TMI Blog2013 (9) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance u/s 40(a)(ia) of the I.T Act could be made only in respect of such amounts which are payable as on 31st Mach of the year under consideration - Held that:- Hon'ble Gujarat High Court has considered all aspects of the issues raised in the decision of Special Bench in case of Merilyn Shipping Transporters V. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM). We further find that that even Hon'ble Calcutta High Court has overruled this decision in case of CIT Vs. Cresent Export Syndicate [2013 (5) TMI 510 - CALCUTTA HIGH COURT]. 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 (2013 (5) TMI 457 - GUJARAT HIGH COURT) as well as the decision of Hon'ble Calcutta High Court in case of CIT Vs. Cresent Export Syndicate (2013 (5) TMI 510 - CALCUTTA HIGH COURT). Therefore, with respect to above we decline to following the decision of Hon'ble Allahabad High Court for the above reasons. - Decided against the assessee. - ITA No. 987, 988 & 989/Chd/2011 - - - Dated:- 6-9-2013 - Shri T. R. Sood, A. M And Ms. Sushma Chowla, JM,JJ. For the Appellant : Shri Surinder Babb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75.16 593763 1410237 Electrical installation 12337.82 -- 12337.82 6.5 The appellant has claimed to have added machinery appellant more than 50% during Assessment year 2004-05. However, the addition in machinery has not been proved with documentary evidence to support the same. This issue was examined in great detail by the ld. CIT, Shimla while exercising jurisdiction u/s 263 of the Income-tax Act. It was found that the addition of Rs. 1,81,000/- stated to have been made in Assessment year 2003-04 was not genuine. Moreover the claim of the expansion is not acceptable in view of the fact that neither there is any corresponding addition in electrical installations nor the meter capacity. Labour charges at Rs. 2,84,715/- in the current year are almost the same as in last year, repair expenses came down from Rs. 7607/- in Assessment year 2003-04 to nil in the current year. Keeping in view the above discussion and in the absence of any documentary evidence in the form of sale of addition items claimed to have been manufactured, the appellant's claim for deduction u/s 80IC is rejected. The appellant's claim of "Roller Flour Mill" having d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of assessment because assessee's claim was summarily rejected therefore, same may be admitted. The ld. counsel of the assessee further submitted that the assessee has made certain renovations and now the Flour Mill was upgraded as Roller Flour Mill and therefore, same was eligible for deduction u/s 80IC. 7 On the other hand, the ld. DR for the revenue submitted that the issue is squarely covered against the assessee by the decision of the Tribunal in case of Pooja Industries 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 no material to show that Flour Mill was different from Roller Flour Mill. He also referred to the decision of Hon'ble Supreme Court in case of Union of India and others Vs. Garware Nylons Ltd. Etc . Civil Appeal No. 11644 of 1996 arising out of S.L.P. (c) Nos. 11008 of 1988 and Civil Appeal No. 7564 of 1996. (copy of the judgment filed on record). He particularly referred to the observations made at para 10 wherein it has been observed that a particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... virtue of Schedule XIII. Thus the prohibition is in respect of the production of flour, and it is immaterial whether the flour mill producing the flour is an ordinary chakki or a roller flour mill. In fact, 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 much of investment, what to talk of substantial expansion and such other things. Further flour mills can be of various 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. Flour is a common product in all kinds of milling processes. Therefore, it can not be said that what is intended by entry No.8 in part B of schedule XIII is only a stone 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 classification of 11.01 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held in Padmasundra Rao 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 also held by Hon'ble Supreme Court in the case of Vikrant Tyres V First ITO, 247 ITR 821 (S.C) that unless there is an intention to the contrary, the words in a statute should be given their ordinary grammatical or natural meaning (emphasis supplied)." The relevant portion of Section 80IC reads as under: "80-IC. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (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 gains, as specified in sub-section (3). (2) This section applies to any undertaking or enterprise,-- (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gories of products under various heads known as "Divisions". Division 15 reads as under: DIVISION 15 "Manufacture of food products of brewages 15311 Flour Milling" 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. Since this Division pertain to Food and Brewages and only one item in respect of Flour Milling is there, it becomes clear 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 National Industries classification under Division 15 at Sl No. 15311. Therefore, the activity of Flour milling or article or thing under which can be called "Flour" is not eligible for deduction u/s 80IC by virtue of its entry in the negative list in Part B of Schedule XIII. 10 The ld. counsel of the assessee though argued that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Mills are not covered under Sl No. 1 of Annexure III and hence are eligible for sales tax incentives subject to fulfillment of other requirements. Yours faithfully Sd/- Joint Secretary (Industries) to the Government of Himachal Pradesh " In our opinion, the ld. CIT(A) has correctly brushed aside this clarification because it deals with the sales tax etc. which is a State subject and this clarification can not negates the intention of the Parliament given in Part B of Schedule XIII which is a negative list for deduction u/s 80IC. In these circumstances, 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 80IC. The Assessing Officer has been more than reasonable for granting deduction u/s 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 before the Hon'ble Himachal Pradesh High Court in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular meaning in it then the word are to be construed as having that particular meaning, though it may differ from the common or ordinary meaning of the words." We have no quarrel with the above observation but we are of the opinion that even in the trade Roller Flour Mill 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 the 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 confirmation of rejection of claim for deduction u/s 80IC in respect of Roller Flour Mill. 13 Facts regarding this issue are identical to the facts involved in the appeal of the assessee for Assessment year 2004-05 which we have adjudicated in para No. 9 10 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 confirmation of rejection of claim for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussing the issue in detail in case of CIT V. Sikandarkhan N Tunwar and others (supra). We further find that in case of CIT V. Vector Shipping Services, the issue was different. In that case the question posed before the Hon'ble High Court reads as under: "Whether on the facts and in the circumstances of the 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 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 undertaking, it included contract also." In that case some expenses were disallowed u/s 40(a)(ia) because not tax was deducted. On appeal the Tribunal found that the ld. CIT(A) has already given a finding that Mercator Lines Ltd. had deducted the TDS on salary paid on behalf of the assessee. under such circumstances the assessee was not required to deduct the TDS on reimbursement on salary being made by it to M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of such amounts which are payable as on 31st Mach of the year under consideration? 2 Whether decision of Special Bench of the Tribunal in the case of M/s Merilyn Shipping Transporters V. ACIT (supra) lays down correct law?" 27 Hon'ble Gujarat High Court after considering the submissions of both the parties referred to the provision of Chapter XVII A of the Act dealing with the Tax Deduction Provisions. After this reference was made to Section 40(a)(ia) through which it was provided that tax has not been deducted on certain payments and the same will not be allowable. 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 professional services or fees for technical services payable to a resident, or amounts payable to a contractor 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 before the due date, such amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision 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 used. In their opinion the provision would apply only 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 year s provision can be allowed in subsequent years only if TDS is deducted and deposited and, therefore, 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 accepting 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 income 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamine two aspects. Firstly, what would be the correct interpretation of the said provision. Secondly, whether our such understanding of the language used by the legislature should waver on the premise that as propounded by the 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 consequences of not being able to claim deduction on certain payments irrespective of the provisions contained in Sections 30 to 38 of the Act would flow if the following requirements are satisfied:- (a) There is interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to resident or amounts payable to a contractor or sub-contractor being resident for carrying out any work. (b) These amounts are such on which tax is deductible at source under Chapter XVII-B. (c) Such tax has not been deducted or after deduction 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. 24. What this Sub-Section, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-Tax, Gujarat vs. Ashokbhai Chimanbhai (supra), would not alter this situation. The said decision, 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 considerable significance. However, this decision nowhere indicates that the events which take place during the accounting period 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 accounting 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 test of payability only as on 31st March of the year under consideration. Merely because, accounts are closed on that date and the computation of profit and loss is to be judged with reference to such date, does not mean that whether an amount is payable or not must be ascertained on the strength of the position emerging on 31st March. 25. This brings us to the second aspect of this discussion, namely, whether this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easure. 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 consideration in ascertaining the true object and intention of the Legislature. 29. In yet another Constitution Bench judgment in the 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 not 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 is raised whether a certain phrase or expression was up for consideration 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 arriving at a proper construction of the expression fixing rates of wages to look into the Statement of Objects and Reasons attached to the Bill No.13 of 1955 as introduced in the Rajya Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting such an amended provision, the Courts would immediately inquire what was the statutory provision before and what changes the legislature brought about and compare the effect of the two. The other occasion for applying the principle, we notice from various decisions of the Supreme Court, has been when the language 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 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 protection to all the labourers 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 onc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -operative societies as they apply to banking companies. The Parliament was also aware that the definition of banking company in Section 5(c) had not been altered by Act No.23 of 1965 and it was kept intact, and in fact additional definitions were 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 incorporating or even referring to the substantive provisions of the BR Act. The meaning of banking company must, therefore, necessarily be strictly confined to the words used in Section 5(c) of the BR Act. It would have been the easiest thing for Parliament to say that banking company shall mean banking company as defined in 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. There 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 banks ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation is required to be made to Section 8 of the Act either to apply Section 5 of the Limitation act or its principles so as to enable a party to make an application after the expiry of the period of limitation prescribed on showing sufficient cause for 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 providing for condonation of delay. Thus, when Section 5 of the Limitation Act is not made applicable to the proceedings under Section 8 of the Act unlike to the other proceedings under the Act, as already stated above, it is appropriate to construe that the period of limitation prescribed under Section 8 of the Act specifically and expressly governs an application to be made under the said section 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 applied by comparing the draft presented in Parliament and ultimate legislation which may be passed. Secondly, the statutory provision i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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