TMI Blog2020 (3) TMI 1201X X X X Extracts X X X X X X X X Extracts X X X X ..... Sankar Naskar, Sr. DR. ORDER PER N. K. BILLAIYA, AM: This appeal by the assessee is preferred against the order of the CIT(A)-15, New Delhi dated 20.11.2018 pertaining to A.Y. 2015-16. 2. The sum and substance of the grievance of the assessee is that the CIT(A) erred in upholding the disallowance of ₹ 18.55 lacs made by the AO u/s. 40 (a) (ia) of the Act. 3. None appeared on behalf of the assessee. The notice issued by the registry returned un-served. I decide to proceed exparte. The DR was heard at length who placed strong reliance on the orders of the authorities below. 4. Briefly stated the facts of the case are that during the course of the scrutiny assessment proceedings the AO noticed that the assessee has made payments to M/s. Rising overseas amounting to ₹ 61.85 lacs without deducting tax at source. The assessee was asked to explain why disallowance should not be made u/s.40(a)(ia) of the Act on payment of shipment expenses of ₹ 61.85 lacs. The assessee filed a detailed reply objecting for the proposed disallowance. The reply of the assessee did not find any favour of the AO to proceeded by dismissing 30% of expenses paid ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Special Bench in the case of Merilyn Shipping Transports (supra) 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. Their Lordships have further observed that in the present case tax was deducted as TDS from the salaries of the employees paid by M/s. Mercator Lines Ltd. and the circumstances under which such salaries were paid by M/s. Mercator Lines Ltd., for M/s. Vector Shipping Services, the assessee were sufficiently explained. In last few lines, the Hon'ble High Court has made a reference to the ratio laid down by the Special Bench of the Tribunal and observed that it is noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 7.11 Our attention was also invited to a circular dated 16/12/2013 issued by the CBDT clarifying the stand of the Department in the light of the aforesaid judgments of different High Courts and it has been clarified that statutory provisions are amply clear and in the context of section 40(a)(ia) of the Act, the term payable would include amounts which are paid during the previous year. For the sake of reference, we extract the circular as under. Circular No.10/DV/2013 (Department view) F. No.279/Misc./M-61/2012-ITJ (Vol.II) Government of India Ministry of Finance Department of Revenue Central B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) of the Act, the amount should be payable and not which has been paid during the year. However, the decisions of the Hon'ble Gujarat and Calcutta High Courts (supra) were not brought to the attention of the Hon'ble Allahabad High Court. 3.4 In the case of ACIT, Circle 4(2), Mumbai v. Rishti Stock and Shares Pvt. Ltd. in ITA No, 112/Mum/2012, Hon'ble ITAT, Mumbai in its order dated 02-08-2013 has examined the decision of the Hon'ble Allahabad High Court (supra) as regards to section 40(a)(ia) of the Act and concluded that the same was an orbiter dicta while the decisions of the Hon'ble Gujarat and Calcutta High Court (supra) were 'ratio decidendi . The ITAT accordingly applied the view taken by the Hon'ble Gujarat and Calcutta High Court as ratio decidendi prevails over an orbiter dicta. 4. After careful examination of the issue, the Board is of the considered view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down in the case of Merilyn Shipping Transports (supra), as it was overruled by the other High Court. While discussing the above factual and legal position, the Hon'ble ITAT, Lucknow Bench-B, has finally held in para-9 of their order that: we hold that the provision of section 40(a)(ia) would cover not only to the amounts which are payable as on 31st March of a particular year but also which are payable at any time during the year. Therefore, respectfully following the discussions made, analysis done and the judgment passed by Hon ble ITAT, Lucknow Bench-B in the case of Ama Medical Diagnostic Centre (supra) , it is held that the assessee was required to deduct TDS on the full amount paid or payable during the year under consideration. Since, the same has not been done, which is an admitted fact by the appellant during the appellate proceedings, therefore, in my considered opinion, the A.O. has rightly made the disallowance of ₹ 18,55,500/- u/s 40(a)(ia) of the IT Act. Accordingly, the action of the A.O. is upheld. 7. I have given a thoughtful consideration to the findings of the CIT(A). I do not find error or infirmity in the findings of the CIT(A), ..... X X X X Extracts X X X X X X X X Extracts X X X X
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