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TMI Blog2014 (11) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) erred in in ignoring the fact that these services are essential in nature as they can only be availed by members of stock exchange. (iii) On the facts and in the circumstances of the case and in law the learned CIT(A) erred in ignoring the facts that use of technology and algorithmic based programs have converted an erstwhile physical market into a digitally operated market. (iv) On the facts and in the circumstances of the case and in law the learned CIT(A) erred in ignoring the fact that the services rendered by the brokers are not standard services but services that has been developed to cater to the needs of the broker community to facilitate trading. (v) On the facts and in the circumstances of the case and in law the learned CIT(A) has overlooked the fact that the brokers have in subsequent years themselves started deducting the TDS on such payments and that there is no reason to give a different treatment in this year. 2. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the addition of Rs. 4,41,221 made under section 14A r/w Rule 8D by the Assessing Officer. 3. On the facts and in the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid decision of the High Court. 4. Thus, in view of the above submissions, we hold that insofar as the transaction charges are concerned, the assessee was liable to deduct TDS under section 194J in view of the decision of Hon'ble Jurisdictional High Court in Kotak Securities Ltd., which is a later decision and, therefore, the disallowance under section 40(a)(ia), has rightly been made by the Assessing Officer. As regards V-SAT charges are concerned for sum amounting to Rs. 1.10 lakhs, following the decision of Angel Capital &Debit Market Ltd. (supra), we hold that these are not in the nature of technical services, therefore, no TDS was required and consequently, no disallowance under section 40(a)(ia) is called for. 5. However, regarding ground no.1, before us, the learned counsel has raised an alternative plea that all the payments remained paid up to 31st March 2007 and, therefore, no disallowance under section 40(a)(ia) should be made even with regard to transaction charges in view of the decision of Allahabad High Court in Vector Shipping Services Pvt. Ltd. He submitted that though there are two High Court decision, one of Calcutta High Court and other of Gujarat High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf of Vector Shipping Service (the assessee) and the circumstances in which such salaries were paid by M/s. Mercator Lines Ltd., for M/. Vector Shipping Services, where sufficiently explained by the assessee. Thus, the issue was decided on the ground that the tax has already been deducted, therefore, no disallowance under section 40(a)(ia) should be made. After having answered the question in the aforesaid manner, the Hon'ble High Court further observed as under:- "It is to be noted that for disallowing expenses from business and profession on the ground that TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year." 9. Such an observation of the Hon'ble High Court sans the issue in question of law formulated is in the form of obiter dicta. This observation was made by the Court because the Tribunal while dealing with the said disallowance has referred to the decision of the Special Bench in M/s. Merilyn Shipping and Transport Ltd., 136 ITD 23 (SB). It is not the case where the Hon'ble High Court has categorically affirmed the reasoning and interpretation given by the Special Bench. On the contrary, we find that the Hon'ble Cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce shall be restricted to the money which is yet to be paid. What the Tribunal by majority did was to supply the casus omissus which was not permissible and could only have been done by the Supreme Court in an appropriate case. Bhuwalka Steel Industries vs. Bombay Iron & Steel Labour Board reported in 2010 (2) SCC 273, relied on. The key words used in Sec. 40(a)(ia), are "on which tax is deductible at source under Chapter XVII-B". If the question is "which expenses are sought to be disallowed?" The answer is bound to be "those expenses on which tax is deductible at source under Chapter XVII-B. Once this is realized nothing turns on the basis of the fact that the legislature used the word 'payable' and not 'paid or credited'. Unless any amount is payable, it can neither be paid nor credited. If an amount has neither been paid nor credited, there can be no occasion for claiming any deduction. The language used in the draft was unclear and susceptible to giving more than one meaning. By looking at the draft it could be said that the legislature wanted to treat the payments made or credited in favour of a contractor or sub-contractor differently than the payments on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable" 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, therefore, an amount which is already paid over ceases to be payable and conversely what is payable cannot be one that is already paid. For the purpose of Section 40(a)(ia) of the Act, term "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 interchangably. Despite this narrow interpretation of section 40(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 context, Court examined 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition 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 made by the proposer of a bill are ordinarily not considered as relevant or safe tools for interpretation of a statute. It would all the more be unsafe to refer to or rely upon the drafts, amendments, debates etc for interpretation of a statutory provision when the language used is not capable of several meanings. In the present case the Tribunal in case of M/s. Merilyn Shipping & Transports vs. ACIT fell in a serious error in merely comparing the language used in the draft bill and final enactment to assign a particular meaning to the statutory provision. 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 brought about. While interpreting 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, has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008-09, in view of the decision of the Hon'ble Jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. v/s DCIT, (2010), 328 ITR 081 (Bom.). Accordingly, he gave a reasonable basis for determining the quantum of disallowance in the following manner:- "I find that it will be reasonable to determine the quantum of the amount of expenditure incurred for earning of exempted income at the ratio of the total expenditure debited to P&L Account in proportion that the value of transaction in shares which has yielded exempt income bears to the value of total transactions in share as under:- Amount of expenditure allowable to earning of exempt income - Total Expenditure debited to P&L Nc (Direct & Indirect) X Value of transaction in share yielding exempt income Value of Total Transactions in share The amounts so determined shall be disallowed as per the provisions of section 14A, being expenditure incurred for earning of exempt income. The A.O. is directed to determine the quantum of such expenditure by applying the ratio as mentioned above and disallow the same as per the provisions of section 14A. The appeal on this ground is accordingly, disposed off with these directions: The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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