TMI Blog2017 (6) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... ically, it cannot be held that the word 'payable' occurring in Section 40(a)(ia) refers to only those cases where the amount is yet to be paid and does not cover the cases where the amount is actually paid. If the provision is interpreted in the manner suggested by the appellant herein, then even when it is found that a person, like the appellant, has violated the provisions of Chapter XVIIB (or specifically Sections 194C and 200 in the instant case), he would still go scot free, without suffering the consequences of such monetary default in spite of specific provisions laying down these consequences. - Decided in favour of revenue - ITA No. 757/JP/2016 - - - Dated:- 23-6-2017 - Bhagchand (Accountant Member) For the Assessee : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd contradictory judgments rendered by various High Courts, has decided to follow the judgment of Hon ble Allahabad High Court in the case of CIT Vs. Vector Shipping Services (P) Ltd. [357 ITR 642] (affirmed by Supreme Court) by following the Hon ble Supreme Court s direction rendered in CIT Vs. Vegetable Products Ltd. reported in 88 ITR 192 to the effect that when two views are possible on an issue, then the one favouring assessee has to be preferred. Thus, the action of Ld. CIT(A) deserves to be hold bad in law and the addition so sustained deserves to be deleted. 1.2 That, the Ld. CIT(A) has further erred in ignoring the fact that the assessee has not been treated as assessee in default u/s 201 of the I.T. Act, 1961 and therefore, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 40(a)(ia) covers not only those cases where the amount is payable but also when it is paid. In this behalf, one has to keep in mind the purpose with which Section 40 was enacted and that has already been noted above. We have also to keep in mind the provisions of Sections 194C and 200. Once it is found that the aforesaid Sections mandate a person to deduct tax at source not only on the amounts payable but also when the sums are actually paid to the contractor, any person who does not adhere to this statutory obligation has to suffer the consequences which are stipulated in the Act itself. Certain consequences of failure to deduct tax at source from the payments made, where tax was to be deducted at source or failure to pay the same to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of specific provisions laying down these consequences. The Punjab Haryana High Court has exhaustively interpreted Section 40(a(ia) keeping in mind different aspects. We would again quote the following paragraphs from the said judgment, with our complete approval thereto: 26. Further, the mere incurring of a liability does not require an assessee to deduct the tax at source even if such payments, if made, would require an assessee to deduct the tax at source. The liability to deduct tax at source under Chapter XVII-B arises only upon payments being made or where so specified under the sections in Chapter XVII, the amount is credited to the account of the payee. In other words, the liability to deduct tax at source arises not on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted, would require an adjudication by the tax authorities as to the liability of the assessee to make payment. They would then be required to investigate all the records of an assessee to ascertain its liability to third parties. This could in many cases be an extremely complicated task especially in the absence of the third party. The third party may not press the claim. The parties may settle the dispute, if any. This is an exercise not even remotely required or even contemplated by the section. 16) As mentioned above, the Punjab Haryana High Court found support from the judgments of the Madras and Calcutta High Courts taking identical view and by extensively quoting from the said judgments. 17) Insofar as judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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