Vinay Ashwinikumar Joneja, Pune v. ITO, Pune

ITA 1514/PUN/2012 | 2006-2007
Pronouncement Date: 22-10-2013 | Result: Dismissed

Appeal Details

RSA Number 151424514 RSA 2012
Assessee PAN PLAZA2421E
Bench Pune
Appeal Number ITA 1514/PUN/2012
Duration Of Justice 1 year(s) 3 month(s) 12 day(s)
Appellant Vinay Ashwinikumar Joneja, Pune
Respondent ITO, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 22-10-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 22-10-2013
Assessment Year 2006-2007
Appeal Filed On 10-07-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 1514/PN/2012 (ASSESSMENT YEAR 2006-07) VINAY ASHWINIKUMAR JONEJA 88 PORWAL PLAZA 2421 EAST STREET PUNE 411001. PAN NO.ABKPJ8047M .. APPELLANT VS. ITO WARD-4(5) PUNE .. RESPONDENT APPELLANT BY : SHRI SUNIL GANOO RESPONDENT BY : SHRI K.K. OJHA DATE OF HEARING : 03-10-2013 DATE OF PRONOUNCEMENT : 22-10-2013 ORDER PER R.K. PANDA AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 30- 03-2012 OF THE CIT(A)-II PUNE RELATING TO ASSESSME NT YEAR 2006-07. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS NOT DEDUCTED TAX ON PAYMENT TO VARIOUS SUB-CONTRACTORS AND LATE INTEREST PAYMENT TO M/S. POONA PETROLEUM COMPANY THE DETAILS OF WHI CH ARE AS UNDER : SR.NO. NAME OF THE CONTRACTOR AMOUNT (RS.) 1 D.H. SHAIKH 1 12 000 2 K.T. CONSTRUCTION (DAMANIA) 4 55 835 3 CHANDER RATHOD 1 05 000 4 POONA PETROLEUM CO. 47 397 7 20 252 2 THE ASSESSING OFFICER THEREFORE REJECTING THE EXP LANATION OF THE ASSESSEE DISALLOWED AN AMOUNT OF RS.7 20 252/- (RS.6 72 855/ - + RS.47 397/-) FOR NON DEDUCTION OF TDS U/S.40(A)(IA). 3. BEFORE CIT(A) IT WAS SUBMITTED THAT SINCE THE EX PENDITURE CLAIMED HAS ALREADY BEEN PAID AND NOT REMAINED PAYABLE AT THE Y EAR END THEREFORE THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. FOR THIS PROPOSITION THE ASSESSEE RELIED ON THE DECISION OF THE HYDERABAD BE NCH OF THE TRIBUNAL IN THE CASE OF TEJA CONSTRUCTION VS. ACIT REPORTED IN 129 TTJ 57. HOWEVER THE LD.CIT(A) WAS NOT SATISFIED WITH THE EXPLANATION GI VEN BY THE ASSESSEE. RELYING ON VARIOUS OTHER DECISIONS THE LD.CIT(A) UP HELD THE ADDITION MADE BY THE ASSESSING OFFICER. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT[A] HAS ERRED IN SUSTAINING THE DISALLOWANCE OF ` 7 20 252.00 MADE BY THE LEARNED ASSESSING OFFICER U/S 40[A][IA] OF THE I.T. ACT 196 1. THE SAID DISALLOWANCE BEING PATENTLY ILLEGAL BAD IN LAW AND DEVOID OF MERITS T HE SAME MAY PLEASE BE DELETED. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT[A] HAS FAILED TO APPRECIATE THAT DURING THE YEAR THE APPEL LANT HAD PAID AN AMOUNT OF ` 6 72 855.00 AS LABOUR CHARGES AND NO AMOUNT WAS PAY ABLE AS ON 31-03-2006 AS THE APPELLANT WAS FOLLOWING CASH METHOD OF ACCOUNTI NG. IN THE CIRCUMSTANCES THE LEARNED CIT[A] OUGHT TO HAVE DELETED THE DISALLOWAN CE OF ` 6 72 855.00 MADE BY THE LEARNED ASSESSING OFFICER U/S 40[A][IA] OF THE I.T. ACT 1961. THE SAID DISALLOWANCE BE DELETED. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LEARNED CIT[A] HAS FAILED TO APPRECIATE THAT DURING THE YEAR THE APPEL LANT HAD PAID AN AMOUNT OF ` 47 397.00 AS INTEREST TO POONA PETROLEUM COMPANY AN D NO AMOUNT OF INTEREST WAS PAYABLE AS ON 31-03-2006 AS THE APPELLANT WAS F OLLOWING CASH METHOD OF ACCOUNTING. IN THE CIRCUMSTANCES THE LEARNED CIT[A] OUGHT TO HAVE DELETED THE DISALLOWANCE OF ` 47 397.00 MADE BY THE LEARNED ASSESSING OFFICER U/S 40[A][IA] OF THE I.T. ACT 1961. THE SAID DISALLOWANCE BE DELETED . 3 5. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO TH E DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. M/S. VE CTOR SHIPPING SERVICE PVT. LTD. REPORTED IN 2013-TIOL-599-HC-ALL-IT VIDE ITA NO.122 OF 2013 ORDER DATED 09-07-2013 SUBMITTED THAT THE HONBLE H IGH COURT FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF MERILYN SHIPPING AND TRANSPORT LTD. REPORTED IN 136 ITD 23 HAS HELD THAT NO DISALLOWANCE U/S.40(A)(IA) CAN BE MADE WHEN NO AMOUNT IS PAYABLE AT THE END OF THE YEAR. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND SUBMITTED THAT THE ABOVE DECISION RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IS NOT APPLICABLE SINCE THEY HAVE SIMPLY RELIED ON THE ORD ER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TR ANSPORT LTD. (SUPRA). HE SUBMITTED THAT THE HONBLE CALCUTTA HIGH COURT IN T HE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE HAS ANALYSED THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TR ANSPORT LTD. (SUPRA) AND HAS HELD THAT THE MAJORITY VIEW EXPRESSED IN THE CA SE OF MERILYN SHIPPING AND TRANSPORT LTD. (SUPRA) ARE NOT ACCEPTABLE. REFERRI NG TO THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. S IKANDARKHAN N. TUNVAR REPORTED IN 2013-TIOL-389-HC-AHM-IT HE SUBMITTED TH AT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT PROVISIONS OF SECTION 40(A)(IA) IS COVERED NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE A S ON 31 ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY T IME DURING THE YEAR. ACCORDINGLY THEY HAVE HELD THAT THE DECISION OF TH E SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSP ORT LTD. (SUPRA) DOES NOT LAY DOWN THE CORRECT LAW. HE ACCORDINGLY SUBMITTED THAT THE 2 DECISIONS OF THE HIGH COURTS WHICH WERE SUBSEQUENT TO THE DECISION O F THE SPECIAL BENCH OF THE TRIBUNAL WOULD PREVAIL. SINCE THESE DECISIONS WERE NOT BROUGHT TO THE 4 NOTICE OF THE HONBLE HIGH COURT THEREFORE THE DE CISION OF THE HONBLE ALLAHABAD HIGH COURT CANNOT BE APPLIED. 7. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDE R SUBMITTED THAT WHEN THERE ARE CONFLICTING DECISIONS THE DECISION WHICH IS IN FAVOUR OF THE ASSESSEE HAS TO BE FOLLOWED IN VIEW OF THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD. REPORTED IN 88 ITR 192. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSING OFFICER IN THE BODY OF THE ASSESSMENT ORDER DISALLO WED AN AMOUNT OF RS.7 20 252/- U/S.40(A)(IA) FOR NON DEDUCTION OF TA X. WE FIND THE LD.CIT(A) DISTINGUISHING VARIOUS DECISIONS CITED BEFORE HIM U PHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. IT IS THE CASE OF T HE LD. COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THE DECISION OF HONBLE AL LAHABAD HIGH COURT IN THE CASE OF M/S. VECTOR SHIPPING SERVICE PVT. LTD. (SUP RA) NO DISALLOWANCE U/S.40(A)(IA) CAN BE MADE SINCE NO AMOUNT WAS PAYAB LE AT THE END OF THE YEAR. 8.1 WE FIND THE HONBLE HIGH COURT WHILE DECIDING T HE ISSUE HAS RELIED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL I N THE CASE OF MERILYN SHIPPING AND TRANSPORT LTD. REPORTED IN 136 ITD 23 (SC). WE FIND THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF MERILYN SHIPPING AND TRANSPORT LTD. (SUPRA) WAS REVERSED BY THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE VI DE ORDER DATED 03-04-2013 REPORTED IN TIOL-404-HC-KOL. THE RELEVANT OBSERVAT ION OF THE HONBLE HIGH COURT READ AS UNDER : 5 WE REQUESTED MR. KHAITAN LEARNED SENIOR ADVOCATE T O ASSIST THE COURT IN RESOLVING THE ISSUE. THE MATTER WAS DIRECTED TO BE LISTE D FOR FURTHER HEARING ON 1ST APRIL 2013. DICTATED ON 3RD APRIL 2013 MR. KHAITAN LEARNED SENIOR COUNSEL SUBMITTED THAT T HE VIEWS EXPRESSED BY THE ACCOUNTANT MEMBER ARE PREFERABLE TO THE VIEWS EXPRESSE D BY THE JUDICIAL MEMBERS. THE ACCOUNTANT MEMBER IN THE CASE OF MERILYN SHIPPING & TRANSPORTS HAD EXPRESSED THE FOLLOWING VIEWS : 12.2. THE QUESTION FOR CONSIDERATION IS AS TO WHY THE WORDS ' CREDITED' OR 'PAID' CONTEMPLATED IN THE BILL WERE DROPPED WHI LE INCORPORATING SECTION 40(A)(IA). ALL THE AMOUNTS WHETHER 'CREDITED ' OR 'PAID' COME WITHIN THE AMBIT OF TERM 'PAYABLE' AND THEREFORE THE TWO TERMS VIZ. 'CREDITED' OR 'PAID' WERE ONLY SUPERFLUOUS AND THERE FORE WERE DROPPED IN THE SECTION 40(A)(IA) INSERTED IN THE ACT. IN THE PROVISIONS RELATING TO TDS THE RELEVANCE OF THESE TERMS WAS WITH REFERENCE T O TIMING OF DEDUCTION BUT WHILE MAKING DISALLOWANCE UNDER SECTIO N 40(A)(IA) THESE TERMS HAD NO RELEVANCE AND THEREFORE LEGISLATURE DR OPPED THESE TWO TERMS VIZ. 'PAID' OR 'CREDITED' BEFORE INSERTION OF SECTION 40(A)(IA) IN THE STATUTE. 12.3. IT IS NOTICEABLE THAT SECTION 40(A) IS APPLICABLE IRR ESPECTIVE OF THE METHOD OF ACCOUNTING FOLLOWED BY AN ASSESSEE. THEREFORE BY USING THE TERM 'PAYABLE' LEGISLATURE INCLUDED THE ENTIRE ACCRU ED LIABILITY. IF ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING TH EN THE MOMENT AMOUNT WAS CREDITED TO THE ACCOUNT OF PAYEE O N ACCRUAL OF LIABILITY TDS WAS REQUIRED TO BE MADE BUT IF ASSESSEE W AS FOLLOWING CASH SYSTEM OF ACCOUNTING THEN ON MAKING PAYMENT TDS WAS TO BE MADE AS THE LIABILITY WAS DISCHARGED BY MAKING PAYMENT . THE TDS PROVISIONS ARE APPLICABLE BOTH IN THE SITUATION OF ACT UAL PAYMENT AS WELL OF THE CREDIT OF THE AMOUNT. IT BECOMES VERY CLEAR FROM THE FACT THAT THE PHRASE 'ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER C HAPTER XVII-B' WAS NOT THERE IN THE BILL BUT INCORPORATED IN THE ACT. THIS WAS NOT WITHOUT ANY PURPOSE. 12.4 IN OUR CONSIDERED OPINION THERE IS NO AMBIGUITY IN T HE SECTION AND TERM 'PAYABLE' CANNOT BE ASCRIBED NARROW INTERPRETAT ION AS CONTENDED BY ASSESSEE. HAD THE INTENTIONS OF THE LEGISLATURE WERE T O DISALLOW ONLY ITEMS OUTSTANDING AS ON 31ST MARCH THEN THE TERM 'PAY ABLE' WOULD HAVE BEEN QUALIFIED BY THE PHRASE AS OUTSTANDING ON 31ST MAR CH. HOWEVER NO SUCH QUALIFICATION IS THERE IN THE SECTION AND THEREF ORE THE SAME CANNOT BE READ INTO THE SECTION AS CONTENDED BY THE ASSESSEE. 13. SECTION 40(A)(IA) IS TO BE INTERPRETED HARMONIOUSLY W ITH THE TDS PROVISION AS ITS OPERATION SOLELY DEPENDS ON THE PROVISI ONS CONTAINED UNDER CHAPTER XVII-B. IT CONTEMPLATES ONE OF THE CON SEQUENCES OF NON- DEDUCTION OF TAX AND THEREFORE HAS TO BE INTERPRET ED IN THE LIGHT OF MANDATORY PROVISIONS CONTAINED UNDER CHAPTER XVII-B. IT WOULD BE APPROPRIATE TO REPRODUCE SECTION 40(A)(IA) WHICH R EADS AS UNDER:- SECTION 40(A)(IA):- ANY INTEREST COMMISSION OR BROKER AGE [RENT ROYALTY ] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECH NICAL SERVICES PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRA CTOR OR SUB- CONTRACTOR BEING RESIDENT FOR CARRYING OUT ANY WOR K (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION [HAS NOT BEEN PAID - 6 (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO D EDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139; OR (B) IN ANY OTHER CASE ON OR BEFORE THE LAST DAY OF T HE PREVIOUS YEAR:] [ PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR HAS BEEN DEDUCTED (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PA ID AFTER THE SAID DUE DATE; OR (B) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SU CH TAX HAS BEEN PAID.] EXPLANATION:-FOR THE PURPOSES OF THIS SUB-CLAUSE - (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME MEANI NG AS IN CLAUSE (I) OF THE EXPLANATION TO SECTION 194 H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME M EANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (I) OF SEC TION 9; (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME MEANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLANAT ION III TO SECTION 194C; [(V) RENT SHALL HAVE THE SAME MEANING AS IN CLAUSE (I ) TO THE EXPLANATION TO SECTION 194-I; (V) ROYALTY SHALL HAVE THE SAME MEANING AS IN EXPLAN ATION 2 TO CLAUSE (VI) OF SUB- SECTION (I) OF SECTION 9;] SECTION 40 CONTAINED IN CHAPTER IV DEALS WITH COMPUT ATION OF BUSINESS INCOME AND LISTS OUT VARIOUS AMOUNTS WHICH ARE NOT DEDUCTIBLE NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38. THIS IMPLIES THAT EVEN IF A PARTICULAR AMOUNT IS ALLOWABLE UNDER SECTIONS 30 TO 3 8 STILL IF IT DOES NOT COMPLY THE PROVISIONS CONTAINED IN SECTION 40 THEN T HE SAME CANNOT BE ALLOWED. THE BASIC INGREDIENTS OF SECTION 40(A)(IA) ARE AS UNDE R:- (I) IT APPLIES TO INTEREST COMMISSION OR BROKERAGE RE NT ROYALTY FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES; (II) THE AFOREMENTIONED AMOUNTS ARE PAYABLE TO A RESI DENT (III) THE AMOUNTS ARE PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR BEING RESIDENT. (IV) TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B IN RESPECT OF AMOUNTS PAYABLE IN RESPECT OF A AFOREMENTIONED ITEM S. (V) TAX HAS NOT BEEN DEDUCTED AS PER REQUIREMENT OF C HAPTER XVII-B. (VI) AFTER DEDUCTION OF TAX AMOUNT HAS NOT BEEN PAI D. THEREFORE IF AFOREMENTIONED CONDITIONS ARE NOT FULF ILLED THEN DEDUCTION WOULD NOT BE ALLOWED. HOWEVER PROVISO TO THIS SECTION FURTHER GIVES LEVERA GE TO ASSESSEE TO DEDUCT TAX IN SUBSEQUENT YEAR OR PAY TAX DEDUCTED DURING THE PREVIOUS YEAR AFTER THE DUE DATE SPECIFIED IN SECTION 139(1). IN SUCH A SITUAT ION DEDUCTION WOULD BE ALLOWED IN THE YEAR IN WHICH SUCH TAX HAS BEEN DEDUCT ED. THE EXPLANATION TO THIS SECTION DEFINES VARIOUS AMOUNTS CONTEMPLATED IN T HIS SECTION. THE RELEVANT SECTIONS IN CHAPTER XVII-B ARE RE-PRODUCED HEREUNDER:- INTEREST ON SECURITIES. 193. THE PERSON RESPONSIBLE FOR PAYING [TO A RESIDENT] ANY I NCOME [BY WAY OF INTEREST ON SECURITIES] SHALL [AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT 7 OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN C ASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER] DEDUCT INCOME-TAX [***] AT THE RATES IN FORCE ON THE AMOUNT OF THE INTEREST PAYA BLE: PAYMENTS TO CONTRACTORS AND SUB-CONTRACTORS. 194C. (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RE SIDENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE CONTRA CTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT AN Y WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND ** ** ** SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUN T OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQU E OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER DEDUCT AN AMOUNT EQUAL T O- (I) ONE PER CENT IN CASE OF ADVERTISING (II) IN ANY OTHER CASE TWO PER CENT OF SUCH AS INCOM E-TAX ON INCOME COMPRISED THEREIN. COMMISSION OR BROKERAGE: 194-H: ANY PERSON NOT BEING AN INDIVIDUAL OR A HINDU UNDIV IDED FAMILY WHO IS RESPONSIBLE FOR PAYING ON OR AFTER THE 1ST DAY OF JUNE 2001 TO A RESIDENT ANY INCOME BY WAY OF COMMISSION (NOT BEING INSURANCE C OMMISSION REFERRED TO IN SECTION 194D) OR BROKERAGE SHALL AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER DEDUCT INCOME-TAX THEREON AT THE RATE OF (TEN) PER CENT: ** ** ** RENT. 194-I. ANY PERSON NOT BEING AN INDIVIDUAL OR A HINDU UNDIVI DED FAMILY WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF RENT SHALL AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE O R DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER DEDUCT INCOME-TAX THEREO N AT THE RATE OF (A) TEN PER CENT FOR THE USE OF ANY MACHINERY OR PLA NT OR EQUIPMENT; (B) FIFTEEN PER CENT FOR THE USE OF ANY LAND OR BUIL DING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUD ING FACTORY BUILDING) OR FURNITURE OR FITTINGS WHERE THE PAYEE IS AN INDIVIDUA L OR A HINDU UNDIVIDED FAMILY; AND (C) TWENTY PER CENT FOR THE USE OF ANY LAND OR BUILD ING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUD ING FACTORY BUILDING) OR FURNITURE OR FITTINGS WHERE THE PAYEE IS A PERSON OTH ER THAN AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY: FEES FOR PROFESSIONAL OR TECHNICAL SERVICES SECTION 194-J:- (1) ANY PERSON NOT BEING AN INDIVIDUAL OR A HINDU U NDIVIDED FAMILY WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY SUM BY WAY OF - (A) FEES FOR PROFESSIONAL SERVICES OR (B) FEES FOR TECHNICAL SERVICES (C) ROYALTY OR (D) ANY SUM REFERRED TO IN CLAUSE (VA) OF SECTION 28 SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE PAYEE OR AT THE TI MEOF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER DEDUCT AN AMOUNT EQUAL TO TEN PER CENT OF SUCH SUM AS INCOME TAX ON INCOME COMPRISED THEREIN: 8 ** ** ** EXPLANATION. FOR THE PURPOSES OF THIS SECTION - (A) PROFESSIONAL SERVICES MEANS SERVICES RENDERED BY A P ERSON IN THE COURSE OF CARRYING ON LEGAL MEDICAL ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOUNTANCY OR TECHNICA L CONSULTANCY OR INTERIOR DECORATION OR ADVERTISING OR SUCH OTHER PROF ESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSES OF SECTION 44AA OR OF TH IS SECTION; (B) FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME ME ANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (I) OF SEC TION9; (BA) ROYALTY SHALL HAVE THE SAME MEANING AS IN EXPLA NATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9; (C) WHERE ANY SUM REFERRED TO IN SUB-SECTION (1) IS CRE DITED TO ANY ACCOUNT WHETHER CALLED SUSPENSE ACCOUNT OR BY ANY O THER NAME IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH SUM SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH SUM TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACC ORDINGLY. IF WE EXAMINE THE AFOREMENTIONED SECTIONS WE FIND TH AT IDENTICAL CONSIDERATIONS PERMEATE THROUGH ALL THE AFOREMENTIONED SECTIONS WHI CH ARE AS UNDER:- (I) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RE SIDENT IN RESPECT OF AFOREMENTIONED ITEMS; (II) SHALL; (III) AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUN T OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF CHEQUE OR DR AFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER; (IV) DEDUCT INCOME TAX THEREON AT THE PRESCRIBED RAT E; THE TERM 'SHALL' USED IN ALL THESE SECTIONS MAKE IT CLE AR THAT THESE ARE MANDATORY PROVISIONS AND APPLICABLE TO THE ENTIRE SUM CONTEMPLATED UNDER THE RESPECTIVE SECTIONS. THESE SECTIONS DO NOT GIVE ANY L EVERAGE TO THE ASSESSEE TO MAKE THE PAYMENT WITHOUT MAKING TDS. ON THE CONT RARY THE INTENTION OF THE LEGISLATURE IS EVIDENT FROM THE FACT THAT TIMING OF DEDUCTION OF TAX IS EARLIEST POSSIBLE OPPORTUNITY TO RECOVER TAX EITHER AT THE TI ME OF CREDIT IN THE ACCOUNT OF PAYEE OR AT THE TIME OF PAYMENT TO PAYEE WHICHE VER IS EARLIER. WHEN WE EXAMINE SECTION 40(A)(IA) IN THE BACKDROP O F THESE SECTIONS WE FIND THAT IT REFERS TO THE AMOUNT 'PAYABLE' 'ON WHICH TAX WAS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B'. APPLYING THE PRINCIPLES OF EU JESDEM GENERIS IT CAN EASILY BE INFERRED THAT TERM 'PAYABLE' IN SECTION 40( A)(IA) HAS TO BE INTERPRETED IN THE LIGHT OF SUM REFERRED TO IN VARIOUS SECTIONS CON TAINED IN CHAPTER XVII-B NOTED ABOVE ON WHICH TAX WAS DEDUCTIBLE AND THEREF ORE THE TERM 'PAYABLE' IN SECTION 40(A)(IA) REFERS TO ENTIRE AMOUNT ON WHICH T AX WAS REQUIRED TO BE DEDUCTED. KEEPING IN VIEW THE PRINCIPLES OF HARMONIO US CONSTRUCTION THE TERM 'PAYABLE' IN SECTION 40(A)(IA) CANNOT BE READ SEPARA TELY FROM THE PROVISIONS RELATING TO TDS AS PLEADED ON BEHALF OF ASSESSEE. IN OU R OPINION LD. CIT (APPEALS) HAS RIGHTLY OBSERVED THAT TAKING THE SPIRIT O F TDS PROVISION INTO ACCOUNT AND SECTION 40(A)(IA) BEING DIRECTLY RELATE D TO SUCH TDS PROVISION A HARMONIOUS CONSTRUCTION OF THE WORD 'PAYABLE' LEADS TO INEVITABLE CONCLUSION THAT THE SAID WORD ALSO INCLUDES THE 'PAID' AMOUNT. 9 14. LD. COUNSEL HAS RELIED ON THE DICTIONARY MEANING OF T ERM 'PAYABLE' WHICH IN OUR OPINION CANNOT BE RESORTED TO IN VIEW OF DISC USSION IN FOREGOING PARAS. THE CONTEXT IN WHICH TERM 'PAYABLE' HAS BEEN USED IN SECTION 40(A)(IA) IS TO BE TAKEN INTO CONSIDERATION. THE CONTEXT IS VARIOUS SECTI ONS OF CHAPTER XVII-B. 15. THE NEXT ARGUMENT OF LD. COUNSEL IS BASED ON THE DEFIN ITION OF TERM 'PAID' AS CONTEMPLATED UNDER SECTION 43(2) WHICH READS AS UNDE R:- 43(2) : PAID MEANS ACTUALLY PAID OR INCURRED ACCO RDING TO THE METHOD OF ACCOUNTING UPON THE BASIS OF WHICH THE PROFITS OR G AINS ARE COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSIO N . 16. A BARE READING OF THE ABOVE PROVISION WOULD MAKE IT CLEAR THAT THE TERM 'PAID' DOES NOT ONLY MEAN ACTUAL PAYMENT BUT IF THE LIABILITY HAS BEEN INCURRED ACCORDING TO THE METHOD OF ACCOUNTING FOLLOWED BY T HE ASSESSEE THEN THE SAME ALSO COMES WITHIN THE PURVIEW OF TERM 'PAID'. IF THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THEN AS SOON AS THE LIAB ILITY ACCRUES IN ITS FAVOUR THE SAME IS ACCOUNTED FOR BY CREDITING THE AM OUNT OF PAYEE. THUS IT IS EVIDENT THAT THE EMPHASIS IS ON LIABILITY TO PAY AND N OT ON ACTUAL PAYMENT. IF WE ACCEPT THE CONTENTION OF ASSESSEE THEN SECTION 40(A)(I A) WOULD BECOME OTIOSE AND THE SECTION WILL NOT BE ATTRACTED WHERE PAYMENT IS MADE THOUGH WITHOUT DEDUCTING TAX AT SOURCE. LD. COUNSEL HAS REFERRED TO T HE VARIOUS DECISIONS AND IN THE CASE OF JAIPUR VIDYUT VITARAN NIGAM LIMITED ( SUPRA) THE TRIBUNAL HAD RELIED ON THE DEFINITION OF SECTION 43(2) BUT THE I MPORT OF PHRASE 'INCURRED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING FOLLOWED' WAS NOT CONSIDERED. THEREFORE THE FINDING THAT BY IMPLICATION THE WORD 'PAYABLE' DOES NOT INCLUDE 'PAID' CANNOT BE ACCEPTED. 17. THE NEXT ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE IS BASED ON RULE 30 WHICH CONTEMPLATES TIME AND MODE OF PAYMENT TO GOVER NMENT ACCOUNT OF TAX DEDUCTED AT SOURCE. IN OUR OPINION THIS RULE MERELY CONTEMPLATES THE PROCEDURE OF DEPOSITING THE TDS AMOUNT AND MERELY BE CAUSE DIFFERENT TIME LIMITS ARE PRESCRIBED IT WOULD NOT FOLLOW THAT DIFFE RENT CONSIDERATIONS WOULD APPLY WHILE CONSIDERING THE TERM 'PAYABLE' UNDER SEC TION 40(A)(IA) OF THE ACT. LD. COUNSEL HAS ALSO REFERRED TO SECTION 234B DEALING WITH LEVY OF INTEREST TO DEMONSTRATE THAT ACTUAL PAYMENT AND PAYABLE AMOUNT A RE TO BE SEPARATELY DEALT WITH. HOWEVER THESE PROCEDURAL SECTIONS CANNOT OVERRIDE THE SUBSTANTIVE PROVISION OF THE ACT. TRIBUNAL IN THE CASE OF JAIPUR VIDYUT VITARAN NIGAM LIMITED (SUPRA) HAS ALSO OBSERVED THAT SECTION 4 0(A)(IA) BEING A LEGAL FICTION NEEDS TO BE CONSTRUED STRICTLY. THERE IS NO QU ARREL WITH THIS PROPOSITION BUT AT THE SAME TIME WE HAVE TO TAKE INTO CONSIDERAT ION THE CONTEXT IN WHICH A PARTICULAR WORD IS USED AND THE OVERALL PURPOSE SOUGHT TO BE ACHIEVED BY INSERTING A SECTION IN THE ACT. 18. ONE MORE ARGUMENT OF ASSESSEE IS THAT IF THE AMOUNT HAS A LREADY PAID THEN THE ASSESSEE WILL NOT BE ABLE TO IN A POSITION TO DEDUCT ANY PAY TAX BECAUSE UNDER SUCH CIRCUMSTANCES AS PER THE PROVISIONS OF SECTIO N 191 THE LIABILITY FOR PAYMENT OF TAX IS TO BE DISCHARGED BY PAYEE. IN THE F IRST PLACE THE ARGUMENT SEEMS TO BE QUITE CONVINCING BECAUSE THE ASSESSEE WOULD BE DEPRIVED OF GENUINE EXPENDITURE AND THE PAYEE WILL PAY THE TAX ON ITS INCOME. FURTHER THE PROVISO TO SECTION 40 (A)(IA) DOES NOT MAKE ANY PROVI SION IN REGARD TO THIS CONTINGENCY. THIS MAY BE A CASE OF CASUS OMISUS BUT THE COURT CANNOT FILL THIS GAP. HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF DEY 'S MEDICALS (UP) (P) LTD. CASE (SUPRA) OBSERVED AS UNDER:- 'ONCE A DEDUCTION OF A PARTICULAR AMOUNT IS NOT ALLO WABLE UNDER THE ACT IT IS LIABLE TO BE TAXED AND MERELY BECAUSE SOME OTHE R PERSON MAY ALSO BE LIABLE TO TAX AFTER RECEIVING THE SAID AMOUNT IN ONE OR THE OTHER MANNER IT CANNOT BE SAID THAT FORMER ASSESSEE IS ENTITLE D FOR EXEMPTION AND CANNOT BE TAXED. NO AUTHORITY IS SHOWN PROVIDING THAT SUCH TAXATION IS NOT PERMISSIBLE IN LAW AND IS BAD EVEN OTHERWISE.' 10 19. LD. CIT DR HAS STRONGLY RELIED ON THE DECISION OF TH E HONBLE MADRAS HIGH COURT IN THE CASE OF TUBE INVESTMENTS OF INDIA LTD.S C ASE (SUPRA). THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE IS THAT THIS D ECISION WAS RENDERED IN THE CONTEXT OF CONSTITUTIONAL VALIDITY OF THE PROVISI ONS OF SECTION 40(A)(IA) AND THEREFORE IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF LACHMAN DASS BHATIA HINGWALA (P) LTD.S CASE (SUPRA) TH E SAID DECISION IS NOT RELEVANT. IT IS TRUE THAT THIS DECISION HAS BEEN RENDE RED IN THE CONTEXT OF EXAMINING OF CONSTITUTIONAL VALIDITY OF THE PROVISION S OF SECTION 40(A)(IA) OF THE ACT BUT IN COURSE OF EXAMINING THE CONSTITUTIONAL VAL IDITY HONBLE MADRAS HIGH COURT HAS EXTENSIVELY CONSIDERED THE IMPORT OF SECTION 40(A)(IA) AND THEREFORE IN OUR OPINION THIS DECISION HAS STRONG BEA RING ON THE PRESENT ISSUE. 20. HONBLE MADRAS HIGH COURT HAS NOTICED VARIOUS CONTENTI ONS OF ASSESSEE. WE RE-PRODUCE SOME CONTENTIONS WHICH HAVE DIRECT BE ARING ON THE PRESENT ISSUE:- AT PARA 5 OF JUDGMENT: MR. C. NATARAJAN LEARNED SE NIOR COUNSEL APPEARING FOR THE PETITIONERS IN WRIT PETN. NOS. 1075 0 AND 10751 OF 2009 CONTENDED THAT WHILE CONTRACTORS BUSINESS HAS NO NE XUS TO THE DETERMINATION OF PROFITS AND GAINS OF THE BUSINESS OF T HE PETITIONER S. 40(A)(IA) MUTATES ITSELF TO TAX THE PETITIONERS AT A D ISPROPORTIONATE RATE AND QUANTUM WHILE PURPORTING TO ADDRESS S. 194C AND TH E CONTRACTORS. ACCORDING TO HIM THE EFFECT OF S. 40(A) (IA) IS SO GRO SSLY UNREASONABLE THAT IT IMPOSES TAX LIABILITY ON THE BUSINESS OF THE PET ITIONERS EVEN IF THE CONTRACTOR HIMSELF PAID THE TAX IN HIS RETURNS IN THE ABSENCE OF TDS EFFECTED BY THE PETITIONERS. AT PARA 14 OF JUDGMENT: ACCORDING TO THE LEARNED SEN IOR COUNSEL THE IMPLICATION OF S. 40(A)(IA) IS IRRESPECTIVE OF THE CIR CUMSTANCES IN WHICH THE DEDUCTION FAILED TO BE MADE AND THEREFORE IT IS ARBITRARY. BY RELYING UPON THE DECISIONS OF THE HONBLE SUPREME COURT IN T HE CASE OF COCA COLA AND ELI LILY THE LEARNED SENIOR COUNSEL CONTEN DED THAT WHEN THE HONBLE SUPREME COURT HAS HELD THAT THE LIABILITY OF AN ASSESSEE UNDER S. 201 ON FAILURE TO DEDUCT OR PAY TAX DISAPPEARS ONCE T HE RECIPIENT HAS PAID THE FIX AND EVEN PENALTY CANNOT BE LEVIED IF T HERE WAS A REASONABLE CAUSE FOR NON-DEDUCTION IT SHOULD BE HELD THAT S. 40( A)(IA) CANNOT BE INVOKED IN THE CASE WERE THE RECIPIENT HAD PAID THE TAX. ABSENCE OF SUCH A RELIEF UNDER S. 40(A)(IA) MAKES THE PROVISION ARBITR ARY. AT PARA 18 OF JUDGMENT: ACCORDING TO THE LEARNED CO UNSEL WHEN THE OBJECT OF INTRODUCTION OF S. 40(A)(IA) IS TO ENFORCE TDS PROVISION IN THE LIGHT OF THE FACT THAT VERY MANY PROVISIONS BY WAY OF IMPOSITION OF PENALTY INTEREST AND PROSECUTION HAVE BEEN PROVIDED UNDER THE RECOVERY CHAPTER VIZ. CHAPTER XVII THE ADDITION OF S. 40(A)(IA) DISALLOWING THE WHOLE OF THE ACTUAL EXPENDITURE IS HI GHLY ONEROUS AND THEREBY IT BECOMES ARBITRARY UNREASONABLE WARRANTIN G DECLARATION OF THE PROVISION AS ULTRA VIRES OF THE CONSTITUTION. AT PARA 20 OF JUDGMENT: ACCORDING TO THE LEARNED CO UNSEL THE PROVISO TO S. 40(A)(IA) DOES NOT IN ANY WAY MITIGATE THE DAMA GE CAUSED UNDER THE MAIN PROVISION. IT WAS ALSO CONTENDED THAT UNDER S. 195(5) OF THE ACT RELATING TO NON-RESIDENTS WHERE ON PRODUCTION O F A CERTIFICATE AS PER THE IT RULES THE REQUIREMENT OF TDS IS EXEMPTED SUCH A SAFETY VALVE MEASURE NOT BEING AVAILABLE IN RESPECT OF A RESI DENT RECIPIENT S. 40(A)(IA) IS UNREASONABLE AND UNJUSTIFIABLE. AT PARA 24 OF JUDGMENT: ACCORDING TO THE LEARNED CO UNSEL A COMPARATIVE READING OF S.40(A)(IA) AND S. 198 WOULD SHOW THAT WHI LE UNDER S. 198 THE NON-DEDUCTION OF TDS WOULD RESULT IN DEEMED INCO ME IN THE HANDS OF THE ASSESSEE THERE IS NO SUCH EXPRESSION IN S. 40(A)(IA) AND CONSEQUENTLY THE NON-INCOME VIZ. THE EXPENDITURE CA NNOT BE TREATED AS 11 DEEMED INCOME IN THE HANDS OF THE ASSESSEE. THE LEARNED COUNSEL ALSO CONTENDED THAT SINCE THE RECIPIENT OF THE EXPENDITUR E OF THE ASSESSEE IS ALSO TAXED THE IMPOSITION OF TAX BY INVOKING S. 40(A) (IA) WOULD RESULT IN DOUBLE TAXATION WHICH CANNOT BE PERMITTED. AT PARA 25 OF JUDGMENT: THE LEARNED COUNSEL BY POINT ING OUT SS. 205 AND 64 OF THE ACT CONTENDED THAT IN SIMILAR SITUATIONS TH E LEGISLATURE HAS MADE SPECIFIC EXONERATION OF DOUBLE TAXATION. THE LE ARNED COUNSEL RELIED UPON: (I) CIT V. INDO NIPPON CHEMICALS CO. LTD. [2003] 182 CTR 291/[2003] 261 ITR 275 (SC); (II) K.P. VARGHESE V. CIT [1981] 24 CTR 358 [1981] 1 31 ITR 597 (SC); (III) NAVNIT LAI C. JAVERI V. K.K.SEN AAC [1065] 5 6 ITR 198 (SC); (IV) GOVIND SARAN GANGA SARAN V. CST [1985] 155 ITR 144 (SC); (V) GODHIRA ELECTRICITY CO. LTD. V. CIT [1997] 139 (JR 564/ [1997] 225 ITR 746 (SC) IN SUPPORT OF HIS SUBMISSIONS. AT PARA 33 OF JUDGMENT: IT WAS THEN CONTENDED THAT A N EXPENDITURE IS NOT AN INCOME AND CONSEQUENTLY THE COLLECTION OF TAX AS ENVISAGED UNDER ART. 265 IS NOT PERMISSIBLE. IT WAS ALSO CONTENDED THAT S. 40(A)(IA) CONFLICTS WITH S. 145 OF THE ACT SINCE THE METHOD OF ACCOUNTING IS DISTURBED. AT PARA 41 OF JUDGMENT: AS AGAINST THE SUBMISSIONS OF THE PETITIONERS THAT THE PROVISION IS ILLUSORY THE LEARNED COUNSEL CO NTENDED THAT THOUGH THE WORDS USED IN THE PROVISO ARE DEDUCT AND PAY THER E IS NO PROHIBITION FOR THE ASSESSEE TO MAKE THE PAYMENT WITHO UT ANY DEDUCTION. IN THAT CONTEXT THE LEARNED COUNSEL RELI ED UPON S. 195A AND STATED THAT SUCH A SITUATION IS ENVISAGED THEREIN. THE L EARNED STANDING COUNSEL ALSO RELIED UPON ADDL CIT V. FARASOL LTD. [198 7] 163 ITR 364 (RAJ.) WHERE IN THE CONTEXT OF S.40(A) IT WAS HELD BY THE RAJASTHAN HIGH COURT THAT EVEN WHERE THE AMOUNT IS PAID OUT OF THE ASSESSEES POCKET BUT NOT DEDUCTED HE WOULD BE ELIGIBLE FOR THE DEDU CTION. AT PARA 46 OF JUDGMENT : MR.K. SUBRAMANIAM LEARNED STANDING COUNSEL FOR THE IT DEPARTMENT BROUGHT TO OUR NOTICE THE CBD T CIRCULARS PUBLISHED IN [2009] 310 ITR (ST)55 WHEREIN IT WAS STA TED THAT THE INTRODUCTION OF S.40(A)(IA) ALLOWS ADDITIONAL TIME (T ILL DUE DATE OF FILING RETURN OF INCOME) FOR DEPOSIT OF TDS PURSUANT TO THE DEDUCTION MADE FOR THE MONTH OF MARCH SO THAT THE DISALLOWANCE UNDER THE SUB-CLAUSE IS NOT ATTRACTED. THE LEARNED STANDING COUNSEL SUBMITTED A STATEMENT CONTAINING THE TDS COLLECTIONS FOR THE FINANCIAL YEA R 2008-09 WHICH WAS RS.1 30 470.8 CRORES AS COMPARED TO OTHER FORMS OF TAX COLLECTIONS WHICH SHOWS THAT OUT OF THE NET COLLECTION AT LEAST 1 /3 IS BY WAY OF TDS. THE LEARNED STANDING COUNSEL THEREFORE CONTENDED THAT THE OBJECT FOR INTRODUCING S.40(A)(IA) HAS REALLY WORKED VIZ. AUGME NTATION OF THE TDS PROVISION AND THEREFORE THE PROVISION SHOULD BE UPHELD . IN THE BACKDROP OF THESE SUBMISSIONS HONBLE MADRAS HIGH COURT UPHELD THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF SECTION 40(A)(IA) AND MADE VARIOUS OBSERVATIONS:- (I) HONBLE MADRAS HIGH COURT INTER ALIA NOTED THE OBSERVATIONS OF HONBLE SUPREME COURT IN THE CASE OF A.S.KRISHNA V. S TATE OF MADRAS AIR 1957 SC 297 WHICH ARE AS UNDER:- IT WOULD BE QUITE AN ERRONEOUS APPROACH TO THE QUEST ION TO VIEW SUCH A STATUTE NOT AS AN ORGANIC WHOLE BUT AS A MERE COLLECT ION OF SECTIONS THEN DISINTEGRATE IT INTO PARTS EXAMINE UNDER WHAT HEADS O F LEGISLATION THOSE 12 PARTS WOULD SEVERALLY FALL AND BY THAT PROCESS DETERM INE WHAT PORTIONS THEREOF ARE INTER VIRES AND WHAT ARE NOT. THUS SECTIO N 40(A)(IA) COULD NOT BE VIEWED INDEPENDENTLY AND HAD TO BE CONSIDERED ALONG WITH OTHER PROVISIONS. (II) THE PROVISIONS OF SECTION 40(A)(IA) WERE COMPARED WITH THE PROVISIONS OF SECTION 201 OF THE INCOME TAX ACT AND I T WAS INTER ALIA OBSERVED THAT AS FAR AS SECTION 201 IS CONCERNED THAT WO ULD RELATE TO THE AMOUNT OF TAX THAT COULD BE DEDUCTED BY WAY OF TDS. HOWEVER AS FAR AS SECTION 40(A)(IA) IS CONCERNED WHICH WOULD RESULT IN THE DISALLOWANCE OF WHOLE OF THE EXPENDITURE AND THEREBY THE ENTIRE SUM EXPENDED WOULD ATTRACT THE LEVY OF TAX AT A PRESCRIBED RATE W ITH ALL OTHER CONDITIONS SUCH AS SURCHARGE ETC. THUS HONBLE MADRAS H IGH COURT HAS ALSO HELD IN PARA 61 OF ITS JUDGMENT THAT WHOLE OF THE EXPENDITURE CLAIMED WITHOUT MAKING TDS IS TO BE DISALLOWED AND NO T ONLY PART OF THE EXPENDITURE. (III) THE FINANCE BILL NO.2 OF 2004 STATES THAT THE I NSERTION OF CLAUSE (IA) IN CLAUSE (A) TO SECTION 40 OF THE ACT WAS WITH A VIEW TO AUGMENT COMPLIANCE OF TDS PROVISIONS. (IV) WHEN THE PROVISIONS AND PROCEDURES RELATING TO TD S ARE SCRUPULOUSLY APPLIED FIRST AND FOREMOST IT ENSURES THE I DENTIFICATION OF THE PAYEES AND THEREBY NETWORK OF ASSESSEES GETS CONFIRMED . WHEN ONCE SUCH IDENTITY OF ASSESSEES WHO ARE IN RECEIPT OF T HE INCOME CAN BE ASCERTAINED IT WILL ENABLE TAX COLLECTION MACHINERY TO BRING WITHIN ITS FOLD ALL SUCH PERSONS WHO ARE LIABLE TO COME WITHIN TH E NETWORK OF TAXPAYERS. THUS IF IT IS HELD THAT THE PROVISIONS OF SECTION 40(A) (IA) ARE NOT APPLICABLE IN RESPECT OF THOSE PAYMENTS WHICH HAVE BEE N PAID WITHOUT MAKING TDS AND AT THE END OF THE YEAR NO AMOUNT IS OUTSTANDING THEN THE VERY OBJECT OF IDENTIFICATION OF PAYEES WILL GET FRUSTRATED. (V) THE LEGISLATIVE INTENT OF THE INTRODUCTION OF SEC TION 40(A)(IA) IS IN THE LARGER PERSPECTIVE OF AUGMENTING THE VERY TDS PROVISI ONS THEMSELVES. IT IS NOT MERELY RELATED TO THE COLLECTION OF TDS ONLY. (VI) THE INTENTION OF THE LEGISLATURE IS NOT TO TAX T HE PAYER FOR ITS FAILURE TO DEDUCT THE TAX AT SOURCE. THE OBJECT OF INTRODUCT ION OF SECTION 40(A)(I) AS WELL AS SECTION 40(A)(IA) IS TO ENSURE THAT ONE OF THE MODES OF RECOVERY AS PROVIDED IN CHAPTER XVII-B IS SCRUPULOU SLY IMPLEMENTED WITHOUT ANY DEFAULT IN ORDER TO AUGMENT THE SAID MO DE OF RECOVERY. HONBLE MADRAS HIGH COURT INTER ALIA OBSERVED AT PARA 69 OF ITS JUDGMENT AS UNDER:- WITH THE PROVISO TO SECTION 40(A)(IA) THE DEDUCTION IN THE SUBSEQUENT YEAR BY RECTIFYING THE DEFAULT COMMITTED I N THE MATTER OF TDS IN THE PREVIOUS YEAR A DEFAULTING ASSESSE E CANNOT BE HEARD TO SAY THAT IRRESPECTIVE OF THE DELIBERATE D EFAULT COMMITTED BY IT IN IMPLEMENTING THE PROVISION RELATI NG TO TDS IT SHOULD BE HELD THAT A HIGHER TAX LIABILITY IS MULCTE D ON IT. HONBLE MADRAS HIGH COURT INTER ALIA OBSERVED IN PARA 83 OF ITS JUDGMENT AS UNDER:- AFTER ALL THE PROVISO HAS BEEN INSERTED IN ORDER TO ENSURE THAT EVEN A DEFAULTER IS NOT PUT TO SERIOUS PREJUDICE IN AS MUCH AS BY OPERATION OF THE SUBSTANTIVE PROVISION THE EXPENDITU RE WHICH IS OTHERWISE ALLOWABLE AS A DEDUCTION IS DENIED ON THE GR OUND THAT THE OBLIGATION OF TDS PROVISIONS IS VIOLATED. THE LAW MAKES WHILE 13 IMPOSING SUCH A STRINGENT RESTRICTION WANTED TO SIMULTAN EOUSLY PROVIDE SCOPE FOR THE DEFAULTER TO GAIN THE DEDUCTIO N BY COMPLYING WITH THE TDS PROVISION AT A LATER PINT OF TIME. THUS IMPLIEDLY HONBLE MADRAS HIGH COURT HAS INTER ALIA HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) WILL BE APPLICABLE WIT H RESPECT TO ENTIRE EXPENDITURE. IT IS TRUE THAT SPECIFIC ISSUE REGARDING PAID CREDITED AND PAYABLE HAS NOT BEEN CONSIDERED BUT FROM THE JUDGME NT IT IS EVIDENT THAT IF ASSESSEES CONTENTION IS ACCEPTED THEN THE VERY O BJECT OF INCORPORATION OF SECTION 40(A)(IA) WOULD BE FRUSTRATE D. 21. IN VIEW OF ABOVE DISCUSSION WE ANSWER THE QUESTION AS U NDER:- THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT 1961 ARE APPLICABLE NOT ONLY TO THE AMOUNT WHICH IS SHOWN AS P AYABLE ON THE DATE OF BALANCE-SHEET BUT IT IS APPLICABLE TO SUCH EX PENDITURE WHICH BECOME PAYABLE AT ANY TIME DURING THE RELEVANT PREV IOUS YEAR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR. IN THE RESULT THE QUESTION IS DECIDED IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE. BEFORE DEALING WITH THE SUBMISSIONS OF THE LEARNED COUN SEL APPEARING FOR THE ASSESSEES IN BOTH THE APPEALS WE HAVE TO EXAMINE THE CORRECTNESS OF THE MAJORITY VIEWS IN THE CASE OF MERILY N SHIPPING. WE ALREADY HAVE QUOTED EXTENSIVELY BOTH THE MAJORITY AND THE MINORITY VIEWS EXPRESSED IN THE AFORESAID CASE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FACT THAT THE LEGISLATURE HAS REP LACED THE EXPRESSION AMOUNTS CREDITED OR PAID WITH THE EXPRESSIO N PAYABLE IN THE FINAL ENACTMENT. COMPARISON BETWEEN THE PRE-AMENDMENT AND POST AMENDME NT LAW IS PERMISSIBLE FOR THE PURPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED OR THE OBJECT SOUGHT TO BE ACHIEVED BY AN A MENDMENT. 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 PERMISSIB LE. NOR CAN THE DRAFT OR THE BILL BE USED FOR THE PURPOSE OF REGULATI NG THE MEANING AND PURPORT OF THE ENACTED LAW. IT IS THE FINALLY ENACTE D LAW WHICH IS THE WILL OF THE LEGISLATURE. THE LEARNED TRIBUNAL FELL INTO AN ERROR IN NOT REAL IZING THIS ASPECT OF THE MATTER. THE LEARNED TRIBUNAL HELD THAT WHERE LANGUAGE IS CL EAR THE INTENTION OF THE LEGISLATURE IS TO BE GATHERED FROM THE LANGUAG E 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-CALLE D REPRESENTATIONS MADE BY THE PROFESSIONAL BODIES. THE LEARNED TRIBUNAL HELD THAT SECTION 40(A)(IA) O F THE ACT CREATES A LEGAL FICTION BY VIRTUE OF WHICH EVEN THE GENUINE A ND ADMISSIBLE EXPENSES CLAIMED BY AN ASSESSEE UNDER THE HEAD INCOME F ROM 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 THEREFO RE CANNOT BE INVOKED BY ASSESSING OFFICER TO DISALLOW THE GENUINE AND REASONABLE EXPENDITURE ON THE AMOUNTS OF EXPENDITURE ALREADY PA ID? DOES THIS NOT AMOUNT TO DELIBERATELY READING SOMETHING IN THE LAW WHICH IS NOT THERE? 14 WE AS SUCH HAVE NO DOUBT IN OUR MIND THAT THE LEARN ED TRIBUNAL REALIZED THE MEANING AND PURPORT OF SECTION 40(A)(I A) CORRECTLY WHEN IT HELD THAT IN CASE OF OMISSION TO DEDUCT TAX EVEN THE G ENUINE AND ADMISSIBLE EXPENSES ARE TO BE DISALLOWED. BUT THEY SOUGH T TO REMOVE THE RIGOUR OF THE LAW BY HOLDING THAT THE DISALLOWAN CE SHALL BE RESTRICTED TO THE MONEY WHICH IS YET TO BE PAID. WHAT THE TRIBU NAL BY MAJORITY DID WAS TO SUPPLY THE CASUS OMISSUS WHICH WAS NOT PERMISSIBLE AND COULD ONLY HAVE BEEN DONE BY THE SUPREME COURT IN AN APPR OPRIATE CASE. REFERENCE IN THIS REGARD MAY BE MADE TO THE JUDGMENT IN THE CASE OF BHUWALKA STEEL INDUSTRIES VS. BOMBAY IRON & STEEL LAB OUR BOARD REPORTED IN 2010 (2) SCC 273. UNPROTECTED WORKER WAS FINALLY DEFINED IN SECTION 2 (II) OF THE MATHADI ACT AS FOLLOWS:- UNPROTECTED WORKER MEANS A MANUAL WORKER WHO IS ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMENT. THE CONTENTION RAISED WITH REFERENCE TO WHAT WAS THER E IN THE BILL WAS REJECTED BY THE SUPREME COURT BY HOLDING AS FOLLOWS:- IT MUST AT THIS JUNCTURE BE NOTED THAT IN SPITE OF SECTION 2(11) WHICH INCLUDED THE WORDS BUT FOR THE PROVISIONS OF THIS ACT IS NOT ADEQUATELY PROTECTED BY LEGISLATION FOR WELFARE AND BENEFITS OF THE LABOUR FORCE IN THE STATE THESE PRECISE WORDS WER E REMOVED BY THE LEGISLATURE AND THE DEFINITION WAS MADE LIMITED AS IT HAS BEEN FINALLY LEGISLATED UPON. IT IS TO BE NOTED THAT WHE N THE BILL CAME TO BE PASSED AND RECEIVED THE ASSENT OF THE VICE- PRES IDENT ON 05-06- 1969 AND WAS FIRST PUBLISHED IN THE MAHARASHTRA GOV ERNMENT GAZETTE EXTRAORDINARY PART IV ON 13-06-1969 THE A FOREMENTIONED WORDS WERE OMITTED. THEREFORE THIS WOULD BE A CLEA R POINTER TO THE LEGISLATIVE INTENT THAT THE LEGISLATURE BEING CONSC IOUS OF THE FACT AND BEING ARMED WITH ALL THE COMMITTEE REPORTS AND ALSO BEING ARMED WITH THE FACTUAL DATA DELIBERATELY AVOIDED T HOSE WORDS. WHAT THE APPELLANTS ARE ASKING WAS TO READ IN THAT DEFINITION THESE PRECISE WORDS WHICH WERE CONSCIOUSLY AND DEL IBERATELY OMITTED FROM THE DEFINITION. THAT WOULD AMOUNT TO S UPPLYING THE CASUS OMISSUS AND WE DO NOT THINK THAT IT IS POSSIB LE PARTICULARLY IN THIS CASE. THE LAW OF SUPPLYING THE CASUS OMISSU S BY THE COURTS IS EXTREMELY CLEAR AND SETTLED THAT THOUGH THIS COURT M AY SUPPLY THE CASUS OMISSUS IT WOULD BE IN THE RAREST OF THE RAR E CASE AND THUS SUPPLYING OF THIS CASUS OMISSUS WOULD BE EXTREMELY N ECESSARY DUE TO THE INADVERTENT OMISSION ON THE PART OF THE LEGI SLATURE. BUT THAT IS CERTAINLY NOT THE CASE HERE. WE SHALL NOW ENDEAVOUR TO SHOW THAT NO OTHER INTERPRE TATION IS POSSIBLE. THE KEY WORDS USED IN SECTION 40(A)(IA) ACCO RDING 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 DEDUCTIBL E AT SOURCE UNDER CHAPTER XVII B. ONCE THIS IS REALIZED NOTHING TURNS ON THE BASIS OF THE FACT THAT THE LEGISLATURE USED THE WORD PAYAB LE AND NOT PAID OR CREDITED. UNLESS ANY AMOUNT IS PAYABLE IT CAN NEITH ER BE PAID NOR CREDITED. IF AN AMOUNT HAS NEITHER BEEN PAID NOR CRE DITED THERE CAN BE NO OCCASION FOR CLAIMING ANY DEDUCTION. THE LANGUAGE USED IN THE DRAFT WAS UNCLEAR AND SUSCEPTI BLE TO GIVING MORE THAN ONE MEANING. BY LOOKING AT THE DRAFT IT C OULD BE SAID THAT THE LEGISLATURE WANTED TO TREAT THE PAYMENTS MADE OR CRED ITED IN FAVOUR OF A CONTRACTOR OR SUB-CONTRACTOR DIFFERENTLY THAN THE PA YMENTS ON ACCOUNT 15 OF INTEREST COMMISSION OR BROKERAGE FEES FOR PROFESSION AL SERVICES OR FEES FOR TECHNICAL SERVICES BECAUSE THE WORDS AMOUNTS CR EDITED 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 DEDUCTIBL E AT SOURCE UNDER CHAPTER XVII-B PAYABLE ON ACCOUNT OF INTEREST COMMI SSION OR BROKERAGE RENT ROYALTY FEES FOR PROFESSIONAL SERVICE S OR FEES FOR TECHNICAL SERVICES OR TO A CONTRACTOR OR SUB-CONTRACTO R 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 ENACT ED LAW IS CLEAR AND UNAMBIGUOUS WHEREAS THE LANGUAGE USED IN THE BILL WAS A MBIGUOUS. 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 T O READ THE SAME IN A MANNER WHICH WAS NOT INTENDED BY THE LEGISLATURE. T HIS IS OUR ANSWER TO THE SUBMISSION OF MR. BAGCHI. THE SUBMISSION OF MS. ROY CHOWDHURI THAT THE SECOND PROVISO SOUGHT TO BECOME EFFECTIVE FR OM 1ST APRIL 2013 SHOULD BE HELD TO HAVE ALREADY BECOME OPERATIVE PRIO R TO THE APPOINTED DATE CANNOT ALSO BE ACCEDED TO FOR THE SAME REASON IN DICATED ABOVE. THE LAW WAS DELIBERATELY MADE HARSH TO SECURE COMPLIA NCE OF THE PROVISIONS REQUIRING DEDUCTIONS OF TAX AT SOURCE. IT IS NOT THE CASE OF AN INADVERTENT ERROR. FOR THE REASONS DISCUSSED ABOVE WE ARE OF THE OPINION T HAT THE MAJORITY VIEWS EXPRESSED IN THE CASE OF MERILYN SHIPPING & TRANSPORTS A RE NOT ACCEPTABLE. THE SUBMISSIONS ADVANCED BY LEARNED ADVOCATES HAVE ALREADY B EEN DEALT WITH AND REJECTED. THE APPEAL IS THUS ALLOWED IN FAVOUR OF THE REVENU E. 8.2 WE FIND THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. SIKANDARKHAN N. TUNVAR IN THE ORDER DATED 02-05-201 3 REPORTED IN 2013- TIOL-389-HC-AHM HAS HELD AS UNDER : 5. IN ALL THESE APPEALS THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH IN THE CASE OF M/S. MERILYN SHIPPING & TRANSP ORTS VS. ACIT (SUPRA) AND DELETED THE DISALLOWANCE ON THIS LIMITED GROUND. AS IN THE PRESENT CASE OTHER GROUNDS OF CONTROVERSY BETWEEN THE PARTIES WITH RESPECT TO ALLOWABILITY OR OTHERWISE OF SUCH EXPENDITURE WAS NOT EXAMINED BY THE TRIBUNAL. FOR THE PURPOSE OF THESE APPEALS THEREFORE WE FRAME FOLLO WING SUBSTANTIAL QUESTIONS OF LAW:- '1. WHETHER DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT 1961 COULD BE MADE ONLY IN RESPECT OF SUCH AMOUNTS WHICH ARE PAYABLE AS ON 31ST MARCH OF THE YEAR UNDER CONSI DERATION? 2. WHETHER DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) LAYS DOWN CORRECT LAW?' 6. COUNSEL FOR THE REVENUE CONTENDED THAT THE TRIBUNAL HAS COMMITTED SERIOUS ERROR IN HOLDING THAT PROVISION OF SECTION 40( A)(IA) OF THE ACT WOULD APPLY ONLY WHEN THE AMOUNT HAS REMAINED PAYABLE TILL THE END OF THE ACCOUNTING YEAR. THEY POINTED OUT THAT THE WORD 'PAY ABLE' HAS NOT BEEN DEFINED UNDER THE ACT AND THE SAME WOULD IN THE CON TEXT OF THE PROVISION UNDER CONSIDERATION INCLUDE THE EXPRESSION 'PAID'. ANY OTHER INTERPRETATION 16 WOULD LEAD TO ABSURD RESULTS. THEY CONTENDED THAT THE INTERPRETATION WHICH ADVANCES THE TRUE MEANING OF THE PROVISION SHOULD BE ADOPTED AND NOT ONE WHICH FRUSTRATES THE PROVISION. 7. IN THIS RESPECT RELIANCE WAS PLACED ON THE FOLLOWI NG DECISIONS:- (1) IN THE CASE OF K.P.VARGHESE VS. INCOME-TAX OFFI CER ERNAKULAM AND ANOTHER REPORTED IN [1981] 131 ITR 5 97 = F2O02-TIOL-128-SC-IT) IN WHICH IT WAS OBSERVED THAT 'IT IS A WELL RECOGNIZED RULE OF CONSTRUCTION THAT THE STA TUTORY PROVISION MUST BE SO CONSTRUED IF POSSIBLE THAT A BSURDITY AND MISCHIEF MAY BE AVOIDED.' (2) IN THE CASE OF COMMISSIONER OF INCOME-TAX BANG ALORE VS. J.H. GOLTA REPORTED IN [1985] 156 ITR 323 = (2002-TIOL- 131-SC-IT) IN WHICH IT WAS OBSERVED THAT 'WHERE THE PLAIN LITERAL INTERPRETATION OF A STATUTORY PROVISION PRO DUCES A MANIFESTLY UNJUST RESULT WHICH COULD NEVER HAVE BE EN INTENDED BY THE LEGISLATURE THE COURT MIGHT MODIFY THE LANGUAGE USED BY THE LEGISLATURE SO AS TO ACHIEVE T HE INTENTION OF THE LEGISLATURE AND PRODUCE RATIONAL CONSTRUCTION.' (3) IN THE CASE OF C.W.S.(INDIA) LTD. VS. COMMISSIO NER OF INCOME-TAX REPORTED IN [1994] 208 ITR 649 IN WHICH IT WAS OBSERVED THAT 'WHILE WE AGREE THAT LITERAL CONSTRUC TION MAY BE THE GENERAL RULE IN CONSTRUING TAXING ENACTMENTS IT DOES NOT MEAN THAT IT SHOULD BE ADOPTED EVEN IF IT LEADS TO A DISCRIMINATORY OR INCONGRUOUS RESULT. INTERPRETATIO N OF STATUTES CANNOT BE A MECHANICAL EXERCISE.' 8. COUNSEL ALSO CONTENDED THAT INTERPRETATION MADE B Y THE TRIBUNAL LEADS TO RESULTS WHOLLY UNINTENDED BY THE LEGISLATURE . IF DISALLOWANCE UNDER SECTION 40(A)(IA) IS APPLIED ONLY IN CASE OF AMOUNTS PAYABLE AS ON 31ST MARCH OF THE YEAR UNDER CONSIDERATION IN LARGE NUMB ER OF CASES WHERE THE ASSESSEES MIGHT HAVE ACTUALLY PAID THE AMOUNTS BUT MIGHT NOT HAVE EITHER DEDUCTED TAX AT SOURCE THOUGH REQUIRED UNDER THE ACT OR EVEN AFTER DEDUCTION NOT DEPOSITED WITH THE GOVERNMENT WOULD ESC APE THE CONSEQUENCES ENVISAGED UNDER THE SAID PROVISION. IT WAS FURTHER CONTENDED THAT SECTION 40(A)(IA) OF THE ACT IN ITS PLAIN LANGUAGE D OES NOT PERMIT SUCH INTERPRETATION ADOPTED BY THE TRIBUNAL IN THE CASE OF M /S. MERILYN SHIPPING & TRANSPORTS VS. ACIT(SUPRA). EVEN ON THE PREMISE OF LITERAL CONSTRUCTION THE VIEW ADOPTED BY THE TRIBUNAL SHOULD BE REJECTED. 9. ON THE OTHER HAND COUNSEL APPEARING FOR THE ASS ESSEES SUPPORTED THE VIEW OF THE TRIBUNAL. THEY CONTENDED THAT IN TAXING STATUTE THERE IS NO ROOM FOR INTENDMENT. THE PROVISIONS MUST BE CONSTRUED STRICTLY ON THE BASIS OF PLAIN LANGUAGE USED BY THE LEGISLATURE. ACCOR DING TO THEM ONLY MEANING THAT CAN BE ASCRIBED TO SECTION 40(A)(IA) OF TH E ACT IS THAT THE DISALLOWANCE CAN BE MADE IN RESPECT OF AMOUNTS WHICH ARE PAYABLE BUT NOT YET PAID TILL 31ST MARCH OF THE YEAR UNDER CONSIDERAT ION AND NO OTHER. 10. IT WAS CONTENDED THAT THE PROVISION IN QUESTION IS EXPROPRIETARY SINCE IT DISALLOWS ENTIRE EXPENDITURE FOR NOT DEDUCTING A SMALL PORTION OF TAX AT SOURCE. IT IS THUS IN A NATURE OF PENALTY. IT WAS CONTEND ED THAT IN ANY CASE SECTION 40(A)(IA) CREATES DEEMING FICTION WHERE THE SU M . THOUGH NOT AN INCOME OF THE ASSESSEE IS TAXED AS SUCH. IT WAS THEREFORE CON TENDED THAT SUCH PROVISION SHOULD BE INTERPRETED STRICTLY AN D NARROWLY. EVEN IF THE INTENTION OF THE LEGISLATURE MAY NOT HAVE BEEN TO LIMIT SUCH PROVISI ON IF THE PLAIN LANGUAGE OF THE SECTION PERMITS NO OTHER MEAN ING THIS COURT CANNOT AND WOULD NOT EXPAND THE MEANING OF THE SECTION TO COVER ANY LEGISLATIVE IMPERFECTIONS OR ERRORS. 17 11. IT WAS STRONGLY CONTENDED THAT TERMS 'PAYABLE' AND 'PAID' ARE NOT SYNONYMOUS. SECTION 40(A)(IA) THEREFORE WHEN USES THE EXPRESSION 'PAYABLE' SUCH TERM MUST BE GIVEN ITS ORDINARY MEANING AND THE EXPRESSION 'PAID' CANNOT BE READ INTO IT. COUNSEL F URTHER SUBMITTED THAT THE FINANCE BILL NO.2 OF 2004 UNDER WHICH SECTION 40 OF THE ACT WAS P ROPOSED TO BE AMENDED TO INCLUDE CLAUSE (A)(IA) ORIGINALLY USED DIFFERENT LANG UAGE. IN PLACE OF THE WORD 'PAYABLE' EXPRESSION USED WAS 'AMOUNT CREDITED OR PAID'. IN THE AMENDMENT WHICH WAS ULTIMATELY BROUGHT ABOUT THE SAID EXPRESSION WAS CONSCIOUSLY DROPPED. THUS THERE WAS CONSCIOUS OMISSION ON THE PART OF THE LEGISLATURE. THEY THEREFORE CONTENDED WITH ALL THE MORE FORCE THAT THE TERM 'PAYABLE' USED IN SECTION 40(A)(IA) OF THE ACT WO ULD NOT INCLUDE EXPRESSION 'PAID'. THEY POINTED OUT THAT TERM 'PAID' HAS B EEN DEFINED UNDER SECTION 43(2) OF THE ACT WHEREAS THE WORD 'PAYABLE' HAS NOT BEEN DEFINED IN THE ACT. 12. IN SUPPORT OF THE CONTENTIONS THEY RELIED ON THE FOLLOWING DECISION:- IN THE CASE OF MUGAT DYEING AND PRINTING MILLS VS. ASSI STANT COMMISSIONER OF INCOME-TAX REPORTED IN [2007] 290 ITR 282 (GUJ) IN WHICH THE DIVISION BENCH OF THIS COURT IN THE CONTEXT OF SECTION 43B O F THE ACT OBSERVED THAT THE EXPRESSION EMPLOYED IN THE SAID SECTION IS 'ACTUALL Y PAID' AND IN VIEW OF THE NON-OBSTANTE CLAUSE CONTAINED IN THE SAID SECTION IT WOULD NOT BE PERMISSIBLE TO REFER TO THE EXPRESSION 'PAID' AS DEFINED UNDER SECTION 43(2) OF THE ACT. THIS DECISION HOWEVER WAS RENDERED IN TH E BACKGROUND OF SECTION 43B OF THE ACT WHICH USED THE EXPRESSION 'A CTUALLY PAID'. RELIANCE WAS PLACED IN THE CASE OF COMMISSIONER OF INCO ME-TAX VS. UPNISHAD INVESTMENT P. LTD AND OTHERS REPORTED IN [200 3] 260 ITR 532 WHEREIN THE DIVISION BENCH OF THIS COURT HAD AN OCCASI ON TO INTERPRET EXPRESSIONS 'RECEIVABLE' AND 'DUE'. IT WAS OBSERVED TH AT EXPRESSIONS 'RECEIVABLE' IS USED WITH REFERENCE TO THE RECIPIENT AND THE WORD 'PAYABLE' IS USED WITH REFERENCE TO THE PAYER. 13. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE S UPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX GUJARAT VS. ASHOKBHAI CHIMANBHAI REPORTED IN [1965] 56 ITR 42 WHEREIN WHILE EXPLAINING THE CONCEPT OF TAXABILITY OF INCOME WHEN IT ACCRUES ARISES OR IS RE CEIVED IT WAS OBSERVED THAT THE RECEIPT IS NOT THE ONLY TEST OF CHARGEABILIT Y TO TAX AND IF INCOME ACCRUES OR ARISES IT MAY BECOME LIABLE TO TAX. IN THI S CONTEXT IT WAS OBSERVED THAT 'WORKING OF COMPANY FROM DAY TO DAY WO ULD CERTAINLY NOT INDICATE ANY PROFIT OR LOSS EVEN WORKING OF THE COMP ANY FROM MONTH TO MONTH COULD NOT BE TAKEN AS A RELIABLE GUIDE FOR THI S PURPOSE. IF THE PROFIT OR LOSS HAS TO BE ASCERTAINED BY COMPARISON OF THE ASSETS AT TWO STATED POINTS THE MOST BUSINESSLIKE WAY WOULD BE TO DO SO AT STATED INT ERVALS OF ONE YEAR AND THAT WOULD BE A REASONABLE PERIOD TO BE ADOPTED FOR THE PURPOSE.' ON THE BASIS OF SUCH OBSERVATIONS IT WAS CANVASSED THAT THE PAYABILITY OF THE SUM AS REFERRED TO IN SECTION 40(A)(IA) OF THE ACT MU ST BE JUDGED AS ON 31ST MARCH OF THE PARTICULAR YEAR. 14. COUNSEL HAVE ALSO REFERRED TO VARIOUS JUDGMENTS IN SUPPORT OF THE CONTENTION THAT IN THE PRESENT CASE STRICT INTERPRETATION IS CALLED FOR. IT IS NOT NECESSARY TO REFER TO SUCH DECISIONS. 15. CHAPTER XVII-A OF THE ACT PERTAINS TO COLLECTION AN D RECOVERY OF THE TAX. PART-A THEREOF IS GENERAL. PART-B OF CHAPTER XVII PERTAINS TO DEDUCTIO N AT SOURCE. SEVERAL PROVISIONS HAVE BEEN MADE IN THE SAI D CHAPTER FASTENING THE LIABILITY ON THE PAYEE TO DEDUCT TAX AT SOURCE A ND DEPOSIT WITH THE GOVERNMENT. FOR EXAMPLE SUB-SECTION (1) OF SECTION 194A OF THE ACT PROVIDES THAT ANY PERSON NOT BEING AN INDIVIDUAL OR A N HINDU UNDIVIDED FAMILY WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF INTEREST OTHER THAN THE INCOME BY WAY OF INTEREST ON SECURITIES SHALL AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DR AFT OR BY ANY OTHER 18 MODE WHICHEVER IS EARLIER DEDUCT INCOME TAX AT THE RATES IN FORCE. LIKEWISE SECTION 194C OF THE ACT PROVIDES THAT ANY PERSON RESPO NSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (REFERRED TO AS A CONTRACTOR) FOR CARRYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR IN PURSUANCE OF A CONTRACT BET WEEN THE CONTRACTOR AND THE SPECIFIED PERSON SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMEN T THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHI CHEVER IS EARLIER DEDUCT THE AMOUNT SPECIFIED IN THE SAID PROVISION AS INCO ME-TAX ON INCOME COMPRISED THEREIN. SECTION 200 OF THE ACT PERTAINS TO DU TY OF PERSON DEDUCTING TAX. SUB-SECTION (1) THEREOF PROVIDES THAT ANY PERSON DEDUCTING ANY SUM IN ACCORDANCE WITH THE FOREGOING PROVISIONS OF THE CHAPTER SHALL PAY WITHIN THE PRESCRIBED TIME THE SUM SO DEDUCTED TO THE CREDIT OF THE CENTRAL GOVERNMENT OR AS THE BOARD DIRECTS. SECTION 2 01 PROVIDES FOR CONSEQUENCES OF FAILURE TO DEDUCT OR PAY TAX AT SOURCE . SUB-SECTION (1) THEREOF IN ESSENCE PROVIDES THAT ANY PERSON WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WITH THE PROVISIONS OF THE ACT OR REFERRED TO IN SUB- SECTION (1) OF SECTION 192 BEING AN EMPLOYER BUT DOES NOT DEDUCT OR DOES NOT PAY OR AFTER SO DEDUCTING FAILS TO PAY WHOLE OR P ART OF THE TAX AS REQUIRED UNDER THE ACT THEN SUCH PERSON SHALL WITHOU T PREJUDICE TO ANY OTHER CONSEQUENCES WHICH HE MAY INCUR BE DEEMED TO B E AN ASSESSEE IN DEFAULT IN RESPECT OF THE SAID TAX. SECTION 271C OF T HE ACT PROVIDES FOR PENALTY FOR FAILURE TO DEDUCT TAX AT SOURCE. 16. IN ADDITION TO SUCH PROVISIONS ALREADY EXISTING T HE LEGISLATURE INTRODUCED YET ANOTHER PROVISION FOR ENSURING COMPLI ANCE WITH THE REQUIREMENT OF DEDUCING TAX AT SOURCE AND DEPOSITING IT WITH THE CENTRAL GOVERNMENT. SECTION 40(A) (IA) RELEVANT FOR OUR PUR POSE READS AS UNDER:- '(IA) ANY INTEREST COMMISSION OR BROKERAGE RENT ROYALTY FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR BEING RESIDENT FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) ON WHICH TAX IS D EDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEE N DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUBSECTION (1) OF SECTION 139: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR HAS BEEN DEDUCT ED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECI FIED IN SUB- SECTION(L) OF SECTION 139 SUCH SUM SHALL BE ALLOWE D AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS Y EAR IN WHICH SUCH TAX HAS BEEN PAID.' 17. IN PLAIN TERMS SECTION 40(A)(IA) PROVIDES THAT IN CASE OF ANY INTEREST COMMISSION OR BROKERAGE RENT ROYALTY FEES FOR PROF ESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY W ORK ON WHICH TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUC TED OR AFTER DEDUCTION HAS NOT BEEN PAID BEFORE THE DUE DATE SUCH AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS O F BUSINESS OR PROFESSION' IRRESPECTIVE OF THE PROVISIONS CONTAINED IN SECTIONS 30 TO 38 OF THE ACT. PROVISO TO SECTION 40(A)(IA) HOWEVE R ENABLES THE ASSESSEE TO TAKE SUCH DEDUCTION IN SUBSEQUENT YEAR IF TAX IS D EDUCTED IN SUCH YEAR OR THOUGH DEDUCTED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION(1) OF SECTION 139 OF THE ACT. 18. IN SUCH CONTEXT THEREFORE THE QUESTION ARISES WHETHE R UNDER SECTION 40(A)(IA) OF THE ACT DISALLOWANCE OF THE EXPENDITURE PAYMENT OF WHICH THOUGH REQUIRED DEDUCTION OF TAX AT SOURCE HAS NOT BEEN MADE WOULD BE CONFINED ONLY TO THOSE CASES WHERE THE AMOUNT REMAINS PAYABLE TILL THE END OF THE PREVIOUS YEAR OR WOULD INCLUDE ALL AMOUNT S WHICH BECAME PAYABLE DURING THE ENTIRE PREVIOUS YEAR. 19 19. DECISION IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) WAS RENDERED BY THE SPECIAL BENCH BY A SPLIT OPINION. LEARNED ACCOUNTANT MEMBER WHO WAS IN MINORITY PLACED HEAVY RELIANCE ON A DECISION OF MADRAS HIGH COURT IN THE CASE OF TUBE INVESTMENTS OF INDIA LTD. AND ANOTHER VS. ASSISTANT COMMISSIONER OF INCOME-TAX (TDS) AND OTHERS REPORTED IN [2010] 325 ITR 610 (MAD) = (2O09-TIOL-5 29-HC-MAD-IT). LEARNED JUDGE DID NOTICE THAT THE HIGH COURT IN SUCH CASE WAS CONCERNED WITH THE VIRES OF THE STATUTORY PROVISION BUT FOUND SOM E OF THE OBSERVATIONS MADE BY THE COURT IN THE PROCESS USEFUL AND APPLICABLE. L EARNED JUDGE REJECTED THE THEORY OF NARROW INTERPRETATION OF TERM 'P AYABLE' AND OBSERVED AS UNDER: '12.4 IN OUR CONSIDERED OPINION THERE IS NO AMBIGU ITY IN THE SECTION AND TERM 'PAYABLE' CANNOT BE ASCRIBED NARRO W INTERPRETATION AS CONTENDED BY ASSESSEE. HAD THE IN TENTIONS OF THE LEGISLATURE WERE TO DISALLOW ONLY ITEMS OUTSTAN DING AS ON 31ST MARCH THEN THE TERM 'PAYABLE' WOULD HAVE BEEN QUALIFIED BY THE PHRASE AS OUTSTANDING ON 31ST MARCH. HOWEVER NO SUCH QUALIFICATION IS THERE IN THE SECTION AND THEREFOR E THE SAME CANNOT BE READ INTO THE SECTION AS CONTENDED BY THE ASSESSEE.' 20. ON THE OTHER HAND LEARNED JUDICIAL MEMBER SPEAK ING FOR MAJORITY ADOPTED A STRICTER INTERPRETATION. HEAVY RELIANCE WAS PLACED ON THE FINANCE BILL OF 2004 WHICH INCLUDED THE DRAFT OF THE AMENDMEN T IN SECTION 40 AND THE ULTIMATE AMENDMENT WHICH ACTUALLY WAS PASSED BY T HE PARLIAMENT. IT WAS OBSERVED THAT FROM THE COMPARISON BETWEEN THE PR OPOSED AND THE ENACTED PROVISION IT CAN BE SEEN THAT THE LEGISLATURE H AS REPLACED THE WORDS 'AMOUNTS CREDITED OR PAID' WITH THE WORD 'PAYABLE' IN T HE ENACTMENT. ON SUCH BASIS IT WAS HELD THAT THIS IS A CASE OF CONSCIOU S OMISSION AND WHEN THE LANGUAGE WAS CLEAR THE INTENTION OF THE LEGISLATURE HA D TO BE GATHERED FROM LANGUAGE USED. IN THEIR OPINION THE PROVISION WOULD APPL Y ONLY TO AMOUNTS WHICH ARE PAYABLE AT THE END OF THE YEAR. HAVING SAID SO CURIOUSLY IT WAS OBSERVED THAT THE PROVISO TO SECTION 40(A)(IA) OF THE ACT LAYS DOWN THAT EARLIER YEAR'S PROVISION CAN BE ALLOWED IN SUBSEQUENT Y EARS ONLY IF IDS IS DEDUCTED AND DEPOSITED AND THEREFORE REVENUE'S FEA R IS UNFOUNDED AS THE PROVISION OF SECTION 40(A)(IA) OF THE ACT COVERS THE SITUAT ION. 21. IN THE PRESENT CASE WE HAVE NO HESITATION IN ACCEPTI NG THE CONTENTION THAT THE PROVISION MUST BE CONSTRUED STRICT LY. THIS BEING A PROVISION WHICH CREATES AN ARTIFICIAL CHARGE ON AN AMOUNT WHICH IS OTHERWISE NOT AN INCOME OF THE ASSESSEE CANNOT BE LIB ERALLY CONSTRUED. UNDOUBTEDLY IF THE LANGUAGE OF THE SECTION IS PLAIN IT MUST BE GIVEN ITS TRUE MEANING IRRESPECTIVE OF THE CONSEQUENCES. WE HAVE NOTIC ED THAT THE PROVISION MAKES DISALLOWANCE OF AN EXPENDITURE WHICH HAS OTHERWISE BEEN INCURRED AND IS ELIGIBLE FOR DEDUCTION ON THE GROUND TH AT THOUGH TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE IT WAS NOT DEDUCTED OR IF DEDUCTED HAD NOT BEEN DEPOSITED BEFORE THE DUE DATE. BY ANY INTEND MENT OR LIBERAL CONSTRUCTION OF SUCH PROVISION THE LIABILITY CANNOT BE F ASTENED IF THE PLAIN MEANING OF THE SECTION DOES NOT SO PERMIT. 22. FOR THE PURPOSE OF THE SAID SECTION WE ARE ALSO OF THE OPINION THAT THE TERMS 'PAYABLE' AND 'PAID' ARE NOT SYNONYMOUS. W ORD 'PAID' HAS BEEN DEFINED IN SECTION 43(2) OF THE ACT TO MEAN ACTUALLY P AID OR INCURRED ACCORDING TO THE METHOD OF ACCOUNTING UPON THE BASIS OF WHICH PROFITS AND GAINS ARE COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. SUCH DEFINITION IS APPLICABLE FOR THE PURPOSE OF SECTION S 28 TO 41 UNLESS THE CONTEXT OTHERWISE REQUIRES. IN CONTRAST TERM 'PAYABLE' HAS NOT BEEN DEFINED. THE WORD 'PAYABLE' HAS BEEN DESCRIB ED IN WEBSTER'S THIRD NEW INTERNATIONAL UNABRIDGED DICTIONARY AS REQUIRING TO BE PAID: CAPABLE OF BEING PAID: SPECIFYING PAYMENT TO A PARTICULA R PAYEE AT A SPECIFIED TIME OR OCCASION OR ANY SPECIFIED MANNER. IN THE CONTEXT OF SECTION 40(A)(IA) THE WORD 'PAYABLE' WOULD NOT INCLUDE 'PAID'. I N OTHER WORDS 20 THEREFORE AN AMOUNT WHICH IS ALREADY PAID OVER CEASES TO BE PAYABLE AND CONVERSELY WHAT IS PAYABLE CANNOT BE ONE THAT IS ALREA DY PAID. WHEN AS RIGHTLY POINTED OUT BY COUNSEL MR. HEMANI THE ACT U SES TERMS 'PAID' AND 'PAYABLE' AT DIFFERENT PLACES IN DIFFERENT CONTEXT DIFFERENTLY FOR THE PURPOSE OF SECTION 40(A)(IA) OF THE ACT TERM 'PAYA BLE' 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 INTERCHANGA BLY. IN THE CASE OF BIRLA CEMENT WORKS AND ANOTHER VS. STATE OF RAJASTHAN AND ANOTHER REPORTED IN AIR 1994 (SC) 2393 THE APEX COURT OBSERVED THAT 'THE WORD PAYABLE IS A DESCRIPTIVE WORD WHICH ORDINARILY MEANS THAT WHICH MUST BE PAID OR IS DUE OR MAY BE PAID BUT ITS CORRECT MEANING CAN ONLY BE DET ERMINED IF THE CONTEXT IN WHICH IT IS USED IS KEPT IN VIEW. THE WORD HAS BEE N FREQUENTLY UNDERSTOOD TO MEAN THAT WHICH MAY CAN OR SHOULD BE PAID AND IS H ELD EQUIVALENT TO 'DUE'. 23. 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 WE WOULD LIKE TO EXAMINE 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. BOTH THESE ASPECTS W E WOULD ADDRESS ONE AFTER ANOTHER. IF ONE LOOKS CLOSELY TO THE PROVISI ON 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 SERV ICES PAYABLE TO RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUBCONTRACTOR BEING RESIDENT FOR CARRYING OUT ANY WORK. (B) THESE AMOUNTS ARE SUCH ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B. (C) SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTI ON 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 P ROVISO 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 S UCH 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 P ROVISION NOWHERE REQUIRES THAT THE AMOUNT WHICH IS PAYABLE MUST REMAIN SO PAY ABLE THROUGHOUT DURING THE YEAR. TO REITERATE THE PROVISION HAS CERTAIN STRICT A ND STRINGENT REQUIREMENTS BEFORE THE UNPLEASANT CONSEQUENCES ENV ISAGED THEREIN CAN BE APPLIED. WE ARE PREPARED TO AND WE ARE DUTY BOUND T O INTERPRET SUCH REQUIREMENTS STRICTLY. SUCH REQUIREMENTS HOWEVER CANNOT BE ENLARGED BY ANY ADDITION OR SUBTRACTION OF WORDS NOT USED BY THE LE GISLATURE. THE TERM USED IS INTEREST COMMISSION BROKERAGE ETC. IS PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY WORK. THE LANGUAGE USED IS NOT THAT SUCH AMOUNT MUST CONTINUE TO REMAI N PAYABLE TILL THE END OF THE ACCOUNTING YEAR. ANY SUCH INTERPRETATION WOULD REQUIRE READING WORDS WHICH THE LEGISLATURE HAS NOT USED. NO SUCH I NTERPRETATION WOULD EVEN OTHERWISE BE JUSTIFIED BECAUSE IN OUR OPINION THE LEGISLATURE COULD NOT HAVE INTENDED TO BRING ABOUT ANY SUCH DISTINCTION NOR TH E LANGUAGE USED IN THE SECTION BRINGS ABOUT ANY SUCH MEANING. IF THE INTERPRETATIO N AS ADVANCED BY THE ASSESSEES IS ACCEPTED IT WOULD LEAD TO A SITUATION WHERE THE ASSESSEE 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 AMOUN T WAS ALREADY PAID OVER BEFORE THE END OF THE YEAR IN CONTRAST TO ANOTHER A SSESSEE WHO WOULD OTHERWISE 21 BE IN SIMILAR SITUATION BUT IN WHOSE CASE THE AMOUN T 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 DIVE RSE 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 THE PARLIAMENT CONVEYED SUCH A MEANING WE WOULD NOT HAVE HESITATED IN ADOPTING SUCH AN INTERPRETATION. WE ONLY HIGHLIGHT THAT WE WOULD NOT READIL Y ACCEPT THAT THE LEGISLATURE DESIRED TO BRING ABOUT AN INCONGRUOUS AND SEEMINGLY IRRECON CILABLE CONSEQUENCES. THE DECISION OF THE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX GUJARAT VS. ASHOKBHAI CHIMANBHAI (SUPRA) WOULD NOT ALTER THIS SITUATION. THE SAID DECISION OF COURSE RECOGNIZES THE CO NCEPT OF ASCERTAINING THE PROFIT AND LOSS FROM THE BUSINESS OR PROFESSION WITH REFERENCE TO A CERTAIN PERIOD I.E. THE ACCOUNTING YEAR. IN THIS CONTEXT LAST DATE OF SUCH ACCOUNTING PERIOD WOULD ASSUME CONSIDERABLE SIGNIFICANCE. HOWEVER THIS DECISION NOWHERE INDICATES THAT THE EVENTS WHICH TAKE PLACE DURING THE ACCOUNTING PERIOD SHOULD BE IGNORED AND THE ASCERTAINMENT OF FULFILLING A CERTAIN CONDITION PROVIDED UNDER THE STATUTE MUST BE JUDGED WITH REFERENCE TO LAST DATE OF THE ACCOUNTING PERIOD. PARTICULARLY IN THE CONTEXT OF REQUIREMENTS OF 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 31 ST 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 M UST BE ASCERTAINED ON THE STRENGTH OF THE POSITION EMERGING ON 31ST MARCH. 25. THIS BRINGS US TO THE SECOND ASPECT OF THIS DI SCUSSION 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 C OURTS HAVE OFTEN APPLIED HYDEN'S RULE OR THE MISCHIEF RULE AND ASCERTAINED W HAT WAS THE POSITION BEFORE THE AMENDMENT WHAT THE AMENDMENT SOUGHT TO REMEDY AND WHAT WAS THE EFFECT OF THE CHANGES. 27. IN THE CASE OF BENGAL IMMUNITY CO. LTD. VS. STA TE OF BIHAR AND OTHERS REPORTED IN AIR 1955 SC 661 THE APEX COURT REFERRED TO THE FAMOUS ENGLIS H DECISION IN HYDEN'S CASE WHEREIN WHILE ADOPTING RESTRICTIVE OR ENLARGING INTERPRETATION IT WAS OBSERVED THAT FOUR THINGS ARE TO B E CONSIDERED (1) WHAT WAS THE COMMON LAW BEFORE MAKING OF THE ACT (2) WHA T WAS THE MISCHIEF AND DEFECT IN WHICH THE COMMON LAW DID NOT PROVIDE. (3) WHAT REMEDY THE PARLIAMENT HAD RESOLVED AND ADOPTED TO CURE THE DIS EASE AND (4) TRUE REASON OF THE REMEDY. 28. IN SUCH CONTEXT THE POSITION PREVAILING PRIOR TO THE AMENDMENT INTRODUCED IN SECTION 40(A) WOULD CERTAINLY BE A RELEVANT FACTOR. HOWEVER THE P ROCEEDINGS IN THE PARLIAMENT ITS DEBATES AND EVEN THE SPEECHES MADE BY THE PROPOSER OF A BILL ARE ORDINARILY NOT CONSIDERED AS RELEVANT OR SAFE TOOLS FOR INTERPRETATION OF A STATUTE. IN THE CASE OF ASWINI KUMAR CHOSE AND ANOTHER VS. ARABI NDA BOSE AND ANOTHER REPORTED IN A.I.R. 1952 SC 369 IN A CONSTITUTI ON BENCH DECISION OF (CORAM: PATANJALI SASTRI CJ.) OBSERVED THAT:- '33. .....IT WAS URGED THAT ACCEPTANCE OR REJECTION OF AMENDMENTS TO A BILL IN THE COURSE OF PARLIAMENTARY PROCEEDINGS FOR MS PART OF THE PRE- ENACTMENT HISTORY OF A STATUTE AND AS SUCH MIGHT TH ROW VALUABLE LIGHT ON THE INTENTION OF THE LEGISLATURE WHEN THE LANGUA GE USED IN THE STATUE ADMITTED OF MORE THAN ONE CONSTRUCTION. WE A RE UNABLE TO ASSENT TO THIS PREPOSITION. THE REASON WHY A PARTICULAR AMENDMENT WAS PROPOSED OR ACCEPTED OR REJECTED IS OFTEN A MATTER OF CONTROVERSY AS IT HA PPENED TO BE IN THIS 22 CASE AND WITHOUT THE SPEECHES BEARING UPON THE MOT ION IT CANNOT BE ASCERTAINED WITH ANY REASONABLE DEGREE OF CERTAINTY . AND WHERE THE LEGISLATURE HAPPENS TO BE BICAMERAL THE SECOND CHA MBER MAY OR MAY NOT HAVE KNOWN OF SUCH REASON WHEN IT DEALT WITH TH E MEASURE. WE HOLD ACCORDINGLY THAT ALL THE THREE FORMS OF EXTRIN SIC AID SOUGHT TO BE RESORTED TO BY THE PARTIES IN THE CASE MUST BE EXCL UDED FROM CONSIDERATION IN ASCERTAINING THE TRUE OBJECT AND I NTENTION OF THE LEGISLATURE.' 29. IN YET ANOTHER CONSTITUTION BENCH JUDGMENT IN TH E CASE OF A.K.GOPALAN VS. STATE OF MADRAS REPORTED IN AIR 1950 SC 27 IT WA S OBSERVED AS UNDER: - '17.....THE RESULT APPEARS TO BE THAT WHILE IT IS N OT PROPER TO TAKE INTO CONSIDERATION THE INDIVIDUAL OPINIONS OF MEMBERS OF PARLIAMENT OR CONVENTION TO CONSTRUE THE MEANING OF THE PARTICULA R CLAUSE WHEN A QUESTION IS RAISED WHETHER A CERTAIN PHRASE OR EXPR ESSION WAS UP FOR CONSIDERATION AT ALL OR NOT A REFERENCE TO THE DEB ATES MAY BE PERMITTED.' 30. IN THE CASE OF EXPRESS NEWSPAPER (PRIVATE) LTD. AND ANOTHER VS. THE UNION OF INDIA AND OTHERS REPORTED IN AIR 1958 SC 578 N.H.BHAGWATI J. OBSERVED AS UNDER :- 173. WE DO NOT PROPOSE TO ENTER INTO ANY ELABORATE DISCUSSION ON THE QUESTION WHETHER IT WOULD BE COMPETENT TO US IN ARR IVING AT A PROPER CONSTRUCTION OF THE EXPRESSION 'FIXING RATES OF WAG ES' TO LOOK INTO THE STATEMENT OF OBJECTS AND REASONS ATTACHED TO THE BI LL NO. 13 OF 1955 AS INTRODUCED IN THE RAJYA SABHA OR THE CIRCUMSTANCES UNDER WHICH THE WORD 'MINIMUM' CAME TO BE DELETED FROM THE PROVISIO NS OF THE BILL RELATING TO RATES OF WAGES AND THE WAGE BOARD AND T HE FACT OF SUCH DELETION WHEN THE ACT CAME TO BE PASSED IN ITS PRES ENT FORM. THERE IS A CONSENSUS OF OPINION THAT THESE ARE NOT AIDS TO THE CONSTRUCTION OF THE TERMS OF THE STATUTE WHICH HAVE OF COURSE TO BE GIV EN THEIR PLAIN AND GRAMMATICAL MEANING (SEE: ASHVINI KUMAR GHOSH V. AR ABINDA BOSE 1953 SC R 1:(AIR 1952 SC 369) (Z24) AND PROVAT KUMA R KAR V. WILLIAM TREVELYAN CURTIEZ PARKER AIR 1950 CAL 116 (Z25) I T IS ONLY WHEN THE TERMS OF THE STATUTE ARE AMBIGUOUS OR VAGUE THAT RE SORT MAY BE HAD TO THEM FOR THE PURPOSE OF ARRIVING AT THE TRUE INTENT ION OF THE LEGISLATURE .' 31. IT CAN THUS BE SEEN THAT THE DEBATES IN THE PARLI AMENT ARE ORDINARILY NOT CONSIDERED AS THE AIDS FOR INTERPRETATION OF THE ULTIMATE PROVISION WHICH MAY BE BROUGHT INTO THE STATUTE. THE DEBATES AT BEST INDICATE THE OPINION OF THE INDIVIDUAL MEMBERS AND ARE ORDINARILY NOT RELIED UPO N FOR INTERPRETING THE PROVISIONS PARTICULARLY WHEN THE PROVISIONS ARE PLAIN. WE ARE CONSCIOUS THAT DEPARTURE IS MADE IN TWO EXCEPTIONAL CASES NAMELY TH E DEBATES IN THE CONSTITUENT ASSEMBLY AND IN CASE OF FINANCE MINISTER'S SPEECH EXPLAINING THE REASON FOR INTRODUCTION OF A CERTAIN PROVISION. THE REASON WHY A CERTAIN LANGUAGE WAS USED IN A DRAFT BILL AND WHY THE PROVISI ON ULTIMATELY ENACTED CARRIED A DIFFERENT EXPRESSION CANNOT BE GATHERED FROM MERE COMPARISON OF THE TWO SETS OF PROVISIONS. THERE MAY BE VARIETY OF REASONS WHY THE ULTIMATE PROVISION MAY VARY FROM THE ORIGINAL DRAFT. IN THE P ARLIAMENTARY SYSTEM TWO HOUSES SEPARATELY DEBATE THE LEGISLATIONS UNDER CONSIDERA TION. IT WOULD ALL THE MORE BE UNSAFE TO REFER TO OR RELY UPON THE DRAFTS AMENDMENTS DEBATES ETC FOR INTERPRETATION OF A STATUTORY PROVISION WHEN THE LANGU AGE USED IS NOT CAPABLE OF SEVERAL MEANINGS. IN THE PRESENT CASE THE TR IBUNAL IN CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) FELL I N 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. 32. IT IS OF COURSE TRUE THAT THE COURTS IN INDIA H AVE BEEN APPLYING THE PRINCIPLE OF DELIBERATE OR CONSCIOUS OMISSION. SUCH PRINCIPLE IS APPLIED MAINLY 23 WHEN AN EXISTING PROVISION IS AMENDED AND A CHANGE IS BROUGHT ABOUT. WHILE INTERPRETING SUCH AN AMENDED PROVISION THE COURTS WOU LD IMMEDIATELY INQUIRE WHAT WAS THE STATUTORY PROVISION BEFORE AND WHAT CHANG ES THE LEGISLATURE BROUGHT ABOUT AND COMPARE THE EFFECT OF THE TWO. THE OTHER OCCASION FOR APPLYING THE PRINCIPLE WE NOTICE FROM VARIOUS DECISIONS OF THE SUP REME COURT HAS BEEN WHEN THE LANGUAGE OF THE LEGISLATURE IS COMPA RED WITH SOME OTHER ANALOGOUS STATUTE OR OTHER PROVISIONS OF THE SAME STATUT E OR WITH EXPRESSION WHICH COULD APPARENTLY OR OBVIOUSLY BEEN USED IF THE LEGISLATURE HAD DIFFERENT INTENTION IN MIND WHILE FRAMING THE PROVISION. WE M AY REFER TO SOME OF SUCH DECISIONS PRESENTLY. IN THE CASE OF BHUWALKA STEEL INDUSTRIES LTD. VS. BOMBAY IRON AND STEEL LABOUR BOARD REPORTED IN AIR 2010 (SUP PL.) 122 THE APEX COURT OBSERVED AS UNDER:- 'THE OMISSION OF THE WORDS AS PROPOSED EARLIER FROM THE FINAL DEFINITION IS A DELIBERATE AND CONSCIOUS ACT ON THE PART OF THE LEGISLATURE ONLY WITH THE OBJECTIVE TO PROVIDE PRO TECTION TO ALL THE LABOURERS OR WORKERS WHO WERE THE MANUAL WORKE RS AND WERE ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPL OYMENT. THEREFORE THERE WAS A SPECIFIC ACT ON THE PART OF THE LEGISLATURE TO ENLARGE THE SCOPE OF THE DEFINITION AND ONCE WE ACCEPT THIS ALL THE ARGUMENTS REGARDING THE OBJECTS AND REASONS TH E COMMITTEE REPORTS THE LEGISLATIVE HISTORY BEING CONTRARY TO THE EXPRESS LANGUAGE ARE RELEGATED TO THE BACKGROUND AND ARE L IABLE TO BE IGNORED.' 33. IN THE CASE OF AGRICULTURAL PRODUCE MARKET COMMITTE E NARELA DELHI VS. COMMISSIONER OF INCOME TAX AND ANR. REPORTED IN A IR 2008 SC (SUPPLEMENT) 566 = (2008-TIOL-155-SC-IT) THE SUPREME COURT NOTICED THAT PRIOR TO FINANCE ACT 2002 THE INCOME TAX ACT D ID NOT CONTAIN THE DEFINITION OF WORDS 'LOCAL AUTHORITY'. THE WORD CAME TO BE DEFINED FOR THE FIRST TIME BY THE FINANCE ACT OF 2002 BY EXPLANATION/ DEFINITION CLAUSE TO SECTION 10(20) OF THE ACT. IT WAS FURTHER NOTICED THAT THERE WERE SIGNIFICANT DIFFERENCE IN THE DEFINITION OF TERM 'LOCAL AUTHORI TY' CONTAINED UNDER SECTION 3(31) OF THE GENERAL CLAUSES ACT 1987 AS COMP ARED TO THE DEFINITION - CLAUSE INSERTED IN SECTION 10(20) OF THE INCOME TAX ACT 1961 VIDE FINANCE ACT OF 2002. IN THIS CONTEXT IT WAS OBSERVED THAT:- ' 27. CERTAIN GLARING FEATURES CAN BE DECIPHERED FROM THE ABOVE COMPARATIVE CHART. UNDER SECTION 3(31) OF THE GENERAL CLAUSES ACT 1897 'LOCAL AUTHORITY' WAS DEFINED TO MEAN ' A MUNICIPAL COMMITTEE DISTRICT BOARD BODY OF PORT COMMISSIONERS OR OTHER AUTHORITY LEGALLY ENTITLED T O THE CONTROL OR MANAGEMENT OF A MUNICIPAL OR LOCAL FUND. THE WORDS ' OTHER AUTHORITY' IN SECTION 3(31) OF THE 18 97 ACT HAS BEEN OMITTED BY PARLIAMENT IN THE EXPLANATION/ DEFI NITION CLAUSE INSERTED IN SECTION 10(20) OF THE 1961 ACT V IDE FINANCE ACT 2002. THEREFORE IN OUR VIEW IT WOULD NOT BE CORRECT TO SAY THAT THE ENTIRE DEFINITION OF THE WORD 'LOCAL A UTHORITY' IS BODILY LIFTED FROM SECTION 3(31) OF THE 1897 ACT AN D INCORPORATED BY PARLIAMENT IN THE SAID EXPLANATIO N TO SECTION 10(20) OF THE 1961 ACT. THIS DELIBERATE OMI SSION IS IMPORTANT.' 34. THE APEX COURT IN THE CASE OF GREATER BOMBAY C OOPERATIVE BANK LTD. VS. M/S. UNITED YARN TEX. PVT. LTD & ORS. REPO RTED IN AIR 2007 SC 1584 IN THE CONTEXT OF QUESTION WHETHER THE COOPERATIVE BANKS TRANSACTING BUSINESS OF BANKING FALL WITHIN THE MEA NING OF 'BANKING COMPANY' DEFINED IN THE BANKING REGULATION ACT 1949 OBSERVED AS UNDER:- '59. THE RDB ACT WAS PASSED IN 1993 WHEN PARLIAMENT HAD BEFORE IT THE PROVISIONS OF THE BR ACT AS AMENDED B Y ACT NO.23 OF 1965 BY ADDITION OF SOME MORE CLAUSES IN S ECTION 56 OF THE ACT. THE PARLIAMENT WAS FULLY AWARE THAT THE PROVISIONS 24 OF THE BR ACT APPLY TO CO-OPERATIVE SOCIETIES AS TH EY APPLY TO BANKING COMPANIES. THE PARLIAMENT WAS ALSO AWARE TH AT THE DEFINITION OF 'BANKING COMPANY' IN SECTION 5(C) HAD NOT BEEN ALTERED BY ACT NO.23 OF 1965 AND IT WAS KEPT INTACT AND IN FACT ADDITIONAL DEFINITIONS WERE ADDED BY SECTION 5 6(C).'CO- OPERATIVE BANK' WAS SEPARATELY DEFINED BY THE NEWLY INSERTED CLAUSE (CCI) AND 'PRIMARY CO-OPERATIVE BANK' WAS SI MILARLY SEPARATELY DEFINED BY CLAUSE (CCV). THE PARLIAMENT WAS SIMPLY ASSIGNING A MEANING TO WORDS; IT WAS NOT INCORPORATING OR EVEN REFERRING TO THE ''SUBSTANTIV E PROVISIONS OF THE BR ACT. THE MEANING OF 'BANKING C OMPANY' MUST THEREFORE NECESSARILY BE STRICTLY CONFINED T O THE WORDS USED IN SECTION 5(C) OF THE BR ACT IT WOULD HAVE B EEN THE EASIEST THING FOR PARLIAMENT TO SAY THAT 'BANKING C OMPANY' SHALL MEAN 'BANKING COMPANY' AS DEFINED IN SECTION 5(C) AND SHALL INCLUDE 'CO-OPERATIVE BANK' AS DEFINED IN SEC TION 5(CCI) AND 'PRIMARY CO-OPERATIVE BANK' AS DEFINED IN SECTI ON 5(CCV). HOWEVER THE PARLIAMENT DID NOT DO SO. THERE WAS TH US A CONSCIOUS EXCLUSION AND DELIBERATE COMMISSION OF CO - OPERATIVE BANKS FROM THE PURVIEW OF THE RDB ACT. TH E REASON FOR EXCLUDING COOPERATIVE BANKS SEEMS TO BE THAT CO - OPERATIVE BANKS HAVE COMPREHENSIVE SELF-CONTAINED AND LESS EXPENSIVE REMEDIES AVAILABLE TO THEM UNDER THE STAT E CO- OPERATIVE SOCIETIES ACTS OF THE STATES CONCERNED W HILE OTHER BANKS AND FINANCIAL INSTITUTIONS DID NOT HAVE SUCH SPEEDY REMEDIES AND THEY HAD TO FILE SUITS IN CIVIL COURTS .' 35. IN THE CASE OF NATIONAL MINERAL DEVELOPMENT CO RPORATION LTD. VS. STATE OF M.P AND ANOTHER REPORTED IN AIR 2004 SC 245 6 THE APEX COURT OBSERVED AS UNDER:- '29. THE PARLIAMENT KNOWING IT FULL WELL THAT THE I RON ORE SHALL HAVE TO UNDERGO A PROCESS LEADING TO EMERGENCE OF L UMPS FINES CONCENTRATES AND SLIMES CHOSE TO MAKE PROVIS ION FOR QUANTIFICATION OF ROYALTY ONLY BY REFERENCE TO THE QUANTITY OF LUMPS FINES AND CONCENTRATES. IT LEFT SLIMES OUT O F CONSIDERATION. NOTHING PREVENTED THE PARLIAMENT FRO M EITHER PROVIDING FOR THE QUANTITY OF IRON ORE AS SUCH AS T HE BASIS FOR QUANTIFICATION OF ROYALTY. IT CHOSE TO MAKE PROVISI ON FOR THE QUANTIFICATION BEING AWAITED UNTIL THE EMERGENCE OF LUMPS FINES AND CONCENTRATES. HAVING DONE SO THE PARLIAME NT HAS NOT SAID 'FINES INCLUDING SLIMES'. THOUGH 'SLIMES' ARE NOT 'FINES' THE PARLIAMENT COULD HAVE ASSIGNED AN ARTIFICIAL OR EXT ENDED MEANING TO 'FINES' FOR THE PURPOSE OF LEVY OF ROYAL TY WHICH IT HAS CHOSEN NOT TO DO. IT IS CLEARLY SUGGESTIVE OF I TS INTENTION NOT TO TAKE INTO CONSIDERATION 'SLIMES' FOR QUANTIFYING THE AMOUNT OF ROYALTY. THIS DELIBERATE OMISSION OF PARLIAMENT CANNOT BE MADE GOOD BY INTERPRETATIVE PROCESS SO AS TO CHARGE ROYALTY ON 'SLIMES' BY READING SECTION 9 OF THE ACT DIVORCE D FROM THE PROVISIONS OF THE SECOND SCHEDULE. EVEN IF SLIMES W ERE TO BE HELD LIABLE TO CHARGE OF ROYALTY THE QUESTION WOUL D STILL HAVE REMAINED AT WHAT RATE AND ON WHAT QUANTITY WHICH QU ESTIONS CANNOT BE ANSWERED BY SECTION 9.' 36. IN THE CASE OF GOPAL SARDAR VS. KARUNA SARDAR REPOR TED IN AIR 2004 SC 3068 THE APEX . COURT IN THE CONTEXT OF LIMITATION WITHIN WHICH R IGHT OF PREEMPTION MUST BE EXERCISED AND WHETHER IN THE CONTE XT OF THE RELEVANT PROVISIONS CONTAINED IN WEST BENGAL LAND REFORMS AND LI MITATION ACT 1963 APPLIED OR NOT OBSERVED AS UNDER:- '8....PRIOR TO 15-2-1971 AN APPLICATION UNDER SECT ION 8 WAS REQUIRED TO BE MADE TO THE 'REVENUE OFFICER SPECIFI CALLY 25 EMPOWERED BY THE STATE GOVERNMENT IN THIS BEHALF.' THIS PHRASE WAS SUBSTITUTED BY THE PHRASE 'MUNSIF HAVING TERRITORIAL JURISDICTION' BY THE AFOREMENTIONED AME NDMENT. EVEN AFTER THIS AMENDMENT WHEN AN APPLICATION IS RE QUIRED TO BE MADE TO SECTION 8 OF THE ACT EITHER TO APPLY SEC TION 5 OF THE LIMITATION ACT OR ITS PRINCIPLES SO AS TO ENABLE A PARTY TO MAKE AN APPLICATION AFTER THE EXPIRY OF THE PERIOD OF LI MITATION PRESCRIBED ON SHOWING SUFFICIENT CAUSE FOR NOT MAKI NG AN APPLICATION WITHIN TIME. THE ACT IS OF 1955 AND FOR ALL THESE YEARS NO PROVISION IS MADE UNDER SECTION 8 OF THE ACT PROVIDING FOR CONDONATION OF DELAY. THUS WHEN SECT ION 5 OF THE LIMITATION ACT IS NOT MADE APPLICABLE TO THE PR OCEEDINGS UNDER SECTION 8 OF THE ACT UNLIKE TO THE OTHER PROC EEDINGS UNDER THE ACT AS ALREADY STATED ABOVE IT IS APPRO PRIATE TO CONSTRUE THAT THE PERIOD OF LIMITATION PRESCRIBED U NDER SECTION 8 OF THE ACT SPECIFICALLY AND EXPRESSLY GOV ERNS AN APPLICATION TO BE MADE UNDER THE SAID SECTION AND N OT THE PERIOD PRESCRIBED UNDER ARTICLE 137 OF THE LIMITATI ON ACT.' 37. IN OUR OPINION THE TRIBUNAL COMMITTED AN ERRO R IN APPLYING THE PRINCIPLE OF CONSCIOUS OMISSION IN THE PRESENT CASE. FIR STLY AS ALREADY OBSERVED WE HAVE SERIOUS DOUBT WHETHER SUCH PRINCIPLE CAN BE APPLIED BY COMPARING THE DRAFT PRESENTED IN PARLIAMENT AND ULTIMATE L EGISLATION WHICH MAY BE PASSED. SECONDLY THE STATUTORY PROVISION IS AMPLY CLEAR. 38. IN THE RESULT WE ARE OF THE OPINION THAT SECTION 40(A) (IA) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31TH MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. OF COURSE AS LONG AS THE OTHER REQUIREMENTS OF THE SAID PROVISION ' EXIST. IN THAT CONTEXT IN OUR OPINION THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPO RTS VS. ACIT (SUPRA) DOES NOT LAY DOWN CORRECT LAW. 39. WE ANSWER THE QUESTIONS AS UNDER:- QUESTION (1) IN THE NEGATIVE I.E. IN FAVOUR OF THE REVE NUE AND AGAINST THE ASSESSEES. QUESTION (2) ALSO IN THE NEGATIVE I.E. IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEES. 40. ALL TAX APPEALS ARE ALLOWED. DECISIONS OF THE TR IBUNAL UNDER CHALLENGE ARE REVERSED. IN THE EARLIER PORTION OF TH E JUDGMENT WE HAD RECORDED THAT THE TRIBUNAL IN ALL CASES HAD PROCEEDED ONLY ON THIS SHORT BASIS WITHOUT ADDRESSING OTHER ISSUES. WE THEREFORE PLACE ALL THESE MATTERS BACK BEFORE THE TRIBUNAL FOR FRESH CONSIDERATION OF OT HER ISSUES IF ANY REGARDING DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. ALL APPEALS ARE DISPOSED OF ACCORDINGLY. 8.3 HOWEVER WE FIND ALTHOUGH THE ABOVE 2 DECISIONS WERE RENDERED PRIOR TO THE HEARING BEFORE THE HONBLE ALLAHABAD HIGH CO URT THE SAME WERE NOT BROUGHT TO THE NOTICE OF THE HONBLE BENCH AND THE BENCH RELYING ON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MERILY N SHIPPING AND TRANSPORT LTD. (SUPRA) UPHELD THE DECISION OF THE TRIBUNAL. UNDER THESE CIRCUMSTANCES 26 FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT AND HONBLE CALCUTTA HIGH COURT (SUPRA) WE UPHOLD THE ORDER OF THE CIT(A) SUSTAINING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. WE FUR THER FIND THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. SHRI BHARAT DHANPAL PATIL VIDE ITA NO.600/PN/2012 ORDER DATED 30-07-2013 FOLLOWING THE DECISION OF HONBLE CALCUTTA HIGH COURT AND GUJARAT HIGH COURT CITED (SUPRA) HAD ALLOWED THE APPEAL FILED BY THE REVENUE WHEREIN THE CIT(A) HAD HELD THAT PROVISIONS OF SECTION 40(A)(IA) WOULD APPLY WHEN TH E AMOUNT IS PAYABLE AND WHERE THE EXPENDITURE IS PAID. THE ARGUMENT OF THE LD.COUNSEL FOR THE ASSESSEE THAT WHEN TWO VIEWS ARE POSSIBLE THE VIEW FAVOURABLE TO THE ASSESSEE HAS TO BE FOLLOWED IN VIEW OF THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD.(SUPRA) IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. IN TH IS VIEW OF THE MATTER WE UPHOLD THE ORDER OF THE CIT(A) AND THE GROUNDS RAIS ED BY THE ASSESSEE ARE DISMISSED. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF OCTOBER 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) ( R.K. PANDA) JUDICIAL MEMBER ACC OUNTANT MEMBER PUNE DATED: 22 ND OCTOBER 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II PUNE 4 CIT-II PUNE 5. THE D.R B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT PUNE BENCHES PUNE