TMI Blog2015 (3) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... at all and simple passing reference was made with regard to the order of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports and the relief was granted to the assessee on merit. Therefore, the ratio laid down in the case of Merilyn Shipping & Transports , which has been suspended by Hon'ble Andhra Pradesh High Court has not been approved by the Hon'ble Allahabad High Court. Therefore, subordinate judicial forum are not required to follow the ratio order laid down in the case of Merilyn Shipping & Transports (supra), as it was overruled by the other High Court. The scope of section 254(2) of the Act has been explained through various judicial pronouncements and it has been repeatedly held that the order of the Tribunal under section 254(2) of the Act can only be rectified when there is an error apparent on the record. If the order is passed having examined all the aspects, the same cannot be reviewed under the garb of rectification. When we speak of amendment or rectifying the mistake the earlier order can never be recalled by the Tribunal. The earlier order must hold the field and the mistake can be rectified or amended can be made to the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e different High Courts, in which contrary view was taken. While adjudicating the issue, the Tribunal has categorically observed that in the case of Vector Shipping Services (P) Ltd., the Hon'ble High Court has simply made a passing reference, as the impugned issue was not raised before the Hon'ble High Court. The Tribunal has reproduced the judgment of the Hon'ble jurisdictional High Court in the case of Vector Shipping Services (P) Ltd. and the judgments of other High Courts in order to analyze the legal position. The ld. D.R. has further contended that even before the Hon'ble Supreme Court, the impugned issue was not raised, therefore, dismissal of the SLP cannot be held to be approval of the view, as propounded by the assessee, in this Miscellaneous Application. The ld. D.R. has further contended that since the Tribunal was quite conscious about the judgments of the jurisdictional High Court and other High Courts and has taken a conscious view, the order of the Tribunal cannot be revised under section 254(2) of the Act, as the scope of section 254(2) of the Act is very limited and only arithmetical error can be rectified. 4. We have heard the rival submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding signed between both the companies and as per the definition of memorandum of understanding, it included contract also. 7.4 The main thrust of the argument before the Hon'ble High Court was that M/s Mercator Lines Ltd. had deducted TDS on salaries paid by it on behalf of the assessee. Under such circumstances, the assessee was not required to deduct TDS on reimbursement being made by it to M/s Mercator Lines Ltd. Besides reference was also made about the order of the Special Bench in the case of Merilyn Shipping Transports wherein it has been held that if no amount remained payable at the year end, there would not be any disallowance as the provision of section 40(a)(ia) are not applicable. After recording the finding of the Tribunal and the CIT(A), the Hon'ble High Court has observed in last two paras that the provision of 40(a)(ia) was brought on statute to disallow the claim of even genuine and admissible expenses of the assessee under the head 'Income from Business and Profession' in case the assessee does not deduct TDS on such expenses and the default in deduction of TDS would result in disallowance of expenditure on which such TDS was deductible. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.5 The impact of the judgment of Hon'ble Allahabad High Court and other High Courts was also examined by the different benches of the Tribunal and they have categorically held that the Hon'ble Allahabad High Court has decided the issue referred to it on different footing and has made a passing reference about the decision rendered by the Special Bench. Therefore, we are of the view that the Hon'ble Jurisdictional High Court has not examined the impugned issue i.e. whether disallowance u/s 40(a)(ia) of the Act could be made only in respect of such amount which are payable as on 31st March of every year under consideration whereas the Hon'ble Gujarat High Court and Hon'ble Calcutta High Court have dealt with the issue in detail in the light of various judicial pronouncement and have categorically held that section 40(a)(ia) would cover not only to the amount which are payable as on 31st March of a particular year but also which are payable at any time during the year. 7.6 Before the Hon'ble Gujarat High Court in the case of CIT vs. Sikandarkhan N. Tunvar (supra), the following question of law was raised: (i) Whether the disallowance u/s 40(a)(ia) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Madras High Court in the case of Tube Investments of India Ltd. v. Asst. CIT (TDS) reported in [2010] 325 ITR 610 (Mad). The learned judge did notice that the High Court in such case was concerned with the vires of the statutory provision but found some of the observations made by the court in the process useful and applicable. The learned judge rejected the theory of narrow interpretation of the term payable and observed as under (page 21 of 16 ITR (Trib)) : 12.4 In our considered opinion, there is no ambiguity in the section and the term 'payable' cannot be ascribed a narrow interpretation as contended by the assessee. Had the intentions of the Legislature were to disallow only items outstanding as on March 31, then the term 'payable' would have been qualified by the phrase as outstanding on March 31. However, no such qualification is there in the section and, therefore, the same cannot be read into the section as contended by the assessee. On the other hand, the learned Judicial Member, speaking for majority, adopted a stricter interpretation. Heavy reliance was placed on the Finance Bill of 2004, which included the draft of the amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee who 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 irreconcilable consequences. The decision of the Supreme Court in the case of CIT v. Ashokbhai Chimanbhai (supra), would not alter this situation. The said decision, of course, recognizes the concept of ascertaining the profit and loss from the business or profession with reference to a certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emedied or the object sought to be achieved by an amendment. This is precisely what was done by the Apex Court in the case of CIT Vs. Kelvinator reported in 2010(2) SCC 723. But the same comparison between the draft and the enacted law is not permissible. Nor can the draft or the bill be used for the purpose of regulating the meaning and purport of the enacted law. It is the finally enacted law which is the will of the legislature. The Learned Tribunal fell into an error in not realizing this aspect of the matter. The Learned Tribunal held that where language is clear the intention of the legislature is to be gathered from the language used . Having held so, it was not open to seek to interpret the section on the basis of any comparison between the draft and the section actually enacted nor was it open to speculate as to the effect of the so-called representations made by the professional bodies. The Learned Tribunal held that Section 40(a)(ia) of the Act creates a legal fiction by virtue of which even the genuine and admissible expenses claimed by an assessee under the head income from business and profession if the assessee does not deduct TDS on such expenses are di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on account of interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services or to a contractor or sub-contractor shall not be deducted in computing the income of an assessee in case he has not deduced, or after deduction has not paid within the specified time. The language used by the legislature in the finally enacted law is clear and unambiguous whereas the language used in the bill was ambiguous. A few words are now necessary to deal with the 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 Ms. Roychowdhuri that the second proviso sought to become effective from 1st April, 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, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce been put under interim suspension by the Andhra Pradesh High Court. 3.1 The Hon'ble Calcutta High Court and Hon'ble Gujarat High Court in the case of Commissioner of Income-tax, Kolkata-XI v. Crescent Exports Syndicate and Commissioner of Income-tax-IV v. Sikandarkhan N Tunvar respectively, have held that section 40(a)(ia) of the Act would cover not only the amounts which are payable at the end of the previous year but also which are payable at any time during the year. 3.2 The Hon'ble High Courts have further held that the intention of the legislation was to disallow certain types of expense, subject to provisions of Chapter XVII-B, which are payable at any time during the year but no tax was deducted at source or if deducted was not paid within the stipulated time. There is no such condition that amount should remain payable at the end of the year. 3.3 The Hon'ble Allahabad High Court in CIT v. Vector Shipping Service (P) Ltd . has affirmed the decision of the Special Bench in Merilyn Shipping that for disallowance under section 40(a) (ia) ofthe Act, the amount should be payable and not which has been paid during the year. However, the decisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and adjudicated by the Jurisdictional High Court, it would have been respectfully followed by the Tribunal irrespective of the fact that contrary view have been expressed by the different High Courts. The Hon'ble Jurisdictional High Court has not examined the impugned issue at all and simple passing reference was made with regard to the order of the Special Bench of the Tribunal in the case of Merilyn Shipping Transports and the relief was granted to the assessee on merit. Therefore, the ratio laid down in the case of Merilyn Shipping Transports , which has been suspended by Hon'ble Andhra Pradesh High Court has not been approved by the Hon'ble Allahabad High Court. Therefore, subordinate judicial forum are not required to follow the ratio order laid down in the case of Merilyn Shipping Transports (supra), as it was overruled by the other High Court. 5. The scope of section 254(2) of the Act has been explained through various judicial pronouncements and it has been repeatedly held that the order of the Tribunal under section 254(2) of the Act can only be rectified when there is an error apparent on the record. If the order is passed having examined all the aspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means a mistake either clerical or grammatical or arithmetical or of like nature, which can be detected without there being any necessity to re-argue the matter or to re-appraise the fact as appearing from the records. In another case CIT Vs. Golal Chand Agarwal; 202 ITR 14 their Lordships of Calcutta High Court have also held that section 254(2) of the Income-tax Act, 1961 empowers the Tribunal to amend its order passed u/s 254(1) to rectify any mistake apparent from the record either suo moto or on an application. If in its order there is no mistake which is patent and obvious on the basis of the record, the exercise of the jurisdiction by the Tribunal u/s 254(2) will be illegal and improper. An oversight of the fact cannot constitute an apparent mistake rectifiable under section 254(2). This might, at the worst, lead to perversity of the order for which the remedy available to the assessee is not under section 254(2) but a reference proceedings u/s 256. The normal rule is that the remedy by way of review is a creature of the statute and unless clothed with such power by the statute, no authority can exercise the power. 8. The Hon ble High Court of Allahabad in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re again examined by the Apex Court in the case of CIT Vs. Hero Cycles Pvt. Ltd.; 228 ITR 463 in which their Lordships have held that rectification can only be made when a glaring mistake of fact or law committed by the officer passing the order becomes apparent from record. Rectification is not possible if the question is debatable. Moreover, a point which was not examined on facts or in law cannot be dealt with as mistake apparent from record. In the case of ITO Vs. ITAT; 229 ITR 651 their Lordships of Patna High Court have also expressed a similar observation after holding that section 254(2) of the Act empowers the Tribunal to amend any order passed by it under sub-section (1) with a view to rectifying a mistake from record. However, section 254(2) does not authorize the Tribunal to review its order or to sit in appeal over its earlier order. If it is done, it would amount to an amendment of an earlier order with a view to rectify a mistake apparent from record, but it would be an order passed on reappraisal of the material facts and circumstances and on a fresh application of the legal position which is not permissible within the scope of section 254(2) of the Act. 10. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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