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TMI Blog2016 (5) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of Rs. 2,60,00,000/-. The total cost of land / building included stamp duty and registration charges of Rs. 2,81,48,318/-. The assessee purchased the property for business purpose and in fact, the same was used for business from the date of purchase. The assessee has also claimed depreciation. In fact, the assessee omitted to claim the depreciation in the return of income by oversight. However, the details of depreciation in respect of the block of asset, including the building, were furnished before the Assessing Officer during the course of assessment proceeding by a letter dated 08.12.2011. Since the property purchased was wholly used for the business of the assessee, the interest paid till 31.03.2009 was claimed as business expenditure. However, the Assessing Officer disallowed the claim of the assessee on the ground that the building itself was demolished during the financial year 2008-09 and a new building constructed was put to use only during the next financial year. Therefore, the Assessing Officer found that the interest payment of Rs. 23,82,173/- has to be capitalized. According to the Ld. representative, the building itself was used for business purpose du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to use the building from the local Municipal Corporation. The assessee also needs to register itself with sales tax authorities for payment of sales tax. Apart from that, the assessee also needs to get clearance from other statutory authorities for carrying out its business in the premises, which was purchased by using the borrowed funds. In this case, no material is available on record to suggest that the building was used for business. In fact, the assessee demolished the building during the year under consideration. Therefore, the contention of the assessee that the building was used for its business in the year under consideration is farfetched one. When the building was demolished and new construction was started, at no stretch of imagination it can be said that the assessee used the building for its business. 7. In view of the above, this Tribunal finds no merit in the contention of the Ld. representative for the assessee. Accordingly, this Tribunal has no hesitation to confirm the order of the CIT(Appeals). Accordingly, the order of the CIT(Appeals) is confirmed. 8. The next ground of appeal is with regard to claim of depreciation on the building. 9. The assessee claims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rued as subcontract, hence the assessee is not expected to deduct tax. Alternatively, the Ld. representative contended that the assessee has already paid amount and nothing remains to be payable, therefore, the assessee is not expected to deduct tax on the amount paid and remains to be payable. The Ld. representative placed his reliance on the judgment of Allahabad High Court in CIT v. Vector Shipping Services (P.) Ltd. (2013) 357 ITR 642. 13. On the contrary, Sh. P. Radhakrishnan, the Ld. Departmental Representative, submitted that the assessment year under consideration is 2010-11. Section 194-I of the Act was amended with effect from 13.07.2006. When the assessee has paid charges/ rent for hiring equipment or machinery, the assessee has to necessarily deduct tax at 2% for use of any machinery or asset or any equipment. In this case, admittedly, the assessee had to hire machineries, namely, generator, JCB, etc. from M/s Ready Power Services, M/s Amirtham Earth Movers and Shri M. Venkatappa. Therefore, these payments have to be disallowed under Section 40(a)(ia) of the Act for non-deduction of tax under Section 194-I of the Act. In respect of payments made to soil testing and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less the TDS was made. The payment made for centring work is nothing but sub-contract. Therefore, the assessee is liable to deduct tax under Section 194C of the Act. In view of the above, this Tribunal is of the considered opinion that the assessee is liable to deduct tax in respect of all the payments made. Therefore, the Assessing Officer has rightly disallowed the claim under Section 40(a)(ia) of the Act. 16. Now coming to alternative claim of the assessee that the amounts were already paid, this Tribunal is of the considered opinion that under the scheme of Income-tax Act, tax has to be deducted either at the time of payment or at the time of crediting the same in the books of account. In the case before us, the assessee has admittedly paid the amounts, therefore, the assessee is expected to deduct tax at the time of payment. The contention of the assessee that the tax has to be deducted only on the amount remains to be payable and the amount already paid cannot be a subject matter of disallowance under Section 40(a)(ia) of the Act is contrary to the scheme of Income-tax Act. In case the assessee gives credit in the books of account and the amount was not actually paid, then t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Allahabad High Court, after reproducing the relevant paragraph from the order of CIT(A) and referring to the decision of the Special Bench of this Tribunal in Merilyin Shipping & Transports (supra) found that the Tribunal has not committed an error. It is obvious that there is no discussion about the correctness or otherwise of the decision rendered by the Special Bench of this Tribunal in Merilyn Shipping & Transports (supra). However, we find that the Gujarat High Court in the case of CIT vs Sikandarkhan N Tunvar ITA Nos 905 of 2012, 709 & 710 of 2012, 333 of 2013, 832 of 2012, 857 of 2012, 894 of 2012, 928 of 2012, 12 of 2013, 51 of 2013, 58 of 2013 and 218 of 2013 judgment dated 02-05-2013 considered the decision of the Special Bench of this Tribunal in Merilyn Shipping & Transports (supra) and specifically disagreed with the principles laid down by the Special of this Tribunal in Merilyn Shipping & Transports (supra). The Calcutta High Court also in the case of Crescent Exports Syndicate & Another in ITAT 20 of 2013 and GA 190 of 2013 judgment dated 03-04-2013 considered elaborately the judgment of the Special Bench of this Tribunal in Merilyn Shipping & Transports (supra) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned 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 disallowed". Having held so was it open to the Tribunal to seek to justify that "this fiction cannot be extended any further and, therefore, cannot be invoked by Assessing Officer to disallow the genuine and reasonable expenditure on the amounts of expenditure already paid"? Does this not amount to deliberately reading something in the law which is not there? We, as such, have no doubt in our mind that the Learned Tribunal realized the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is certainly not the case here. We shall now endeavour to show that no other interpretation is possible. The key words used in Section 40(a)(ia), according to us, 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 n 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 of subcontractor differently than the payments on account of interest, commission or brokerage, fees for professional services or fees for technical services because the words "mounts credited or paid" were used only in relation to a contractor of sub-contractor. This dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 XVIII-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, which is such on which tax is deductible at source under Chapter XVII-B but such tax has not been deducted or if deducted not paid before the due date. This provision nowhere requires that the amount which is payable must remain so payable throughout during the year. To reiterate the provision has certain strict and stringent requirements before the unpleasant consequences envisaged therein can be applied. We are prepared to and we are duty bound to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute must be 19 I.T.A. Nos.1352 & 1353/Mds/15 judged with reference to last date of the accounting period. Particularly, in the context of requirements f 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 31t 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 deliberately brought about a certain situation which does not require any further interpretation. This is the fundamental argument of the Tribunal in the case of M/s Merilyn Shipping & Transports vs. ACIT (supra) to adopt a particular view. 26. While interpreting a statutory provision the Courts have often applied Hyden's rule or the mischief rule and ascertained what was the position before the amendment, what the amendment sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants, disallowance cannot be sustained. This contention was sought to be substantiated by relying on the judgment of the Allahabad High Court in Commissioner of Income Tax v. Vector Shipping Services (P) [(2013) 357 ITR 642 (All)]. Primarily, this contention should be answered with reference to the language used in the statutory provision. Section 40(a)(ia) makes it clear that the consequence of disallowance is attracted when an individual, who is liable to deduct tax on any interest payable to a resident on which tax is deductible at source, commits default. The language of the Section does not warrant an interpretation that it is attracted only if the interest remains payable on the last day of the financial year. If this contention is to be accepted, this Court will have to alter the language of Section 40(a)(ia) and such an interpretation is not permissible. This view that we have taken is supported by judgments of the Calcutta High Court in Crescent Exports Syndicate and another [ITAT 20 of 2013] and the Gujarat High Court in the case of Commissioner of Income Tax v. Sikandadarkhan N. Tunvar [ITA Nos.905 of 2012 & connected cases], which have been relied on by the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown the liability in the name of following sundry creditors:- (a) Ooviya Interiors Rs. 1,51,748 (b) National AShphalt Products & Construction Co. Rs. 3,35,737 (c) Exim Engineering Co. Rs. 1,46,155 (d) Seven Hills Enterprises Rs. 93,089 (e) Sree Andhal & Co. Rs. 1,84,302 (f) Jay Dheep Techno Ent P. Ltd. Rs. 1,40,737 (g) Maragadhavel Rs. 1,27,610 (h) P.K. Mohammed & Co Rs. 2,56,744 (i) Sathyam Steel Roof Structures P. Ltd. Rs. 93,614 (j) M.S. Subramaniam & Co. Rs. 2,65,634 17,95,370 In order to verify the claim of the assessee, the Assessing Officer issued summons under Section 131 of the Act to six persons. All of them confirmed that no outstanding was due to the assessee-firm. In fact, National AShphalt Products & Construction Co. clarified that the amount outstanding was written off in the books as bad debt as on 31.03.2009 itself. The four parties, namely, Maragadhavel, P.K. Mohammed & Co., Satyam Steel Roof Structures P. Ltd. and M.S. Subramaniyam & Co. confirmed that no amount was outstanding as on 31.03.2010. The assessee claims that the amount was written off during the assessment years 2011-12 and 2012-13. This claim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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