Appeal Details
Counselvise Citation
[2013] 140 COUNSELVISE.COM (IT) 68518 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 1 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-09-2013
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
B
Next Hearing Date
17-07-2013
Assessment Year
2008-2009
Appeal Filed On
12-08-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.801 /CHD/2011 (ASSESSMENT YEAR : 2008-09) THE D.C.I.T., VS. SH.SUKHWINDER SINGH, CIRCLE 1, PROP.M/S AHMEDGARH TANKER LUDHIANA. TRANSPORT CO., HEERA NAGAR, STREET NO.4, LUDHIANA. PAN: ANZPS8434Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMARVEER SINGH, DR RESPONDENT BY : SHRI DEEPAK AGGARWAL DATE OF HEARING : 17.07.2013 DATE OF PRONOUNCEMENT : 30.09.2013 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, LUDHIANA DA TED 13.05.2011 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS UNDER: 1. THAT THE LD CIT(A) ERRED IN LAW AND ON FACTS BY DELETING THE ADDITION OF RS.3,56,76,400/- MADE U/S 40(A)(IA) OF THE I.T.ACT, 1961, WHEREAS THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE IN ACCORDANCE WI TH THE PROVISIONS OF SECTION 194C OF I.T. ACT, 1961 ON THE PAYMENTS MADE BY HIM UNDER THE HEAD FREIGHT. 2. THAT THE LD C1T(A) ERRED IN LAW AND ON FAC TS IN DELETING THE ADDITION OF RS.35,99 ,080/- MADE ON ACCOUNT OF DISALLOWANCE OF CASH PAYMENTS PAID IN CONTRAVENTION TO PROVISIONS OF SECTION 40A(3) AND O N ACCOUNT OF NON VERIFICATION OF ANY OF THE EXPENSES BOOKED UNDER THE HEAD FREIGH T PAID. 3. THAT THE ORDER OF THE LD CIT(A) BE SET ASI DE AND THAT OF A.O. BE RESTORED. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 2 3. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST DELET ION OF ADDITION OF RS.3.56 CRORES MADE IN VIEW OF THE PROVISIONS OF SE CTION 40(A)(IA) OF THE ACT FOR THE FAILURE TO DEDUCT TAX AT SOURCE UNDER S ECTION 194C OF THE ACT ON THE PAYMENTS MADE UNDER THE HEAD FREIGHT EXPENS ES. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF EDIBLE OIL FROM KANDL A SEA PORT TO DIFFERENT PARTS OF THE COUNTRY. FURTHER THE ASSESSEE ALSO TR ANSPORTED MOLASSES FROM U.P. AND BLACK OIL FROM/TO DIFFERENT PLACES WI THIN THE COUNTRY. THE ASSESSEE OWNED FLEET OF OIL TANKERS OF HIS OWN FOR CARRYING ON THE BUSINESS OF TRANSPORTATION. FURTHER THE ASSESSEE H IRED VEHICLES FROM THE MARKET IN ORDER TO CARRY ON TRANSPORTATION ACTIVITI ES. THE TOTAL RECEIPTS ON ACCOUNT OF CARTAGES WERE RS.194.36 LACS AND IN A DDITION ASSESSEE HAD DECLARED INCOME FROM COMMISSION AT RS.21,40,484/-. THE ASSESSING OFFICER REQUISITIONED THE ASSESSEE TO RECONCILE THE TOTAL RECEIPTS WITH THE TDS CLAIM FILED BY IT. ON VERIFICATION THE ASSESSI NG OFFICER NOTED THAT THE TOTAL RECEIPTS CORRESPONDING TO TDS CLAIMED BY THE ASSESSEE AMOUNTED TO RS.5,14,03,741/-. THE EXPLANATION OF T HE ASSESSEE WITH REGARD TO THE SAME WAS THAT THE REMAINING RECEIPTS WERE NOT BROUGHT INTO PROFIT & LOSS ACCOUNT AS THE ASSESSEE ONLY RECEIVED COMMISSION FROM PETTY TRANSPORTERS WHICH WAS CREDITED TO THE PROFIT & LOSS ACCOUNT. THE RECEIPTS FROM FREIGHT PERTAINING TO THE SAID PETTY TRANSPORTERS, AS PER THE ASSESSEE, WERE CREDITED TO THEIR RESPECTIVE PERSONA L ACCOUNTS, UNDER THEIR RESPECTIVE VEHICLE NUMBERS. THE ASSESSING OFFICER AFTER EXCLUDING THE COMMISSIONS @ 6% AT RS.21,40,584/- SOUGHT EXPLANATI ON FROM THE ASSESSEE IN RESPECT OF NET PAYMENT OF RS.3,35,35,81 6/- AS AGAINST RECEIPTS OF RS.3,56,76,400/-. THE ASSESSEE WAS ASK ED TO EXPLAIN THE FULFILLMENT OF PROVISIONS OF SECTION 40(A)(IA) OF T HE ACT. THE REPLY OF THE ASSESSEE IS INCORPORATED AT PAGES 2 TO 4 OF THE ASSESSMENT ORDER. THE 3 MAIN PLEA OF THE ASSESSEE WAS THAT THE SMALL TRANSP ORTERS WERE ARRANGED PURELY ON COMMISSION BASIS ON THE TERMS AND CONDITI ONS VERBALLY SETTLED BETWEEN THE ASSESSEE AND THE SAID PETTY TRANSPORTER S. THE ASSESSEE CLAIMED TO HAVE FOLLOWED THE SAID SYSTEM FROM YEAR TO YEAR AND WAS SHOWING RECEIPTS FROM ITS FLEET OF VEHICLES AS INCO ME FROM TRANSPORT BUSINESS AND ONLY COMMISSION WAS RECEIVED FROM PETT Y TRANSPORTERS AND THE SAME WAS CREDITED TO THE PROFIT & LOSS ACCOUNT. THE FREIGHT AMOUNT PERTAINING TO SUCH TRANSPORTERS WAS CLAIMED TO HAVE BEEN CREDITED TO THEIR PARTY ACCOUNTS UNDER THEIR RESPECTIVE VEHICLE NUMBERS, AND AFTER DEDUCTING THE COMMISSION AND PETTY EN-ROUTE EXPENSE S, THE BALANCE WAS PAID TO THEM. THE ASSESSING OFFICER CONSIDERING TH E LEGAL POSITION UNDER SECTION 194C AND SECTION 40(A)(IA) OF THE ACT READ WITH RULE 29D OF INCOME TAX RULES AND ANALYSED THE CASE UNDER FOLLOW ING HEADS: 1) WHETHER THE ASSESSEE HAS TO RECOGNIZE ALL THE RE CEIPTS FROM GRS AS PART OF HIS TOTAL RECEIPTS IN THE P&L A/C AS HE IS A CONTRACTEE FOR THE MAIN PARTY AND NOT A COMMISSION AGENT:- THE ASSESSING OFFICER NOTED THAT THE GRS WERE BEING PREPARED IN THE NAME OF THE ASSESSEE THOUGH THE ASSESSEE CLAIMED THAT HE WAS ONLY ACTING AS COMMISSION AGENT. RELIANCE WAS PLACED ON QUESTION NO.9 AND 10 AND ANSWER TO IT IN CIRCULAR NO.715 DATED 8.8.1994, REPORTED IN 125 ITR (ST.) 12 AND IT WAS OBSERVED BY THE ASSESSING OFFICER THAT ALL THE PARTIES WERE DEDUCTING TAX AT SOURCE ON THE PAYMENTS MADE TO THE ASSESSEE AND HENCE THE TOTAL RECEIPTS OF THE ASSESSEE SHOULD BE ADOPTED AT RS.5.14 CRORES. (2) WHETHER THE ASSESSEE HAS TO SHOW THE PAYMENTS M ADE TO THE PETTY TRANSPORTERS AS PAYMENTS TO SUB-CONTRACTORS A ND CLAIM THEM AS EXPENSES:- 4 THE ASSESSING OFFICER NOTED THAT THE ASSESSEE CLAIMED TO HAVE FURNISHED FORM NO.15I AND 15J IN RESPECT OF CERTAIN PETTY TRANSPORTERS. THE ASSESSING OFFICER OBSERVED THAT WHILE THE ASSESSEE WOULD RECEIVE THE WHOLE AMOUNT AS STATED IN THE GR FROM THE MAIN PARTY ON DELIVERY OF GOODS, HE WOULD GIVE THE MONEY TO THE PETTY TRANSPORTERS ONLY WHEN HE IS SATISFIED ABOUT THE ACTUAL DELIVERY AS PER CONTRACTUAL OBLIGATIONS. THE ASSESSEE HAS IN HIS OWN REPLY DATED 23.12.10 STATED THAT HE ARRANGES THE TRUCKS OF PETTY TRANSPORTERS ON TERMS AND CONDITIONS VERBALLY SETTLED BETWEEN HIM AND THE PETTY TRANSPORTER. THE USE OF TERMS AND CONDITIONS SIGNIFIES THE EXISTENCE OF CONTRACTUAL RELATIONSHIP BETWEEN THE ASSESSEE AND THE PETTY TRANSPORTERS. THEREFORE, PAYMENTS MADE TO THE PETTY TRANSPORTERS SHOULD BE ENTERED IN THE EXPENSES INCURRED BY THE ASSESSEE. THE ASSESSEE CONTENDS THAT HE IS CHARGING COMMISSION 6% BUT THIS COMMISSION IS ACTUALLY THE MARGIN OR THE PROFIT OF THE ASSESSEE IN THE CONTRACT . (3) WHETHER FOR CLAIMING THESE EXPENSES, THE ASSESS EE NEEDS TO COMPLY TO THE PROVISIONS OF SECTION 194C RWS 40(A)( IA):- THE ASSESSING OFFICER HELD THAT IN VIEW OF THE NON COMPLIANCE OF THE PROVISIONS OF SECTION 194C, IT IS HELD THAT FREIGHT PAYMENTS OF RS.3,56,76,400/- SHALL NOT BE ALLOWABLE TO THE ASSESSEE AS A BUSINESS EXPENDITURE. THEREFORE, THE AMOUNT OF RS.3,56,76,400/- IS BEING DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE FOR NON-COMPLIANCE OF PROVISIONS OF SECTION 194C RWS 40(A)(IA). 5 5. THE SECOND ISSUE BEFORE THE ASSESSING OFFICER WA S IN RELATION TO DISALLOWANCE OF EXPENSES UNDER SECTION 40A(3) OF TH E ACT RESULTING IN ADDITION OF RS.40,24,080/- ON ACCOUNT OF CASH PAYME NTS. 6. BEFORE THE CIT (APPEALS) THE ASSESSEE FILED WRIT TEN SUBMISSIONS WHICH ARE INCORPORATED AT PAGES 4 TO 17 OF THE APPE LLATE ORDER. THE MAIN PLEA OF THE ASSESSEE WAS THAT THE SAME METHOD OF AC COUNTING HAS BEEN FOLLOWED FROM YEAR TO YEAR AND EXPENDITURE HAD BEEN ALLOWED IN THE EARLIER YEAR, WHICH MERITS TO BE ALLOWED IN THE YEA R UNDER CONSIDERATION ALSO. THE SECOND PLEA OF THE ASSESSEE WAS THAT THO UGH THE BILLS WERE RAISED IN THE NAME OF THE ASSESSEE BUT THE PAYMENT IS MADE TO THE VEHICLE OWNER ON HIRING THE VEHICLE FROM THE MARKET. THE ASSESSEE RECEIVED WHOLE AMOUNT OF JR BUT THE SAME IS DISBURSED TO THE TRUCK OWNER AFTER DELIVERY OF THE GOODS. ANOTHER PLEA WAS RAISED BY THE ASSESSEE THAT THERE NEVER EXISTED A RELATIONSHIP OF CONTRACTOR AN D SUB-CONTRACTOR BETWEEN THE ASSESSEE AND PETTY TRANSPORTERS AND HEN CE THERE IS NO OBLIGATION TO DEDUCT TAX AT SOURCE OUT OF HIRE CHAR GES PAID TO THEM. THE ASSESSEE FURNISHED BREAK UP OF THE DETAILS AND POIN TED OUT THAT THIS STATEMENT IS IN RESPECT OF PETTY TANKER OWNERS FOR THE PERIOD FROM 01.04.2007 TO 31.03.2008 TO WHOM TOTAL HIRE CHARGES OF RS.1,60,59,051/- WERE PAID AND FROM WHOM A SUM OF RS.9,47,480/- WAS EARNED AS COMMISSION. THE SUMMARY OF THE DEDUCTION MADE FROM THE HIRE CHARGES ON VARIOUS COUNTS AND ADVANCES MADE TO THEM TO MEET THE VARIOUS EXPENSES RELATING TO THE RUNNING AND MAINTENANCE OF THEIR TANKERS IS GIVEN AS WELL AS THE CREDITS OF FREIGHTS ETC. AS UNDER :- AMOUNTS DEBITED 1) AMOUNT PAID- RS. 36,77,271/- 2) AMOUNT PAID FROM KANDLA OFFICE - RS. 5,62,904/- 3) DIESEL -RS.48,24,721/- 4) SHORTAGE -RS. 6,27,855/- 6 5) COMMISSION DEBITED - RS. 9,47,480/- 6) TANKER REPAIR- RS. 1,69,939/- 7) LOAN INSTALMENT ON A/C OF VEHICLE FINANCING RS.35,1 0,138/- 8) ADVANCE PAID - RS. 26,15,763/- 9) TANKER SERVICE - RS. 74,178/- 10) NEW TYRES- RS.3,01,700/- 11) PAID FOR DOCUMENTS- RS.2,17,485/- AMOUNTS CREDITED L)FREIGHT CREDITED- RS.1,60,59,051/- 2)AMOUNT RECEIVED- RS.15,26,104/- 7. THE CIT (APPEALS) HELD AS UNDER: 5. I HAVE CONSIDERED THE BASIS OF AO'S CONCLUSION I N APPLYING THE PROVISIONS OF SECTION .APPELLANT DEFENDING THE NON DEDUCTION OF T AX AT SOURCE. THE FIRST ISSUE TO BE CONSIDERED HERE IS WHETHER THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE WHEREIN THE RECEIPTS/EXPENDITURE PERTAINING TO PETT Y TRANSPORTERS IS NOT CREDITED IN THE PROFIT AND LOSS ACCOUNT, IS CORRECT OR NOT. THE AR'S CONTENTION IS THAT THE RECEIPTS/EXPENDITURE IS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE APPELLANT BY CREDITING THE RECEIPTS IN THE INDIVIDUAL ACCOUNTS O F THE PETTY TRANSPORTERS, WHEREAS AS PER AO THE SAME SHOULD BE CREDITED IN THE PROFIT AND LOSS ACCOUNT AND FURTHER PAYMENTS MADE TO THEM OR ON BEHALF OF THEM SHOULD B E DEBITED IN THE PROFIT AND LOSS ACCOUNT. 6. I INTEND TO AGREE WITH THE VIEW OF THE AR ON THIS I SSUE AS THE METHOD ADOPTED BY THE APPELLANT GIVES FAIR PICTURE OF THE AFFAIRS OF THE BUSINESS CARRIED ON BY THE APPELLANT. THE AMOUNTS RECEIVED W HETHER ASSESSEE'S OWN ACCOUNT OR ON ACCOUNT OF PETTY TRANSPORTERS REPRESE NT THE WORK DONE BY THE ASSESSEE AS A CONTRACTOR. THE GRS HAPPEN TO BE IN T HE NAME OF THE ASSESSEE AND TAX AT SOURCE HAS ALSO BE DEDUCTED FROM THE PAY MENTS MADE TO THE ASSESSEE. SINCE AS PER ASSESSEE'S OWN CLAIM, REITER ATED VEHEMENTLY THAT THE ENTIRE WORK PERTAINING TO THE CONTRACT BETWEEN THE PRINCIPALS AND ASSESSEE HAS BEEN EXECUTED BY HIM EITHER THROUGH HI S OWN TRUCKS OR BY HIRING THE SAME FROM MARKET, MAINTAINING SEPARATE L EDGER ACCOUNT IN RESPECT OF EACH PETTY TRANSPORTER. IT IS ALSO TO BE CONSIDERED THAT THIS METHOD OR ACCOUNTING AS BEEN FOLLOWED CONSISTENTLY BY THE APPELLANT AND HAS BEEN SUBJECTED TO SCRUTINY IN NUMBER OF YEARS A S PER THE HISTORY OF THE CASE WHICH CLEARLY SHOWS THAT THE SAME HAS BEEN ACCEPTED BY TH E DEPARTMENT. THEREFORE, THERE IS NO LOGICAL BASIS FOR AO TO CONC LUDE THAT THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE HAD TO BE REJECT ED. 7. THE NEXT ISSUE WHICH WOULD DETERMINE WHETHER THE AP PELLANT IS ALLY OBLIGED TO DEDUCT TAX AT SOURCE ON PAYMENTS MADE TO PETTY TRAN SPORTER DEPENDS UPON THE UNDERSTANDING OF THE RELATIONSHIP BETWEEN THE APPEL LANT AND THE PETTY TRANSPORTER. THE ASSESSING OFFICER HAS PROCEEDED WI TH THE PRESUMPTION THAT THE PETTY TRANSPORTER ACT AS SUB CONTRACTORS EVEN THOUG H HE HAS RECORDED IN THE ORDER THAT IT IS THE ASSESSEE WHO HAS THE FINAL RES PONSIBILITY OF SAFETY OF THE GOODS AND HE INCURS VARIOUS EXPENSES ON BEHALF OF THE PET TY TRANSPORTERS TO ENSURE THAT WORK CONTRACTED BY HIM VIS-A-VIS THE PRINCIPAL IS C ARRIED OUT SMOOTHLY. THE AR ON THE OTHER HAND HAS BROUGHT ON RECORD VOLUMINO US DATA TO HIGHLIGHT THE UNIQUE RELATIONSHIP BETWEEN HIM AND THE PETTY TRANS PORTERS WHEREIN THE ASSESSEE IS IN COMPLETE CHARGE OF THE CONTRACT FOR WHICH HE HAS UNDERTAKEN 7 TO MEET THE EXPENDITURE ON VARIOUS ASPECTS OF TRANS PORTATION EVEN IN RESPECT OF HIRED TRUCKS. THE DETAILS SUBMITTED IN THIS REGARD BEFORE THE A.O. SHOW THAT THE ASSESSEE HAS MET THE FOLLOWING EXPENSES IN RESPECT OF TRUCKS HIRED FROM PETTY TRANSPORTERS:- 12) AMOUNT PAID FROM KANDLA OFFICE - RS. 5,62,904/- 13) DIESEL -RS.48,24,721/- 14) SHORTAGE -RS. 6,27,855/- 15) COMMISSION DEBITED - RS. 9,47,480/- 16) TANKER REPAIR- RS. 1,69,939/- 17) LOAN INSTALMENT ON A/C OF VEHICLE FINANCING - RS.35 ,10,138/- 18) ADVANCE 19) TANKER SERVICE - RS. 74,178/- 20) NEW TYRES- RS. 3,01,700/- 21) PAID FOR DOCUMENTS- RS. 2,17,485/- THE PERUSAL OF ABOVE DETAILED DATA SHOWS THAT THE P ETTY TRANSPORTERS SIMPLY HANDED OVER THEIR TRUCKS TO THE ASSESSEE AS ALMOST ALL THE OPER ATIONAL EXPENSES TO RUN A TRUCK HAVE BEEN INCURRED BY THE ASSESSEE. SO MUCH SO THAT EVEN THE LOAN INSTALLMENTS DUE ON ACCOUNT OF VEHICLE FINANCING HAVE ALSO BEEN MET BY THE ASSESSEE. THIS PARTICULAR FEATURE OF RELATIONSHIP BETWEEN ASSESSEE AND PETTY TRANSPORTERS CLEARLY SHOWS THAT NO CONTRACT EXISTS BETWEEN THE ASSESSEE AND PETTY TRAN SPORTER. THE AR HAS ALSO BROUGHT ON RECORD ORDER PASSED BY MY PREDECESSOR IN THE CASE O F THE ASSESSEE FOR ASSESSMENT YEAR 2006-07 WHEREIN THIS ISSUE HAD COME UP FROM DIFFERE NT ANGLE AND IT WAS HELD THAT THE ASSESSEE HAD SIMPLY HIRED THE TRUCKS IN ORDER TO ME ET THE SHORTFALL IN EXECUTING THE WORK CONTRACTED. THE ORDER SO PASSED HAS ASSUMED FI NALITY AS NO APPEAL AGAINST IT HAS BEEN FILED BEFORE THE HON'BLE ITAT. 8. THE AR HAS ALSO PLACED RELIANCE ON THE CASE OF MYTHRI TRANSPORT CORPORATION VS. ACIT 124 TTJ 970(VISAKHAPATNAM). 9. THE FACTS OF THE ABOVE MENTIONED CASE ARE COMPAR ABLE WITH THE FACTS OF THE CASE OF APPELLANT EXCEPT THAT THER E IS NO SPECIFIC WRITTEN CONTRACT BETWEEN THE PRINCIPAL AND THE APPELLANT EVEN THOUGH THE AR HAS CONTENDED THAT THE SAME IS UNDERS TOOD BY BOTH THE PARTIES BECAUSE OF YEARS OF CONDUCTING BUSINESS AND THEREFO RE THE TERMS AND CONDITIONS GET SETTLED BY CONVENTION EXCEPT THAT THERE IS NO SPECI FIC OBVIATING ANY NEED FOR WRITTEN CONTRACT. IN VIEW OF THE ABOVE DETAILED ANALYSIS AN D THE JUDICIAL PRONOUNCEMENT QUOTED ABOVE. IT IS ABUNDANTLY APPEARS THAT NO REL ATIONSHIP OF A CONTRACTOR AND A CONTRACTEE EXISTED BETWEEN THE APPELLANT AND THE PE TTY TRANSPORTS AND THE RELATIONSHIP COULD SIMPLY BE DESCRIBED AS HIRE. TH EREFORE, THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE TO THE FACTS OF THE CASE MEANI NG THEREBY NO DISALLOWANCE UNDER SECTION 40(A)(IA) IS WARRANTED FOR NON DEDUCTION OF TAX AT SOURCE. ADDITION MADE BY THE AO IS THEREFORE DELETED. 8. IN RESPECT OF THE SECOND ADDITION MADE ON ACCOUN T OF DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT, THE CIT (APPEALS) DELETED THE SAME IN THE ABSENCE OF ANY EVIDENCE BROUGHT ON RECORD TO SH OW THAT ONE SINGLE PAYMENT EXCEEDED RS.20,000/- IN CASH. HOWEVER, THE CIT (APPEALS) FURTHER HELD AS UNDER: 8 HOWEVER CERTAIN PORTION OF THE EXPENSES CLAIMED UN DER THIS HEAD REMAIN UNVERIFIABLE ESSENTIALLY BECAUSE OF THE NATURE OF E XPENSES INVOLVED. FOR INSTANCE THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 83,800/- AS ENTRY/DTO AND EXPENSES T.I AMOUNTING TO RS. 68,350/- WHICH SEEMS TO BE IN THE NATURE OF SPEED MONEY ALLEGEDLY GIVEN TO THE AUTHORITIES ON HIGHWAYS/ROADS. FURTHER EXPENSES ON MEALS, MOBILE PHONE ETC. ARE ALSO NOT FULLY VERIFIABLE. THEREFORE , 10% OF EXPENSES CLAIMED UNDER THIS HEAD NEED TO BE DISALLOWED TO COUNT FOR POSSIBLE UN VERIFIABLE/DISALLOWABLE EXPENSES. AS SUCH AN ADDITION OF RS.4,25,000/- IS CONFIRMED THOU GH NOT UNDER ACTION 40A(3). 9. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CIT (APPEALS). THE LEARNED D.R. FOR THE REVENUE POINTED OUT THAT T HE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRANSPORTATION THROUGH O WN AND HIRED TRUCKS AND NO TAX WAS DEDUCTED OUT OF FREIGHT PAID BY THE ASSESSEE. OUR ATTENTION WAS DRAWN TO THE DETAILS FURNISHED AT PAG E 36 OF THE PAPER BOOK, WHEREIN THE ASSESSEE HAD GIVEN A BREAK-UP OF THE FREIGHT RECEIVED TRUCK-WISE. THE ASSESSEE HAS GIVEN TABULATED DETAI LS IN IT IS PAPER BOOK WHEREIN THE PAYMENT HAD BEEN MADE FOR THE DIESEL, C OMMISSION, TANKER REPAIR, LOAN INSTALMENT, TANKER SERVICE, NEW TYRES, PAID FOR DOCUMENTS AND ALSO ADVANCE PAID INCLUDING FREIGHT AMOUNT RECE IVED BY THE ASSESSEE TRUCK-WISE. THE LEARNED D.R. FOR THE REVENUE POINT ED OUT THAT THE PERUSAL OF THE LEDGER ACCOUNT OF THE TRUCKS PLACED BY THE ASSESSEE IN PAPER BOOK AT PAGES 37 ONWARDS WOULD REFLECT THAT E ACH INDIVIDUAL PAYMENT FOR HIRING THE TRUCK WAS ABOUT RS.50,000/- WHICH CLEARLY ATTRACTS APPLICATION OF THE PROVISIONS OF SECTION 194C OF TH E ACT. FURTHER THE ASSESSEE HIMSELF CLAIMED TO HAVE RECEIVED FORM NO.1 5-I WHICH IS NOT FILED BY THE ASSESSEE. THE LEARNED D.R. FOR THE RE VENUE PLACED RELIANCE ON THE DECISION OF THE JODHPUR BENCH OF THE TRIBUNA L IN SHREE CHOUDHARY TRANSPORT COMPANY VS. ITO [119 TTJ 3 (JODHPUR). 10. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY ADMITT ED THAT THE ASSESSEE OWNED TANKERS WHICH WERE ATTACHED TO ITS FLEET OF T ANKERS. IT WAS STRESSED BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE CONTRACT WAS 9 BETWEEN THE ASSESSEE AND THE PERSONS WHOSE GOODS WE RE BEING CARRIED. THE ASSESSEE GETS THE FREIGHT RECEIPTS AND TDS DEDU CTED OUT OF SUCH RECEIPTS AND ASSESSEE ALSO CLAIMED CREDIT OF SUCH T AX DEDUCTED AT SOURCE. HOWEVER, THE ASSESSEE WAS HIRING TRUCKS FROM THE MA RKET AND WAS PAYING FREIGHT TO SUCH TRUCKS OWNERS BUT THERE IS NO CONTR ACT AS THE ASSESSEE WAS ONLY RECEIVING COMMISSION ON SUCH HIRING OF TRUCKS. OUR ATTENTION WAS DRAWN TO THE WRITTEN SUBMISSIONS FILED IN THIS REGA RD BEFORE THE CIT (APPEALS). THE NEXT CONTENTION OF THE LEARNED A.R. FOR THE ASSESSEE WAS THAT THE FREIGHT WAS JUST LIKE PURCHASE OF GOODS AN D THERE IS NO WRITTEN OR ORAL AGREEMENT BETWEEN THE ASSESSEE AND TRUCKS OWNE RS AND AS INDIVIDUAL PAYMENT WAS LESS THAN RS.20,000/- AND IN THE ABSENC E OF ANY CONTRACT, THE PROVISIONS OF SECTION 194C OF THE ACT WERE NOT ATTRACTED. THE LEARNED A.R. FOR THE ASSESSEE FURTHER POINTED OUT T HAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WERE NOT ATTRACTED AS NO EXPENDITURE WAS CLAIMED BY THE ASSESSEE. THE TURN OVER ON ACCOUNT OF FREIGHT DID NOT BELONG TO THE ASSESSEE WAS THE NEXT CONTENTION OF T HE LEARNED A.R. FOR THE ASSESSEE. IT WAS POINTED OUT BY THE LEARNED A. R. FOR THE ASSESSEE THAT THE SAME WAS DIFFERENT PROCEDURAL ASPECT IN ORDER T O PREVENT LEAKAGE. THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANCE O N THE RULE OF CONSISTENCY AS SIMILAR EXPENDITURE WAS ALLOWED IN T HE EARLIER YEAR. THE LEARNED A.R. FOR THE ASSESSEE FURTHER STATED THAT A S NO WORK WAS DONE BY SO CALLED CONTRACTORS AND HENCE IT COULD NOT BE CAL LED A CASE OF SUB- CONTRACTOR. IN RESPECT OF THE ISSUE RAISED VIDE GR OUND NO.2 BY THE REVENUE, THE LEARNED A.R. FOR THE ASSESSEE SUBMITTE D THAT ADMITTEDLY FREIGHT EXPENSES WERE PAID IN CASH BUT NONE OF THE PAYMENTS WERE ABOVE RS.20,000/- AND NO DISALLOWANCE UNDER SECTION 40A(3 ) OF THE ACT WAS MERITED. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT IMPLIEDLY THE PAYMENTS WERE MADE FOR HIRING OF TANKERS AND ALL AP PLICATIONS IN RESPECT THEREOF WERE TAKEN CARE OF BY THE ASSESSEE. FURTHE R RELIANCE WAS PLACED 10 ON THE CIRCULAR NO.715 DATED 8.8.1994 AS REFERRED T O BY THE CIT (APPEALS). 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. SECTION 194C OF THE ACT PROVIDES AS UNDER: 194C. (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO AN Y RESIDENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE CONTRACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRA CT BETWEEN THE CONTRACTOR AND A SPECIFIED PERSON SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO ( I ) ONE PER CENT WHERE THE PAYMENT IS BEING MADE OR C REDIT IS BEING GIVEN TO AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY; ( II ) TWO PER CENT WHERE THE PAYMENT IS BEING MADE OR C REDIT IS BEING GIVEN TO A PERSON OTHER THAN AN INDIVIDUAL OR A HINDU UNDIVIDED FAMIL Y, OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THERE IN. (2) WHERE ANY SUM REFERRED TO IN SUB-SECTION (1) IS CREDITED TO ANY ACCOUNT, WHETHER CALLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. (3) WHERE ANY SUM IS PAID OR CREDITED FOR CARRYING OUT ANY WORK MENTIONED IN SUB- CLAUSE ( E ) OF CLAUSE ( IV ) OF THE EXPLANATION , TAX SHALL BE DEDUCTED AT SOURCE ( I ) ON THE INVOICE VALUE EXCLUDING THE VALUE OF MATER IAL, IF SUCH VALUE IS MENTIONED SEPARATELY IN THE INVOICE; OR ( II ) ON THE WHOLE OF THE INVOICE VALUE, IF THE VALUE O F MATERIAL IS NOT MENTIONED SEPARATELY IN THE INVOICE. (4) NO INDIVIDUAL OR HINDU UNDIVIDED FAMILY SHALL B E LIABLE TO DEDUCT INCOME-TAX ON THE SUM CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACT OR WHERE SUCH SUM IS CREDITED OR PAID EXCLUSIVELY FOR PERSONAL PURPOSES OF SUCH INDI VIDUAL OR ANY MEMBER OF HINDU UNDIVIDED FAMILY. (5) NO DEDUCTION SHALL BE MADE FROM THE AMOUNT OF A NY SUM CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID TO THE ACCOUNT OF, OR TO, THE C ONTRACTOR, IF SUCH SUM DOES NOT EXCEED TWENTY THOUSAND RUPEES : PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS OF SUCH SUM S CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR EXCEEDS FIFTY THOUSAND RUPEES, THE PERSON RESPONSIBLE FOR PAYING SUCH SUMS REFERRED TO IN SUB-SECTION (1) SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SECTION. (6) NO DEDUCTION SHALL BE MADE FROM ANY SUM CREDITE D OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE PREVIOUS YEAR TO THE ACCOUNT OF A CONTRACTOR DURING THE COURSE OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAG ES, ON FURNISHING OF HIS PERMANENT ACCOUNT NUMBER, TO THE PERSON PAYING OR CREDITING S UCH SUM. (7) THE PERSON RESPONSIBLE FOR PAYING OR CREDITING ANY SUM TO THE PERSON REFERRED TO IN SUB-SECTION (6) SHALL FURNISH, TO THE PRESCRIBED IN COME-TAX AUTHORITY OR THE PERSON AUTHORISED BY IT, SUCH PARTICULARS, IN SUCH FORM AN D WITHIN SUCH TIME AS MAY BE PRESCRIBED. EXPLANATION. FOR THE PURPOSES OF THIS SECTION, ( I ) SPECIFIED PERSON SHALL MEAN, ( A ) THE CENTRAL GOVERNMENT OR ANY STATE GOVERNMENT; O R 11 ( B ) ANY LOCAL AUTHORITY; OR ( C ) ANY CORPORATION ESTABLISHED BY OR UNDER A CENTRAL , STATE OR PROVINCIAL ACT; OR ( D ) ANY COMPANY; OR ( E ) ANY CO-OPERATIVE SOCIETY; OR ( F ) ANY AUTHORITY, CONSTITUTED IN INDIA BY OR UNDER A NY LAW, ENGAGED EITHER FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNING, DEVELOPMENT OR IMPROVE MENT OF CITIES, TOWNS AND VILLAGES, OR FOR BOTH; OR ( G ) ANY SOCIETY REGISTERED UNDER THE SOCIETIES REGIST RATION ACT, 1860 (21 OF 1860), OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF INDIA; OR ( H ) ANY TRUST; OR ( I ) ANY UNIVERSITY ESTABLISHED OR INCORPORATED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT AND AN INSTITUTION DECLARED TO BE A UNIVERSITY UNDER SECTION 3 OF THE UNIVERSITY GRANTS COMMISSION ACT, 1956 (3 OF 19 56); OR ( J ) ANY GOVERNMENT OF A FOREIGN STATE OR A FOREIGN EN TERPRISE OR ANY ASSOCIATION OR BODY ESTABLISHED OUTSIDE INDIA; OR ( K ) ANY FIRM; OR ( L ) ANY PERSON, BEING AN INDIVIDUAL OR A HINDU UNDIVI DED FAMILY OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS, IF SUCH PERSON, (A) DOES NOT FALL UNDER ANY OF THE PRECEDING SUB-C LAUSES; AND (B) IS LIABLE TO AUDIT OF ACCOUNTS UNDER CLAUSE ( A ) OR CLAUSE ( B ) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR; ( II ) GOODS CARRIAGE SHALL HAVE THE MEANING ASSIGNED TO IT IN THE EXPLANATION TO SUB- SECTION (7) OF SECTION 44AE ; ( III ) CONTRACT SHALL INCLUDE SUB-CONTRACT; ( IV ) WORK SHALL INCLUDE ( A ) ADVERTISING; ( B ) BROADCASTING AND TELECASTING INCLUDING PRODUCTION OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; ( C ) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TR ANSPORT OTHER THAN BY RAILWAYS; ( D ) CATERING; ( E ) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCH ASED FROM SUCH CUSTOMER, BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER . ] 12. THE REQUIREMENT OF SECTION 194C OF THE ACT ARE THAT IN PURSUANCE TO A CONTRACT BETWEEN THE CONTRACTOR AND SPECIFIED PERSON WHERE ANY SUM ABOVE RS.20,000/- PER CONTRACT OR RS.50,000/- CUMUL ATIVELY IN THE YEAR, IS PAID FOR CARRYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK, THEN AT THE TIME OF PAYMENT OR AT THE TIME OF CREDIT, THE CONTRACTOR IS OBLIGED TO DEDUCT TAX AT SOURCE AT TH E PRESCRIBED RATES. AS 12 PER THE EXPLANATION TO SECTION 194C OF THE ACT, THE CONTRACT SHALL ALSO INCLUDE SUB-CONTRACT OF ANY WORK. 13. UNDER SECTION 40 OF THE ACT IT IS PROVIDED THAT CERTAIN AMOUNTS AS PRESCRIBED IN THE CLAUSES OF SECTION 40 OF THE ACT, WOULD NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE SAID CLAUSE IS NON OB STANTE CLAUSE I.E. NOT WITHSTANDING ANYTHING TO THE CONTRARY PROVIDED IN SECTIONS 30 TO 38 OF THE ACT. UNDER SECTION 40(A)(IA) OF THE ACT IT IS PROVIDED AS UNDER: 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO [ 38 ], THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARG EABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, (A) IN THE CASE OF ANY ASSESSEE [(I) ANY INTEREST (NOT BEING INTEREST ON A LOAN I SSUED FOR PUBLIC SUBSCRIPTION BEFORE THE 1ST DAY OF APRIL, 1938), ROYALTY, FEES FOR TECHNICA L SERVICES OR OTHER SUM CHARGEABLE UNDER THIS ACT, WHICH IS PAYABLE, (A) OUTSIDE INDIA; OR (B) IN INDIA TO A NON-RESIDENT, NOT BEING A COMPAN Y OR TO A FOREIGN COMPANY, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPT ER XVII-B AND SUCH TAX HAS NOT BEEN REALLY DEDUCTED OR, AFTER DEDUCTION, HAS NOT B EEN PAID DURING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY O F THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 200 : PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEE N DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCTED IN THE PREVIO US YEAR BUT PAID IN ANY SUBSEQUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCR IBED UNDER SUB-SECTION (1) OF SECTION 200, SUCH SUM SHALL BE ALLOWED AS A DEDUCTI ON IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. EXPLANATION.FOR THE PURPOSES OF THIS SUB-CLAUSE, (A) ROYALTY SHALL HAVE THE SAME MEANING AS IN EX PLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9 ; (B) FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9 ; (IA) ANY INTEREST, COMMISSION OR BROKERAGE, [RENT, ROYALTY,] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, [HAS NOT BEEN PAID, (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR, ON OR BEFORE THE DUE DA TE SPECIFIED IN SUB- SECTION (1) OF SECTION 139 ; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY O F THE PREVIOUS YEAR:] [ PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED 13 (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE; OR (B) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BU T PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUT ING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID.] EXPLANATION.FOR THE PURPOSES OF THIS SUB-CLAUSE, (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECTION 194H ; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9 ; (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME MEANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J ; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPL ANATION III TO SECTION 194C ; [(V) RENT SHALL HAVE THE SAME MEANING AS IN CLAU SE (I) TO THE EXPLANATION TO SECTION 194-I ; (VI) ROYALTY SHALL HAVE THE SAME MEANING AS IN E XPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9 ;] 14. THE SAID PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WERE FIRST ANALYZED BY THE SPECIAL BENCH OF VISHAKHAPATNAM TRI BUNAL IN MERILYN SHIPPING TRANSPORTERS V. ACIT [136 ITD 23 (VISHAKHA PATNAM)] WHEREIN IT WAS HELD THAT ANY AMOUNT WHICH HAD BEEN PAID DUR ING THE YEAR UNDER CONSIDERATION AND WAS NOT PAYABLE AT THE CLOSE OF T HE YEAR WAS NOT TO BE DISALLOWED UNDER THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE. THE SAID DECISION HAS BEEN OVER RULED BY THE HON'BLE GUJARAT HIGH COURT IN CIT V. SIKANDARKHAN N TUNWAR AND OTHERS [87 DTR 137(GUJ)] AND ALSO BY THE CALCUTTA HIGH COU RT IN CIT V. CRESENT EXPORT SYNDICATE, 216 TAXMAN 258 [CAL)]. I N THE FACTS OF THE CASE BEFORE THE HON'BLE GUJARAT HIGH COURT IN CIT V . SIKANDARKHAN N TUNWAR AND OTHERS (SUPRA), THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRANSPORT CONTRACT AND COMMISSION. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSING OFFICER IN THAT CASE THAT THE EXPENDITURE TO THE TUNE OF RS.8.74 CRORES WAS ON AC COUNT OF PAYMENT MADE BY THE ASSESSEE TO ITS SUB-CONTRACTORS. THE A SSESSEE HAD NOT DEDUCTED TAX AT SOURCE FROM SUCH PAYMENT AND INDIVI DUAL PAYMENT/S EXCEEDED THE LIMIT OF RS.20,000/- FOR A SINGLE AND AGGREGATED OVER 14 RS.50,000/- DURING THE YEAR. THOUGH THE ASSESSEE H AD OBTAINED FORM NO.15-I FROM SUCH SUB-CONTRACTORS WHICH WERE NOT SU BMITTED BEFORE THE CIT (APPEALS) BEFORE THE DUE DATE AND HENCE THE EXP ENDITURE ON ACCOUNT OF PAYMENT TO SUB CONTRACTORS WERE DISALLOWED BY IN VOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE TR IBUNAL IN THE SAID APPEAL OF THE ASSESSEE ALLOWED THE CLAIM OF EXPENDI TURE IN TURN RELYING UPON THE RATIO LAID DOWN BY THE SPECIAL BENCH OF TH E TRIBUNAL IN MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA). THE TRIBUNA L HELD THAT THE WORD PAYABLE USED IN SECTION 40(A)()IA) WOULD MAKE PRO VISION APPLICABLE ONLY IN RESPECT OF EXPENDITURE PAYABLE ON 31 ST MARCH OF A PARTICULAR YEAR AND SUCH PROVISION CANNOT BE INVOKED TO DISALL OW THE AMOUNTS WHICH HAS ALREADY BEEN PAID DURING THE YEAR THOUGH THE TAX MAY NOT HAVE BEEN DEDUCTED AT SOURCE. FOLLOWING SPECIFIC QUESTIONS WERE 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 T RANSPORTERS V. ACIT (SUPRA) AND DELETED THE DISALLOWANCE ON THIS L IMITED GROUND. AS IN THE PRESENT CASE, OTHER MERILYN SHIPPING TRANSPO RTERS V. ACIT (SUPRA) GROUNDS OF CONTROVERSY BETWEEN THE PARTIES WITH RESPECT TO ALLOWABILITY OR OTHERWISE OF SUCH EXPENDITURE WAS N OT EXAMINED BY THE TRIBUNAL. FOR THE PURPOSE OF THESE APPEALS, THEREF ORE, 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) L AYS DOWN CORRECT LAW? 15. THE HON'BLE GUJARAT HIGH COURT IN CIT V. SIKAND ARKHAN N TUNWAR AND OTHERS (SUPRA) AFTER CONSIDERING THE SUBMISSION S 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 MADE TO SECTION 40(A)(IA) THROUGH WHICH IT WAS PROVIDED THAT TAX HA S NOT BEEN DEDUCTED ON CERTAIN PAYMENTS AND THE SAME WILL NOT BE ALLOWA BLE. THE HON'BLE 15 HIGH COURT DISCUSSED THE IMPLEMENTATIONS OF THESE P ROVISIONS AND DECISION OF SPECIAL BENCH IN CASE OF MERILYN SHIPPI NG 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 PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY WORK ON WHICH TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID BEFOR E THE DUE DATE, SUCH AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IRRESPECTIVE OF THE PROVI SIONS CONTAINED IN SECTIONS 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 SPECI FIED 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 WHIC H, 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 O R WOULD INCLUDE ALL AMOUNTS WHICH BECAME PAYABLE DURING 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 DECISION 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 WAS CONCERN ED WITH THE VIRES OF THE STATUTORY PROVISION BUT FOUND SOME OF THE OBSERVATIONS MADE B Y THE COURT IN THE PROCESS USEFUL AND APPLICABLE. LEARNED JUDGE REJECTED THE THEORY O F 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 WER E 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, THEREFOR E, THE SAME CANNOT BE READ INTO THE SECTION AS CONTENDED BY THE ASSESSEE. 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 SECTION 40 A ND THE ULTIMATE AMENDMENT WHICH ACTUALLY WAS PASSED BY THE PARLIAMENT. IT WAS OBSER VED THAT FROM THE COMPARISON BETWEEN THE PROPOSED AND THE ENACTED PROVISION IT C AN BE SEEN THAT THE LEGISLATURE HAS REPLACED THE WORDS AMOUNTS CREDITED OR PAID WITH TH E WORD PAYABLE IN THE ENACTMENT. ON SUCH BASIS, IT WAS HELD THAT THIS IS A CASE OF C ONSCIOUS OMISSION AND WHEN THE LANGUAGE WAS CLEAR THE INTENTION OF THE LEGISLATURE HAD TO BE GATHERED FROM LANGUAGE USED. IN THEIR OPINION THE PROVISION WOULD APPLY ON LY TO AMOUNTS WHICH ARE PAYABLE 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 YEARS PROVISION CAN BE ALLOWED IN SUBSEQUENT YEARS ONLY IF TDS IS DEDUCTED AND DEPOSI TED AND, THEREFORE, REVENUES FEAR IS UNFOUNDED AS THE PROVISION OF SECTION 40(A)(IA) OF THE ACT COVERS THE SITUATION. 16 21. IN THE PRESENT CASE, WE HAVE NO HESITATION IN A CCEPTING THE CONTENTION THAT THE PROVISION MUST BE CONSTRUED STRICTLY. THIS BEING A PROVISION WHICH CREATES AN ARTIFICIAL CHARGE ON AN AMOUNT WHICH IS OTHERWISE NOT AN INCOM E OF THE ASSESSEE, CANNOT BE LIBERALLY CONSTRUED. UNDOUBTEDLY IF THE LANGUAGE OF THE SECTION IS PLAIN, IT MUST BE GIVEN ITS TRUE MEANING IRRESPECTIVE OF THE CONSEQUENCES. WE HAVE NOTICED THAT THE PROVISION MAKES DISALLOWANCE OF AN EXPENDITURE WHICH HAS OTHE RWISE BEEN INCURRED AND IS ELIGIBLE FOR DEDUCTION, ON THE GROUND THAT THOUGH T AX WAS REQUIRED TO BE DEDUCTED AT SOURCE IT WAS NOT DEDUCTED OR IF DEDUCTED, HAD NOT BEEN DEPOSITED BEFORE THE DUE DATE. BY ANY INTENDMENT OR LIBERAL CONSTRUCTION OF SUCH P ROVISION, THE LIABILITY CANNOT BE FASTENED IF THE PLAIN MEANING OF THE SECTION DOES N OT 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 INCURRED ACCORDING TO THE METHOD OF ACCOUNTING, UPON THE BASIS OF WHICH PROFITS AND GAINS ARE COMPUTED U NDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. SUCH DEFINITION IS APPLICAB LE FOR THE PURPOSE OF SECTIONS 28 TO 41 UNLESS THE CONTEXT OTHERWISE REQUIRES. IN CONTRA ST, TERM PAYABLE HAS NOT BEEN DEFINED. THE WORD PAYABLE HAS BEEN DESCRIBED IN WEB STERS THIRD NEW INTERNATIONAL UNABRIDGED DICTIONARY AS REQUIRING TO BE PAID: CAPA BLE OF BEING PAID: SPECIFYING PAYMENT TO A PARTICULAR PAYEE AT A SPECIFIED TIME O R OCCASION OR ANY SPECIFIED MANNER. IN THE CONTEXT OF SECTION 40(A)(IA), THE WORD PAYAB LE WOULD NOT INCLUDE PAID. IN OTHER WORDS, THEREFORE, AN AMOUNT WHICH IS ALREADY PAID O VER CEASES TO BE PAYABLE AND CONVERSELY WHAT IS PAYABLE CANNOT BE ONE THAT IS AL READY PAID. WHEN AS RIGHTLY POINTED OUT BY COUNSEL MR. HEMANI, THE ACT USES TERMS PAID AND PAYABLE AT DIFFERENT PLACES IN DIFFERENT CONTEXT DIFFERENTLY, FOR THE PURPOSE OF S ECTION 40(A)(IA) OF THE ACT, TERM PAYABLE CANNOT BE SEEN TO BE INCLUDING THE EXPRESSI ON PAID. THE TERM PAID AND PAYABLE IN THE CONTEXT OF SECTION 40(A)(IA) ARE NOT USED INTERCHANGABLY. IN THE CASE OF BIRLA CEMENT WORKS AND ANOTHER VS. STATE OF RAJASTH AN AND ANOTHER REPORTED IN AIR 1994(SC) 2393 , THE APEX COURT OBSERVED THAT THE WORD PAYABLE IS A DESCRIPTIVE WORD, WHICH ORDINARILY MEANS THAT WHICH MUST BE PAID OR I S 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 THAT WH ICH MAY, CAN OR SHOULD BE PAID AND IS HELD EQUIVALENT TO 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 OF THE SAI D PROVISION. SECONDLY, WHETHER OUR SUCH UNDERSTANDING OF THE LANGUAGE USED BY THE LEGI SLATURE SHOULD WAVER ON THE PREMISE THAT AS PROPOUNDED BY THE TRIBUNAL, 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 CONS EQUENCES OF NOT BEING ABLE TO CLAIM DEDUCTION ON CERTAIN PAYMENTS IRRESPECTIVE OF THE P ROVISIONS CONTAINED IN SECTIONS 30 TO 38 OF THE ACT WOULD FLOW IF THE FOLLOWING REQUIREME NTS 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 CAR RYING 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 SECTION 39. FOR THE PURPOSE OF CURRENT DISCUSSION REFERENCE TO THE PROVISO IS NOT NECESSARY. 17 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 BE EN DEDUCTED OR IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THIS PROVISION NO-WHERE R EQUIRES THAT THE AMOUNT WHICH IS PAYABLE MUST REMAIN SO PAYABLE THROUGHOUT DURING TH E YEAR. TO REITERATE THE PROVISION HAS CERTAIN STRICT AND STRINGENT REQUIREMENTS BEFOR E THE UNPLEASANT CONSEQUENCES ENVISAGED THEREIN CAN BE APPLIED. WE ARE PREPARED T O AND WE ARE DUTY BOUND TO INTERPRET SUCH REQUIREMENTS STRICTLY. SUCH REQUIREM ENTS, HOWEVER, CANNOT BE ENLARGED BY ANY ADDITION OR SUBTRACTION OF WORDS NOT USED BY THE LEGISLATURE. THE TERM USED IS INTEREST, COMMISSION, BROKERAGE ETC. IS PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY W ORK. THE LANGUAGE USED IS NOT THAT SUCH AMOUNT MUST CONTINUE TO REMAIN PAYABLE TILL TH E 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 BE JUSTIFI ED BECAUSE IN OUR OPINION, THE LEGISLATURE COULD NOT HAVE INTENDED TO BRING ABOUT ANY SUCH DISTINCTION NOR THE LANGUAGE USED IN THE SECTION BRINGS ABOUT ANY SUCH MEANING. IF THE INTERPRETATION AS ADVANCED BY THE ASSESSEES IS ACCEPTED, IT WOULD LEA D TO A SITUATION WHERE THE ASSESSEE WHO THOUGH WAS REQUIRED TO DEDUCT THE TAX AT SOURCE BUT NO SUCH DEDUCTION WAS MADE OR MORE FLAGRANTLY DEDUCTION THOUGH MADE IS NOT PAI D TO THE GOVERNMENT, WOULD ESCAPE THE CONSEQUENCE ONLY BECAUSE THE AMOUNT WAS ALREADY PAID OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOTHER ASSESSEE WHO WOULD OTHE RWISE 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 DESIRED 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 INTERPRETATION WHICH WE HAVE GIVEN . IF THE LANGUAGE USED BY THE PARLIAMENT CONVEYED SUCH A MEANING, WE WOULD NOT HA VE HESITATED IN ADOPTING SUCH AN INTERPRETATION. WE ONLY HIGHLIGHT THAT WE WOULD NOT READILY ACCEPT THAT THE LEGISLATURE DESIRED TO BRING ABOUT AN INCONGRUOUS AND SEEMINGLY IRRECONCILABLE CONSEQUENCES. 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 PERIOD WOULD ASSUME CO NSIDERABLE SIGNIFICANCE. HOWEVER, THIS DECISION NOWHERE INDICATES THAT THE EVENTS WHI CH TAKE PLACE DURING THE ACCOUNTING PERIOD SHOULD BE IGNORED AND THE ASCERTAINMENT OF F ULFILLING A CERTAIN CONDITION PROVIDED UNDER THE STATUTE MUST BE JUDGED WITH REFE RENCE TO LAST DATE OF THE ACCOUNTING PERIOD. PARTICULARLY, IN THE CONTEXT OF REQUIREMENT S OF SECTION 40(A)(IA) OF THE ACT, WE SEE NO WARRANT IN THE SAID DECISION OF THE SUPREME COURT TO APPLY THE TEST OF PAYABILITY ONLY AS ON 31 ST MARCH OF THE YEAR UNDER CONSIDERATION. MERELY BECA USE, ACCOUNTS ARE CLOSED ON THAT DATE AND THE COMPUTATION OF PROFIT A ND 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 LEGISLATUR E MUST BE SEEN TO HAVE DELIBERATELY BROUGHT ABOUT A CERTAIN SITUATION WHICH DOES NOT RE QUIRE ANY FURTHER 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 INTERPRETING A STATUTORY PROVISION THE CO URTS HAVE OFTEN APPLIED HYDENS RULE OR THE MISCHIEF RULE AND ASCERTAINED WHAT WAS THE P OSITION BEFORE THE AMENDMENT, WHAT THE AMENDMENT SOUGHT TO REMEDY AND WHAT WAS THE EFF ECT 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 HYDENS CASE WHEREIN WHILE ADOPTING RESTRICTIVE OR ENLARGIN G INTERPRETATION, IT WAS OBSERVED THAT FOUR THINGS ARE TO BE CONSIDERED, (1) WHAT WAS THE COMMON LAW BEFORE MAKING OF THE ACT 18 (2) WHAT WAS THE MISCHIEF AND DEFECT IN WHICH THE C OMMON LAW DID NOT PROVIDE. (3) WHAT REMEDY THE PARLIAMENT HAD RESOLVED AND ADOPTED TO C URE 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 MADE BY THE PROPOSER OF A BILL ARE ORDINARILY NOT CONSIDERED AS RELEVANT OR SAFE TOOLS FOR INTERPRETATION OF A STATUTE. IN THE CASE OF ASWINI KUMAR GHOSE 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 PROCEEDINGS FOR MS PART OF THE PRE-ENACTMENT HISTORY OF A STATUTE AND AS SUCH MIGH T THROW VALUABLE LIGHT ON THE INTENTION OF THE LEGISLATURE WHEN THE LANGUAGE USED IN THE STATUE ADMITTED OF MORE THAN ONE CONSTRUCTION. WE ARE UNABLE TO ASSENT TO THIS PREPOSITION. THE REASON WHY A PARTICULAR AMENDMENT WAS PROPOSED OR ACCEPTED OR REJECTED IS OFTEN A MATTER OF CONTROVERSY, AS IT HAPPENED TO BE IN THIS CASE, AND WITHOUT THE SPEECHES BEARING UPON TH E MOTION, IT CANNOT BE ASCERTAINED WITH ANY REASONABLE DEGREE OF CERTAINTY. AND WHERE THE LEGISLATURE HAPPENS TO BE BICAMERAL, THE SECOND CHAMBER MAY OR MAY NOT HAVE KNOWN OF SUCH REASON WH EN IT DEALT WITH THE MEASURE. WE HOLD ACCORDINGLY THAT ALL THE THREE FORMS OF EXTRINSIC AID SOUGHT TO BE RESORTED TO BY THE PARTI ES IN THE CASE MUS BE EXCLUDED FROM CONSIDERATION IN ASCERTAINING THE TRUE OBJECT AND INTENTION OF THE LEGISLATURE. 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 INTRODUCED IN THE RAJYA SABHA OR THE CIRCUMSTANCES UNDER WHICH THE WORD MINIMUM CAME TO BE DELETED FROM THE PROVISIONS OF THE BILL RELATING TO RATES OF WAGES A ND THE WAGE BOARD AND THE FACT OF SUCH DELETION WHEN THE ACT CAME TO BE PASSED IN ITS PRESENT FORM. THERE IS A CONSENSUS OF OPINION THAT THESE ARE NOT AIDS TO THE CONSTRUCTION OF THE TERMS OF THE STATUTE WHICH HAVE OF COURSE TO BE GIVEN THEIR PLAI N 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 TREVELYAN CURTIEZ P ARKER, 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 ARRIVING AT T HE TRUE INTENTION OF THE LEGISLATURE. 19 31. IT CAN THUS BE SEEN THAT THE DEBATES IN THE PARLIAMENT ARE ORDINARILY NOT CONSIDERED AS THE AIDS FOR INTERPRETATION OF THE ULTIMATE PROV ISION WHICH MAY BE BROUGHT INTO THE STATUTE. THE DEBATES AT BEST INDICATE THE OPINION O F THE INDIVIDUAL MEMBERS AND ARE ORDINARILY NOT RELIED UPON FOR INTERPRETING THE PRO VISIONS, PARTICULARLY WHEN THE PROVISIONS ARE PLAIN. WE ARE CONSCIOUS THAT DEPARTU RE IS MADE IN TWO EXCEPTIONAL CASES, NAMELY, THE DEBATES IN THE CONSTITUENT ASSEMBLY AND IN CASE OF FINANCE MINISTERS SPEECH EXPLAINING THE REASON FOR INTRODUCTION OF A CERTAIN PROVISION. THE REASON WHY A CERTAIN LANGUAGE WAS USED IN A DRAFT BILL AND WHY T HE PROVISION ULTIMATELY ENACTED CARRIED A DIFFERENT EXPRESSION CANNOT BE GATHERED F ROM MERE COMPARISON 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 WOULD ALL THE MORE BE UNSAFE TO REFER TO OR RELY UPON THE DRAFTS, AMENDMENTS, DEBATES ETC FOR INTERPRETAT ION OF A STATUTORY PROVISION WHEN THE LANGUAGE USED IS NOT CAPABLE OF SEVERAL MEANINGS. I N 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 BIL L AND FINAL ENACTMENT TO ASSIGN A PARTICULAR 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 BROUGHT ABOUT. WHILE INTERPRETING SUCH AN AMENDED PROVISION, THE COURTS WOULD IMMEDIATELY INQ UIRE WHAT WAS THE STATUTORY PROVISION BEFORE AND WHAT CHANGES THE LEGISLATURE B ROUGHT ABOUT AND COMPARE THE EFFECT OF THE TWO. THE OTHER OCCASION FOR APPLYING THE PRI NCIPLE, WE NOTICE FROM VARIOUS DECISIONS OF THE SUPREME COURT, HAS BEEN WHEN THE L ANGUAGE OF THE LEGISLATURE IS COMPARED WITH SOME OTHER ANALOGOUS STATUTE OR OTHER PROVISIONS OF THE SAME STATUTE OR WITH EXPRESSION WHICH COULD APPARENTLY OR OBVIOUSLY BEEN USED IF THE LEGISLATURE HAD DIFFERENT INTENTION IN MIND, WHILE FRAMING THE PROV ISION. 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 ENGAGED IN ANY SCHEDULED EMPLOYMENT. THEREFORE, THERE WAS A SPECIFIC ACT ON THE PART OF THE LEGISLATURE TO ENLARGE THE SCOPE OF THE DEFINITION AND ONCE WE ACCEPT THIS, ALL THE ARGUMENTS REGARDING THE OBJECTS AND REASONS, THE CO MMITTEE REPORTS, THE LEGISLATIVE HISTORY BEING CONTRARY TO THE EXPRESS L ANGUAGE, ARE RELEGATED TO THE BACKGROUND AND ARE LIABLE TO BE IGNORED. 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 AUTHORITY. TH E WORD CAME TO BE DEFINED FOR THE FIRST TIME BY THE FINANCE ACT OF 2002 BY EXPLANATIO N/ DEFINITION CLAUSE TO SECTION 10(20) OF THE ACT. IT WAS FURTHER NOTICED THAT THERE WERE SIGNIFICANT DIFFERENCE IN THE DEFINITION OF TERM LOCAL AUTHORITY CONTAINED UNDER SECTION 3(3 1) OF THE GENERAL CLAUSES ACT, 1987 AS COMPARED TO THE DEFINITION CLAUSE INSERTED IN SE CTION 10(20) OF THE INCOME TAX ACT, 1961 VIDE FINANCE ACT, OF 2002. IN THIS CONTEXT IT WAS OBSERVED THAT:- 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 MUNICI PAL COMMITTEE, DISTRICT BOARD, BODY OF PORT COMMISSIONERS OR OTHER AUTHORITY LEGALLY ENTITLED TO THE CONTROL OR MANAGEMENT OF A MUNICIPA L OR LOCAL FUND. 20 THE WORDS OTHER AUTHORITY IN SECTION 3(31) OF THE 1897 ACT HAS BEEN OMITTED BY PARLIAMENT IN THE EXPLANATION/ DEFINITIO N 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 TH E ENTIRE DEFINITION OF THE WORD LOCAL AUTHORITY IS BODILY LIFTED FROM SECT ION 3(31) OF THE 1897 ACT AND INCORPORATED, BY PARLIAMENT, IN THE SA ID EXPLANATION 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 THE BANKING R EGULATION 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-OPERA TIVE SOCIETIES AS THEY APPLY TO BANKING COMPANIES. THE PARLIAMENT WAS ALSO AWARE THAT THE DEFINITION OF BANKING COMPANY IN SECTION 5(C) HAD N OT BEEN ALTERED BY ACT NO.23 OF 1965 AND IT WAS KEPT INTACT, AND IN FACT A DDITIONAL DEFINITIONS WERE ADDED BY SECTION 56(C).CO-OPERATIVE BANK WAS SEPARA TELY DEFINED BY THE NEWLY INSERTED CLAUSE (CCI) AND PRIMARY CO-OPERATIV E 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, NECESSARILY BE STRICTLY CONFINED T O THE WORDS USED IN SECTION 5(C) OF THE BR ACT. IT WOULD HAVE BEEN THE EASIEST THING FOR PARLIAMENT TO SAY THAT BANKING COMPANY SHALL MEAN B ANKING COMPANY AS DEFINED IN SECTION 5(C) AND SHALL INCLUDE CO-OPERAT IVE BANK AS DEFINED IN SECTION 5(CCI) AND PRIMARY CO-OPERATIVE BANK AS DEF INED IN SECTION 5(CCV). HOWEVER, THE PARLIAMENT DID NOT DO SO. THERE WAS TH US A CONSCIOUS EXCLUSION AND DELIBERATE COMMISSION OF CO-OPERATIVE BANKS FROM THE PURVIEW OF THE RDB ACT. THE REASON FOR EXCLUDING CO-OPERATIVE BANKS SEEMS TO BE THAT CO-OPERATIVE BANKS HAVE COMPREHENSIVE, S ELF-CONTAINED AND LESS EXPENSIVE REMEDIES AVAILABLE TO THEM UNDER THE STAT E CO-OPERATIVE SOCIETIES ACTS OF THE STATES CONCERNED, WHILE OTHER BANKS AND FINANCIAL 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 I RON ORE SHALL HAVE TO UNDERGO A PROCESS LEADING TO EMERGENCE OF LUMPS, FI NES, CONCENTRATES AND SLIMES CHOSE TO MAKE PROVISION FOR QUANTIFICATION O F ROYALTY ONLY BY REFERENCE TO THE QUANTITY OF LUMPS, FINES AND CONCE NTRATES. IT LEFT SLIMES OUT OF CONSIDERATION. NOTHING PREVENTED THE PARLIAMENT FROM EITHER PROVIDING FOR THE QUANTITY OF IRON ORE AS SUCH AS THE BASIS F OR QUANTIFICATION OF ROYALTY. IT CHOSE TO MAKE PROVISION FOR THE QUANTIFICATION B EING AWAITED UNTIL THE EMERGENCE OF LUMPS, FINES AND CONCENTRATES. HAVING DONE SO THE PARLIAMENT HAS NOT SAID FINES INCLUDING SLIMES. THOUGH SLIMES ARE NOT FINES THE PARLIAMENT COULD HAVE ASSIGNED AN ARTIFICIAL OR EXT ENDED MEANING TO FINES FOR THE PURPOSE OF LEVY OF ROYALTY WHICH IT HAS CHO SEN NOT TO DO. IT IS CLEARLY SUGGESTIVE OF ITS INTENTION NOT TO TAKE INT O CONSIDERATION SLIMES FOR QUANTIFYING THE AMOUNT OF ROYALTY. THIS DELIBERATE OMISSION OF PARLIAMENT CANNOT BE MADE GOOD BY INTERPRETATIVE PROCESS SO AS TO CHARGE ROYALTY ON 21 SLIMES BY READING SECTION 9 OF THE ACT DIVORCED FRO M THE PROVISIONS OF THE SECOND SCHEDULE. EVEN IF SLIMES WERE TO BE HELD LIABLE TO CHARGE OF ROYALTY, THE QUESTION WOULD STILL HAVE REMAINED AT WHAT RATE AND ON WHAT QUANTITY WHICH QUESTIONS 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 CONTEXT OF LIMITATION WITHIN WHIC H RIGHT OF PREEMPTION MUST BE EXERCISED AND WHETHER IN THE CONTEXT OF THE RELEVAN T PROVISIONS CONTAINED IN WEST BENGAL LAND REFORMS AND LIMITATION ACT, 1963 APPLIE D 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 JURISDICTION BY THE AFOREMENTION ED AMENDMENT. EVEN AFTER THIS AMENDMENT WHEN AN APPLICATION IS REQUIRED TO B E 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 LIMITATION PRESCRIBED ON SHOWING SUFFICIENT CAUSE F OR NOT MAKING AN APPLICATION WITHIN TIME. THE ACT IS OF 1955 AND FOR ALL THESE YEARS, NO PROVISION IS MADE UNDER SECTION 8 OF THE ACT PROVID ING FOR CONDONATION OF DELAY. THUS, WHEN SECTION 5 OF THE LIMITATION ACT I S NOT MADE APPLICABLE TO THE PROCEEDINGS UNDER SECTION 8 OF THE ACT UNLIKE T O THE OTHER PROCEEDINGS UNDER THE ACT, AS ALREADY STATED ABOVE, IT IS APPRO PRIATE TO CONSTRUE THAT THE PERIOD OF LIMITATION PRESCRIBED UNDER SECTION 8 OF THE ACT SPECIFICALLY AND EXPRESSLY GOVERNS AN APPLICATION TO BE MADE UNDER T HE SAID SECTION AND NOT THE PERIOD PRESCRIBED UNDER ARTICLE 137 OF THE LIMI TATION 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 COURSE, 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. 16. THE HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V. SIKAND ARKHAN N TUNWAR AND OTHERS (SUPRA) AFTER CONSIDERING VARIOUS FACTS OF THE ISSUE RAISED IN THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA), OVER RULED T HE DECISION OF THE SPECIAL BENCH AND HELD THAT THE PROVISIONS OF SECTI ON 40(A)(IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUNTS WHICH WERE PAY ABLE AS ON THE 22 CLOSE OF PARTICULAR YEAR BUT ALSO WHICH WERE PAYAB LE AT ANY TIME DURING THE YEAR. 17. SIMILAR PROPOSITION HAD BEEN LAID DOWN BY THE H ON'BLE HIGH COURT IN THE CASE OF CIT VS. CRESENT EXPORT SYNDICATE (SU PRA). 18. FURTHER CHANDIGARH BENCH OF THE TRIBUNAL HAD CO NSISTENTLY FOLLOWED THE DECISION OF THE HON'BLE GUJARAT HIGH C OURT IN THE CASE OF CIT V. SIKANDARKHAN N TUNWAR AND OTHERS (SUPRA) AS WELL THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN CIT VS. CRESE NT EXPORT SYNDICATE (SUPRA) AND APPLIED THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT TO THE AMOUNTS WHICH WERE PAYABLE DURING THE YEAR UNDER CO NSIDERATION, FROM WHICH NO TAX WAS DEDUCTED AT SOURCE, BUT MAY HAVE B EEN PAID BEFORE THE CLOSE OF THE RESPECTIVE FINANCIAL YEAR. 19. WE FURTHER FIND THAT THE HON'BLE ALLAHABAD HIGH COURT IN CIT VS. VECTOR SHIPPING SERVICES, ITA NO. 122 OF 2013 HAD U PHELD THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA). HOWEVER, WE FIND THA T IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES (SUPRA) THE ISSUE WAS DIFFERENT. IN THAT CASE THE QUESTION POSED BEFORE THE HON'BLE HIGH COU RT 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 THEREBY DELETING THE DISALLOWANCE OF RS. 1,17,68,621/- MADE BY THE ASSESSING 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 MANAGEME NT WORK ON BEHALF OF THE ASSESSEE M/S VECTOR SHIPPING SERVICES (P) LTD AND THERE WAS A MEMORANDUM OF UNDERTAKING SIGNED BETWEEN BOTH THE COMPANIES AND A S PER THE DEFINITION OF MEMORANDUM OF UNDERTA KING, IT INCLUDED CONTRACT ALSO. 20. IN THE FACTS OF THE CASE BEFORE THE HON'BLE ALL AHABAD HIGH COURT, CERTAIN EXPENSES WERE DISALLOWED U/S 40(A)(IA) BECA USE NO TAX WAS DEDUCTED. ON APPEAL THE TRIBUNAL FOUND THAT THE LD . CIT(A) HAS ALREADY GIVEN A FINDING THAT M/S MERCATOR LINES LTD. HAD DE DUCTED THE TDS ON 23 SALARY PAID ON BEHALF OF THE ASSESSEE AND HENCE UND ER SUCH CIRCUMSTANCES THE ASSESSEE WAS NOT REQUIRED TO DEDUCT THE TDS ON REIMBURSEMENT ON SALARY BEING MADE BY IT TO M/S MERCATOR LINES LTD. THE HON'BLE HIGH COURT HAS CONFIRMED THE DECISION OF THE TRIBUNAL. THUS IT IS CLEAR THAT HON'BLE ALLAHABAD HIGH COURT WAS NEITHER REQUIRED N OR HAS GIVEN DETAILED REASONS FOR APPROVING THE DECISION OF SPEC IAL BENCH WHEREAS HON'BLE GUJARAT HIGH COURT IN CIT V. SIKANDARKHAN N TUNWAR AND OTHERS (SUPRA) HAS AFTER DETAILED DISCUSSION OVER RULED TH E DECISION OF SPECIAL BENCH IN MERILYN SHIPPING TRANSPORTERS V. ACIT (SUP RA). 21. NOW COMING TO THE FACTS OF THE PRESENT CASE BEF ORE US, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF ED IBLE OIL FROM KANDLA SEA PORT TO DIFFERENT PARTS OF THE COUNTRY. THE AS SESSEE WAS ALSO ENGAGED IN THE TRANSPORTATION OF MOLASSES FROM U.P. AND BLACK OIL FROM/TO DIFFERENT PLACES OF THE COUNTRY. THE ASSES SEE HAD ENTERED INTO AN ARRANGEMENT FOR THE SAID TRANSPORTATION OF THE GOOD S, WHICH THE ASSESSEE CLAIMED WAS EXCLUSIVELY MADE BETWEEN THE ASSESSEE A ND THE PRINCIPALS/CONSIGNORS, WHOSE GOODS WERE REQUIRED TO BE TRANSPORTED. THE ASSESSEE HAD A FLEET OF OIL TANKERS OF HIS OWN AND BECAUSE OF THE VOLUME OF WORK, THE ASSESSEE CLAIMED TO HAVE HIRED TANKERS FROM MARKET TO COMPLETE HIS CONTRACT WITH THE PRINCIPALS/CONSIGNOR S. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DECLARED TOTAL CARTAGES RECEIPTS AT RS.194.36 LACS AND INCOME FROM COMMISSION AT RS.21, 40,484/-. THE ASSESSEE CLAIMED TO HAVE RECEIVED THE SAID COMMISSI ON ON ACCOUNT OF HIRING THE VEHICLES AND USING THE SAID VEHICLES FOR TRANSPORTATION OF THE GOODS ON BEHALF OF HIS PRINCIPALS/CONSIGNORS. THE ASSESSEE IN THE RETURN OF INCOME CLAIMED CREDIT OF TAX DEDUCTED AT SOURCE OUT OF THE FREIGHT RECEIPTS AND ON VERIFICATION THE ASSESSING OFFICER NOTED THAT THE TOTAL RECEIPTS CORRESPONDING TO THE TDS AMOUNTED TO RS.51 4.03 LACS. THE 24 ASSESSEE HAD ONLY DECLARED TOTAL CARTAGES RECEIPTS AT RS.194.36 LACS AND THE BALANCE RECEIPTS WERE CLAIMED TO BE IN RESPECT OF THE VEHICLES HIRED BY THE ASSESSEE. THE NET RECEIPTS AFTER EXCLUDING THE AMOUNT SHOWN BY THE ASSESSEE TOTALED TO RS.3,56,76,400/-. 22. THE FIRST PLEA RAISED BY THE ASSESSEE WAS THAT THE RECEIPTS RELATABLE TO THE SAID TRUCKS ATTACHED WITH THE TRANSPORT BUSI NESS OF THE ASSESSEE WERE NOT INCLUDIBLE AS RECEIPTS OF THE ASSESSEE. F URTHER PLEA RAISED BY THE ASSESSEE IN THIS REGARD WAS THAT THE SAID TRUCK S WERE ENGAGED PURELY ON COMMISSION BASIS ON THE BASIS OF TERMS AND CONDI TIONS VERBALLY SETTLED BETWEEN THE PARTIES IN ORDER TO FACILITATE THE TRANSPORTATION OF GOODS OF THE PRINCIPALS/CONSIGNORS WITH WHOM THE AS SESSEE HAD AN UNDERSTANDING. ADMITTEDLY, THE GRS/BILLS AGAINST T HE FREIGHT DUE FROM THE PRINCIPALS WERE RAISED IN THE NAME OF M/S AHMED NAGAR TANKER TRANSPORT I.E. THE ASSESSEE BEFORE US. THE SAID GR S/BILLS WERE RAISED BY THE ASSESSEE IN RESPECT OF THE TANKERS OWNED BY HIM AND ALSO IN RESPECT OF THE TANKERS HIRED BY THE ASSESSEE. THE PAYMENT AGAINST SUCH HIRING OF THE TANKERS BOTH OF THE ASSESSEE AND OF INDIVIDUAL TANKER OWNERS, WERE MADE TO THE ASSESSEE BY THE PRINCIPAL/CONSIGNOR AND TAX WAS DEDUCTED AT SOURCE OUT OF SUCH PAYMENTS. THE ASSESSEE IN THE R ETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION, HAD CLAIMED THE C REDIT OF SUCH TAX DEDUCTED AT SOURCE THOUGH THE RECEIPTS RELATING TO THE INDIVIDUAL TANKER OWNERS WERE NOT INCLUDED BY THE ASSESSEE IN ITS TOT AL RECEIPTS AND ONLY COMMISSION CLAIMED TO BE EARNED ON SUCH TRANSACTION S WAS REFLECTED IN THE PROFIT & LOSS ACCOUNT. THE ASSESSEE CLAIMS THA T BECAUSE OF THE UNDERSTANDING BETWEEN HIM AND THE SO CALLED INDIVID UAL TANKER OWNERS, THE SERVICES OF THE SAID TANKERS WERE UTILIZED FOR THE TRANSPORTATION BUSINESS CARRIED ON BY THE ASSESSEE, UNDER WHICH TH E TANKERS OWNED BY INDIVIDUAL OWNERS WERE ATTACHED WITH THE FLEET OF T ANKERS OWNED BY THE 25 ASSESSEE. SIMILARLY, RECOGNITION OF INCOME IN THE HANDS OF THE ASSESSEE WAS BEING FOLLOWED FROM YEAR TO YEAR. THE LD. AR F OR THE ASSESSEE, IN THIS REGARD RAISED THE PLEA OF CONSISTENCY TO BE AP PLIED FOR NON- RECOGNITION OF SUCH RECEIPTS AS RECEIPTS OF THE ASS ESSEE. WE FIND NO MERIT IN THE STAND OF THE ASSESSEE ON ACCOUNT OF TH E FACT THAT THE ASSESSEE HAD RAISED THE GRS/BILLS IN THE NAME OF HIS CONCERN BOTH IN RESPECT OF THE TANKERS OWNED BY HIM AND IN RESPECT OF THE TANKERS ALLEGEDLY HIRED BY HIM. ADMITTEDLY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD NOT SHOWN ALL THE RECEIPTS FROM THE SAID GRS OF THE TAN KERS/TRUCKS WHICH WERE ATTACHED TO THE FLEET OF TANKERS AS PART OF TH E TOTAL RECEIPTS IN THE PROFIT & LOSS ACCOUNT. THE ASSESSEE HAD ENTERED IN TO CONTRACT WITH PRINCIPALS/CONSIGNORS FOR PROVIDING TRANSPORT SERVI CE TO THEM AND HAD RECEIVED THE FREIGHT PAYMENT FROM THE SAID PRINCIPA LS/TRANSPORTERS NOT ONLY IN RESPECT OF ITS OWN FLEET OF TANKERS BUT ALS O IN RESPECT OF ALL OTHER TANKERS WHICH ARE CLAIMED TO BE ATTACHED TO ITS FLE ET OF TANKERS. THE SAID PRINCIPALS/TANKERS HAD DEDUCTED TAX AT SOURCE OUT O F THE PAYMENT MADE TO THE ASSESSEE. THE CONTENTION OF THE ASSESSEE WITH REGARD TO THE FREIGHT RELATING TO SUCH TANKERS WHICH ARE ATTACHED TO THE FLEET OWNED BY THE ASSESSEE WAS THAT THE SAID RECEIPTS COULD NOT BE A DDED AS INCOME OF THE ASSESSEE IN VIEW OF THE FACT THAT IT WAS ONLY RECEI VING COMMISSION ON THE SAID RECEIPTS. ADMITTEDLY THE ASSESSEE HAD CLAIMED CREDIT OF TAX AT SOURCE OUT OF SUCH RECEIPTS, WHICH AS PER THE ASSES SEE WERE NOT INCLUDIBLE IN HIS HANDS AS RECEIPTS, FOR THE FINANC IAL YEAR UNDER CONSIDERATION. THE SECOND PLEA RAISED BY THE ASSES SEE WAS THAT THOUGH GRS WERE BEING PREPARED IN THE NAME OF THE ASSESSEE , EACH GR WAS TO BE TAKEN AS AN INDEPENDENT CONTRACT. HOWEVER, THE ASS ESSING OFFICER NOTED FROM THE PERUSAL OF TDS RECONCILIATION STATEMENT FU RNISHED BY THE ASSESSEE THAT ALL THE MAIN PARTIES WERE DEDUCTING T AX AT SOURCE OUT OF THE PAYMENTS MADE TO THE ASSESSEE. IN VIEW THEREOF, WE ARE IN AGREEMENT 26 WITH THE ORDERS OF THE AUTHORITIES BELOW THAT THE T OTAL CONTRACT RECEIPTS RECEIVED BY THE ASSESSEE BOTH ON ACCOUNT OF OWN FLE ET OF TANKERS AND ON ACCOUNT OF TANKERS SO ENGAGED BY IT ARE TO BE RECOG NIZED AS RECEIPTS IN THE HANDS OF THE ASSESSEE. THE ASSESSEE HIMSELF HAD CLAIMED THE BENEFIT/CREDIT OF TAX DEDUCTED AT SOURCE OUT OF SUC H RECEIPTS AND THE SAME ARE TO BE TREATED AS PART OF THE TOTAL RECEIPTS OF THE ASSESSEE. THE PLEA OF THE ASSESSEE THAT IT WAS FOLLOWING THE SAME ACCOUNT ING PRINCIPLE FROM YEAR TO YEAR, WHICH IN TURN HAD BEEN ACCEPTED BY TH E DEPARTMENT IN THE PREVIOUS YEAR, IS NOT TENABLE IN VIEW OF THE ESTABL ISHED PRINCIPLE THAT UNDER THE INCOME TAX ACT EACH ASSESSMENT YEAR IS IN DEPENDENT AND THE PRINCIPLES OF RES-JUDICATA ARE NOT APPLICABLE TO TH E INCOME-TAX PROCEEDINGS. FURTHER WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN CIT VS BRITISH PAINTS INDI A LTD. 188 ITR 44 (SC) WHEREIN IT HAS BEEN HELD THAT THE ASSESSING OF FICER IS TO DETERMINE CORRECT INCOME AND NOT BOUND BY ANY METHOD FOLLOWED IN EARLIER YEAR, OBSERVING AS UNDER: IT IS NOT ONLY THE RIGHT BUT THE DUTY OF THE ASSES SING OFFICER TO CONSIDER WHETHER OR NOT THE BOOKS DISCLOSE THE TRUE STATE OF ACCOUNTS AND THE CORRECT INCOME CAN BE DEDUCED THER EFROM. IT IS INCORRECT TO SAY, AS CONTENDED ON BEHALF OF THE ASS ESSEE, THAT THE OFFICER IS BOUND TO ACCEPT THE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE THE CORRECTNESS OF WHICH H AD NOT BEEN QUESTIONED IN THE PAST. THERE IS NO ESTOPPEL IN THE SE MATTERS AND THE OFFICER IS NOT BOUND BY THE METHOD FOLLOWED IN THE EARLIER YEAR. 23. IN VIEW THEREOF WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE AND HOLD THAT THE TOTAL RECEIPTS OF RS.514.03 LACS ARE TO BE RECOGNIZED AS INCOME OF THE ASSESSEE. CONSEQUENTLY, THE SAID RECE IPTS ARE TO BE INCLUDED IN THE HANDS OF THE ASSESSEE FOR COMPUTING THE INCOME FROM TRUCK BUSINESS. UNDER THE PROVISIONS OF THE INCOME TAX ACT, THE RECEIPTS RELATABLE TO THE TAX DEDUCTED AT SOURCE CLAIMED BY THE ASSESSEE ARE TO BE INCLUDED IN THE HANDS OF THE ASSESSEE ITSELF AND HE NCE WE UPHOLD THE 27 ORDER OF THE AUTHORITIES BELOW INCLUDING THE NET RE CEIPTS AT RS. 3,56,76,400/- AS INCOME OF THE ASSESSEE. 24. THE FIRST ASPECT OF THE ISSUE ARISING BEFORE US HAS BEEN ADJUDICATED IN THE PARAS HEREINABOVE, UNDER WHICH WE HAVE HELD THAT THE TOTAL FREIGHT RECEIPTS ON WHICH TAX HAD BEEN DEDUCTED AT SOURCE B Y THE PRINCIPALS IS TO BE INCLUDED IN THE HANDS OF THE ASSESSEE AS ITS REC EIPT. THE SECOND ASPECT OF THE ISSUE ARISING IN THE PRESENT APPEAL I S THE CLAIM OF EXPENDITURE BEING THE AMOUNT PAYABLE TO THE INDIVID UAL TANKER OWNERS. THE CASE OF THE ASSESSEE WAS THAT IN CASE THE TOTAL RECEIPTS ARE INCLUDED IN THE HANDS OF THE ASSESSEE, THEN THE CORRESPONDIN G PAYMENTS MADE TO INDIVIDUAL TANKERS OWNERS ARE TO BE ALLOWED AS AN E XPENDITURE AS THE SAID AMOUNT HAS BEEN PAID TO SUCH PERSONS. THE FIRST AS PECT OF THE SAID DEDUCTION CLAIMED BY THE ASSESSEE WAS THAT IN THE A BSENCE OF ANY CONTRACT BETWEEN THE PARTIES, THERE WAS NO MERIT IN APPLYING THE PROVISIONS OF SECTION 194C OF THE ACT. FURTHER PLE A RAISED WAS THAT AS THE SAID PROVISIONS WERE NOT APPLICABLE, THERE WAS NO LIABILITY TO DEDUCT TAX AT SOURCE AND THE ASSESSEE HAVING NOT DEDUCTED THE SAID TAX AT SOURCE, THERE WAS NO MERIT IN ANY DISALLOWANCE OF EXPENDITU RE UNDER SECTION 40(A)(IA) OF THE ACT. 25. THE ASSESSEE HAD PLACED ON RECORD THE COPIES OF THE LEDGER ACCOUNT OF VARIOUS TRUCK NUMBERS AT PAGES 37 TO 122 OF THE PAPER BOOK. THE FIRST COPY OF THE ACCOUNT OF TRUCK NO. 10CB 2407 FOR THE FINANCIAL YEAR 2007- 08 IS PLACED AT PAGES 37 TO 43 OF THE PAPER BOOK. THE PERUSAL OF THE SAID COPY OF ACCOUNT REFLECTS THE FIRST BILL OF FRE IGHT RAISED ON 18.7.2007 IS OF RS.68,695/-. PRIOR TO THE RAISING OF THE SAI D BILL OF RS.68,695/- THERE ARE CERTAIN DEBITS TO THE ACCOUNT OF THE SAID TRUCKS ON ACCOUNT OF VARIOUS TAXES PAID. THE PERUSAL OF THE ACCOUNT FUR THER REFLECTS THAT IN 28 THE MONTH OF AUGUST, 2007 THERE WERE SEVERAL RECEIP TS ON ACCOUNT OF FREIGHT CREDITED TO THE SAID ACCOUNT, WHICH ARE AS UNDER: 1) 18.2.2007 RS.28,267/- 2) 6.8.2007 RS.47,295/- 3) 6.8.2007 RS.75,084/- 4) 14.8.2007 RS.28,557/- 5) 24.8.2007 RS.41,610/- 6) 24.8.2007 RS.22,076/- 7) 30.8.2007 RS.60,478/- 26. SIMILAR CREDITS ARE MADE FROM MONTH TO MONTH IN THE COPY OF THE ACCOUNT FILED BY THE ASSESSEE. THE ASSESSEE AT PAG E 44 ONWARDS HAD ATTACHED THE COPY OF ACCOUNT OF ANOTHER TANKER NO.P B 1-BX 0418 IN WHICH THERE ARE CREDITS OF SIMILAR AMOUNTS STARTING FROM APRIL, 2007 ITSELF. IN THE MONTH OF APRIL, 2007, THE CREDITS W ERE AS UNDER: 1) 2.4.2007 RS.40,350/- 2) 2.4.2007 RS.28,713/- 3) 2.4.2007 RS.26,405/- 4) 7.4.2007 RS.70,798/- 5) 15.4.2007 RS.40,050/- 6) 17.4.2007 RS.26,730/- 7) 17.4.2007 RS.26,583/- 27. THE PERUSAL OF THE SAID COPIES OF ACCOUNT OF DI FFERENT TANKERS REFLECT CERTAIN DEBITS WHICH ARE RECURRING FROM MON TH TO MONTH. THE ASSESSEE AT PAGE 36 OF THE PAPER BOOK HAD FURNISHED THE BREAK UP OF THE AMOUNTS PAID HEAD-WISE ON ACCOUNT OF EACH TRUCK, WH ICH IS AS UNDER: 29 30 28. THE ASSESSEE HAD GIVEN BREAK UP OF THE FREIGHT AMOUNT DUE AND THE AMOUNT PAID ON ACCOUNT OF DIESEL, SHORTAGE, COMMISS ION, TANKER REPAIR, LOAN INSTALLMENTS PAID, TANKERS SERVICE, NEW TYRES, PAID FOR DOCUMENTS, IN RESPECT OF 22 TRUCKS. FROM THE TABULATED DETAILS, I T TRANSPIRES THAT THE ASSESSEE IN RESPECT OF TRUCK NO. 10BX 0418 HAS SHOW N FREIGHT OF RS. 17,75,410/- AGAINST WHICH THE EXPENDITURE ON DIESEL IS RS. 5,70,509/-, TANKER REPAIR RS. 97209/-, LOAN INSTALLMENT RS. 6,1 7,500/-, ADVANCE PAID OF RS. 206479/-, TANKER SERVICE OF RS. 11,211/-, NE W TYERS OF RS. 61,000/- AND PAID FOR DOCUMENTATION RS. 45,000/-, E TC TOTALING RS. 2141557/-. SIMILAR EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE IN RESPECT OF OTHER TRUCKS. THE PERUSAL OF THE SAID T ABULATED BREAK UP OF THE FREIGHT AMOUNT DUE TO INDIVIDUAL TANKER REFLECT S THAT THE ASSESSEE WAS INCURRING EXPENDITURE ON DIESEL, TANKER REPAIR, TAN KER SERVICE AND EVEN THE LOAN INSTALLMENTS OF SOME OF THE TRUCKS WERE BE ING PAID BY THE ASSESSEE INCLUDING THE AMOUNT TO BE PAID FOR DOCUME NTATION. THE ASSESSEE WAS ALSO INCURRING EXPENDITURE OF NEW TYRE S AND CERTAIN AMOUNTS ON ACCOUNT OF SHORTAGE. PART OF THE FREIGHT AMOUNT WAS ALSO BEING PAID AND FURTHER IN RESPECT OF FEW OF THE TRUCKS THERE W AS CERTAIN AMOUNT DUE TO THE SAID TRUCK OWNERS. WHEREAS IN RESPECT OF CE RTAIN TRUCK OWNERS ADVANCE HAD BEEN GIVEN AGAINST THE AMOUNT DUE TO TH E SAID PERSONS. THE SAID ARRANGEMENT IS BETWEEN THE ASSESSEE AND ALL TH E TANKERS, WHICH ARE ATTACHED WITH THE FLEET OF TANKERS OWNED BY THE ASS ESSEE. THE SAME ESTABLISHES EXISTENCE OF CONTRACT BETWEEN THE ASSES SEE AND THE INDIVIDUAL TRUCK OWNERS AND THE PROVISIONS OF SECTION194C OF T HE ACT ARE APPLICABLE. 29. FURTHER, THE TOTAL FREIGHT IN RELATION TO SUCH TRUCKS/TANKERS IS IN EXCESS OF RS.50,000/- PER TRUCK DURING THE YEAR. A S POINTED OUT IN THE PARAS HEREINABOVE AND IN MAJORITY OF THE CASES THE PAYMENTS PER MONTH 31 WERE IN EXCESS OF RS.50,000/-. THE PERUSAL OF THE DETAILS REFLECTS THAT THE TOTAL PAYMENTS IN RESPECT OF THREE TRUCKS WERE LESS THAN RS.50,000/- I.E. RS.33,988/-,RS. 37,596/- AND RS.26,358/- AND E XCLUDING THE SAID THREE PAYMENTS THE TOTAL PAYMENT IN RESPECT OF ALL THE OTHER TRUCKS WERE ABOVE RS.50,000/- DURING THE FINANCIAL YEAR. IN VIE W THEREOF, WHERE THE CONTRACT BETWEEN THE ASSESSEE AND THE RESPECTIVE TA NKER OWNERS WAS IN EXCESS OF RS. 50,000/- PER YEAR, THE PROVISIONS OF SECTION 194C OF THE ACT WERE ATTRACTED AND THE ASSESSEE WAS LIABLE TO D EDUCT TAX AT SOURCE. 30. NOW THE ISSUE BEFORE US IS THAT AFTER THE RE COGNITION OF THE SAID INCOME IN THE HANDS OF THE ASSESSEE AS TOTAL RECEIP TS IS THE PAYMENTS MADE TO THE PETTY TRANSPORTERS ARE TO BE ALLOWED AS EXPENDITURE IN THE HANDS OF ASSESSEE. THE CASE OF THE ASSESSEE WAS THA T THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE OUT OF THE PAYMENTS MADE TO SUCH PERSONS AS THE SAID PERSONS WERE NOT CONTRACTEES OF THE ASSESSEE. THE LD. AR FOR THE ASSESSEE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE VISHAKHAPATNAM BENCH OF TRIBUNAL IN MYTHRI TRANSPORT CORPORATION VS ACIT (2009) 124 TTJ 970 FOR THE PROPOSITION THAT EVEN IN CASES WHER E THE TRUCKS ARE HIRED FROM DIFFERENT PERSONS IN THE ABSENCE OF ANY SUB-CO NTRACT, THE PAYMENTS MADE TO SUCH SUB-CONTRACTORS ARE NOT COVERED UNDER THE PROVISIONS OF SECTION 194C(2) OF THE ACT. IN THE FACTS OF THE CA SE IN MYTHRI TRANSPORT CORPORATION VS ACIT (SUPRA), WE FIND THAT THERE IS A FINDING OF NON- EXISTENCE OF CONTRACT BETWEEN THE ASSESSEE AND THE PERSON FROM WHOM THE TRUCKS WERE HIRED. HOWEVER, AS ESTABLISHED BY US I N THE PARAS HEREIN ABOVE, IN THE CASE OF THE ASSESSEE BEFORE US, ADMIT TEDLY THERE WAS AN UNDERSTANDING BETWEEN THE PARTIES, UNDER WHICH THE ASSESSEE NOT ONLY ENGAGED THE SERVICES OF THE INDIVIDUAL TANKER OWNER S, BUT HAD ALSO AGREED TO INCUR VARIOUS EXPENDITURES RELATABLE TO SUCH TAN KERS INCLUDING THE INSTALLMENT DUE ON TANKERS. THE MODUS-OPERANDI ADO PTED BY THE ASSESSEE 32 ESTABLISHES THE PRESENCE OF CONTRACT BETWEEN THE PA RTIES UNDER WHICH IT WAS FULLY AGREED THAT OUT OF THE FREIGHT AMOUNT DUE TO SUCH INDIVIDUAL TANKER OWNERS, VARIOUS EXPENDITURES RELATABLE TO TH E SAID TANKERS I.E. THE INSTALLMENT DUE ON THE TANKERS, DIESEL AND OTHER EX PENSES AND EVEN COST OF DOCUMENTATION WAS PAID BY THE ASSESSEE AND THERE AFTER BALANCE AMOUNT WAS PAID EITHER IN ADVANCE OR ON COMPLETION OF THE CONTRACT. THE ABOVE ESTABLISHES THE PRESENCE OF A CONTRACT BETWEEN THE PARTIES AND IN VIEW THEREOF, THE APPLICABILITY OF THE PROVISIONS OF SEC TION 194C OF THE ACT IS TO BE SEEN. THE FACTS OF THE CASE HAVE TO BE SEEN IN ORDER TO DETERMINE THE SAID ISSUE. THE ASSESSEE ADMITTEDLY HAD MADE A N ARRANGEMENT WITH THE PERSONS OWNING SUCH TANKERS. THE ARRANGEMENT B ETWEEN THE ASSESSEE AND THE OWNERS OF THE TANKERS IS THOUGH NOT IN WRIT ING BUT IS A CLEAR UNDERSTANDING BETWEEN THE TWO UNDER WHICH THE ASSES SEE WAS OBLIGED NOT ONLY TO PASS THE SAID FREIGHT PAYMENTS TO THE PERSO NS BUT OUT OF THE SAID PAYMENTS THE ASSESSEE IN SOME CASES WHERE NO AMOUNT S WERE EVEN RECEIVED, WAS INCURRING EXPENDITURE ON BEHALF OF TH E TRUCK OWNERS. THE LIST OF EXPENDITURE WHICH HAD BEEN INCURRED BY THE ASSESSEE ON BEHALF OF THE TRUCK OWNERS AS ENLISTED AT PAGE 36 OF THE PAPE R BOOK REFLECTS A DEFINITE UNDERSTANDING BY WAY OF CONTRACT BETWEEN T HE ASSESSEE AND THE TRUCK OWNERS WHEREIN THE ASSESSEE HAD EVEN OBLIGED TO PAY LOAN INSTALLMENT OF VARIOUS TRUCKS, WHICH WERE ATTACHED TO ITS FLEET OF OWN TRUCKS. THE PAYMENT FOR DIESEL IS ALSO PART OF THE SAID CONTRACT AND IN ADDITION THE ASSESSEE WAS PAYING FOR TANKER REPAIR, TANKER SERVICE, NEW TYRES, DOCUMENTATION AND VARIOUS OTHER EXPENSES. E VEN ADVANCES HAD BEEN PAID TO CERTAIN TRUCK OWNERS. FURTHER IN RESP ECT OF TRUCK NO.10CC 0490 THE FREIGHT AMOUNT IS RS.6,68,258/- AND THE AM OUNT PAID FOR DIESEL IS RS.2,57,183/-, INSTALLMENT PAID IS RS.2,68,300/- , ADVANCE PAID IS RS.91,604/- AND OTHER EXPENSES WHICH TOTALED UP TO RS.8,60,417/-, AGAINST WHICH THERE IS CLOSING BALANCE OF RS.1,68,1 59/-. ALL THE ABOVE 33 SAID EXPENDITURE INCURRED BY THE ASSESSEE ON BEHALF OF VARIOUS TRUCKS REFLECT CLEAR UNDERSTANDING BETWEEN THE ASSESSEE AN D VARIOUS TRUCK OWNERS THAT OUT OF THE FREIGHT PAYMENTS DUE TO THE SAID PARTIES WHICH ADMITTEDLY WAS OVER AND ABOVE RS.50,000/-, THE ASSE SSEE HAD UNDERTAKEN TO PAY EVEN THE TRUCK INSTALLMENTS, WHICH IN NO CAS E, ARE LESS THAN RS.20,000/-. IN VIEW THEREOF, WE FIND NO MERIT IN THE SUBMISSIONS OF THE ASSESSEE THAT THERE WAS NO CONTRACT BETWEEN THE ASS ESSEE AND VARIOUS TRUCK OWNERS AND IN THE ABSENCE OF ANY CONTRACT THE PROVISIONS OF SECTION 194C OF THE ACT WERE NOT ATTRACTED. 31. THE LD. AR FOR THE ASSESSEE FURTHER PLACED RELI ANCE ON THE RATIO LAID DOWN IN CIT VS TRUCK OPERATORS UNION (2011) 339 IT R 532 (P&H) WHICH IS A CASE OF A TRUCK OPERATORS UNION AND THE SAID RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IS NOT A PPLICABLE TO THE FACTS OF THE CASE BEFORE US. ANOTHER RELIANCE WAS P LACED BY THE LD. AR FOR THE ASSESSEE ON THE RATIO LAID DOWN IN CIT VS U NITED RICE LAND LTD. 322 ITR 594 AND CIT VS BHAGWATI STEELS 326 ITR 108. WE FIND NO MERIT IN THE SAID RELIANCE PLACED BY THE ASSESSEE ON THE ABOVESAID RATIO IN VIEW OF OUR HOLDING THE ASSESSEE TO HAVE ENTERED INTO A CONTRACT WITH THE INDIVIDUAL TANKER OWNERS, WHOSE TANKERS WERE ATTACH ED BY THE ASSESSEE WITH ITS FLEET OF TANKERS FOR CARRYING ON ITS TRANS PORTATION BUSINESS AND THE NATURE OF THE UNDERSTANDING BETWEEN THE ASSESSE E IN THE FACTS OF THE PRESENT CASE WHEREIN THE TOTAL RECEIPTS PER MONTH W ERE IN EXCESS OF RS. 50,000/- AND ALSO THE UNDERSTANDING TO INCUR VARIOU S ITEMS OF EXPENDITURE AS POINTED OUT BY US IN PARAS HEREIN AB OVE ESTABLISHES CLEAR UNDERSTANDING BETWEEN THE PARTIES, WHICH CONTRACT A S ENVISAGED UNDER SECTION 194C OF THE ACT. THE ASSESSEE, IN VIEW THE REOF WAS OBLIGED TO DEDUCT TAX AT SOURCE OUT OF SUCH PAYMENTS BEING MAD E TO ITS CONTRACTEES AND THE ASSESSEE IN THE PRESENT CASE HAS FAILED TO DEDUCT TAX AT SOURCE. 34 IN VIEW THEREOF, PROVISIONS OF SECTION 40A(IA)OF TH E ACT ARE APPLICABLE. WE UPHOLD THE ORDER OF THE CIT (APPEALS) IN DISALLO WING SUM OF RS.356.76 LACS AND ADDING THE SAME AS INCOME OF THE ASSESSEE FOR NON- COMPLIANCE OF THE PROVISIONS OF SECTION 194C R.W.S. 40(A)(IA) OF THE ACT. THE GROUND OF APPEAL NO. 1 RAISED BY THE REVENUE IS THUS, ALLOWED. 32. THE NEXT ISSUE RAISED BY THE REVENUE IS IN RELA TION TO THE DELETION OF ADDITION MADE UNDER SECTION 40A(3) OF THE ACT. THE CIT(APPEALS) HAS GIVEN A FINDING THAT NO PAYMENT IN THE PRESENT CASE IS ABOVE RS.20,000/- AND THE DETAILS FURNISHED BEFORE THE ASSESSING OFFI CER WERE IN RESPECT OF THE TOTAL CASH PAYMENTS MADE TO A PARTY WHICH IN MA NY CASES EXCEEDED RS. 20,000/-. UNDER THE PROVISIONS OF SECTION 40A(3 ) OF THE ACT, THE REQUIREMENT IS THAT EACH PAYMENT SHOULD NOT EXCEED RS. 20,000/- IN CASH. THE LD. DR FOR THE REVENUE FAILED TO CONTROVERT THE FINDINGS OF THE CIT(APPEALS) AND IN THE ABSENCE OF THE SAME, WE FIN D NO MERIT IN THE GROUND OF APPEAL NO.2 RAISED BY THE REVENUE AND THE SAME IS DISMISSED. 33. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH SEPTEMBER, 2013 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH
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