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TMI Blog2016 (4) TMI 1419X X X X Extracts X X X X X X X X Extracts X X X X ..... l is being disposed off after hearing Ld. DR and the facts as discussed by the authorities below. 3. The brief facts qua the issue raised is that, assessee as a Commission Agent of transport business, has received freight charges of Rs. 3,51,64,121/- out of which a freight charges paid amounted to Rs. 3,39,60,169/-. While making payment of the freight to various parties, the assessee had not deducted TDS in accordance with the section 194C(2). In response to the show cause notice, why disallowance under section 40(a)(ia) should not be made, the assessee's submission has been noted by the AO in the following manner:- 1. In response to it Shri Gitesh Bhanushali, ITP has submitted the lists of vehicles number and amount paid. As per provisions of section assessee has submitted name and address of the person to whom freight/transportation charges paid. In case the owner is having less than two lorries and amount received less than Rs. 50,000/- during the year than the copy of form 15-I regarding the declaration collected from the owner and the same should have submitted to the concerned authority and in case TDS has not deducted than the above details is required to be submitted bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rits declining to admit additional evidences filed before him, however, on the alternative plea, he accepted the assessee's contention after observing and holding as under:- "I have also gone through assessment folder and it is noted that audit report filed in the case in Col. 16(f) shows amounts inadmissible u/s 40(ia) at NIL. Thus, the AO has correctly observed and brought it on record in the para 5.3 of the assessment order that the audit report given in Form No.3CD for the AY 2009-10 has not made any comments on TDS provisions applicable. The method of accounting as per this audit report is Mercantile. Then, looking into Profit & Loss Account, it is noted that the freight receipts are shown at Rs. 3,51,64,121/- and hiring charges paid are reflected at Rs. 3,39,60,169.70. This figure when cross checked with Profit & Loss Account filed with return of income filed for AY 2009-10 it is noted that the gross receipts of business are reflected at Rs. 3,61,54,120/- and freight paid at Rs. 3,39,60,170/-. There return shows debtors as on 31.3.2009 at 'Nil' and the creditors are shown at Rs. 23,89,429/-. Then it is also noted that figure of sundry creditors does not go in line if openin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o decisions of the Allahabad High Court decision in the case of Sikandarkhan Tunvar (supra) has been dealt by the Tribunal in detail in the case of M/s ITO vs. Pratibhuti Viniyog Ltd in ITA No.18654/Mum/2011 order dated 22.08.2014. He further submitted that, now, P&H High Court, vide judgment and order dated 29.04.2015 in the case of PMS Diesel vs. CIT have dealt the decision of Special Bench in the case of Merlyn Shipping Transport Private Limited (supra) and held that same is not a good law and also they have reiterated the ratio laid down by the Calcutta High Court and also explained the ratio of Allahabad High Court decision in the case of Vector Shipping Services Pvt. Ltd. 7. After considering the aforesaid submissions of Ld. DR and relevant finding given in the impugned orders, we find that the Ld. CIT(A) has given part relief following the ratio laid down by the Special Bench decision in the case of Merlyn Shipping Transport Private Limited (supra). The contrary view has been taken by the Hon'ble Calcutta High Court in the case of Crescent Exports (supra) disapproving the decision of the Special Bench and held that, provision of section 40(a)(ia) would apply on both "paid" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year." 9. Such an observation of the Hon'ble High Court sans the issue in question of law formulated is in the form of obiter dicta. This observation was made by the Court because the Tribunal while dealing with the said disallowance has referred to the decision of the Special Bench in M/s. Merilyn Shipping and Transport Ltd., 136 ITD 23 (SB). It is not the case where the Hon'ble High Court has categorically affirmed the reasoning and interpretation given by the Special Bench. On the contrary, we find that the Hon'ble Calcutta High Court in CIT v/s Crescent Exports Syndicate, [2013] 262 CTR (Cal.) 525, has specifically examined the correctness of the majority view of Marilyn Shipping and disapproved the view taken by the Special Bench in the following manner:- The High Court examined the correctness of the majority views in the case of Merilyn Shipping. The main thrust of the majority view was based on the fact "that the Legislature has replaced the expression "amounts credited or paid" with the expression 'payable' in the final enactment. Comparison between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 an 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 or subcontractor differently than the payments on account of interest, commission or brokerage, fees for professional services or fees for technical services because the words "amounts credited or paid" were used only in relation to' a contractor or sub-contractor. This differential treatment was not intended. Therefore, the legislature provided that the amounts, on which tax is deductible at source under Chapter XVII-B payable on account of interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services or to a contractor or subcontractor sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a)(ia) of the Act, term "payable" cannot be seen to be including the expression "paid". The term "paid" and "payable" in the context of Section 40(a)(ia) are not used interchangably. Despite this narrow interpretation of section 40(a)(ia), the question still survives if the Tribunal in case of M/s. Merilyn Shipping & Transports vs. ACIT (supra) was accurate in its opinion. In this context, Court examined two aspects. Firstly, what would be the correct interpretation of the said provision. Secondly, whether our such understanding of the language used by the legislature should waver on the premise that as propounded by the Tribunal, this was a case of conscious omission on part of the Parliament. If one looks closely to the provision, in question, adverse consequences of not being able to claim deduction on certain payments irrespective of the provisions contained in Sections 30 to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of M/s. Merilyn Shipping & Transports vs. ACIT fell in a serious error in merely comparing the language used in the draft bill and final enactment to assign a particular meaning to the statutory provision. The Courts in India have been applying the principle of deliberate or conscious omission. Such principle is applied mainly when an existing provision is amended and a change is brought about. While interpreting such an amended provision, the Courts would immediately inquire what was the statutory provision before and what changes the legislature brought about and compare the effect of the two. The other occasion for applying the principle, has been when the language of the legislature is compared with some other analogous statute or other provisions of the same statute or with expression which could apparently or obviously been used if the legislature had different intention in mind, while framing the provision. Tribunal committed an error in applying the principle of conscious omission in the present case. Firstly, Court have serious doubt whether such principle can be applied by comparing the draft presented in Parliament and ultimate legislation which may be passed. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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