TMI Blog2015 (2) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee. In view of the above, the Assessing Officer shall verify the actual payment of tax by the assessee on the expenditure claimed and thereafter allow the claim in the year in which the tax was actually paid. - Decided partly in favour of assessee. - I.T.A No. 410/Coch/2014 - - - Dated:- 12-12-2014 - Shri N.R.S. Ganesan and Shri Chandra Poojari, JJ. For the Appellant : Shri Anand For the Respondent : Shri K.K. John ORDER N. R. S. Ganesan (Judicial Member).- This appeal of the assessee is directed against the order of the Commissioner of Income-tax (Appeals), Thiruvananthapuram dated July 31, 2014 for the assessment year 2006-07. 2. Shri Anand, learned counsel for the assessee submitted that the only issue arises for consideration is disallowance of ₹ 23,03,617 and ₹ 35,63,645 being the ECB interest and royalty payment for non-deduction of tax under section 40(a)(ia) of the Act. According to learned counsel, the Allahabad High Court in the case of CIT v. Vector Shipping Services (P) Ltd. vide judgment dated July 31, 2013 found that what is to be disallowed is only in respect of the amount remains to be payable on the last day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent Export Syndicate (I. T. A. No. 23 of 2013) [2013] 1 ITR-OL 1 (Cal) examined the issue elaborately and found that the decision of the Special Bench in Merilyn Shipping and Transports v. Addl. CIT [2012] 16 ITR (Trib) 1 (Visakhapatnam) [SB] is not a good law. For the purpose of clarity we are reproducing the observations made by the Calcutta High Court and Gujarat High Court below : Calcutta High Court in Crescent Exports Syndicate Another (supra) Before dealing with the submissions of the learned counsel appearing for the assessees in both the appeals we have to examine the correctness of the majority views in the case of Merilyn Shipping and Transports. We already have quoted extensively both the majority and the minority views expressed in the aforesaid case. The main thrust of the majority view is based on the fact that the Legislature has replaced the expression 'amounts credited or paid' with the expression 'pay able' in the final enactment. Comparison between the pre-amendment and post amendment law is permissible for the purpose of ascertaining the mischief sought to be remedied or the object sought to be achi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d worker means a manual worker who is engaged or to be engaged in any scheduled employment.' The contention raised with reference to what was there in the bill was rejected by the Supreme Court by holding as follows : It must, at this juncture, be noted that in spite of section 2(11), which included the words but for the provisions of this Act is not adequately protected by legislation for welfare and benefits of the labour force in the State , these precise words were removed by the Legislature and the definition was made limited as it has been finally legislated upon. It is to be noted that when the Bill came to be passed and received the assent of the Vice-President on June 5, 1969 and was first published in the Maharashtra Government Gazette Extraordi nary, Part IV on June 13, 1969 the aforementioned words were omitted. Therefore, this would be a clear pointer to the legislative intent that the Legislature being conscious of the fact and being armed with all the Committee reports and also being armed with the factual data, deliberately avoided those words. What the appellants are asking was to read in that definition, these precise words, which were consc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of Mr. Bagchi and Ms. Roychowdhuri. There can be no denial that the provision in question is harsh. But that is no ground to read the same in a manner which was not intended by the Legislature. This is our answer to the submission of Mr. Bagchi. The submission of Mr. Roy chowdhuri that the second proviso sought to become effective from April 1, 2013 should be held to have already become operative prior to the appointed date cannot also be acceded to for the same reason indicated above. 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.' For the reasons discussed above, we are of the opinion that the majority views expressed in the case of Merilyn Shipping and Trans ports v. Addl. CIT [2012] 16 ITR (Trib) 1 (Visakhapatnam) [SB] are not acceptable. The submissions advanced by learned advocates have already been dealt with and rejected. Gujarat High Court in CIT v. Sikandarkhan N. Tunvar [2013] 357 ITR 312 (Guj) 23. Despite this narrow interpretation of section 40(a)(ia), the question still survives if the Tribunal in case of Merilyn Shippi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even otherwise be justified because in our opinion, 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 advanced by the assessees is accepted, it would lead to a situation where the assessee 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. We simply do not see any logic why the Legislature would have desired to bring about such irreconcilable and diverse consequences. We hasten to add that this is not the prime basis on which we have adopted the interpretation which we have given. If the language used by Parliament conveyed such a meaning, we would not have hesitated in adopting such an interpretation. We only highlight that we would not readily accept that the Legislature desired to bring about an incongruous and seemingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a particular year but also which are payable at any time during the year. Of course, as long as the other requirement of the said provision exist. In that context, in our opinion the decision of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports v. Addl. CIT, does not lay down correct law. 5. In view of the above, this Tribunal is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly confirmed the disallowance since the assessee has not admittedly deducted tax at the time of making payment. 6. Now coming to the alternative contention of learned counsel for the assessee that it has to be allowed in the year in which the tax was paid, this Tribunal is of the considered opinion that in view of provisos to section 40(a)(ia) and 40(a)(i) the deduction claimed by the assessee has to be allowed in the year in which the tax was actually paid by the assessee. The learned Departmental representative also has no objection to allow the claim of the assessee in the year in which the tax was actually paid by the assessee. In view of the above, the Assessing Officer shall verify the actual payment of tax by the assessee on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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