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TMI Blog2015 (3) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... objected to by the assessee, claiming that assessee is not directly the shareholder of M/s Bhambani Shipping Pvt. Ltd., therefore, provisions of section 2(22)(e) are not applicable to the case of the assessee. However the A.O. did not agree with the assessee's contention and added an amount u/s 2(22)(e) of the Act. 3. By the impugned order, the ld. CIT(A) deleted the addition after having following observation:- "7. I have considered the facts of the case and submissions of the assessee. The A.O. has made the addition on protective basis in the hands of the assessee, whereas, the A.O. has held that it is to be added in the hands of Mr. Hari Bhambhani, director and shareholder of the company on substantive basis. The A.O. has relied on the decision of Hon'ble Bombay High Court in the case of CIT vs. Universal Medicare Pvt. Ltd. 324 ITR 263, whereas, this decision is in favour of the assessee company because it has been held that even if such defalcated amount was to be treated as a dividend then it can be assessed in the hands of shareholder only. Admittedly, assessee is not the shareholder of M/s Bhambhani Shipping Pvt. Ltd. A.O. has not given any specific reason for making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transport vs. ACIT, ITAT (SB)G Vishakhapatnam). Assessee further claimed that on payment of hiring charges Rs. 4,83,64,270/-, the assessee has made TDS @ 1.699% as per the certificate issued by ACIT-TDS and, therefore, no disallowance is required on the payment of Rs. 4,83,64,270/- because TDS has been made as per the certificate issued by the ACIT, TDS, and the same has been paid on 31/3/09. On balance amount of Rs. 3,09,54,910/- it is claimed that TDS has been made and deposited on 3/8/09 i.e. before the due date of filing of return on 30/9/09 and, therefore, claimed as allowable expenditure and not covered u/s. 40(a)(ia). By the impugned order, the ld. CIT(A) deleted the disallowance made u/s 40(a)(ia) of the Act after having following observation:- "11. I have considered the facts of the case and submissions of the assessee. The disallowed amount on account of shipping hire charges Rs.ll,96,62,680/- consists of three parts, 1) Amount actually paid during F.Y.2008-09 Rs. 4,03,43,500/-, 2) Amount on which TDS has been made as per the Certificate for lower TDS issued by ACIT(TDS) - Rs. 4,83,64,270/- and the balance amount on which appropriate TDS is made but deposited afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my view, my answer to the question referred by Hon'ble President to the Special Bench is as under. "The provisions of section 40(a)(ia) of the Act are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow which had been actually paid during the previous year, without deduction of TDS. Therefore, respectfully following the decision of Hon'ble ITAT in the case of Merilyn Shipping and Transport (supra), disallowance to the extent of Rs. 4,03,43,5001- is deleted because this is the amount of shipping hire charges claimed by the assessee paid during the year and, therefore, it is not covered u/s. 40(a)(ia) of I.T. Act. 5. Against the above order of ld. CIT(A), the Revenue has preferred this appeal and assessee has filed the cross objection before the Tribunal. 6. At the time of hearing, the ld. A.R. has drawn our attention to the order of the Hon'ble Bombay High Court in the case of CIT vs. Impact Containers Pvt. Ltd. in Income Tax Appeal No. 114 of 2012 dated July, 4, 2014 wherein exactly similar issue of addition u/s 2(22(e) was before the Hon'ble Bombay High Court and it was held as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plea that hire charges had been paid and was not outstanding at the end of the year. With regard to disallowance of hiring charges on the plea that hiring charges actually paid during the year, it was argued by the ld. A.R. that no disallowance can be made u/s 40(i)(a) of the Act because the word used in this section 'payable' and therefore, the amount actually paid during the financial year cannot be disallowed u/s 40(i)(a) of the Act. For this purpose, reliance was placed on the decision of ITAT in the case of M/s Merilyn Shipping and Transport vs. ACIT. It was also contention of the ld. A.R. that recipient of hire charges had already included hire charges in their return of income and also paid taxes thereon, therefore, taxes cannot be recovered once more on the very same income. 9. The ld. A.R. has placed reliance on the decision of Hon'ble Allahabad High Court in the case of CIT vs. Vector Shipping Services (P) (2013) 357 ITR 642 (All) wherein it was held that for disallowing expenses u/s 40(i)(a) 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. It was further submitted by the ld. A.R. that SLP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here uses the words "amount payable by the end of the year". (v) That the Hon'ble High Court erred in law and in the facts and circumstances of the case in not appreciating that the work 'payable' is usd to mean the amount which is required to be paid for carrying out any work done during the previous year under consideration. It includes the amount which is actually paid during the year as well as the amount which remains unpaid at the end of the year." 10. The ld. A.R. has also placed on record Mumbai ITAT order in the case of M/s Arcadia Share & Stock Brokers Pvt. Ltd. vs. DCIT in ITA No. 1871/Mum/2013 order dated 22-12-2014 wherein exactly similar issue has been decided by the Tribunal by observing as under:- "We have heard the rival submissions and carefully perused the record. We shall first take up the last alternative ground, i.e. when the payment is made by the assessee whether section 40(a)(ia) can be attracted? On this issue this very Bench, in the case of Amit Naresh Shah (ITA No. - 4154/Mum/2013), had taken a consistent stand that in the light of the decision rendered by Hon'ble Supreme Court, in the form of dismissal of Revenue's SLP in the case of Vector Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the FAA was justified in following the order of Marilyn Shipping & Transport (supra). Considering the facts of the case and the clarification issued by the Hon'ble Andhra Pradesh High Court on 24.06.2014 in the case of Janapriya Engineers Syndicate, we decide the effective ground of appeal in favour of the assessee and confirm the order of the FAA." 7. Reverting to the facts on hand, the Tax Authorities had not disputed the fact that the assessee paid depository charges without deduction the tax and taxes are already paid by the recipient [see para 3.3 & 3.4 of the order passed by the CIT(A). Since the amount was already paid and the taxes are paid by the recipient, in our opinion, the decision of the Special Bench in the case of Marilyn Shipping & Transports (supra) is applicable and by following the decision of the ITAT, Mumbai Benches (supra) we hold that the Tax Authorities have wrongly invoked provisions of section 40(a)(ia) in the instant case. We, therefore, set aside the orders passed by the Tax Authorities disallowing 6,27,423/-. In the light of the decision on merit it is not necessary for us to deal with the other aspects urged before us since they will be of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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