THE C IT(A), THE LD. DR SUBMITTED THAT THE CIT(A) DIRECTED THE ASSESSING OF FICER TO VERIFY THE INVESTMENTS MADE BY THE ASSESSEE AND EXCLUDE THE INVESTMENTS IN ITA NO.326, 729 & 730/16 :- 4 -: THE SUBSIDIARY COMPANIES. THEREFORE, ACCORDING TO THE LD. DR, THE ASSESSEE CANNOT HAVE ANY GRIEVANCE AGAINST THE ORDE R OF THE CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. FR OM THE ORDERS OF THE LOWER AUTHORITIES IT APPEARS THAT THE ASSESSEE HAS INVESTED ` 1509.4741 CRORES IN SEVERAL COMPANIES AND EARNED DI VIDEND INCOME OF ` 17,10,42,083/-. THE ASSESSEE HAS ALSO COMPUTED D ISALLOWANCE TOWARDS EXPENDITURE TO THE EXTENT OF ` 8,000/-. HOWEVER, IT IS NOT KNOWN HOW THE ASSESSEE ARRIVED AT THE DISALLOWANCE OF ` 8,000/-. RULE 8D OF INCOME TAX RULES SPECIFICALLY PROVIDES F OR COMPUTING THE METHOD OF DISALLOWANCE. IT IS ALSO NOT KNOWN WHETH ER THE ASSESSEE BORROWED FUNDS EITHER FOR BUSINESS OR FOR MAKING IN VESTMENTS. IF THERE IS ANY DIRECT NEXUS WITH THE BORROWED FUNDS THEN TH E INTEREST PAID BY THE ASSESSEE ON THE BORROWED FUNDS HAS TO BE DISAL LOWED IN VIEW OF RULE 8D(2)(I) OF THE ACT. IF THE EXPENDITURE/INTER EST IS NOT RELATABLE TO THE INCOME WHICH WAS EXEMPTED FROM TAXATION, THEN D ISALLOWANCE HAS TO BE COMPUTED UNDER SUB-CLAUSE(2)(II) OF RULE 8D. IT IS ALSO NECESSARY TO EXAMINE THE DETAILS OF THE INVESTMENT MADE FROM THE FIRST DAY OF THE FINANCIAL YEAR AND THE LAST DAY OF THE FINANCIAL YE AR AS FOUND IN THE BALANCE SHEET FOR THE PURPOSE OF COMPUTING THE AGGR EGATE EXPENDITURE UNDER THIRD LIMB OF RULE 8D(2). THESE EXERCISES WE RE NOT DONE EITHER ITA NO.326, 729 & 730/16 :- 5 -: BY THE ASSESSING OFFICER OR THE CIT(A). MOREOVER , THE INVESTMENT MADE IN SHRIRAM TRANSPORT FINANCE COMPANY LTD AND S HRIRAM CITY UNION FINANCE LTD. WAS CLAIMED TO BE INVESTMENT IN THE SUBSIDIARY COMPANIES. IT IS NOT KNOWN HOW SHRIRAM TRANSPORT F INANCE COMPANY LTD AND SHRIRAM CITY UNION FINANCE LTD. ARE SISTER CONCERNS OF THE ASSESSEE-COMPANY. MERELY BECAUSE SOME OF THE DIREC TORS ARE COMMON IN BOTH THE COMPANIES, THAT CANNOT BE A REAS ON TO HOLD THAT THE COMPANIES IN WHICH THE ASSESSEE INVESTED ARE S UBSIDIARY/HOLDING COMPANIES. THIS TRIBUNAL IS OF THE CONSIDERED OPI NION THAT THE SHAREHOLDING PATTERN OF THE ASSESSEE-COMPANY AND TH E COMPANIES IN WHICH INVESTMENTS WERE MADE HAS TO BE EXAMINED TO D ECIDE WHETHER THE INVESTMENT WAS MADE BY THE ASSESSEE IN THE SUB SIDIARY/HOLDING COMPANIES. THESE FACTS WERE NOT APPARENTLY EXAMINE D BY THE LOWER AUTHORITIES. MOREOVER, THE AVAILABILITY OF LIQUID FUNDS WITH THE ASSESSEE ON THE DATE OF THE INVESTMENT ALSO NEEDS T O BE EXAMINED. SINCE THESE FACTUAL ASPECTS ARE NOT EXAMINED BY ANY OF THE LOWER AUTHORITIES, THIS TRIBUNAL IS OF THE CONSIDERED OP INION THAT THE MATTER NEEDS TO BE REEXAMINED. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ENTIRE DISALLOWAN CE MADE BY THE ASSESSING OFFICER U/S 14A R.W. RULE 8D IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE MATERIAL THAT MAY BE FIL ED BY THE ASSESSEE ITA NO.326, 729 & 730/16 :- 6 -: AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH L AW AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 6. NOW COMING TO THE REVENUES APPEAL I.T.A.NO. 729/MDS/2016 FOR ASSESSMENT YEAR 2012-13, THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOWANCE OF ` 34,28,05,564/-. 7. DR. U. ANJANEYALU, LD. DR SUBMITTED THAT THE ASSESS ING OFFICER DISALLOWED ` 34,28,05,564/- U/S 14A R.W. RULE 8D. HOWEVER, WHILE COMPUTING THE BOOK PROFIT, HE ALSO ADDED BACK THE SAME TO THE BOOK PROFIT. SINCE THE ASSESSING OFFICER AS WELL A S THE CIT(A) HAS NOT EXAMINED THE SHAREHOLDING PATTERN OF THE COMPANY IN WHICH THE INVESTMENTS WERE MADE, ACCORDING TO THE LD. DR, THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER. 8. ON THE CONTRARY, SHRI R. SIVARAMAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE MADE BY TH E ASSESSING OFFICER U/S 14A TO THE EXTENT OF ` 34,28,05,564/- CANNOT BE ADDED BACK TO THE BOOK PROFIT UNDER THE PROVISIONS OF THE COMPANIES ACT. ACCORDING TO THE LD. COUNSEL, THERE IS NO PROVISION FOR ADDING THE DISALLOWANCE MADE U/S 14A TO THE BOOK PROFIT. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY ITA NO.326, 729 & 730/16 :- 7 -: THE LD. COUNSEL AND THE LD. DR, THE ASSESSING OFFIC ER ADDED THE DISALLOWANCE TO THE EXTENT OF ` 34,28,05,564/- MADE U/S 14A TO THE BOOK PROFIT COMPUTED UNDER THE PROVISIONS OF THE CO MPANIES ACT FOR THE PURPOSE OF LEVYING MINIMUM ALTERNATE TAX U/S 1 15JB OF THE ACT. SINCE THIS TRIBUNAL FOUND THAT THE DISALLOWANCE MAD E U/S 14A NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER, THE ADDIT ION TO THE BOOK PROFIT ALSO NEEDS TO BE RECONSIDERED BY THE ASSESSI NG OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ENTIRE ISSUE RAISED BY THE ASSESSEE AND REVENUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING O FFICER SHALL REEXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE MATERIAL THAT MAY BE FILED BY THE ASSESSEE IN ACCORDANCE WITH LAW AFTER GIVING A REAS ONABLE OPPORTUNITY TO THE ASSESSEE. 10. NOW COMING TO THE REVENUES APPEAL I.T.A.NO. 730/MDS/2016 FOR ASSESSMENT YEAR 2009-10, THE ONLY ISSUE ARISES FOR CONSIDERATION IS ADDITION OF ` 33 CRORES MADE U/S 40(A)(IA) OF THE ACT. 11. DR.U. ANJANEYALU, LD. DR SUBMITTED THAT ADMITTEDLY THE ASSESSEE PAID ` 33 CRORES IN PURSUANCE OF AN AGREEMENT FOR ACQUIRI NG RIGHT TO GET SERVICES/INFORMATION. ACCORDING TO TH E LD. DR, THE TRANSACTION IS NOTHING BUT A CONTRACTUAL SERVICE, T HEREFORE, THE ASSESSEE HAS TO DEDUCT TAX U/S 194C OF THE ACT. SINCE TAX WAS NOT ITA NO.326, 729 & 730/16 :- 8 -: DEDUCTED, THE ASSESSING OFFICER DISALLOWED THE CLAI M OF THE ASSESSEE U/S 40(A)(IA) OF THE ACT. HOWEVER, ON APPEAL BY TH E ASSESSEE, THE CIT(A) FOUND THAT SINCE THE ASSESSEE HAS ALREADY P AID THE AMOUNT AND NOTHING IS OUTSTANDING AS ON 31.3.2009, THERE CANN OT BE ANY DISALLOWANCE. THE CIT(A) PLACED HIS RELIANCE ON TH E DECISION OF THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN I.T.A.NO.512/MDS/2015 DATED 26.6.2015. THIS BENCH OF THE TRIBUNAL IN FACT PLACED ITS RELIANCE ON THE DECISION OF THE VISHAKAPATNAM SPECIAL BENCH IN MERILYN SHIPPING AND TRANSPORTS VS ADDL. C IT, 16 ITR (TRIB) 1. REFERRING TO THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIKANDARKHAN N. TUNVAR, 33 TAXMANN.C OM 133, CALCUTTA HIGH COURT IN THE CASE OF CIT VS CRESC ENT EXPORT SYNDICATES DATED 3.4.2013 IN I.T.A.NO.20 OF 2013 THE LD. DR SUBMITTED THAT ALL THE TWO HIGH COURTS EXAMINED THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND T RANSPORTS (SUPRA) AND FOUND THAT THE DECISION OF THE SPECIAL BE NCH ARE NOT LAID DOWN THE CORRECT PROPOSITION OF LAW. THE HIGH COUR T FOUND THAT UNDER THE SCHEME OF THE INCOME-TAX ACT, 1961, TAX HAS TO BE DEDUCTED AT THE TIME OF PAYMENT OR AT THE TIME OF CREDIT IN THE ACCOUNTS. IF THE AMOUNTS REMAINS PAYABLE OR IT WAS NOT GIVEN CR EDIT, THERE IS NO NEED TPO O DEDUCT TAX AT ALL, THEREFORE, THE PROVI SIONS OF 40(A)(IA) OF THE ACT MAY NOT BE APPLICABLE. IN THE CASE BEFOR E US, THE ITA NO.326, 729 & 730/16 :- 9 -: ASSESSEE ADMITTEDLY PAID THE AMOUNT, THEREFORE, THE POINT OF DEDUCTION OF TAX IS AT THE TIME OF MAKING THE PAYMENT. HENCE , 40(A)(IA) OF THE ACT WOULD BE SQUARELY APPLICABLE, THEREFORE, THE AS SESSING OFFICER HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. 12. ON THE CONTRARY, SHRI R. SIVARAMAN, , LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ADMITTEDLY, THE ENTIRE AMOU NT WAS PAID AND NOTHING REMAINS TO BE PAID AS ON 31.3.2009, THEREFO RE, THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX IN VIEW OF THE DECISION OF SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS (SUPRA) . THE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES PVT. LTD 357 ITR 642, EXAMINED THIS ISSUE AND FOUND THAT IF THE AMOU NT REMAINS OUTSTANDING AS ON 31 ST MARCH OF THE RELEVANT FINANCIAL YEAR, THERE IS NO NEED FOR DEDUCTION OF TAX. IN VIEW OF THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN M/S VECTOR SHIPPING SERVICES (P) LTD, ACCORDING TO THE LD. COUNSEL, THE ASSESSEE NEED NOT DEDUCT TAX AT ALL. FURTHERMORE, IN CASE BEFORE US, ACCORDING TO THE LD. COUNSEL, THE RECIPI ENTS OF THE AMOUNT HAVE ALREADY DISCLOSED THE SAME IN THEIR RETURN AND PAID THE TAXES. SINCE THE RECIPIENTS HAVE ALREADY PAID THE TAXES, T HERE CANNOT BE ANY DISALLOWANCE U/S 40(A)(IA) OF THE ACT. ITA NO.326, 729 & 730/16 :- 10 -: 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE ADMITTEDLY PAID ` 33 CRORES IN PURSUANCE OF AGREEMENTS ENTERED IN TO WITH THREE COMPANIES FOR THE PURPOSE OF ACQUIRING R IGHT TO GET SERVICES OR INFORMATION. IT IS NOT IN DISPUTE THAT THE AMOU NTS PAID BY THE ASSESSEE ARE TAXABLE IN THE HANDS OF THE RECIPIENT COMPANIES. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE-COMPANY HAS N OT DEDUCTED TAX AT THE TIME OF PAYMENT. THE LD. COUNSEL NOW CLAIMS TH AT TAX IS DEDUCTIBLE IN CASE THE AMOUNT REMAINS PAYABLE ON THE LAST DA Y OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDER ATION. THE LD. COUNSEL MAINLY PLACED HIS RELIANCE ON THE DECISION OF THE SPECIAL BENCH IN MERILYN SHIPPING AND TRANSPORTS (SUPRA). WE FIN D THAT THE DECISION OF THE SPECIAL BENCH WAS EXAMINED BY THE CALCUTTA H IGH COURT IN THE CASE OF CRESENT EXPORT SYNDICATES (SUPRA) AND FOUND THAT THE DECISION OF THE SPECIAL BENCH IS NO LONGER A GOOD LAW. SIMI LAR VIEW WAS TAKEN BY THE GUJARAT HIGH COURT IN THE CASE OF SIKANDARKH AN N. TUNVAR(SUPRA). IN VIEW OF THESE JUDGMENTS, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DECISION OF THE SPECIAL BENCH MAY NOT BE APPLICABLE TO THE FACTS OF THIS CASE. 14. WE HAVE GONE THROUGH THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING COMPANY PVT. L TD (SUPRA). THE ITA NO.326, 729 & 730/16 :- 11 -: ALLAHABAD HIGH COURT AFTER REFERRING TO THE DECISIO N OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORT S CONFIRMED THE ORDER OF THE DELHI BENCH OF THIS TRIBUNAL. THE ALLA HABAD HIGH COURT HAS NO OCCASION TO CONSIDER THE SPECIAL BENCH DECISION IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS(SUPRA). MOREOVER, A PASSING REFERENCE WAS MADE ABOUT THE DECISION OF THE SPECIA L BENCH DECISION. THE GUJARAT HIGH COURT AND CALCUTTA HIGH COURTS IN FACT EXAMINED THE CORRECTNESS OF THE DECISION OF THE SPECIAL BENCH I N THE CASE OF MERILYN SHIPPING AND TRANSPORTS AND FOUND THAT THE DECISIO N OF THE SPECIAL BENCH IS NOT LONGER A GOOD LAW. IN VIEW OF THE ABO VE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENTS OF GUJ ARAT HIGH COURT AND CALCUTTA HIGH COURT NEEDS TO BE PREFERRED RATHE R THAN THE JUDGMENT OF THE ALLAHABAD HIGH COURT. THEREFORE, M ERELY BECAUSE THE ASSESSEE HAS ALREADY PAID THE AMOUNTS, THIS TRIBUNA L CANNOT SAY THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX. IN T HE CASE BEFORE US, THE ASSESSEE HAS ADMITTEDLY, PAID THE AMOUNT WITHOUT DE DUCTING THE TAX. THEREFORE, THERE IS A CLEAR VIOLATION OF THE PROVIS IONS OF SEC. 194C OF THE ACT, HENCE, DISALLOWANCE HAS TO BE MADE U/S 40 (A)(IA) OF THE ACT. 15. THIS TRIBUNAL FOUND THAT THE COCHIN BENCH OF THI S TRIBUNAL HAD AN OCCASION TO CONSIDER AN IDENTICAL SITUATION IN SHRI THOMAS GEORGE MUTHOOT VS ACIT IN I.T.A.NOS. 63 & 64/COCH/2 014 DATED ITA NO.326, 729 & 730/16 :- 12 -: 28.8.2014. AFTER CONSIDERING THE JUDGMENTS OF THE CALCUTTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE & ANOTHER AND GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR(SUPRA), IT WAS FOUND THAT TAX HAS TO BE DEDUCTED AT THE TIME OF MAKING PAYMENT OR GIVING CR EDIT. THEREFORE, IT MAY NOT BE CORRECT TO SAY THAT TAX HAS TO BE DEDUCT ED ONLY ON THE AMOUNT WHICH REMAINS PAYABLE ON THE LAST DAY OF T HE FINANCIAL YEAR. IN FACT, THE COCHIN BENCH OF THIS TRIBUNAL HAS OBSE RVED AS FOLLOWS: 11. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE HAS ALREADY PAID THE AMOUNT, PROVISIONS OF SECTION 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF THE AMOUNT WHICH REMA INS TO BE PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR. THE LD.REPRESENTATIVE PLACED HIS RELIANCE ON THE DECISI ON OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS VS ADDL CIT (2012) 70 DTR 81 AND ALSO THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN CIT VS M/S VECTOR SHIPPING SERVICES (P) LTD I.T.A NO.122 OF 2013 JUDGMENT DATED 09-07-2013 AND SUBMITTED THAT THE SLP FILED BY THE REVENUE IN THE APEX COURT AGAINST THE JUDGMENT OF TH E ALLAHABAD HIGH COURT IN M/S VECTOR SHIPPING SERVICE S (P) LTD (SUPRA) IS DISMISSED BY THE APEX COURT. IT IS WELL S ETTLED PRINCIPLES OF LAW THAT THE LAW LAID DOWN BY THE APE X COURT IS BINDING ON ALL COURTS AND AUTHORITIES INCLUDING THI S TRIBUNAL UNDER ARTICLE 141 OF THE CONSTITUTION OF INDIA. IT I S ALSO EQUALLY SETTLED PRINCIPLE THAT A DISMISSAL OF SLP W ITHOUT ANY DISCUSSION IS NOT THE LAW DECLARED BY THE APEX COURT . THE APEX COURT THOUGHT IT FIT THAT IT WAS NOT A FIT CASE TO BE ADMITTED FOR CONSIDERATION. THEREFORE, WHILE DISMIS SING THE SLP, THE APEX COURT DID NOT DECLARE ANY LAW. HENCE, WE CANNOT SAY THAT THE APEX COURT HAS DECLARED THE LAW DECLARI NG THAT SECTION 40(A)(IA) IS APPLICABLE ONLY IN RESPECT OF TH E AMOUNTS REMAINS TO BE PAYABLE AT THE LAST DAY OF THE FINANC IAL YEAR. ITA NO.326, 729 & 730/16 :- 13 -: 12. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN CIT VS M/S VECTOR SHIPPING SERVICES (P) LTD (SUPRA), COPY OF WHICH IS FILED BY THE ASSE SSEE. THE ALLAHABAD HIGH COURT, AFTER REPRODUCING THE RELEVAN T PARAGRAPH FROM THE ORDER OF CIT(A) AND REFERRING TO THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN ME RILYN SHIPPING & TRANSPORTS (SUPRA) FOUND THAT THE TRIBUN AL HAS NOT COMMITTED AN ERROR. IT IS OBVIOUS THAT THERE IS NO DISCUSSION ABOUT THE CORRECTNESS OR OTHERWISE OF THE DECISION RENDERED BY THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHI PPING & TRANSPORTS (SUPRA). HOWEVER, WE FIND THAT THE GUJAR AT HIGH COURT IN THE CASE OF CIT VS SIKANDARKHAN N TUNVAR I TA NOS 905 OF 2012, 709 & 710 OF 2012, 333 OF 2013, 832 OF 2012, 857 OF 2012, 894 OF 2012, 928 OF 2012, 12 OF 2013, 51 OF 2013, 58 OF 2013 AND 218 OF 2013 JUDGMENT DATED 02-05-2013 CONSIDERED THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS (SUPRA) AND SPECIF ICALLY DISAGREED WITH THE PRINCIPLES LAID DOWN BY THE SPEC IAL OF THIS TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS (SUPRA). THE CALCUTTA HIGH COURT ALSO IN THE CASE OF CRESCENT EXP ORTS SYNDICATE & ANOTHER IN ITAT 20 OF 2013 AND GA 190 OF 2013 JUDGMENT DATED 03-04-2013 CONSIDERED ELABORATELY THE JUDGMENT OF THE SPECIAL BENCH OF THIS TRIBUNAL IN ME RILYN SHIPPING & TRANSPORTS (SUPRA) AND FOUND THAT THE DE CISION RENDERED BY THE SPECIAL BENCH OF THIS TRIBUNAL IS NO T THE CORRECT LAW. IT IS WELL SETTLED PRINCIPLES OF LAW T HAT WHEN DIFFERENT HIGH COURTS EXPRESSED DIFFERENT OPINIONS O N A POINT OF LAW, THEN, NORMALLY, THE BENEFIT OF DOUBT UNDER THE TAXATION LAW WOULD GO TO THE ASSESSEE. IT IS ALSO EQUALLY SE TTLED PRINCIPLES OF LAW THAT THE JUDGMENT WHICH DISCUSSES THE POINT IN ISSUE ELABORATELY AND GIVES AN ELABORATE REASONI NG HAS TO BE PREFERRED WHEN COMPARED TO THE JUDGMENT WHICH HAS N O REASONING AND DISCUSSION. ADMITTEDLY, THE CALCUTTA HIGH COURT AND GUJARAT HIGH COURT HAVE DISCUSSED THE ISSUE ELA BORATELY AND THE SPECIFIC REASONING HAS ALSO BEEN RECORDED A S TO WHY THE SPECIAL BENCH IS NOT CORRECT. THEREFORE, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDGMENTS OF THE CA LCUTTA HIGH COURT CRESCENT EXPORTS SYNDICATE & ANOTHER (SUP RA) AND GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR (SUPRA) HAVE TO ITA NO.326, 729 & 730/16 :- 14 -: BE PREFERRED WHEN COMPARED TO THE ALLAHABAD HIGH CO URT IN M/S VECTOR SHIPPING SERVICES (P) LTD (SUPRA). 13. FOR THE PURPOSE OF CONVENIENCE WE REPRODUCING BE LOW THE OBSERVATIONS MADE BY THE CALCUTTA HIGH COURT IN CRE SCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) AND GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR (SUPRA): CALCUTTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE & ANOTHER (SUPRA) BEFORE DEALING WITH THE SUBMISSIONS OF THE LEARNED COUNSEL APPEARING FOR THE ASSESSEES IN BOTH THE APPEALS WE HAVE TO EXAMINE THE CORRECTNESS OF THE MAJORITY VIEWS IN THE CASE OF MERILYN SHIPPING. WE ALREADY HAVE QUOTED EXTENSIVELY BOTH THE MAJ ORITY AND THE MINORITY VIEWS EXPRESSED IN THE AFORESAID CA SE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FA CT THAT THE LEGISLATURE HAS REPLACED THE EXPRESSION AMOUNTS CREDITED OR PAID WITH THE EXPRESSION PAYABLE IN T HE FINAL ENACTMENT. COMPARISON BETWEEN THE PRE-AMENDMENT AND POST AMENDMENT LAW IS PERMISSIBLE FOR THE PURPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED OR THE OBJECT SOUGHT TO BE ACHIEVED BY AN AMENDMENT. THIS IS PRECISELY WHAT WAS DONE BY THE APEX COURT IN THE CAS E OF CIT VS. KELVINATOR REPORTED IN 2010(2) SCC 723. BUT THE SAME COMPARISON BETWEEN THE DRAFT AND THE ENACTED L AW IS NOT PERMISSIBLE. NOR CAN THE DRAFT OR THE BILL BE U SED FOR THE PURPOSE OF REGULATING THE MEANING AND PURPORT O F THE ENACTED LAW. IT IS THE FINALLY ENACTED LAW WHICH IS THE WILL OF THE LEGISLATURE. THE LEARNED TRIBUNAL FELL INTO AN ERROR IN NO T REALIZING THIS ASPECT OF THE MATTER. THE LEARNED TRIBUNAL HELD THAT WHERE LANGUAGE IS C LEAR THE INTENTION OF THE LEGISLATURE IS TO BE GATHERED FROM THE ITA NO.326, 729 & 730/16 :- 15 -: LANGUAGE USED. HAVING HELD SO, IT WAS NOT OPEN TO SEEK TO INTERPRET THE SECTION ON THE BASIS OF ANY COMPARISO N BETWEEN THE DRAFT AND THE SECTION ACTUALLY ENACTED NOR WAS IT OPEN TO SPECULATE AS TO THE EFFECT OF THE SO-CAL LED REPRESENTATIONS MADE BY THE PROFESSIONAL BODIES. THE LEARNED TRIBUNAL HELD THAT SECTION 40(A)(IA) OF THE ACT CREATES A LEGAL FICTION BY VIRTUE OF WHICH EVEN THE GENUINE AND ADMISSIBLE EXPENSES CLAIMED BY AN ASSESS EE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION : IF THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES AR E DISALLOWED. HAVING HELD SO WAS IT OPEN TO THE TRIBUNAL TO SEEK TO JUSTIFY THAT THIS FICTION CANNOT BE EXTENDED ANY FU RTHER AND, THEREFORE, CANNOT BE INVOKED BY ASSESSING OFFI CER TO DISALLOW THE GENUINE AND REASONABLE EXPENDITURE ON T HE AMOUNTS OF EXPENDITURE ALREADY PAID? DOES THIS NOT AMOUNT TO DELIBERATELY READING SOMETHING IN THE LAW WHICH IS NOT THERE? WE, AS SUCH, HAVE NO DOUBT IN OUR MIND THAT THE LEA RNED TRIBUNAL REALIZED THE MEANING AND PURPORT OF SECTIO N 40(A)(IA) CORRECTLY WHEN IT HELD THAT IN CASE OF OMIS SION TO DEDUCT TAX EVEN THE GENUINE AND ADMISSIBLE EXPENSES A RE TO BE DISALLOWED. BUT THEY SOUGHT TO REMOVE THE RIGOUR OF THE LAW BY HOLDING THAT THE DISALLOWANCE SHALL BE RESTR ICTED TO THE MONEY WHICH IS YET TO BE PAID. WHAT THE TRIBUNA L BY MAJORITY DID WAS TO SUPPLY THE CASUS OMISSUS WHICH WAS NOT PERMISSIBLE AND COULD ONLY HAVE BEEN DONE BY THE SU PREME COURT IN AN APPROPRIATE CASE. REFERENCE IN THIS REG ARD MAY BE MADE TO THE JUDGMENT IN THE CASE OF BHUWALKA STEE L INDUSTRIES VS. BOMBAY IRON & STEEL LABOUR BOARD REPOR TED IN 2010(2) SCC 273. UNPROTECTED WORKER WAS FINALLY DEFINED IN SECTION 2(11) OF THE MATHADI ACT AS FOLLOWS:- UNPROTECTED WORKER MEANS A MANUAL WORKER WHO IS ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMEN T. ITA NO.326, 729 & 730/16 :- 16 -: THE CONTENTION RAISED WITH REFERENCE TO WHAT WAS TH ERE IN THE BILL WAS REJECTED BY THE SUPREME COURT BY HO LDING AS FOLLOWS: IT MUST, AT THIS JUNCTURE, BE NOTED THAT IN SPITE OF SECTION 2(11), WHICH INCLUDED THE WORDS BUT FOR THE PROVISIONS OF THIS ACT IS NOT ADEQUATELY PROTECTED BY LEGISLATION FOR WELFARE AND BENEFITS OF THE LABOUR FORCE IN THE STATE, THESE PRECISE WORDS WERE REMOVED BY THE LEGISLATURE AND THE DEFINITION WAS MADE LIMITED AS IT HAS BEEN FINALLY LEGISLATED UPON. IT IS TO BE NOTED THA T WHEN THE BILL CAME TO BE PASSED AND RECEIVED THE ASSENT OF TH E VICE- PRESIDENT ON 05-06-1969 AND WAS FIRST PUBLISHED IN THE MAHARASHTRA GOVERNMENT GAZETTE EXTRAORDINARY, PART I V ON 13-06-1969, THE AFOREMENTIONED WORDS WERE OMITTED. THEREFORE, T HIS WOULD BE A CLEAR POINTER TO THE LE GISLATIVE INTENT THAT THE LEGISLATURE BEING CONSCIOUS OF THE FACT AND BEING ARMED WITH ALL THE COMMITTEE REPORTS AND ALSO BEING ARMED WITH THE FACTUAL DATA, DELIBERATELY AVOIDED T HOSE WORDS. WHAT THE APPELLANTS ARE ASKING WAS TO READ I N THAT DEFINITION, THESE PRECISE WORDS, WHICH WERE CONSCIO USLY AND DELIBERATELY OMITTED FROM THE DEFINITION. THAT WOUL D AMOUNT TO SUPPLYING THE CASUS OMISSUS AND WE DO NOT THINK THAT IT IS POSSIBLE, PARTICULARLY, IN THIS CASE. THE LAW OF SU PPLYING THE CASUS OMISSUS BY THE COURTS IS EXTREMELY CLEAR AND S ETTLED THAT THOUGH THIS COURT MAY SUPPLY THE CASUS OMISSUS , IT WOULD BE IN THE RAREST OF THE RATE CASE AND THUS SU PPLYING OF THIS CASUS OMISSUS WOULD BE EXTREMELY NECESSARY DUE TO THE INADVERTENT OMISSION ON THE PART OF THE LEGISLATURE . BUT, THAT IS CERTAINLY NOT THE CASE HERE. WE SHALL NOW ENDEAVOUR TO SHOW THAT NO OTHER INTERPRETATION IS POSSIBLE. THE KEY WORDS USED IN SECTION 40(A)(IA), ACCORDING TO US, ARE ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAP TER XVII-B. IF THE QUESTION IS WHICH EXPENSES ARE SOUGH T TO BE DISALLOWED? THE ANSWER IS BOUND TO BE THOSE EXP ENSES ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER X VII-B. ITA NO.326, 729 & 730/16 :- 17 -: ONCE THIS IS REALIZED NOTHING TURNS ON THE BASIS OF THE FACT THAT THE LEGISLATURE USED THE WORD PAYABLE AND NO T PAID OR CREDITED. UNLESS ANY AMOUNT IS PAYABLE, IT CAN NEI THER BE PAID NOR CREDITED. IF AN AMOUNT HAS NEITHER BEEN PA ID NOR CREDITED, THERE CAN BE NO OCCASION FOR CLAIMING ANY DEDUCTION. THE LANGUAGE USED IN THE DRAFT WAS UNCLEAR AND SUSCEPTIBLE TO GIVING MORE THAN ONE MEANING. BY LOO KING AT THE DRAFT IT COULD BE SAID THAT THE LEGISLATURE WAN TED TO TREAT THE PAYMENTS MADE OR CREDITED IN FAVOUR OF A CONTRACTOR OF SUBCONTRACTOR DIFFERENTLY THAN THE PA YMENTS ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, FE ES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S BECAUSE THE WORDS AMOUNTS CREDITED OR PAID WERE USED ONLY IN RELATION TO A CONTRACTOR OF SUB-CONTRACTOR. THIS DI FFERENTIAL TREATMENT WAS NOT INTENDED. THEREFORE, THE LEGISLAT URE PROVIDED THAT THE AMOUNTS, ON WHICH TAX IS DEDUCTIBL E AT SOURCE UNDER XVII-B PAYABLE ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S OR TO A CONTRACTOR OF SUB-CONTRACTOR SHALL NOT BE DEDUCTED IN COM PUTTING THE INCOME OF AN ASSESSEE IN CASE HE HAS NO T DEDUCTED, OR AFTER DEDUCTION HAS NOT PAID WITHIN TH E SPECIFIED TIME. THE LANGUAGE USED BY THE LEGISLATUR E IN THE FINALLY ENACTED LAW IS CLEAR AND UNAMBIGUOUS WHEREA S THE LANGUAGE USED IN THE BILL WAS AMBIGUOUS. A FEW WORDS ARE NOW NECESSARY TO DEAL WITH THE SUBMISSION OF MR. BAGCHI AND MS. ROYCHOWDHURI. THERE CAN BE NO DENIAL THAT THE PROVISION IN QUESTION IS HARS H. BUT THAT IS NO GROUND TO READ THE SAME IN A MANNER WHICH WAS NOT INTENDED BY THE LEGISLATURE. THIS IS OUR ANSWER TO THE SUBMISSION OF MR. BAGCHI. THE SUBMISSION OF MR. ROYCHOWDHURI THAT THE SECOND PROVISO SOUGHT TO BECO ME EFFECTIVE FROM 1ST APRIL, 2013 SHOULD BE HELD TO HAVE ALREADY BECOME OPERATIVE PRIOR TO THE APPOINTED DAT E CANNOT ALSO BE ACCEDED TO FOR THE SAME REASON INDICATED AB OVE. THE LAW WAS DELIBERATELY MADE HARSH TO SECURE COMPLIANC E OF THE ITA NO.326, 729 & 730/16 :- 18 -: PROVISIONS REQUIRING DEDUCTIONS OF TAX AT SOURCE. IT IS NOT THE CASE OF AN INADVERTENT ERROR. FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE OP INION THAT THE MAJORITY VIEWS EXPRESSED IN THE CASE OF MER ILYN SHIPPING & TRANSPORTS ARE NOT ACCEPTABLE. THE SUBMI SSIONS ADVANCED BY LEARNED ADVOCATES HAVE ALREADY BEEN DEA LT WITH AND REJECTED. GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR( SUPRA) 23. DESPITE THIS NARROW INTERPRETATION OF SECTION 40(A)(IA), THE QUESTION STILL SURVIVES IF THE TRIBUNA L IN CASE OF M/S MERILYN SHIPPING & TRANSPORS VS. ACIT (SUPRA ) WAS ACCURATE IN ITS OPINION. IN THIS CONTEXT, WE WOULD L IKE TO EXAMINE TWO ASPECTS. FIRSTLY, WHAT WOULD BE THE CORR ECT INTERPRETATION OF THE SAID PROVISION. SECONDLY, WHE THER OUR SUCH UNDERSTANDING OF THE LANGUAGE USED BY THE LEGI SLATURE SHOULD WAVER ON THE PREMISE THAT AS PROPOUNDED BY T HE TRIBUNAL, THIS WAS A CASE OF CONSCIOUS OMISSION ON THE PART OF THE PARLIAMENT. BOTH THESE ASPECTS WE WOULD ADDRE SS ONE AFTER ANOTHER. IF ONE LOOKS CLOSELY TO THE PROVISIO N, IN QUESTION, ADVERSE CONSEQUENCES OF NOT BEING ABLE TO CLAIM DEDUCTION ON CERTAIN PAYMENTS IRRESPECTIVE OF THE PROVISIONS CONTAINED IN SECTIONS 30 TO 38 OF THE ACT W OULD FLOW IF THE FOLLOWING REQUIREMENTS ARE SATISFIED:- (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 CARRYING OUT ANY WORK. (B) THESE AMOUNTS ARE SUCH ON WHICH TAX IS DEDUCTIBL E AT SOURCE UNDER XVIII-B. (C) SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTIO N HAS NOT BEEN PAID ON OR BEFORE DUE DATE SPECIFIED I N SUB-SECTION (1) OF SECTION 39. FOR THE PURPOSE OF CURRENT DISCUSSION REFERENCE TO THE PROVISO IS NOT NECESSARY. ITA NO.326, 729 & 730/16 :- 19 -: 24. WHAT THIS SUB-SECTION, THEREFORE, REQUIRES IS THA T THERE SHOULD BE AN AMOUNT PAYABLE IN THE NATURE DES CRIBED ABOVE, WHICH IS SUCH ON WHICH TAX IS DEDUCTIBLE AT S OURCE UNDER CHAPTER XVII-B BUT SUCH TAX HAS NOT BEEN DEDUCT ED OR IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THIS P ROVISION NOWHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE M UST REMAIN SO PAYABLE THROUGHOUT DURING THE YEAR. TO RE ITERATE THE PROVISION HAS CERTAIN STRICT AND STRINGENT REQU IREMENTS BEFORE THE UNPLEASANT CONSEQUENCES ENVISAGED THEREI N CAN BE APPLIED. WE ARE PREPARED TO AND WE ARE DUTY BOUN D TO INTERPRET SUCH REQUIREMENTS STRICTLY. SUCH REQUIREM ENTS, HOWEVER, CANNOT BE ENLARGED BY ANY ADDITION OR SUBT RACTION 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-CONTRACTO R FOR CARRYING OUT ANY WORK. THE LANGUAGE USED IS NOT THA T SUCH AMOUNT MUST CONTINUE TO REMAIN PAYABLE TILL THE END OF THE ACCOUNTING YEAR. ANY SUCH INTERPRETATION WOULD REQU IRE READING WORDS WHICH THE LEGISLATURE HAS NOT USED. N O SUCH INTERPRETATION WOULD EVEN OTHERWISE BE JUSTIFIED BE CAUSE IN OUR OPINION, THE LEGISLATURE COULD NOT HAVE INTENDE D TO BRING ABOUT ANY SUCH DISTINCTION NOR THE LANGUAGE USED IN THE SECTION BRINGS ABOUT ANY SUCH MEANING. IF THE INTER PRETATION S ADVANCED BY THE ASSESSEES IS ACCEPTED, IT WOULD L EAD TO A SITUATION WHERE THE ASSESSEE THOUGH 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 BECAU SE 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 REMA INED PAYABLE TILL THE END OF THE YEAR. WE SIMPLY DO NOT SEE ANY LOGIC WHY THE LEGISLATURE WOULD HAVE DESIRED TO BRI NG ABOUT SUCH IRRECONCILABLE AND DIVERSE CONSEQUENCES. WE HA STEN TO ADD THAT THIS IS NOT THE PRIME BASIS ON WHICH WE HA VE ADOPTED THE INTERPRETATION WHICH WE HAVE GIVEN. IF THE LANGUAGE USED BY THE PARLIAMENT CONVEYED SUCH A MEA NING, WE WOULD NOT HAVE HESITATED IN ADOPTING SUCH AN INTERPRETATION. WE ONLY HIGHLIGHT THAT WE WOULD NOT READILY ITA NO.326, 729 & 730/16 :- 20 -: ACCEPT THAT THE LEGISLATURE DESIRED TO BRING ABOUT AN INCONGRUOUS AND SEEMINGLY IRRECONCILABLE CONSEQUENC ES. THE DECISION OF THE SUPREME COURT IN THE CASE OF COMMIS SIONER OF INCOME-TAX, GUJARAT VS. ASHOKBHAI CHIMANBHAI (SUP RA), WOULD NO6T ALTER THIS SITUATION. THE SAID DECISION, OF COURSE, RECOGNIZES THE CONCEPT OF ASCERTAINING THE PROFIT A ND LOSS FROM THE BUSINESS OR PROFESSION WITH REFERENCE TO A CERTAIN PERIOD I.E. THE ACCOUNTING YEAR. IN THIS CONTEXT, LA ST DATE OF SUCH ACCOUNTING PERIOD WOULD ASSUME CONSIDERABLE SIGNIFICANCE. HOWEVER, THIS DECISION NOWHERE INDICA TES THAT THE EVENTS WHICH TAKE PLACE DURING THE ACCOUNTING P ERIOD SHOULD BE IGNORED AND THE ASCERTAINMENT OF FULFILLI NG A CERTAIN CONDITION PROVIDED UNDER THE STATUTE MUST B E JUDGED WITH REFERENCE TO LAST DATE OF THE ACCOUNTIN G PERIOD. PARTICULARLY, IN THE CONTEXT OF REQUIREMENTS F SECTI ON 40(A)(IA) OF THE ACT, WE SEE NO WARRANT IN THE SAID D ECISION OF THE SUPREME COURT TO APPLY THE TEST OF PAYABILIT Y ONLY AS ON 31ST MARCH OF THE YEAR UNDER CONSIDERATION. MEREL Y 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 MUST BE ASCERTAINED ON THE STRENGTH OF THE POSITION EMERGING ON 31T MARCH. 25. THIS BRINGS US TO THE SECOND ASPECT OF THIS DISCU SSION, NAMELY, WHETHER THIS IS A CASE OF CONSCIOUS OMISSIO N AND THEREFORE, THE LEGISLATURE MUST BE SEEN TO HAVE DEL IBERATELY BROUGHT ABOUT A CERTAIN SITUATION WHICH DOES NOT RE QUIRE ANY FURTHER INTERPRETATION. THIS IS THE FUNDAMENTAL ARG UMENT OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) TO ADOPT A PARTICULAR V IEW. 26. WHILE INTERPRETING A STATUTORY PROVISION THE COUR TS HAVE OFTEN APPLIED HYDENS RULE OR THE MISCHIEF RULE AND ASCERTAINED WHAT WAS THE POSITION BEFORE THE AMENDM ENT, WHAT THE AMENDMENT SOUGHT TO REMEDY AND WHAT WAS TH E EFFECT OF THE CHANGES. 27 TO 36.. ITA NO.326, 729 & 730/16 :- 21 -: 37. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERROR I N 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 LEGISLAT ION WHICH MAY BE PASSED. SECONDLY, THE STATUTORY PROVISIONS I S AMPLY CLEAR. 38. IN THE RESULT, W ARE OF THE OPINION THAT SECTION 40(A)(IA) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYAB LE AS ON 31ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE P AYABLE AT ANY TIME DURING THE YEAR. OF COURSE, AS LONG AS THE OTHER REQUIREMENT OF THE SAID PROVISION EXIST. IN THAT CON TEXT, IN OUR OPINION THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRAN SPORTS VS ACIT (SUPRA), DOES NOT LAY DOWN CORRECT LAW. 14. BY FOLLOWING THE JUDGMENTS OF THE CALCUTTA HIGH COURT IN CRESCENT EXPORT SYNDICATE (SUPRA) AND THE GUJARAT HI GH COURT IN SIKANDARKHAN N TUNVAR (SUPRA), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS (SUPRA) AND THE JUDGMENT OF THE ALLAHABAD HIGH COUR T IN VECTOR SHIPPING SERVICES (P) LTD (SUPRA) ARE NOT AP PLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION WHEREAS T HE JUDGMENTS OF THE CALCUTTA HIGH COURT IN CRESCENT EXP ORT SYNDICATE (SUPRA) AND THE GUJARAT HIGH COURT IN SIK ANDARKHAN N TUNVAR (SUPRA) ARE SQUARELY APPLICABLE TO THE FAC TS OF THE CASE. RESPECTFULLY FOLLOWING THE JUDGMENTS OF THE C ALCUTTA HIGH COURT IN CRESCENT EXPORT SYNDICATE (SUPRA) AND THE GUJARAT HIGH COURT IN SIKANDARKHAN N TUNVAR (SUPRA) , WE DO NOT SEE ANY INFIRMITY IN THE ORDERS OF THE LOWER AU THORITIES. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E CONFIRMED. 16. IN FACT, THE ASSESSEE CARRIED THE MATTER BEFORE TH E KERALA HIGH COURT IN SHRI THOMAS GEORGE MUTHOOT VS CIT IN I.T.A.NO.278 OF ITA NO.326, 729 & 730/16 :- 22 -: 2014. THE KERALA HIGH COURT BY JUDGMENT DATED 3.7. 2015, CONFIRMED THE ORDER OF THE TRIBUNAL BY PLACING RELIANCE ON TH E JUDGMENTS OF THE CALCUTTA AND GUJARAT HIGH COURTS. IN FACT, THE KER ALA HIGH COURT OBSERVED AS FOLLOWS IN PARA 17 OF ITS JUDGMENT: 17.ANOTHER CONTENTION THAT WAS PRESSED INTO SERVICE WAS THAT THE APPELLANTS HAD ALREADY PAID THE AMOUNT AND THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA), APPLICABLE ONLY IN RESPECT OF THE AMOUNT WHICH REMAINS TO BE PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR , IS NOT ATTRACTED. THEREFORE, ACCORDING TO THE APPELLAN TS, DISALLOWANCE CANNOT BE SUSTAINED. THIS CONTENTI ON WAS SOUGHT TO BE SUBSTANTIATED BY RELYING ON THE JUD GMENT OF THE ALLAHABAD HIGH COURT IN COMMISSIONER OF INCOME TAX V.VECTOR SHIPPING SERVICES (P) [(2013) 357 ITR 642 (ALL)] . PRIMARILY, THIS CONTENTION SHOULD BE ANSWERED WI TH REFERENCE TO THE LANGUAGE USED IN THE STATUTORY PROVISION. SECTION 40(A)(IA) MAKES IT CLEAR THAT THE CONSEQUENCE OF DISALLOWANCE IS ATTRACTED WHEN AN INDIVIDUAL, WHO IS LIABLE TO DEDUCT TAX ON ANY INTEREST PAYABLE TO A RESIDENT ON WHICH TAX IS DEDUCTIBLE AT SOURCE, COMMITS DEFAULT. THE LAN GUAGE OF THE SECTION DOES NOT WARRANT AN INTERPRETATI ON THAT IT IS ATTRACTED ONLY IF THE INTEREST REMAINS PAYABLE ON THE LAST DAY OF THE FINANCIAL YEAR. IF THIS CONTENTION IS TO BE ACCEPTED, THIS COURT WILL HAVE TO ALTER THE LANGUAGE OF SECTI ON 40(A)(IA) AND SUCH AN INTERPRETATION IS NOT PERMISSIBLE. THI S VIEW THAT WE HAVE TAKEN IS SUPPORTED BY JUDGMENTS OF THE CALC UTTA HIGH COURT IN CRESCENT EXPORTS SYNDICATE AND ANOTHER [I TAT 20 OF 2013] AND THE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V. SIKANDADARKHAN N T UNVAR [ITA NOS.905 OF 2012 & CONNECTED CASES], WHICH HAVE BEEN RELIED ON BY THE TRIBUNAL. 17. UNDER THE SCHEME OF THE INCOME-TAX ACT, 1961, TH E ASSESSEE HAS TO DEDUCT TAX ONLY AT THE TIME OF PAYM ENT OR GIVING ITA NO.326, 729 & 730/16 :- 23 -: CREDIT, THEREFORE, THE AMOUNT WHICH WAS ALREADY PAI D OR GIVEN CREDIT AND REMAINS PAYABLE IS ALSO SUBJECTED TO DISALLOW ANCE U/S 40(A)(IA) OF THE ACT. THEREFORE, WE ARE UNABLE TO UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, THE ORDER OF THE CIT(A ) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 18. NOW THE LD. COUNSEL SUBMITS THAT THE RECIPIENT/DEDU CTEE ADMITTED THE INCOME AND PAID THE TAXES. THIS FACT IS NOT VERIFIED BY ANY OF THE LOWER AUTHORITIES. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IF THE RECIPIENT/DEDUCTEE DISCLOSED TH E RECEIPT IN THE RETURN OF INCOME AND PAID TAXES, THERE IS NO NEED F OR FURTHER DISALLOWANCE. HOWEVER, THE MATTER NEEDS TO BE VERI FIED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE OF DISALLOWANCE U/S 40(A)(I A) OF THE ACT IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL VERIFY WHETHER THE DEDUCTEE/RECIPIENT OF THE AMOUNTS DISCLOSED THE SAME IN THEIR RETURN OF INCOME AND PA ID THE TAXES. THE ASSESSING OFFICER THEREAFTER DECIDE THE SAME IN ACC ORDANCE WITH LAW AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSES SEE. 19. IN THE RESULT, ALL THE APPEALS OF THE REVENUE AND ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO.326, 729 & 730/16 :- 24 -: ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI ! / DATED: 5 TH AUGUST, 2016 RD !' # $% &% / COPY TO: 1 . '( / APPELLANT 4. ) / CIT 2. #*'( / RESPONDENT 5. %+, # - / DR 3. ) () / CIT(A) 6. ,/ 0 / GF