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TMI Blog2013 (12) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... n u/s 40(a)(ia) of the Act for non -deduction of TDS. After hearing both the parties we find that during assessment proceedings the AO noticed that the assessee has paid a sum of Rs. 20,97,689/- towards freight. The amount was paid to the following three persons: Bimla Devi Rs. 8,94,725/- Sanjay Kumar Rs. 6,57,589/- Ajay Rs. 5,45,365/- No TDS was deducted from these parties. Therefore, the Assessing Officer invoked the provisions of section 40(a)(ia) and disallowed the payment. 4 On appeal it was mainly submitted that the provisions of section 40(a)(ia) were not applicable because the assessee has already made the payments. In this regard reliance was placed on the following Tribunal decisions: K. Sirinivas Naidu Vs. ACIT, ITA No. 719, A.Y 2005-06 (Hyderabad Bench of the Tribunal) CIT Vs. Hasmukhbhai Saha, ITA No. 1982, (Ahmedabad Bench of the Tribunal) The ld. CIT(A) discussed the issue in detail and confirmed the addition. 5 Before us, it was mainly contended that Special Bench of the Tribunal in case of ACIT Vs. Merilyn Shipping Transporters, 140 TTJ 1 (SB) Vishakhapatnam which has been further confirmed by Hon'ble Allahabad High Court in case of CIT Vs. Vector Shipp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cator 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 4 Hon'ble Gujarat High Court has after detailed discussion, over ruled the decision of Special Bench. 24 In case of Sikandarkhan N Tunwar (supra) the assessee was engaged in the business of transport contractor and commission agent. During the scrutiny assessment it was noticed by the Assessing Officer that expenditure in the nature of payment made by the assessee to its sub-contractors to the tune of Rs. 8.74 crores. Since the assessee had admittedly 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- contractors but the same were not furnished along with the particulars in Form 15-J to the CIT before due date and therefore, the expenditure on account of payment to sub-contractors was disallowed by invoking the provisions of section 40(a)(ia) of the Act. 25. On app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted in computing the income chargeable under the head Profits and Gains of Business or Profession irrespective of the provisions 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 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 expenditure payment of which, 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 or 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. 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n incurred and is eligible for deduction, on the ground that though tax 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 provision, the liability cannot be fastened if the plain meaning of the section does not so permit. 22. For the purpose of the said section, we are also 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 under the head Profits and Gains of Business or Profession . Such definition is applicable for the purpose of Sections 28 to 41 unless 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: capable of being paid: specifying payment to a particular payee at a specified time or occasion or any specified manner. In the context of section 40(a)(ia), the word payable would not include paid . In other words, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there should be an `amount payable in the nature described above, which is such 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 provision no-where requires that the amount which is payable must remain so payable throughout during the year. To reiterate the provision has certain strict and stringent requirements before the unpleasant consequences envisaged therein can be applied. We are prepared to and we are duty bound to interpret such requirements strictly. Such requirements, 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 work. The 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 in our opinion, the legislature could not have intended to bring about any such distinction nor the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission 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 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 Courts have often applied Hyden s rule or the mischief rule and ascertained what was 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 others reported in AIR 1955 SC 661, the Apex Court referred to the famous english decision in Hyden s case wherein while adopting restrictive or enlarging interpretation, it was observed that four things are to be considered, (1) what was the common law before making of the act (2) what was the mischief and defect in which the common law did not provide. (3) what remedy the Parliament had resolved and adopted to cure 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 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 plain 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 Parker, 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 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 ultimate provision which may be brought into the statute. The debates at best indicate the opinion of the individual members and are ordinarily not relied upon for interpreting 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 Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding the objects and reasons, the Committee Reports, the legislative history being contrary to the express language, are relegated to the background and are liable to be ignored. 33. In the case of Agricultural Produce Market Committee, Narela, Delhi 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 . 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 compared 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expensive remedies available to them under the State 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. State 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 iron ore shall have to undergo a process leading to emergence of lumps, fines, 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 of iron ore as such as the basis for quantification of royalty. It chose to make provision for the quantification being 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 extended meaning to fines for the purpose of levy of Royalty which it has chosen not to do. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he opinion that Section 40(a)(ia) would cover not only to the amounts which are payable as on 31th 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 context, 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. Question (2) also in the negat ive i.e. in favour of the Revenue and against the assessees. " Thus it is clear 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 (supra). W e further find that that even Hon'ble Calcutta 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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