Hi Tech Foods, Solan V. ITO, Solan

ITA 987/CHANDI/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68472 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-08-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 10-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Additional evidence; Question of law
• Section: 80IB; 194C; 148; 56; 263; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITA NO. 987, 988 & 989/CHD/2011 ASSESSMENT YEAR : 2004-05, 2005-06 & 2007-08 HI-TECH FOODS VS. I.T.O. WARD 1 UPPER BAZAR SOLAN SOLAN AACFH 7996 J (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SURINDER BABBAR RESPONDENT BY: SHRI J.S. NAGAR DATE OF HEARING 14.8.2013 DATE OF PRONOUNCEMENT 6.9.2013 O R D E R PER T.R.SOOD, A.M THESE APPEALS ARE DIRECTED AGAINST THE ORDER DATED 26.7.2011 OF THE LD. CIT(A), SHIMLA. THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER. ITA NO. 987/CHD/2011 2 IN THIS APPEAL FOLLOWING GROUNDS HAVE BEEN RAISED : 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PROCEEDI NGS U/S 148 AS VALID AND CONSEQUENTLY ASSESSMENT SO FRAMED U/S 148 AS A VALID ASSESSMENT. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN CONCURRENCE WIT H THE ITO IN REJECTING THE VALID CLAIM OF THE ASSESSEE U/ S 80IC OF THE INCOME-TAX ACT, 1961. 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWANCE OF CLAIM OF RS. 23,67,692/- IN CONCURR ENCE WITH THE ITO BY HOLDING THAT THERE IS NO DIFFERENCE BETWEEN A FLOUR MILL AND A ROLLER FLOUR MILL. 3 OUT OF ABOVE GROUNDS, GROUND NO, 1 WAS NOT PRESSE D AND THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 4 GROUNDS NO. 2 & 3 AFTER HEARING BOTH THE PARTIE S WE FIND THAT THE ASSESSEE IS PARTNERSHIP CONCERN AND WAS EN GAGED IN 2 THE BUSINESS OF RUNNING A FLOUR MILL MANUFACTURING ATTA, MAIDA AND SUZI ETC. DURING THE YEAR THE ASSESSEE HAD FILE D RETURN OF INCOME DECLARING NIL INCOME AFTER CLAIMING DEDUCTIO N U/S 80IC AMOUNTING TO RS. 23,67,692/-. THE CLAIM OF DEDUCTI ON U/S 80IC WAS REJECTED BY THE ASSESSING OFFICER. 5 ON APPEAL BEFORE THE LD. CIT(A) IT WAS MAINLY SUB MITTED THAT THE ASSESSEE WAS RUNNING A ROLLER FLOUR MILL W HICH WAS DISTINCT FROM FLOUR MILL. ASSESSEES UNIT WAS INIT IALLY A FLOUR MILL AND LATER ON SAME WAS CONVERTED INTO A ROLLER FLOUR MILL. IT WAS SUBMITTED THAT THE ROLLER FLOUR MILL WAS DIFFER ENT FROM FLOUR MILL. THE LD. CIT(A) AFTER EXAMINING THE SUB MISSIONS DID NOT ACCEPT THE CLAIM OF THE ASSESSEE VIDE PARA 6.4 TO 6.9 WHICH ARE AS UNDER: 6.4 I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S SEEN THAT THE APPELLANT COMMENCED PRODUCTION ON 29.5.1998 I.E . IN ASSESSMENT YEAR 1999-2000. ASSESSMENT YEAR 2004-05 IS THE 6 TH YEAR OF PRODUCTION. THE COST OF PLANT AND MACHINE RY AND OTHER ITEMS AS ON 31.3.2004 I.E. ASSESSMENT YEAR 20 04-05 AS PER SCHEDULE OF FIXED ASSETS IS AS UNDER: PARTICULARS O.B ADDITION TOTAL PLANT AND MACHINERY 816475.16 593763 1410237 ELECTRICAL INSTALLATION 12337.82 -- 12337.82 6.5 THE APPELLANT HAS CLAIMED TO HAVE ADDED MACHINE RY APPELLANT MORE THAN 50% DURING ASSESSMENT YEAR 2004 -05. HOWEVER, THE ADDITION IN MACHINERY HAS NOT BEEN PRO VED WITH DOCUMENTARY EVIDENCE TO SUPPORT THE SAME. THIS ISS UE WAS EXAMINED IN GREAT DETAIL BY THE LD. CIT, SHIMLA WHI LE EXERCISING JURISDICTION U/S 263 OF THE INCOME-TAX A CT. IT WAS FOUND THAT THE ADDITION OF RS. 1,81,000/- STATED TO HAVE BEEN MADE IN ASSESSMENT YEAR 2003-04 WAS NOT GENUINE. M OREOVER THE CLAIM OF THE EXPANSION IS NOT ACCEPTABLE IN VIE W OF THE FACT THAT NEITHER THERE IS ANY CORRESPONDING ADDITI ON IN ELECTRICAL INSTALLATIONS NOR THE METER CAPACITY. L ABOUR CHARGES AT RS. 2,84,715/- IN THE CURRENT YEAR ARE A LMOST THE SAME AS IN LAST YEAR, REPAIR EXPENSES CAME DOWN FR OM RS. 7607/- IN ASSESSMENT YEAR 2003-04 TO NIL IN THE CUR RENT YEAR. KEEPING IN VIEW THE ABOVE DISCUSSION AND IN THE ABS ENCE OF ANY DOCUMENTARY EVIDENCE IN THE FORM OF SALE OF ADD ITION ITEMS CLAIMED TO HAVE BEEN MANUFACTURED, THE APPELL ANTS CLAIM FOR DEDUCTION U/S 80IC IS REJECTED. THE APPE LLANTS CLAIM OF ROLLER FLOUR MILL HAVING DIFFERENT FROM FLOUR MILL IS NOT TRUE FOR INCOME TAX PURPOSES. THE DISTINCTION CITED VIDE LETTER OF INDUSTRIES DEPARTMENT IS FOR SALES-TAX PU RPOSES ONLY. WE HAVE TO GO BY THE INTENT OF LEGISLATURE IN RESPE CT OF SR NO. 8 OF PART B OF THE THIRTEENTH SCHEDULE STRICTLY . THE APPELLANT HAS NOT BEEN ABLE TO CITE EVEN ONE LEGAL PRECEDENCE FOR THIS DISTINCTION. 6.6 A STATUTE IS THE EDICT OF THE LEGISLATURE. THE LANGUAGE EMPLOYED IN A STATUTE IS THE DETERMINATIVE FACTOR O F THE LEGISLATIVE INTENT. THE FIRST AND PRIMARY RULE OF CONSTRUCTION IS 3 THAT ONE MUST GO BY THE INTENTION OF THE LEGISLATIO N ITSELF (RELIANCE PLACED ON PADMASUNDRA RAO VS. STATE OF TN 255 ITR 147 (S.C), CGT VS. LAXMI DEVI 220 ITR 50: CIT V S. DEEP CHAND, 257 ITR 821 (S.C) THAT UNLESS THERE IS AN IN TENTION TO THE CONTRARY, THE WORDS IN A STATUTE SHOULD BE GIVE N THEIR ORDINARY, GRAMMATICAL OR NATURAL MEANINGS (EMPHASIS SUPPLIED). 6.7 TAKING A CUE FROM THE ABOVE, LET US FIRST EXAMI NE THE ORDINARY GRAMMATICAL MEANING OF THE WORD ROLLER A ND MILL SO AS TO UNDERSTAND THE INTENTION OF THE LEGISLATUR E. 6.8 AS PER THE NEW PENGUIN ENGLISH DICTIONARY, THE WORD ROLLER MEANS A REVOLVING CYLINDER OVER OR ON WHI CH SOMETHING IS MOVED OR WHICH IS USED TO PRESS, SHAPE OR APPLY SOMETHING. AS PER THE SAME DICTIONARY MILLS MEA NS 1. A BUILDING PROVIDED WITH MACHINE FOR GRINDING GRAIN I NTO FLOUR 2. A MACHINE OR APPARATUS FOR GRINDING GRAIN. THE WO RD ROLLER IN ROLLER FLOUR MILL IS AIMED TO SUGGEST ONLY ONE TYPE OF FLOUR MILL WHICH FALLS UNDER THE OVERALL GENRE OF FLOUR M ILL. OBVIOUSLY THE LEGISLATURE DID NOT INTENT TO GRANT D EDUCTION TO ANY FLOUR MILL WHICH IS A MUCH WIDER TERM THAN R OLLER FLOUR MILL. AS A RESULT, THE APPELLANTS CLAIM FAILS TO PASS MUSTER. THUS THERE IS NO FURTHER INTERPRETATION TO BE MADE AS TO WHAT WAS THE INTENTION OF THE LEGISLATURE. 6.9 THEREFORE, THE DEDUCTION U/S 80IC IS NOT ALLOW ABLE TO THE APPELLANT AND DEDUCTION ALLOWED U/S 80IB @ 25% IS CONFIRMED AND DOES NOT CALL FOR ANY INTERFERENCE. AS A RESULT, THESE GROUNDS ARE DISMISSED. 6 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE MOVED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE. HE SUBMITTED THAT ADDITIONAL EVIDENCE WAS IN THE SHAPE OF QUOTAT ION FOR MACHINERY FOR FLOUR MILL AND ROLLER FLOUR MILL WHIC H WOULD SHOW THAT THESE ARE TWO DIFFERENT TYPE OF MILLS. HE SUB MITTED THAT SINCE THESE QUESTIONS ARE NOT RAISED AT THE TIME OF ASSESSMENT BECAUSE ASSESSEES CLAIM WAS SUMMARILY REJECTED THE REFORE, SAME MAY BE ADMITTED. THE LD. COUNSEL OF THE ASSESS EE FURTHER SUBMITTED THAT THE ASSESSEE HAS MADE CERTAIN RENOVA TIONS AND NOW THE FLOUR MILL WAS UPGRADED AS ROLLER FLOUR MIL L AND THEREFORE, SAME WAS ELIGIBLE FOR DEDUCTION U/S 80I C. 7 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUB MITTED THAT THE ISSUE IS SQUARELY COVERED AGAINST THE ASSE SSEE BY THE DECISION OF THE TRIBUNAL IN CASE OF POOJA INDUSTRIE S VS. ITO, ITA NO. 11/CHD/2012, ASSESSMENT YEAR 2007-08 WHICH HAS EVEN BEEN CONFIRMED BY THE HON'BLE HIMACHAL PRADESH HIGH COURT. 8 IN THE REJOINDER THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT IN THAT CASE CLAIM WAS REJECTED BY OBSERVING THAT THERE IS 4 NO MATERIAL TO SHOW THAT FLOUR MILL WAS DIFFERENT F ROM ROLLER FLOUR MILL. HE ALSO REFERRED TO THE DECISION OF HO N'BLE SUPREME COURT IN CASE OF UNION OF INDIA AND OTHERS VS. GAR WARE NYLONS LTD. ETC . CIVIL APPEAL NO. 11644 OF 1996 ARISING O UT OF S.L.P. (C) NOS. 11008 OF 1988 AND CIVIL APPEAL NO. 7564 OF 1996. (COPY OF THE JUDGMENT FILED ON RECORD). HE PARTICU LARLY REFERRED TO THE OBSERVATIONS MADE AT PARA 10 WHEREIN IT HAS BEEN OBSERVED THAT A PARTICULAR TERM OF THE TRADE WHICH HAS BEEN USED IN THAT TRADE THEN THE SAME MEANING HAS TO BE ASSIGNED TO SUCH TERM. 9 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. F IRST OF ALL THE ASSESSEE WAS RUNNING FLOUR MILL ON WHICH DE DUCTION U/S 80IB(4) HAS ALREADY BEEN ALLOWED BY THE ASSESSING OFFICER AT 25%. LATER ON IT IS CLAIMED THAT THE SAME WAS UPG RADE TO ROLLER FLOUR MILL AND THE ASSESSEE WAS ENTITLED TO 100% DEDUCTION U/S 80IC. IN THIS REGARD THE LD. CIT(A) HAS GIVEN A SPECIFIC FINDING THAT ADDITION IN MACHINERY HAS NO T BEEN PROVED WITH DOCUMENTARY EVIDENCE TO SUPPORT THE SAME. TH IS MEANS THE ASSESSEE COULD NOT PROVE THAT THE MACHINERY HAS REALLY BEEN UPGRADED. BEFORE US, NO SUBMISSIONS WERE MADE IN THIS REGARD THEREFORE, THERE IS NO MATERIAL ON RECORD T O SHOW THAT THE ASSESSEE HAS A ROLLER FLOUR MILL. IN ANY CASE WE HAD DISCUSSED THIS ISSUE IN DETAIL IN CASE OF POOJA IND USTRIES (SUPRA) AND OBSERVED THAT THERE IS NO DIFFERENCE BE TWEEN ROLLER FLOUR MILL AND FLOUR MILL. SINCE THE FLOUR MILL AS MENTIONED AT S NO. 8 IN PART B OF SCHEDULE 13 WHICH IS IN NEGATI VE LIST FOR HIMACHAL PRADESH. THIS OBSERVATION WAS GIVEN ON TH E BASIS OF CLASSIFICATION GIVEN IN NATIONAL INDUSTRIES CLASSIF ICATION AND NIC 1998 WHICH ALSO CLARIFIED THE ACTIVITY IN A PAR TICULAR INDUSTRIES AND ULTIMATELY IT WAS HELD THAT ACTIVIT Y OF FLOUR MILL AND ROLLER FLOUR MILL IS SAME. FOR THE SAKE OF CLA RITY WE WOULD LIKE TO REPRODUCE PARAS NO. 9 TO 12 OF THE ORDER OF THE TRIBUNAL IN CASE OF POOJA INDUSTRIES (SUPRA) WHICH ARE AS UN DER: 9 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. WE FIND THAT THE LD. CIT(A) HAS DISCUSSED THE ISSUE IN DETA IL AND IN THIS REGARD WE WOULD LIKE TO PRODUCE PARA 4 TO 4.4 OF HER ORDER WHICH ARE AS UNDER: 4 THE RIVAL SUBMISSIONS HAVE BEEN CONSIDERED. Q - THE ENTRY AT SR NO. 8 IN SCHEDULE XIII, PART B REA DS FLOUR MILL/RICE MILL. ON THE FACT OF IT, THE ENT RY MAKES IT CLEAR THAT ALL TYPES OF FLOUR MILLS AND RICE MIL LS ARE 5 COVERED BY THIS ENTRY. IT DOES NOT ELABORATE THE CATEGORIES OR TYPES OF FLOUR MILLS AND RICE MILLS. THE HEADING OF THE XIII SCHEDULE READS LIST OF ARTICLE OR THING. THEREFORE, IT IS CLEAR THAT WHAT IS PROHI BITED BY VIRTUE OF XIII SCHEDULE IS THE PRODUCTION/MANUFACTU RING OF THE SPECIFIED ARTICLES OR THINGS. ACCORDINGLY, IT IS THE PRODUCTION OF FLOUR/RICE THROUGH FLOUR MILL/RICE MI LL WHICH IS BARRED FROM ENTITLEMENT U/S 80IC OF THE INCOME-T AX ACT, 1961 BY VIRTUE OF SCHEDULE XIII. THUS THE PROHIBITION IS IN RESPECT OF THE PRODUCTION OF FLO UR, AND IT IS IMMATERIAL WHETHER THE FLOUR MILL PRODUCING T HE FLOUR IS AN ORDINARY CHAKKI OR A ROLLER FLOUR MILL. IN F ACT, LOGICALLY SPEAKING, THE PROVISIONS OF SECTION 80IC READ WITH SCHEDULE XIII WOULD HARDLY BE RELEVANT IN THE CASE OF AN ORDINARY CHAKKI WHICH DOES NOT INVOLVE SO MUC H OF INVESTMENT, WHAT TO TALK OF SUBSTANTIAL EXPANSION A ND SUCH OTHER THINGS. FURTHER FLOUR MILLS CAN BE OF V ARIOUS TYPES, SUCH AS STONE MILL, HAMMER MILL, PLATE MILL, PIN MILL, ROLLER MILL ETC. THE EQUIPMENT USED IN THESE MILLS CAN BE POWERED BY HAND, WATER, ANIMALS, ELECTRICITY OR DIESEL ENGINE. THE ONLY DIFFERENCE BETWEEN VARIOUS MILLING PROCESSES IS THAT OF TECHNIQUE AND SPEED. F LOUR IS A COMMON PRODUCT IN ALL KINDS OF MILLING PROCESS ES. THEREFORE, IT CAN NOT BE SAID THAT WHAT IS INTENDED BY ENTRY NO.8 IN PART B OF SCHEDULE XIII IS ONLY A STO NE MILL AND NOT A HAMMER MILL OR A PLATE MILL OR A PIN MILL OR A ROLLER FLOUR MILL. PUTTING SUCH AN INTERPRETATION WOULD REDUCE THE ENTRY TO A FARCE. 4.1 FURTHER, THE RELEVANT ENTRY OF FLOUR MILL/RICE MILLS IN SCHEDULE XIII ALSO MENTIONS AN EXCISE CLASSIFICA TION OF 11.01 AGAINST IT. THIS CLASSIFICATION CODE REFE RS TO CLASSIFICATION OF PRODUCTS UNDER THE CENTRAL EXCISE TARIFF ACT, WHICH DEALS WITH PRODUCTS OF THE MILLING INDUS TRY. THERE IS NO DISTINCTION MADE IN THIS CHAPTER BETWEE N GOODS PRODUCED BY ROLLER FLOUR MILLS OR BY ANY OTHE R TYPE OF FLOUR MILL. VARIOUS PRODUCTS ARE CLASSIFIED AS PER THE STARCH CONTENT AND ASH CONTENT. THE CODE 11.01 REFE RS TO WHEAT FLOUR AND THERE IS NO DISTINCTION MADE AS TO WHETHER THE WHEAT FLOUR IS MADE BY A ROLLER MILL OR BY ANY OTHER MILL. 4.2 CERTAIN DECISIONS UNDER THE CENTRAL EXCISE TARI FF ACT ALSO MAKE IT CLEAR THAT THE CLASSIFICATION CODE 11.01 IS A BROAD HEADING WHICH COVERS VARIOUS PRODUCTIONS OF THE MILLING INDUSTRY. IN THE CASE OF BHAGYALAXMI P OHA INDUSTRIES V. COMMISSIONER (2007) 215 ELT 458 (TRIB BANGALORE), IT WAS HELD THAT RICE FLAKES OR POHA AR E PRIME FACIE CLASSIFIABLE UNDER HEADING 11.01 OF THE CENTRAL EXCISE TAFIFF. IN ANOTHER CASE OF MAHAVIR FOOD PRODUCTS V COMMISSIONER (2007) 211 ELT 29 (TRIB LB) , IT HAS BEEN HELD THAT MAKAI POHA I.E. CORN BOILED A ND FLATTENED BETWEEN ROLLERS, IS CLASSIFIABLE UNDER TH E HEADING 11.01 OF THE CENTRAL EXCISE TARIFF ACT. 4.3 THE ASSESSEES CONTENTION THAT THE STATE GOVERNMENT OF HIMACHAL PRADESH HAS ACCEPTED THE DISTINCTION BETWEEN FLOUR MILL AND ROLLER FLOUR MIL L IS OF NO RELEVANT. THE SCHEME OF SALES TAX INCENTIVES WH ICH WAS IN FORCE IN THE STATE IN 1994 WAS ENTIRELY A SE PARATE SCHEME NOTIFIED BY THE STATE GOVERNMENT. THAT SCHE ME HAS NO RELEVANCE OR CONNECTION WITH THE TAX HOLIDAY COMPRISED IN SECTION 80IC, WHICH WAS ENACTED BY THE FINANCE ACT, 2003 AS A PART OF THE NEW INDUSTRIAL P OLICY 6 OF THE CENTRAL GOVERNMENT ANNOUNCED IN 2003 FOR STA TES LIKE H.P. THIS BECOMES FURTHER CLEAR BY THE FACT T HAT THE LIST OF INELIGIBLE INDUSTRIES CONTAINED IN SCHEDULE XIII IS ALMOST ENTIRELY DIFFERENT IN CONTENT FROM THE LIST OF UNITS DECLARED TO BE INELIGIBLE FOR SALES TAX INCENTIVES BY THE STATE GOVERNMENT. FOR THE PURPOSE OF THE INCOME-TA X ACT, THE ENTRY IN SCHEDULE XIII HAS TO BE UNDERSTOO D IN ITS NORMAL SENSE AND NOT IN TERMS OF ANY CLARIFICAT IONS ISSUED BY THE STATE GOVERNMENT UNDER AN ENTIRELY DIFFERENT SCHEME. 4.4 A STATUTE IS THE EDICT OF THE LEGISLATURE. THE LANGUAGE EMPLOYED IN A STATUTE IS THE DETERMINATIVE FACTOR OF THE LEGISLATIVE INTENT. THE FIRST AND PR IMARY RULE OF CONSTRUCTION IS THAT ONE MUST GO BY THE INT ENTION OF THE LEGISLATION ITSELF AS HELD IN PADMASUNDRA RA O V STTE OF TN 255 ITR 147 (S.C); CGT V. LAXMI DEVI 220 ITR 50, CIT V.DEEP CHAND, 2547 ITR 756. IT WAS ALS O HELD BY HON'BLE SUPREME COURT IN THE CASE OF VIKRAN T TYRES V FIRST ITO, 247 ITR 821 (S.C) THAT UNLESS TH ERE IS AN INTENTION TO THE CONTRARY, THE WORDS IN A STATUT E SHOULD BE GIVEN THEIR ORDINARY GRAMMATICAL OR NATUR AL MEANING (EMPHASIS SUPPLIED). THE RELEVANT PORTION OF SECTION 80IC READS AS UNDER : 80-IC. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSE SSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERT AKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SEC TION (2), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAI NS, AS SPECIFIED IN SUB-SECTION (3). (2) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISE, (A) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRO DUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SP ECIFIED IN THE THIRTEENTH SCHEDULE, OR WHICH MANUFACTURES OR PRODU CES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SP ECIFIED IN THE THIRTEENTH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPA NSION DURING THE PERIOD BEGINNING THE THIRTEENTH SCHEDULE (SEE SECTIONS 80IB(4) AND 80IC(2)} LIST OF ARTICLES OR THINGS PART A FOR THE STATE OF SIKKIM --------------------------------------------------- --------------------------- SCHEDULE XIII LIST OF ARTICLES OR THINGS PART B FOR THE STATE OF HIMACHAL PRADESH AND THE STATE OF UTTARANCHAL S NO ACTIVITY OR ARTICLE OR THING EXCISE CLASSIFICATION SUB-CLASS UNDER NATIONAL INDUSTRIAL CLASSIFICATION (NIC) 1998 1 TOBACCO AND TOBACCO PRODUCTS INCLUDING CIGARETTES AND PAN 24.01 TO 24.04 AND 21.06 1600 7 MASALA 2 THERMAL POWER PLANT (COAL / OIL BASED) 40102 OR 40103 3 COAL WASHERIES/DRY COAL PROCESSING 4 INOROGANIC CHEMICALSL LEXCLUDING MEDICINAL GRADE OXYGEN (2804.11), MEMDICINAL GRADE HYDROGEN PEROXIDE (2847.11), COMPRESSED AIR (2851.30) CHAPTER 28 5 ORGANIC CHEMICALS EXCLUDING PROVITAMINS/VITAMINS, HORMONES (29.36), GLYCOSIDES (29.39), SUGAR (29.40) CHAPTER 29 24117 6 TANNINGAND DYEING EXTRACTS, TANNINS AND THEIR DERIVATIVES, DYES, COLOURS, PAINTS AND VARNISHES, PUTTY, FILLERS AND OTHER MASTICS, INKS CHAPTER 32 24113 OR 24114 7 MARBLE AND MINERAL SUBSTANCES NOR CLASSIFIED ELSEWHERE 25.04 25.05 14106 OR 14107 8 FLOUR MILLS/RICE MILLS 11.01 15311 9 TO 20 FROM THE ABOVE IT IS CLEAR THAT DEDUCTION U/S 80IC IS AVAILABLE WHENEVER THE ASSESSEE UNDERTAKES A SUBSTANTIAL EXPA NSION. THE ISSUE RELATING TO SUBSTANTIAL EXPANSION HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. HOWEVER, SUB-SE C (2) FURTHER REQUIRES THAT DEDUCTION IS AVAILABLE ONLY T O SUCH UNDERTAKING WHICH BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING WHICH ARE NOT MENTIONED IN SCHEDUL E XIII, PART B. THUS IT IS CLEAR AS OBSERVED BY THE LD. CIT(A) T HE DEDUCTION IS NOT DENIED ON A PARTICULAR TYPE OF MILL BUT IT I S DENIED ON A PARTICULAR TYPE OF ARTICLE OR THING WHICH IS MENTIO NED THEREIN. IT SHOULD BE EMPHASIZED THAT PART B OF SCHEDULE XII I, ITEM 8 TALKS OF FLOUR MILL UNDER THE HEAD ACTIVITY OR ART ICLE OR THING BUT THAT HAS BEEN FURTHER CLARIFIED IN THE SCHEDULE ITSELF BY WAY OF EXCISE CLASSIFICATION AS WELL AS SUB-CLAUSE UNDER NATIONAL INDUSTRIES CLASSIFICATION (N.I.C) 1998. T HE LD. CIT(A) HAS FURTHER OBSERVED THAT CENTRAL EXCISE TAR IFF CLASSIFICATION CODE 11.01 OF CENTRAL EXCISE ACT MAK ES IT CLEAR THAT IT IS A BROAD HEADING WHICH COVERS VARIOUS PRO DUCTS OF THE MILLING INDUSTRY. FURTHER N.I.C. 1998 GIVES VARIOU S CATEGORIES OF PRODUCTS UNDER VARIOUS HEADS KNOWN AS DIVISIONS . DIVISION 15 READS AS UNDER: DIVISION 15 MANUFACTURE OF FOOD PRODUCTS OF BREWAGES 15311 FLOUR MILLING 8 THIS CLASSIFICATION UNDER VARIOUS NIC STANDARDS HAS BEEN ISSUED BY MINISTRY OF STATISTICS AND PROGRAMME IMPLEMENTATION, GOVERNMENT OF INDIA. CODE 15311 HAS BEEN MENTIONED IN PART B OF SCHEDULE XIII AT COL. 8. SI NCE THIS DIVISION PERTAIN TO FOOD AND BREWAGES AND ONLY ONE ITEM IN RESPECT OF FLOUR MILLING IS THERE, IT BECOMES CLEA R THAT THE PARLIAMENT WAS CLEAR IN ITS INTENTION THAT ACTIVITY OF FLOUR MILLING WOULD NOT BE ENTITLED TO DEDUCTION U/S 80IC AND THAT IS WHY THE SAME HAS BEEN PLACED IN SCHEDULE XIII ALONG WITH EXCISE CLASSIFICATION CODE 11.01 AS WELL AS NATIONA L INDUSTRIES CLASSIFICATION UNDER DIVISION 15 AT SL N O. 15311. THEREFORE, THE ACTIVITY OF FLOUR MILLING OR ARTICL E OR THING UNDER WHICH CAN BE CALLED FLOUR IS NOT ELIGIBLE F OR DEDUCTION U/S 80IC BY VIRTUE OF ITS ENTRY IN THE NEGATIVE LIS T IN PART B OF SCHEDULE XIII. 10 THE LD. COUNSEL OF THE ASSESSEE THOUGH ARGUED T HAT THIS ITEM SHOULD BE INTERPRETED ON THE BASIS OF A TRADE NAME BUT NO TRADE JOURNAL OR ANY OTHER MATERIAL WAS PRODUCED TO SHOW THAT IN THE TRADE PARLANCE FLOUR MILL IS DISTINCT FROM ROLLER FLOUR MILL. IN ANY CASE THE ASSESSEE ITSELF HAS BE EN SHOWN TO BE RUNNING A FLOUR MILL AS PER THE TAX AUDIT REPORT (COPY OF WHICH IS AVAILABLE AT PG 12 TO 20 AT SL NO. 8 WHICH DEALS WITH THE NATURE OF BUSINESS, THE SAME HAS BEEN SHOWN AS FLOUR MILL. 11 WE HAVE ALSO PERUSED PAGE 25 OF THE PAPER BOOK W HICH IS AN ANNEXURE GIVING QUANTITATIVE DETAILS OF PRINC IPLE ITEMS OF RAW MATERIAL AND FINISHED PRODUCTS HAS BEEN FOLLOWE D. ANNEXURE IV QUANTITATIVE DETAILS OF PRINCIPAL ITEMS OF RAW MATE RIAL ITEM WHEAT (IN QTLS) OPENING STOCK 14345.66 PURCHASES DURING THE PREVIOUS YEAR 140348.5 0 CONSUMPTION DURING THE PREVIOUS YEAR 149102.6 2 SALES DURING THE PREVIOUS YEAR NIL CLOSING STOCK 5591.54 YIELD OF FINISHED PRODUCTS FLOUR 118746 MAIDA/ SUZI 16984. 45 CHOKER 16586.46 %AGE OF YIELD 79.64% 11.39 % 11.12% SHORTAGE/EXCESS, IF ANY PROCESS GAIN(QTLS ) = (3214.29) 2.15% 9 FROM THE ABOVE IT IS CLEAR THAT PRINCIPLE ACTIVITIE S REMAIN MILLING OF FLOUR AND 79.64% WHEAT CRUSHED RESULTS I NTO MILLING OF FLOUR AND MAIDA AND SUZI IS ONLY AT 11.39% WHICH CAN BE CALLED AS BI-PRODUCT. THUS IT IS CLEAR THAT MAIN A CTIVITY OF THE ASSESSEE IS MILLING AND BY DOING THE ACTIVITY LISTE D IN THE NEGATIVE LIST IN PART B OF SCHEDULE XIII, DEDUCTION U/S 80IC, IS NOT AVAILABLE. 12 THE LD. COUNSEL OF THE ASSESSEE HAD PUT UP LOT O F STRESS ON THE CLARIFICATION OF LEGAL EXEMPTION GRANTED BY THE GOVERNMENT OF HIMACHAL PRADESH. RELEVANT LETTER IS EXTRACTED BELOW: IND(A)(F)6-16/94 GOVERNMENT OF HIMACHAL PRADESH INDUSTRIES DEPARTMENT THE D.C-CUM-SECRETARY (INDUSTRIES) TO THE GOVERNMENT OF HIMACHAL PRADESH TO THE DIRECTOR OF INDUSTRIES HIMACHAL PRADESH, SHIMLA-1 DATED, SHIMLA-2 1.7.1994 JUNE 1994 SUB: SALES TAX EXEMPTION TO ROLLER FLOUR MILLS, CLARIFICATION THEREOF SIR, I AM DIRECTED TO REPLY TO YOUR LETTER NO. IN/DEV., F.19-18/91-IB DATED 20.4.94 IN THE ABOVE CITED SUBJECT AND TO SAY THAT THE MATTER HAS BEEN EXAMINED IN CONSULTATION WITH LAW DEPARTME NT. ACCORDING TO RULE 11.1 (D) OF THE REVISED RULES REGARDING GRA NT OF INCENTIVES TO INDUSTRIAL UNITS IN HIMACHAL PRADESH, ALL INDUST RIAL UNITS RE ELIGIBLE FOR SALES TAX INCENTIVES WHICH ARE REGISTE RED AS APPELLATE AUTHORITY DEALER UNDER THE H.P. GENERAL SALES TAX A CT, 1968/CENTRAL SALES TAX ACT, 1956 AND COMPLY WITH IT S PROVISIONS, EXCEPT FOR THE INDUSTRIES NOTIFIED IN ANNEXURE-III OR AS NOTIFIED BY THE STATE GOVERNMENT FROM TIME TO TIME. ACCORDING TO SL NO. 1 OF ANNEXURE III OF THE SAID RULES, FLOUR MILLS ARE NOT ELIGIBLE FOR SALES TAX INCENTIVES. IN OTHER WORDS, THE ROLLER FLOUR M ILLS ARE NOT COVERED UNDER SL NO. 1 OF ANNEXURE III AND HENCE AR E ELIGIBLE FOR SALES TAX INCENTIVES SUBJECT TO FULFILLMENT OF OTHE R REQUIREMENTS. YOURS FAITHFULLY SD/- JOINT SECRETARY (INDUSTRIES) TO THE GOVERNMENT OF HIMACHAL PRADESH IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY BRUSHE D ASIDE THIS CLARIFICATION BECAUSE IT DEALS WITH THE SALES TAX E TC. WHICH IS A STATE SUBJECT AND THIS CLARIFICATION CAN NOT NEGATE S THE INTENTION OF THE PARLIAMENT GIVEN IN PART B OF SCHEDULE XIII WHI CH IS A NEGATIVE LIST FOR DEDUCTION U/S 80IC. IN THESE CIRCUMSTANCE S, WE ARE OF THE OPINION THAT THE ASSESSEE BY VIRTUE OF BEING PLACED IN PART B OF SCHEDULE XIII, IS NOT ENTITLED TO DEDUCTION U/S 80I C. THE ASSESSING OFFICER HAS BEEN MORE THAN REASONABLE FOR GRANTING DEDUCTION U/S 10 80IB @ 25%. IN THESE CIRCUMSTANCES WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND CONFIRM THE SAME. 10 WE FURTHER FIND THAT THIS MATTER WAS TAKEN BEFOR E THE HON'BLE HIMACHAL PRADESH HIGH COURT IN CASE OF POOJ A INDUSTIRES IN ITA NO. 4001 OF 2013 AND THE SAME WAS DISMISSED EVEN BY THE HON'BLE HIGH COURT VIDE ORDER DATED 27. 6.2013 VIDE PARA 3 WHICH READS AS UNDER: IT IS NOT THE CASE OF THE APPELLANT THAT UNDER THE PROVISIONS OF INCOME-TAX ACT APPROPRIATE AUTHORITY HAS MADE DISTI NCTION BETWEEN ROLLER FLOUR MILLS AND FLOUR MILLS/RICE MIL LS. AS SUCH, IN ABSENCE THEREOF, WE FIND NO REASON TO DIFF ER FROM THE OPINION RECORDED BY THE TRIBUNAL IN PARA 12 THAT TH E CIRCULAR PRESSED INTO SERVICE BY THE APPELLANT, WILL BE OF N O AVAIL TO THE APPELLANT. HENCE, DISMISSED. AT THIS STAGE WE MAY OBSERVE THAT ADDITIONAL EVIDEN CE FILED GIVES DETAILS OF THE MACHINERY FOR ROLLER FLOUR MIL L AND FLOUR MILL BUT WE DO NOT FIND MUCH DIFFERENCE IN THE SAME AND IN ANY CASE THE SAME IS OF ACADEMIC NATURE BECAUSE THE ASS ESSEE HAS NOT SHOWN ANY DOCUMENTARY EVIDENCE BEFORE THE LOWER AUTHORITIES TO PROVE WHICH MACHINES HAVE BEEN INST ALLED FOR UPGRADATION. WE FURTHER FIND THAT IN CASE OF UNION OF INDIA AND OTHERS V. GARWARE NYLONS LTD. ETC (SUPRA) HAS OBSER VED AT PARA 10 AS UNDER: THERE ARE INNUMERABLE DECISIONS OF THIS COURT WHIC H HAVE LAID DOWN THE TEST OR THE PRINCIPLES TO BE BORNE IN MIND IN CONSTRUING THE ITEMS OR ENTRIES IN FISCAL STATUTES. IN RECENT DECISION IN INDIAN CABLE COMPANY LTD. CALCUTTA VS.. COLLECTOR OF CENTRAL EXCISE, CALCUTTA AND OTHERS (1994) 6 SCC 610 AT PAGE 615) A THREE MEMBER BENCH STATED THE LAW THUS: ..IN CONSTRUING THE RELEVANT ITEM OR ENTRY, IN FISCAL STATUTES, IF IT IS ONE OF EVERY DAY USE, THE AUTHOR ITY CONCERNED MUST NORMALLY CONSTRUE IT, AS TO HOWEVER, IT IS UNDERSTOOD IN COMMON PARLANCE OR IN THE COMMERCIAL WORLD OR TRADE CIRCLES. IT MUST BE GIVEN ITS POPUL AR MEANING. THE MEANING GIVEN IN THE DICTIONARY MUST NOT PREVAIL. NO SHOULD THE ENTRY BE UNDERSTOOD IN ANY TECHNICAL OR BOTANICAL OR SCIENTIFIC SENSE. IN THE CASE OR TECHNICAL WORDS, IT MAY CALL FOR A DIFFERENT APPROA CH. THE APPROACH TO BE MADE IN SUCH CASES HAS BEEN STAT ED BY LORD ESHER IN UNWIN V. HANSON THUS: IF THE ACT IS DIRECTED TO DEAL WITH MATTERS AFFEC TING EVERYBODY GENERALLY, THE WORDS USED HAVE THE MEANIN G ATTACHED TO THEM IN THE COMMON AND ORDINARY USE OF LANGUAGE. IF THE ACT IS ONE PASSED WITH REFERENCE TO A PARTICULAR TRADE, BUSINESS OR TRANSACTION AND WORDS ARE 11 USED WHICH EVERYBODY CONVERSANT WITH THAT TRADE, BUSINESS OR TRANSACTION KNOWS AND UNDERSTANDS TO HA VE A PARTICULAR MEANING IN IT THEN THE WORD A RE TO BE CONSTRUED AS HAVING THAT PARTICULAR MEANING, THOUGH IT MAY DIFFER FROM THE COMMON OR ORDINARY MEANING OF T HE WORDS. WE HAVE NO QUARREL WITH THE ABOVE OBSERVATION BUT W E ARE OF THE OPINION THAT EVEN IN THE TRADE ROLLER FLOUR MIL L AND FLOUR MILL IS UNDERSTOOD AS ONE AND SAME AND IN ANY CASE AS OBSERVED IN CASE OF POOJA INDUSTRIES (SUPRA) THERE IS NO MATERIAL BEFORE US TO REACH A DIFFERENT CONCLUSION. IN VIEW OF THIS DETAILED DISCUSSION WE FIND NOTHING WRONG IN T HE ORDER OF THE LD. CIT(A) AND WE CONFIRM THE IMPUGNED ORDER. 11N THE RESULT, ITA NO. 987/CHD/2011 IS DISMISSED. ITA NO. 988/CHD/2011 12 IN THIS APPEAL ALSO ONLY DISPUTE IS REGARDING CO NFIRMATION OF REJECTION OF CLAIM FOR DEDUCTION U/S 80IC IN RES PECT OF ROLLER FLOUR MILL. 13 FACTS REGARDING THIS ISSUE ARE IDENTICAL TO THE FACTS INVOLVED IN THE APPEAL OF THE ASSESSEE FOR ASSESSME NT YEAR 2004-05 WHICH WE HAVE ADJUDICATED IN PARA NO. 9 & 1 0 ABOVE AND FOLLOWING THE SAME WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 14 IN THE RESULT, ITA NO. 988/CHD/2011 IS DISMISSED . ITA NO. 989/CHD/2011 15 IN THIS APPEAL FIRST ISSUE IS REGARDING CONFIRM ATION OF REJECTION OF CLAIM FOR DEDUCTION U/S 80IC IN RESPEC T OF ROLLER FLOUR MILL. 16 FACTS REGARDING THIS ISSUE ARE IDENTICAL TO THE FACTS INVOLVED IN THE APPEAL OF THE ASSESSEE F OR ASSESSM ENT YEAR 2004-05 WHICH WE HAVE ADJUDICATED IN PARA NO. 9 & 1 0 ABOVE AND FOLLOWING THE SAME WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 17 SECOND ISSUE AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT T HE 12 ASSESSEE HAD PAID FREIGHT AND COMMISSION CHARGES TO TALING TO RS. 12,91,344/-. ON FURTHER VERIFICATION IT WAS NO TICED THAT THESE PAYMENTS WERE MADE WITHOUT DEDUCTION OF TAX U /S 194C AND 194H. ON ENQUIRY IT WAS SUBMITTED THAT FREIGHT WAS PAID TO THE DRIVERS WHO CARRIES THE GOODS. ON FURTHER INVES TIGATION IT WAS FOUND THAT VARIOUS GRS PRODUCED BY THE ASSESSEE REVEAL THAT THE TRANSPORTERS HAD ISSUED BILLS FOR THE FREI GHT. IN VIEW OF THIS FREIGHT CHARGES AND COMMISSION PAID WERE NOT A LLOWED IN TERMS OF SEC 40(A)(IA) OF THE ACT. 18 ON APPEAL THE ADDITION WAS CONFIRMED BY THE LD. CIT(A). 19 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT SINCE THE AMOUNT HAS ALREADY BEEN PAID THEREFORE, THE DECISION OF SPECIAL BENCH IN CASE OF MERILYN SHIPPI NG TRANSPORTERS V. ACIT, 136 ITD 23 SHOULD BE APPLIED . 20 ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S UBMITTED THE DECISION OF MERILYN SHIPPING TRANSPORTERS V. AC IT (SUPRA) HAS ALREADY BEEN OVER RULED BY HON'BLE CALCUTTA HIG H COURT IN CASE OF CIT V. CRESENT EXPORT SYNDICATE, 216 TAXMAN 258. THE DECISION HAS BEEN FURTHER OVER RULED BY HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V. SIKANDARKHAN N TUNWAR AND OTHERS, 87 DTR 137. THEREFORE, THE DECISION OF SP ECIAL BENCH IN CASE OF MERILYN SHIPPING TRANSPORTERS V. ACIT (S UPRA) IS NO MORE APPLICABLE. 21 IN THE REJOINDER THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT HON'BLE ALLAHABAD HIGH COURT HAS TAKEN A DIFFE RENT VIEW IN CASE OF CIT V. VECTOR SHIPPING SERVICES, ITA NO. 12 2 OF 2013 AND HAD UPHELD THE DECISION OF SPECIAL BENCH IN CAS E OF MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA). HE FURTHER SUBMITTED THAT THE DECISION IS IN FAVOUR OF THE ASS ESSEE AND FAVOURABLE DECISION SHOULD BE ADOPTED IN VIEW OF TH E DECISION OF HON'BLE SUPREME COURT IN CASE OF CIT V. VEGETABL E PRODUCTS LTD. 88 ITR 192 (S.C). 22 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AN D FIND THAT THE DECISION OF SPECIAL BENCH HAS BEEN SPECIF ICALLY OVER RULED BY HON'BLE GUJARAT HIGH COURT BY DISCUSSING T HE ISSUE IN DETAIL IN CASE OF CIT V. SIKANDARKHAN N TUNWAR AND OTHERS (SUPRA). WE FURTHER FIND THAT IN CASE OF CIT V. VEC TOR SHIPPING 13 SERVICES, THE ISSUE WAS DIFFERENT. IN THAT CASE TH E QUESTION POSED BEFORE THE HON'BLE HIGH COURT READS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE HON'BLE ITAT HAS RIGHTLY CONFIRMED THE ORDER OF THE LD. CIT(A) AND 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 MANAGEMENT WORK ON BE HALF OF THE ASSESSEE M/S VECTOR SHIPPING SERVICES (P) LTD A ND THERE WAS A MEMORANDUM OF UNDERTAKING SIGNED BETWEEN BOTH THE COMPANIES AND A S PER THE DEFINITION OF MEMORANDUM OF UNDERTAKING, IT INCLUDED CONTRACT ALSO. IN THAT CASE SOME EXPENSES WERE DISALLOWED U/S 40(A )(IA) BECAUSE NOT TAX WAS DEDUCTED. ON APPEAL THE TRIBUN AL FOUND THAT THE LD. CIT(A) HAS ALREADY GIVEN A FINDING THA T MERCATOR LINES LTD. HAD DEDUCTED THE TDS ON SALARY PAID ON B EHALF OF THE ASSESSEE. UNDER SUCH CIRCUMSTANCES THE ASSESSE E WAS NOT REQUIRED TO DEDUCT THE TDS ON REIMBURSEMENT ON SALA RY BEING MADE BY IT TO M/S MERCATOR LINES LTD. 23 HON'BLE HIGH COURT HAS CONFIRMED THE DECISION OF THE TRIBUNAL. THUS IT IS CLEAR THAT HON'BLE ALLAHABAD HIGH COURT WAS NEITHER REQUIRED NOR HAS GIVEN DETAIL REASONS FOR APPROVING THE DECISION OF SPECIAL BENCH WHEREAS HON 'BLE GUJARAT HIGH COURT HAS AFTER DETAILED DISCUSSION, O VER RULED THE DECISION OF SPECIAL BENCH. 24 IN CASE OF SIKANDARKHAN N TUNWAR (SUPRA) THE ASS ESSEE WAS ENGAGED IN THE BUSINESS OF TRANSPORT CONTRACTOR AND COMMISSION AGENT. DURING THE SCRUTINY ASSESSMENT IT WAS NOTICED BY THE ASSESSING OFFICER THAT EXPENDITURE I N THE NATURE OF PAYMENT MADE BY THE ASSESSEE TO ITS SUB-CONTRAC TORS TO THE TUNE OF RS. 8.74 CRORES. SINCE THE ASSESSEE HAD AD MITTEDLY NOT DEDUCTED THE TAX FROM SUCH PAYMENTS AND INDIVIDUAL PAYMENTS TO TRANSPORTERS EXCEEDED LIMIT OF RS. 20,000/- FOR A SINGLE TRIP AND AGGREGATED OVER RS. 50,000/- IN THE YEAR THOUGH THE ASSESSEE HAD OBTAINED FORM NO. 15-I FROM SUCH SUB-C ONTRACTORS BUT THE SAME WERE NOT FURNISHED ALONG WITH THE PART ICULARS IN FORM 15-J TO THE CIT BEFORE DUE DATE AND THEREFORE, THE EXPENDITURE ON ACCOUNT OF PAYMENT TO SUB-CONTRACTO RS WAS DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT. 25. ON APPEAL THE LD. CIT(A) CONFIRMED THIS ORDER. 14 26 WHEN THE MATTER TRAVELED TO THE TRIBUNAL THE APP EAL OF THE ASSESSEE WAS ALLOWED BY RELYING ON THE DECISION OF MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA). THE TRIBUNA L HELD THAT THE WORD PAYABLE USED IN SECTION 40(A)()IA) WOULD MAKE PROVISION APPLICABLE ONLY IN RESPECT OF EXPENDITUR E PAYABLE ON 31 ST MARCH OF A PARTICULAR YEAR AND SUCH PROVISION CANN OT BE INVOKED TO DISALLOW THE AMOUNTS WHICH HAS ALREADY B EEN PAID DURING THE YEAR THOUGH THE TAX MAY NOT HAVE BEEN DE DUCTED AT SOURCE. FOLLOWING SPECIFIC QUESTION WAS POSED BEFO RE 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 SHIPPI NG TRANSPORTERS V. ACIT (SUPRA) AND DELETED THE DISALL OWANCE ON THIS LIMITED GROUND. AS IN THE PRESENT CASE, OTHER MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA) GROUNDS OF CO NTROVERSY BETWEEN THE PARTIES WITH RESPECT TO ALLOWABILITY OR OTHERWISE OF SUCH EXPENDITURE WAS NOT EXAMINED BY THE TRIBUNA L. FOR THE PURPOSE OF THESE APPEALS, THEREFORE, WE FRAME FOLLOWING SUBSTANTIAL QUESTION OF LAW: 1 WHETHER DISALLOWANCE U/S 40(A)(IA) OF THE I.T AC T COULD BE MADE ONLY IN RESPECT OF SUCH AMOUNTS WHICH ARE PAYABLE AS ON 31 ST MACH OF THE YEAR UNDER CONSIDERATION? 2 WHETHER DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING TRANSPORTERS V. ACIT ( SUPRA) LAYS DOWN CORRECT LAW? 27 HON'BLE GUJARAT HIGH COURT AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES REFERRED TO THE PRO VISION OF CHAPTER XVII A OF THE ACT DEALING WITH THE TAX DEDU CTION PROVISIONS. AFTER THIS REFERENCE WAS MADE TO SECTI ON 40(A)(IA) THROUGH WHICH IT WAS PROVIDED THAT TAX HAS NOT BEEN DEDUCTED ON CERTAIN PAYMENTS AND THE SAME WILL NOT BE ALLOWA BLE. THE HON'BLE HIGH COURT DISCUSSED THE IMPLEMENTATIONS OF THIS PROVISION AND DECISION OF SPECIAL BENCH IN CASE OF MERILYN SHIPPING TRANSPORTERS V. ACIT (SUPRA) AND OBSERVED AND HELD AS UNDER: 17. IN PLAIN TERMS SECTION 40(A)(IA) PROVIDES THAT IN CASE OF ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PR OFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNT S PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY WORK ON WHICH T AX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION H AS NOT BEEN PAID BEFORE THE DUE DATE, SUCH AMOUNTS SHALL NOT BE DEDUCTED IN COM PUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION 15 IRRESPECTIVE OF THE PROVISIONS CONTAINED IN SECTION S 30 TO 38 OF THE ACT. PROVISO TO SECTION 40(A)(IA), HOWEVER, ENABLES THE ASSESSEE TO TAKE SUCH DEDUCTION IN SUBSEQUENT YEAR, IF TAX IS DEDUCTED IN SUCH YEAR OR THOUGH DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION(1) OF SECTION 139 OF THE ACT. 18. IN SUCH CONTEXT, THEREFORE, THE QUESTION ARISES WHETHER UNDER SECTION 40(A)(IA) OF THE ACT DISALLOWANCE OF THE EXPENDITUR E PAYMENT OF WHICH, THOUGH REQUIRED DEDUCTION OF TAX AT SOURCE HAS NOT BEEN MA DE WOULD BE CONFINED ONLY TO THOSE CASES WHERE THE AMOUNT REMAINS PAYABLE TILL T HE END OF THE PREVIOUS YEAR OR WOULD INCLUDE ALL AMOUNTS WHICH BECAME PAYABLE D URING 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 SPLI T OPINION. LEARNED 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. ASSISTANT COMMISSIONER OF INCOME-TAX (TDS) AND OTHERS REPORTED IN [2010] 325 ITR 610 (MAD) . LEARNED JUDGE DID NOTICE THAT THE HIGH COURT IN S UCH CASE WAS CONCERNED WITH THE VIRES OF THE STATUTORY PROVISION BUT FOUND SOME OF THE OBSERVATIONS MADE BY THE COURT IN THE PROCESS U SEFUL AND APPLICABLE. LEARNED JUDGE REJECTED THE THEORY OF NARROW INTERPR ETATION 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 INTERPRETATION AS CONTENDED BY ASSESSEE. HAD THE INTENTIONS OF THE LE GISLATURE WERE TO DISALLOW ONLY ITEMS OUTSTANDING AS ON 31 ST MARCH, THEN THE TERM PAYABLE WOULD HAVE BEEN QUALIFIED BY THE PHRASE AS OUTSTAN DING ON 31 ST MARCH. HOWEVER, NO SUCH QUALIFICATION IS THERE IN THE SECTION AND, THEREFORE, THE SAME CANNOT BE READ INTO THE SE CTION 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 SECTIO N 40 AND THE ULTIMATE AMENDMENT WHICH ACTUALLY WAS PASSED BY THE PARLIAME NT. IT WAS OBSERVED THAT FROM THE COMPARISON BETWEEN THE PROPOSED AND THE EN ACTED PROVISION IT CAN BE SEEN THAT THE LEGISLATURE HAS REPLACED THE WORDS AMOUNTS CREDITED OR PAID WITH THE WORD PAYABLE IN THE ENACTMENT. ON SUCH BASIS, IT WAS HELD THAT THIS IS A CASE OF CONSCIOUS OMISSION AND WHEN THE LANGUAGE WAS CLEAR THE INTENTION OF THE LEGISLATURE HAD TO BE GATHERED FROM LANGUAGE US ED. IN THEIR OPINION THE PROVISION WOULD APPLY ONLY TO AMOUNTS WHICH ARE PAY ABLE AT THE END OF THE YEAR. HAVING SAID SO, CURIOUSLY, IT WAS OBSERVED THAT THE PROVISO TO SECTION 40(A)(IA) OF THE ACT LAYS DOWN THAT EARLIER YEAR S PROVISION CAN BE ALLOWED IN SUBSEQUENT YEARS ONLY IF TDS IS DEDUCTED AND DEPOSITED AND, TH EREFORE, REVENUE S FEAR IS UNFOUNDED AS THE PROVISION OF SECTION 40(A)(IA) OF THE ACT COVERS THE SITUATION. 21. IN THE PRESENT CASE, WE HAVE NO HESITATION IN A CCEPTING THE CONTENTION THAT THE PROVISION MUST BE CONSTRUED STRICTLY. THIS BEIN G A PROVISION WHICH CREATES AN ARTIFICIAL CHARGE ON AN AMOUNT WHICH IS OTHERWISE N OT AN INCOME OF THE ASSESSEE, CANNOT BE LIBERALLY CONSTRUED. UNDOUBTEDLY IF THE L ANGUAGE OF THE SECTION IS PLAIN, IT MUST BE GIVEN ITS TRUE MEANING IRRESPECTIVE OF T HE CONSEQUENCES. WE HAVE NOTICED THAT THE PROVISION MAKES DISALLOWANCE OF AN EXPENDITURE WHICH HAS OTHERWISE BEEN INCURRED AND IS ELIGIBLE FOR DEDUCTI ON, ON THE GROUND THAT THOUGH TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE IT WAS NO T DEDUCTED OR IF DEDUCTED, HAD NOT BEEN DEPOSITED BEFORE THE DUE DATE. BY ANY INTENDMENT OR LIBERAL CONSTRUCTION OF SUCH PROVISION, THE LIABILITY CANNO T BE FASTENED IF THE PLAIN MEANING OF THE SECTION DOES NOT SO PERMIT. 22. FOR THE PURPOSE OF THE SAID SECTION, WE ARE ALS O OF THE OPINION THAT THE TERMS PAYABLE AND PAID ARE NOT SYNONYMOUS. WORD PAID HAS BEEN DEFINED IN SECTION 43(2) OF THE ACT TO MEAN ACTUALLY PAID OR I NCURRED ACCORDING TO THE METHOD OF ACCOUNTING, UPON THE BASIS OF WHICH PROFI TS AND GAINS ARE COMPUTED 16 UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION . SUCH DEFINITION IS APPLICABLE FOR THE PURPOSE OF SECTIONS 28 TO 41 UNL ESS THE CONTEXT OTHERWISE REQUIRES. IN CONTRAST, TERM PAYABLE HAS NOT BEEN DEFINED. THE WORD PAYABLE HAS BEEN DESCRIBED IN WEBSTER S THIRD NEW 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 WO RD PAYABLE WOULD NOT INCLUDE PAID . IN OTHER WORDS, THEREFORE, AN AMOUNT WHICH IS ALR EADY PAID OVER CEASES TO BE PAYABLE AND CONVERSELY WHAT IS PAYABLE CANNOT BE ONE THAT IS ALREADY PAID. WHEN AS RIGHTLY POINTED OUT BY COUNSE L MR. HEMANI, THE ACT USES TERMS PAID AND PAYABLE AT DIFFERENT PLACES IN DIFFERENT CONTEXT DIFFERENT LY, FOR THE PURPOSE OF SECTION 40(A)(IA) OF THE ACT, TE RM PAYABLE CANNOT BE SEEN TO BE INCLUDING THE EXPRESSION PAID . THE TERM PAID AND PAYABLE IN THE CONTEXT OF SECTION 40(A)(IA) ARE NOT USED INTERCHAN GABLY. IN THE CASE OF BIRLA CEMENT WORKS AND ANOTHER VS. STATE OF RAJASTHAN AND ANOTHER REPORTED IN AIR 1994(SC) 2393 , THE APEX COURT OBSERVED THAT THE WORD PAYABLE IS A DESCRIPTIVE WORD, WHICH ORDINARILY MEANS THAT WHICH MUST BE PAID OR IS DUE OR MAY BE PAID BUT ITS CORRECT MEANING CAN ONLY BE DET ERMINED IF THE CONTEXT IN WHICH IT IS USED IS KEPT IN VIEW. THE WORD HAS BEEN FREQUENTLY UNDERSTOOD TO MEAN THAT WHICH MAY, CAN OR SHOULD BE PAID AND IS H ELD 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 CONTEX T, WE WOULD LIKE TO EXAMINE TWO ASPECTS. FIRSTLY, WHAT WOULD BE THE CORRECT INTERPR ETATION OF THE SAID PROVISION. SECONDLY, WHETHER OUR SUCH UNDERSTANDING OF THE LAN GUAGE USED BY THE LEGISLATURE SHOULD WAVER ON THE PREMISE THAT AS PRO POUNDED BY THE TRIBUNAL, THIS WAS A CASE OF CONSCIOUS OMISSION ON PART OF THE PAR LIAMENT. BOTH THESE ASPECTS WE WOULD ADDRESS ONE AFTER ANOTHER. IF ONE LOOKS CL OSELY TO THE PROVISION, IN QUESTION, ADVERSE CONSEQUENCES OF NOT BEING ABLE TO CLAIM DEDUCTION ON CERTAIN PAYMENTS IRRESPECTIVE OF THE PROVISIONS CONTAINED I N SECTIONS 30 TO 38 OF THE ACT WOULD FLOW IF THE FOLLOWING REQUIREMENTS ARE SATISF IED:- (A) THERE IS INTEREST, COMMISSION OR BROKERAGE, REN T, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR BEING RESIDENT FOR C ARRYING OUT ANY WORK. (B) THESE AMOUNTS ARE SUCH ON WHICH TAX IS DEDUCTIB LE AT SOURCE UNDER CHAPTER XVII-B. (C)SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTIO N HAS NOT BEEN PAID ON OR BEFORE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SEC TION 39. FOR THE PURPOSE OF CURRENT DISCUSSION REFERENCE TO THE PROVISO IS NOT NECESSARY. 24. WHAT THIS SUB-SECTION, THEREFORE, REQUIRES IS T HAT THERE SHOULD BE AN `AMOUNT PAYABLE IN THE NATURE DESCRIBED ABOVE, WHICH IS SUC H ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B BUT SUCH TAX HAS NOT BEEN DEDUCTED OR IF DEDUCTED NOT PAID BEFORE THE DUE DATE. THIS PROVISI ON NO-WHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE MUST REMAIN SO PAYABLE THRO UGHOUT DURING THE YEAR. TO REITERATE THE PROVISION HAS CERTAIN STRICT AND STRI NGENT REQUIREMENTS BEFORE THE UNPLEASANT CONSEQUENCES ENVISAGED THEREIN CAN BE AP PLIED. WE ARE PREPARED TO AND WE ARE DUTY BOUND TO INTERPRET SUCH REQUIREMENT S STRICTLY. SUCH REQUIREMENTS, HOWEVER, CANNOT BE ENLARGED BY ANY AD DITION OR SUBTRACTION OF WORDS NOT USED BY THE LEGISLATURE. THE TERM USED IS INTEREST, COMMISSION, BROKERAGE ETC. IS PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR O R SUB-CONTRACTOR FOR CARRYING OUT ANY WORK. THE LANGU AGE USED IS NOT THAT SUCH AMOUNT MUST CONTINUE TO REMAIN PAYABLE TILL THE END OF THE ACCOUNTING YEAR. ANY SUCH INTERPRETATION WOULD REQUIRE READING WORDS WHI CH THE LEGISLATURE HAS NOT USED. NO SUCH INTERPRETATION WOULD EVEN OTHERWISE B E JUSTIFIED BECAUSE IN OUR OPINION, THE LEGISLATURE COULD NOT HAVE INTENDED TO BRING ABOUT ANY SUCH DISTINCTION NOR THE LANGUAGE USED IN THE SECTION BR INGS ABOUT ANY SUCH MEANING. IF THE INTERPRETATION AS ADVANCED BY THE ASSESSEES IS ACCEPTED, IT WOULD LEAD TO A SITUATION WHERE THE ASSESSEE WHO THOUGH WAS REQUIRE D TO DEDUCT THE TAX AT 17 SOURCE BUT NO SUCH DEDUCTION WAS MADE OR MORE FLAGR ANTLY DEDUCTION THOUGH MADE IS NOT PAID TO THE GOVERNMENT, WOULD ESCAPE TH E CONSEQUENCE ONLY BECAUSE THE AMOUNT WAS ALREADY PAID OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOTHER ASSESSEE WHO WOULD OTHERWISE BE IN SIMIL AR SITUATION BUT IN WHOSE CASE THE AMOUNT REMAINED PAYABLE TILL THE END OF TH E 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 INTERPRETA TION WHICH WE HAVE GIVEN. IF THE LANGUAGE USED BY THE PARLIAMENT CONVEYED SUCH A MEANING, WE WOULD NOT HAVE HESITATED IN ADOPTING SUCH AN INTERPRETATION. WE ONLY HIGHLIGHT THAT WE WOULD NOT READILY ACCEPT THAT THE LEGISLATURE DESIR ED TO BRING ABOUT AN INCONGRUOUS AND SEEMINGLY IRRECONCILABLE CONSEQUENC ES. THE DECISION OF THE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, GUJARAT VS. ASHOKBHAI CHIMANBHAI (SUPRA), WOULD NOT ALTER THIS SITUATION. THE SAID DECISION, OF COURSE, RECOGNIZES THE CONCEPT OF ASCE RTAINING 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 CONSIDERABLE SIGNIFICANCE. HOWEVER, THIS DEC ISION NOWHERE INDICATES THAT THE EVENTS WHICH TAKE PLACE DURING THE ACCOUNTING P ERIOD SHOULD BE IGNORED AND THE ASCERTAINMENT OF FULFILLING A CERTAIN CONDITION PROVIDED UNDER THE STATUTE MUST BE JUDGED WITH REFERENCE TO LAST DATE OF THE ACCOUN TING PERIOD. PARTICULARLY, IN THE CONTEXT OF REQUIREMENTS OF SECTION 40(A)(IA) OF THE ACT, WE SEE NO WARRANT IN THE SAID DECISION OF THE SUPREME COURT TO APPLY THE TES T OF PAYABILITY ONLY AS ON 31 ST MARCH OF THE YEAR UNDER CONSIDERATION. MERELY BECAU SE, ACCOUNTS ARE CLOSED ON THAT DATE AND THE COMPUTATION OF PROFIT AND LOSS IS TO BE JUDGED WITH REFERENCE TO SUCH DATE, DOES NOT MEAN THAT WHETHER AN AMOUNT IS PAYABLE OR NOT MUST BE ASCERTAINED ON THE STRENGTH OF THE POSITION EMERGIN G ON 31 ST MARCH. 25. THIS BRINGS US TO THE SECOND ASPECT OF THIS DIS CUSSION, NAMELY, WHETHER THIS IS A CASE OF CONSCIOUS OMISSION AND THEREFORE, THE LEGISLATURE MUST BE SEEN TO HAVE DELIBERATELY BROUGHT ABOUT A CERTAIN SITUATION WHICH DOES NOT REQUIRE ANY FURTHER INTERPRETATION. THIS IS THE FUNDAMENTAL ARG UMENT OF THE TRIBUNAL IN THE CASE OF 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 HYDEN S RULE OR THE MISCHIEF RULE AND ASCERTAINED WHAT WA S THE POSITION BEFORE THE AMENDMENT, WHAT THE AMENDMENT SOUGHT TO REMEDY AND WHAT WAS THE EFFECT OF THE CHANGES. 27. IN THE CASE OF BENGAL IMMUNITY CO. LTD. VS. STATE OF BIHAR AND OTH ERS REPORTED IN AIR 1955 SC 661 , THE APEX COURT REFERRED TO THE FAMOUS ENGLISH DECISION IN HYDEN S CASE WHEREIN WHILE ADOPTING RESTRICTIVE OR ENLARG ING INTERPRETATION, IT WAS OBSERVED THAT FOUR THINGS AR E TO BE CONSIDERED, (1) WHAT WAS THE COMMON LAW BEFORE MAKING OF THE ACT (2) WHAT WA S THE MISCHIEF AND DEFECT IN WHICH THE COMMON LAW DID NOT PROVIDE. (3) WHAT REME DY THE PARLIAMENT HAD RESOLVED AND ADOPTED TO CURE THE DISEASE AND (4) TR UE REASON OF THE REMEDY. 28. IN SUCH CONTEXT, THE POSITION PREVAILING PRIOR TO THE AMENDMENT INTRODUCED IN SECTION 40(A) WOULD CERTAINLY BE A RELEVANT FACTOR. HOWEVER, THE PROCEEDINGS IN THE PARLIAMENT, ITS DEBATES AND EVEN THE SPEECHES M ADE BY THE PROPOSER OF A BILL ARE ORDINARILY NOT CONSIDERED AS RELEVANT OR SAFE T OOLS FOR INTERPRETATION OF A STATUTE. IN THE CASE OF ASWINI KUMAR GHOSE AND ANOTHER VS. ARABINDA BOSE AND 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 FORMS PART OF THE PRE-ENACTMENT HISTORY OF A STATUTE AND AS SUCH MIGHT THROW VALUABLE LIGHT ON T HE INTENTION OF THE LEGISLATURE WHEN THE LANGUAGE USED IN THE ST ATUE ADMITTED OF MORE THAN ONE CONSTRUCTION. WE ARE UNAB LE TO ASSENT TO THIS PREPOSITION. 18 THE REASON WHY A PARTICULAR AMENDMENT WAS PROPOSED OR ACCEPTED OR REJECTED IS OFTEN A MATTER OF CONTROVER SY, AS IT HAPPENED TO BE IN THIS CASE, AND WITHOUT THE SPEECH ES BEARING UPON THE MOTION, IT CANNOT BE ASCERTAINED W ITH ANY REASONABLE DEGREE OF CERTAINTY. AND WHERE THE LEGISLATURE HAPPENS TO BE BICAMERAL, THE SECOND CHA MBER MAY OR MAY NOT HAVE KNOWN OF SUCH REASON WHEN IT DE ALT WITH THE MEASURE. WE HOLD ACCORDINGLY THAT ALL THE THREE FORMS OF EXTRINSIC AID SOUGHT TO BE RESORTED TO BY THE PARTIES IN THE CASE MUS BE EXCLUDED FROM CONSIDERAT ION 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, W HEN A QUESTION IS RAISED WHETHER A CERTAIN PHRASE OR EXPRESSION WAS UP FOR C ONSIDERATION AT ALL 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 ARR IVING AT A PROPER CONSTRUCTION OF THE EXPRESSION FIXING RATES OF WAGES TO LOOK INTO THE STATEMENT OF OBJECTS AND REASONS ATTACHED TO THE BI LL NO.13 OF 1955 AS INTRODUCED IN THE RAJYA SABHA OR THE CIRCUMSTANCES UNDER WHICH THE WORD MINIMUM CAME TO BE DELETED FROM THE PROVISIONS OF THE BILL RELATING TO RATES OF WAGES AND THE WAGE BOARD AND THE FACT OF S UCH DELETION WHEN THE ACT CAME TO BE PASSED IN ITS PRESENT FORM. THERE IS A CONSENSUS OF OPINION THAT THESE ARE NOT AIDS TO THE CONSTRUCTION OF THE TERMS OF THE STATUTE WHICH HAVE OF COURSE TO BE GIVEN THEIR PLAIN AND GRAMMATI CAL MEANING ( SEE: ASHVINI KUMAR GHOSH V. ARABINDA BOSE, 1953 SC R 1:( AIR 1952 SC 369) (Z24) AND PROVAT KUMAR KAR V. WILLIAM TREVELYAN CUR TIEZ PARKER, AIR 1950 CAL 116 (Z25). IT IS ONLY WHEN THE TERMS OF THE STA TUTE ARE AMBIGUOUS OR VAGUE THAT RESORT MAY BE HAD TO THEM FOR THE PURPOS E OF ARRIVING AT THE TRUE INTENTION OF THE LEGISLATURE. 31. IT CAN THUS BE SEEN THAT THE DEBATES IN THE PARLIAMENT ARE ORDINARILY NOT CONSIDERED AS THE AIDS FOR INTERPRETATION OF THE UL TIMATE PROVISION WHICH MAY BE BROUGHT INTO THE STATUTE. THE DEBATES AT BEST INDIC ATE THE OPINION OF THE INDIVIDUAL MEMBERS AND ARE ORDINARILY NOT RELIED UPON FOR INTE RPRETING THE PROVISIONS, PARTICULARLY WHEN THE PROVISIONS ARE PLAIN. WE ARE CONSCIOUS THAT DEPARTURE IS MADE IN TWO EXCEPTIONAL CASES, NAMELY, THE DEBATES IN THE CONSTITUENT ASSEMBLY AND IN CASE OF FINANCE MINISTER S SPEECH EXPLAINING THE REASON FOR INTRODUCTION OF A CERTAIN PROVISION. THE REASON WHY A CERTAIN LA NGUAGE WAS USED IN A DRAFT BILL AND WHY THE PROVISION ULTIMATELY ENACTED CARRIED A DIFFERENT EXPRESSION CANNOT BE GATHERED FROM MERE COMPARISON OF THE TWO SETS OF PR OVISIONS. THERE MAY BE VARIETY OF REASONS WHY THE ULTIMATE PROVISION MAY V ARY FROM THE ORIGINAL DRAFT. IN THE PARLIAMENTARY SYSTEM, TWO HOUSES SEPARATELY DEB ATE THE LEGISLATIONS UNDER CONSIDERATION. IT WOULD ALL THE MORE BE UNSAFE TO R EFER TO OR RELY UPON THE DRAFTS, AMENDMENTS, DEBATES ETC FOR INTERPRETATION OF A STA TUTORY 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 19 A SERIOUS ERROR IN MERELY COMPARING THE LANGUAGE US ED IN THE DRAFT BILL AND FINAL ENACTMENT TO ASSIGN A PARTICULAR MEANING TO THE STA TUTORY PROVISION. 32. IT IS, OF COURSE, TRUE THAT THE COURTS IN INDIA HAVE BEEN APPLYING THE PRINCIPLE OF DELIBERATE OR CONSCIOUS OMISSION. SUCH PRINCIPLE IS APPLIED MAINLY WHEN AN EXISTING PROVISION IS AMENDED AND A CHANGE IS BROUG HT ABOUT. WHILE INTERPRETING SUCH AN AMENDED PROVISION, THE COURTS WOULD IMMEDIA TELY INQUIRE WHAT WAS THE STATUTORY PROVISION BEFORE AND WHAT CHANGES THE LEG ISLATURE BROUGHT ABOUT AND COMPARE THE EFFECT OF THE TWO. THE OTHER OCCASION F OR APPLYING THE PRINCIPLE, WE NOTICE FROM VARIOUS DECISIONS OF THE SUPREME COURT, HAS BEEN WHEN THE LANGUAGE OF THE LEGISLATURE IS COMPARED WITH SOME O THER ANALOGOUS STATUTE OR OTHER PROVISIONS OF THE SAME STATUTE OR WITH EXPRES SION WHICH COULD APPARENTLY OR OBVIOUSLY BEEN USED IF THE LEGISLATURE HAD DIFFEREN T INTENTION IN MIND, WHILE FRAMING THE PROVISION. WE MAY REFER TO SOME OF SUCH DECISIONS PRESENTLY. IN THE CASE OF BHUWALKA STEEL INDUSTRIES LTD. VS. BOMBAY IRON AND STEEL LABOUR BOARD REPORTED IN AIR 2010 (SUPPL.) 122 , THE APEX COURT OBSERVED AS UNDER:- THE OMISSION OF THE WORDS AS PROPOSED EARLIER FROM THE FINAL DEFINITION IS A DELIBERATE AND CONSCIOUS ACT ON THE PART OF THE LEGISLATURE, ONLY WITH THE OBJECTIVE TO PROVIDE PRO TECTION TO ALL THE LABOURERS OR WORKERS, WHO WERE THE MANUAL WORKERS A ND WERE ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMEN T. THEREFORE, THERE WAS A SPECIFIC ACT ON THE PART OF THE LEGISLA TURE TO ENLARGE THE SCOPE OF THE DEFINITION AND ONCE WE ACCEPT THIS, AL L THE ARGUMENTS REGARDING THE OBJECTS AND REASONS, THE COMMITTEE RE PORTS, THE LEGISLATIVE HISTORY BEING CONTRARY TO THE EXPRESS L ANGUAGE, ARE RELEGATED TO THE BACKGROUND AND ARE LIABLE TO BE IG NORED. 33. IN THE CASE OF AGRICULTURAL PRODUCE MARKET COMMITTEE, NARELA, DELH I VS. COMMISSIONER OF INCOME TAX AND ANR. REPORTED IN AIR 2008 SC(SUPPLEMENT) 566 , THE SUPREME COURT NOTICED THAT PRIOR TO FINANCE A CT, 2002, THE INCOME TAX ACT DID NOT CONTAIN THE DEFINITION OF WORDS LOCAL AUTHORITY . THE WORD CAME TO BE DEFINED FOR THE FIRST TIME BY THE FINANCE ACT OF 2002 BY EXPLANATION/ DEFINITION CLAUSE TO SECTION 10(20) OF THE ACT. IT WAS FURTHER NOTICED THAT THERE WERE SIGNIFICANT DIFFERENCE IN THE DEFINITION OF TERM LOCAL AUTHORITY CONTAINED UNDER SECTION 3(31) OF THE GENERAL CLAUSES ACT, 1987 AS C OMPARED TO THE DEFINITION CLAUSE INSERTED IN SECTION 10(20) OF THE INCOME TAX ACT, 1961 VIDE FINANCE ACT, OF 2002. IN THIS CONTEXT IT WAS OBSERVED THAT:- 27. CERTAIN GLARING FEATURES CAN BE DECIPHERED FROM THE ABOVE COMPARATIVE CHART. UNDER SECTION 3(31) OF THE GENERAL CLAUSES ACT, 1897, LOCAL AUTHORITY WAS DEFINED TO MEAN A MUNICIPAL COMMITTEE, DISTRICT BOARD, BODY OF PORT COMMISSIONERS OR OTHER AUTHORITY LEGALLY ENTITLED T O THE CONTROL OR MANAGEMENT OF A MUNICIPAL OR LOCAL FUND. THE WOR DS 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 FIN ANCE ACT, 2002. THEREFORE, IN OUR VIEW, IT WOULD NOT BE CORRE CT TO SAY THAT THE ENTIRE DEFINITION OF THE WORD LOCAL AUTHORITY IS BODILY LIFTED FROM SECTION 3(31) OF THE 1897 ACT AND INCOR PORATED, BY PARLIAMENT, IN THE SAID EXPLANATION TO SECTION 10(2 0) 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 T RANSACTING BUSINESS OF BANKING FALL WITHIN THE MEANING OF BANKING COMPANY DEFINED IN THE BANKING REGULATION ACT, 1949, OBSERVED AS UNDER:- 59. THE RDB ACT WAS PASSED IN 1993 WHEN PARLIAMENT HAD BEFORE IT THE PROVISIONS OF THE BR ACT AS AMENDED BY ACT NO.2 3 OF 1965 BY ADDITION OF SOME MORE CLAUSES IN SECTION 56 OF THE ACT. THE PARLIAMENT WAS FULLY AWARE THAT THE PROVISIONS OF T HE BR ACT APPLY TO 20 CO-OPERATIVE SOCIETIES AS THEY APPLY TO BANKING COM PANIES. THE PARLIAMENT WAS ALSO AWARE THAT THE DEFINITION OF BANKING COMPANY IN SECTION 5(C) HAD NOT BEEN ALTERED BY ACT NO.23 O F 1965 AND IT WAS KEPT INTACT, AND IN FACT ADDITIONAL DEFINITIONS WER E ADDED BY SECTION 56(C). CO-OPERATIVE BANK WAS SEPARATELY DEFINED BY THE NEWLY INSERTED CLAUSE (CCI) AND PRIMARY CO-OPERATIVE BANK WAS SIMILARLY SEPARATELY DEFINED BY CLAUSE (CCV). THE PARLIAMENT WAS SIMPLY ASSIGNING A MEANING TO WORDS; IT WAS NOT INCORPORAT ING OR EVEN REFERRING TO THE SUBSTANTIVE PROVISIONS OF THE BR A CT. THE MEANING OF BANKING COMPANY MUST, THEREFORE, NECESSARILY BE STRICTLY CONFINED TO THE WORDS USED IN SECTION 5(C) OF THE B R ACT. IT WOULD HAVE BEEN THE EASIEST THING FOR PARLIAMENT TO SAY T HAT BANKING COMPANY SHALL MEAN BANKING COMPANY AS DEFINED IN SECTION 5(C) AND SHALL INCLUDE CO-OPERATIVE BANK AS DEFINED IN SECTION 5(CCI) AND PRIMARY CO-OPERATIVE BANK AS DEFINED IN SECTION 5(CCV). HOWEVER, THE PARLIAMENT DID NOT DO SO. THER E WAS THUS 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 BA NKS HAVE COMPREHENSIVE, SELF-CONTAINED AND LESS EXPENSIVE RE MEDIES AVAILABLE TO THEM UNDER THE STATE CO-OPERATIVE SOCIETIES ACTS OF THE STATES CONCERNED, WHILE OTHER BANKS AND FINANCIAL INSTITUT IONS 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 OF ROYALTY ONLY BY REFERENCE TO THE QUANTITY OF LUMPS, FINES AND CONCENTRATES. IT LEFT SLIMES OUT OF CONSIDERATION. NOTHING PREVENTED THE PARLIAMENT FROM EITHER PROVIDING FOR THE QUANTITY O F IRON ORE AS SUCH AS THE BASIS FOR QUANTIFICATION OF ROYALTY. IT CHOSE T O MAKE PROVISION FOR THE QUANTIFICATION BEING AWAITED UNTIL THE EMERGENC E 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 CHOSEN NOT TO DO. IT IS CLEARLY SUGGESTIVE OF I TS INTENTION NOT TO TAKE INTO 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 SLIMES BY READING SECTION 9 OF THE ACT DIVORCED FROM THE PROVISIONS OF THE SECOND SCHEDULE. EVEN IF SLIMES WERE TO BE HELD LIABLE TO CHARGE OF ROYALTY, THE QUESTION WOULD STI LL HAVE REMAINED AT WHAT RATE AND ON WHAT QUANTITY WHICH QUESTIONS CANN OT BE ANSWERED BY SECTION 9. 36. IN THE CASE OF GOPAL SARDAR, VS. KARUNA SARDAR REPORTED IN AIR 2004 SC 3068 , THE APEX COURT IN THE THE CONTEXT OF LIMITATION W ITHIN WHICH RIGHT OF PREEMPTION MUST BE EXERCISED AND WHETHER IN THE CON TEXT OF THE RELEVANT PROVISIONS CONTAINED IN WEST BENGAL LAND REFORMS AN D LIMITATION ACT, 1963 APPLIED OR NOT, OBSERVED AS UNDER:- 8....PRIOR TO 15-2-1971, AN APPLICATION UNDER SECTI ON 8 WAS REQUIRED TO BE MADE TO THE REVENUE OFFICER SPECIFICALLY EMPOWERED BY THE STATE GOVERNMENT IN THIS BEHALF. THIS PHRASE WAS SUBSTITUTED BY THE PHRASE MUNSIF HAVING TERRITORIAL JURISDICTION BY THE AFOREMENTIONED AMENDMENT. EVEN AFTER THIS AMENDMENT WHEN AN APPLIC ATION IS REQUIRED TO BE MADE TO SECTION 8 OF THE ACT EITHER TO APPLY SECTION 5 21 OF THE LIMITATION ACT OR ITS PRINCIPLES SO AS TO EN ABLE A PARTY TO MAKE AN APPLICATION AFTER THE EXPIRY OF THE PERIOD OF LI MITATION PRESCRIBED ON SHOWING SUFFICIENT CAUSE FOR NOT MAKING AN APPLICAT ION WITHIN TIME. THE ACT IS OF 1955 AND FOR ALL THESE YEARS, NO PROV ISION IS MADE UNDER SECTION 8 OF THE ACT PROVIDING FOR CONDONATIO N OF DELAY. THUS, WHEN SECTION 5 OF THE LIMITATION ACT IS NOT M ADE APPLICABLE TO THE PROCEEDINGS UNDER SECTION 8 OF TH E ACT UNLIKE TO THE OTHER PROCEEDINGS UNDER THE ACT, AS ALREADY STATED ABOVE, IT IS APPROPRIATE TO CONSTRUE THAT THE PERIOD OF LI MITATION PRESCRIBED UNDER SECTION 8 OF THE ACT SPECIFICALLY AND EXPRESSLY GOVERNS AN APPLICATION TO BE MADE UNDER THE SAID SE CTION AND NOT THE PERIOD PRESCRIBED UNDER ARTICLE 137 OF THE LIMITATION ACT . 37. IN OUR OPINION, THE TRIBUNAL COMMITTED AN ERROR IN APPLYING THE PRINCIPLE OF CONSCIOUS OMISSION IN THE PRESENT CASE. FIRSTLY, AS ALREADY OBSERVED, WE HAVE SERIOUS DOUBT WHETHER SUCH PRINCIPLE CAN BE AP PLIED BY COMPARING THE DRAFT PRESENTED IN PARLIAMENT AND ULTIMATE LEGISLAT ION WHICH 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 Y EAR. OF COURSE, AS LONG AS THE OTHER REQUIREMENTS OF THE SAID PROVISION EXIST. IN THAT CONTEXT, IN OUR OPINION THE DECISION OF THE SPECIAL BENCH OF THE TR IBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SURPA), DOES NOT LAY DOWN CORRECT LAW. 39. WE ANSWER THE QUESTIONS AS UNDER:- QUESTION (1) IN THE NEGATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEES. QUESTION (2) ALSO IN THE NEGATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEES. THUS IT IS CLEAR THAT HON'BLE GUJARAT HIGH COURT HA S CONSIDERED ALL ASPECTS OF THE ISSUES RAISED IN THE DECISION OF SPECIAL BENCH IN CASE OF MERILYN SHIPPING TRANSPORTERS V. A CIT (SUPRA). WE FURTHER FIND THAT THAT EVEN HON'BLE CA LCUTTA HIGH COURT HAS OVERRULED THIS DECISION IN CASE OF CIT VS . CRESENT EXPORT SYNDICATE. MOREOVER CHANDIGARH BENCH OF THE TRIBUNAL CONSISTENTLY HAS BEEN FOLLOWING THE DECISION OF HON 'BLE GUJARAT HIGH COURT IN CASE OF CIT V. SIKANDARKHAN N TUNWAR AND OTHERS (SUPRA) AS WELL AS THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN CASE OF CIT VS. CRESENT EXPORT SYNDICATE ( SUPRA). THEREFORE, WITH RESPECT TO ABOVE WE DECLINE TO FOLL OWING THE DECISION OF HON'BLE ALLAHABAD HIGH COURT FOR THE AB OVE REASONS. ACCORDINGLY IN THIS RESPECT WE CONFIRMED THE ORDER OF THE LD. CIT(A). 22 24 IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS DI SMISSED. 25 IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6.9.2013 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 6.9.2013 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR