TMI Blog2013 (12) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... hd/2012 - - - Dated:- 27-11-2013 - Shri T. R. Sood And Ms. Sushma Chowla,JJ. For the Appellant : Shri Ashwani Kumar For the Respondent : Shri J. S. Nagar ORDER Per T. R. Sood, A. M This appeal is directed against the order dated 17.8.2012 of the ld. CIT(A), Shimla. 2 In this appeal the assessee has raised the following effective grounds. "2 That the CIT(A) is not justified in not confirming the disallowance of Rs. 20,97,689/- made by the Assessing Officer on account of payment of freight paid by the assessee. 3 That no direct payments were made directly to the parties, the assessee made all the payments to the State Bank of India, Palampur for clearing liabilities of the parties whose trucks were hired. 4 That the Assessing Officer has wrongly applied the provisions of section 40(a)(ia) of the Act wrongly created a demand of Rs. 11,18,650/-. 5 That the order of the Assessing Officer is illegal, uncalled for and the same deserves to be quashed." 3 All the grounds relate to only one dispute i.e. addition 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther 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 Mercator Lines Ltd. 23 Hon'ble High Court has confirmed the decision of the Tribunal. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 shall not be deducted in computing the income chargeable under the head Profits and Gains of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith 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 has otherwise been incurred and is eligible for deduction, on the ground that though tax was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, therefore, requires is that there should be an `amount payable in the nature described above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision, 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 is a case of conscious omission and therefore, the legislature must be seen to have delibera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Sabha or the circumstances under which the word minimum came to be deleted from the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 once we accept this, all the arguments regarding the objects and reasons, the Committee Reports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 have comprehensive, self-contained and less expensive remedies available to them under the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 is amply clear. 38. In the result, we are of the opinion that Section 40(a)(ia) would cover ..... X X X X Extracts X X X X X X X X Extracts X X X X
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