TMI Blog2014 (11) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... licable from the AY 2008-09 as decided in Godrej & Boyce Mfg. Co. Ltd. v/s DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - disallowance cannot be made on the basis of formula laid down by the rule 8D in the AY 2007-08 and some reasonable basis has to be adopted – Decided against revenue. - ITA No. 1689/Mum./2011 - - - Dated:- 22-8-2014 - D. Karunakara Rao, AM And Amit Shukla, JM,JJ. For the Petitioner : Smt. Parminder For the Respondent : Shri Pradip Kedia ORDER Per Amit Shukla,J. M. The present appeal has been preferred by the Revenue challenging the impugned order dated 30th December 2010, passed by the learned Commissioner (Appeals)-VIII, Mumbai, for the quantum of assessment passed under section 143(3) of the Income Tax Act, 1961 (for short the Act ), for the assessment year 2007-08, on the following grounds:- 1(i). On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the disallowance of ₹ 3,00,009 made under section 40(a)(ia) in respect of VSAT charges and transaction charges paid to stock exchange, without appreciating the facts that these were composite charges for professional and technical servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Tribunal has not been accepted by the Department and the matter is pending before the High Court. Therefore, analysing the nature of services in detail, he held that such a payment is to be disallowed under section 40(a)(ia) as the assessee was liable to deduct tax under section 194J. 3. Before us, it has been admitted by both the parties that insofar as the disallowance of ₹ 2,90,009, on account of transaction charges is concerned, the same has been decided against the assessee by the Hon'ble Jurisdictional High Court in CIT v/s Kotak Securities Ltd. [2012] 340 ITR 333 (Bom.) However, the learned counsel pointed out that in another decision, the Hon'ble Jurisdictional High Court in CIT v/s The Stock and Bond Trading Company, vide order dated 14th October 2011, has held that even the transaction charges are not covered under section 194J. He though admitted that this decision of the High Court was delivered few days prior to the decision of Kotak Securities Ltd. Insofar as the V-SAT charges are concerned, the learned counsel submitted that this issue is covered infavour of the assessee by the decision of the Hon'ble Jurisdictional High Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon ble Allahabad High Court in Vector Shipping Services Pvt. Ltd., ITA no.122 of 2013, judgment dated 9th July 2013, it is seen that only question of law which was formulated by the Hon ble High Court was as under:- Whether on the facts and in the circumstances of the case, the Hon'ble ITAT has rightly confirmed the order of the CIT(A) and thereby deleting the disallowance of ₹ 1,17,68,621 made by the Assessing Officer under section 40(a)(ia) of the I.T. Act, 1961, 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 Pvt. Ltd. and there was a Memorandum of Understanding signed between both the companies as per the definition of memorandum of understanding, it includes contract also. 8. Thus issue of paid and payable was not subject of reference before the Hon ble High Court. Further, from the facts which has been incorporated by the Hon ble High Court, was that M/s. Mercator Lines Ltd. had deducted tax at source on the salaries paid by it on behalf of the assessee in respect of which the disallowance was made by the Assessing Officer under section 40(a)(ia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill of the legislature. CIT vs. Kelvinator reported in 2010(2) SCC 723, relied on. The Tribunal fell into an error in not realizing this aspect of the matter. The Tribunal held that where language is clear the intention of the legislature is to be gathered from the language used . Having held so, it was not open to seek to interpret the section on the basis of any comparison between the draft and the section actually enacted nor was it open to speculate as to the effect of the so-called representations made by the professional bodies. The Tribunal held that Section 40(a)(ia) of the Act creates a legal fiction by virtue of which even the genuine and admissible expenses claimed by an assessee under the head income from business and profession if the assessee does not deduct TDS on such expenses are disallowed . Having held so was it open to the Tribunal to seek to justify that this fiction cannot be extended any further and, therefore, cannot be invoked by AO to disallow the genuine and reasonable expenditure on the amounts of expenditure already paid ? Does this not amount to deliberately reading something in the law which is not there? The Tribunal realized the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was not intended by the legislature. The contention that the second proviso sought to become effective from 1st April, 2013 should be held to have already become operative prior to the appointed date cannot also be acceded to. The law was deliberately made harsh to secure compliance of the provisions requiring deductions of tax at source. It is not the case of an inadvertent error. Thus the majority views expressed in the case of Merilyn Shipping Transports was held to be not acceptable. The appeal was thus, allowed in favour of the revenue. Merilyn Shipping Transports (ITA 477/Viz./2008, dated March 29, 2012), overruled. 10. Similar interpretation has been reiterated and explained in detail by the Hon ble Gujarat High Court, in CIT v/s Sikandarkhan N. Tunvar Ors.[ 2013] 357 ITR 312 (Guj.). In this decision, again the Hon ble Gujarat High Court has specifically dealt this issue in a great length and overruled Marilyn Shipping in the following manner:- For the purpose of the said section, 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 accountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e language 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 which the legislature has not used. No such interpretation would even otherwise be justified because 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 lead 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 paid 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 otherwise be in similar situation but in whose case the amount remained payable till the end of the year. This brings us to the second aspect of this discussion, 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. While interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Board 2010 (Suppl.) 122, Agricultural Produce Market Committee, Narela, Delhi vs. Commissioner of Income Tax and anr. AIR 2008 SC (Supplement) 566; Greater Bombay Co-operative Bank Ltd. v/s M/s.United Yarn Tex.Pvt.Ltd Ors. AIR 2007 SC 1584; National Mineral Development Corporation Ltd. vs. State of M.P and another reported in AIR 2004 SC 2456; Gopal Sardar, vs. Karuna Sardar AIR 2004 SC 3068, relied on. 11. Thus, the decision of the Hon ble Calcutta High Court and Hon ble Gujarat High Court constitutes ratio decidendi on this issue which in our humble opinion should prevail. Thus, we do not find any merit in the contention raised by the learned counsel that the decision of the Allahabad High Court in Vector Shipping Services Pvt. Ltd. against which Special Leave Petition has been dismissed by the Hon'ble Supreme Court, lays down a ratio decidendi on the phrase paid and payable by approving the decision of Special Bench in Merlyn Shipping. Thus, ground no.1, of the Revenue is partly allowed. 12. Ground no.2, relates to disallowance of ₹ 4,41,221, made under section 14A, r/w rule 8D. 13. The Assessing Officer has made the disallowance under section 14A, after ..... X X X X Extracts X X X X X X X X Extracts X X X X
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