TaxTMI 
TaxTMI 
2016 (4) TMI 1479
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....m of Rs.52,060/- towards audit fees. The assessee has not deducted tax. According to the Ld. counsel, the assessee has already paid the amount, therefore, in view of the decision of Special Bench of this Tribunal in Merilyn Shipping and Transports v. Addl.CIT (136 ITD 23), there cannot be any disallowance under Section 40(a)(ia) of the Act. 3. On the contrary, Sh. A.B. Koli, the Ld. Departmental Representative, submitted that the decision of the Special Bench in Merilyn Shipping and Transports (supra) was considered by the Calcutta High Court and Gujarat High Court and it was held that the decision of the Special Bench in Merilyn Shipping and Transports (supra) is no longer a good law. Therefore, the CIT(Appeals) by following the judgment of Calcutta High Court in CIT v. Cresent Export Syndicate (216 Taxman 258) and Gujarat High Court in CIT v. Sikandarkhan N. Tunvar (2013) 357 ITR 312, confirmed the order of the Assessing Officer. 4. We have considered the rival submissions on either side and perused the relevant material available on record. Under the scheme of Income-tax Act, the tax has to be deducted at the time of payment or while giving credit in the books of account. In t....
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....Court in CIT vs M/s Vector Shipping Services (P) Ltd (supra), copy of which is filed by the assessee. The Allahabad High Court, after reproducing the relevant paragraph from the order of CIT (A) and referring to the decision of the Special Bench of this Tribunal in Merilyin Shipping & Transports (supra) found that the Tribunal has not committed an error. It is obvious that there is no discussion about the correctness or otherwise of the decision rendered by the Special Bench of this Tribunal in Merilyn Shipping & Transports (supra). However, we find that the Gujarat High Court in the case of CIT vs Sikandarkhan N Tunvar ITA Nos 905 of 2012, 709 & 710 of 2012, 333 of 2013, 832 of 2012, 857 of 2012, 894 of 2012, 928 of 2012, 12 of 2013, 51 of 2013, 58 of 2013 and 218 of 2013 judgment dated 02-05-2013 considered the decision of the Special Bench of this Tribunal in Merilyn Shipping & Transports (supra) and specifically disagreed with the principles laid down by the Special of this Tribunal in Merilyn Shipping & Transports (supra). The Calcutta High Court also in the case of Crescent Exports Syndicate & Another in ITAT 20 of 2013 and GA 190 of 2013 judgment dated 03-04-2013 considered ....
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....and purport of the enacted law. It is the finally enacted law which is the will of the legislature. The Learned Tribunal fell into an error in not realizing this aspect of the matter. The Learned Tribunal held "that where language is clear the intention of the legislature is to be gathered from the language used". Having held so, it was not open to seek to interpret the section on the basis of any comparison between the draft and the section actually enacted nor was it open to speculate as to the effect of the so-called representations made by the professional bodies. The Learned Tribunal held that "Section 40(a)(ia) of the Act creates a legal fiction by virtue of which even the genuine and admissible expenses claimed by an assessee under the head "income from business and profession": if the assessee does not deduct TDS on such expenses are disallowed". Having held so was it open to the Tribunal to seek to justify that "this fiction cannot be extended any further and, therefore, cannot be invoked by Assessing Officer to disallow the genuine and reasonable expenditure on the amounts of expenditure already paid"? Does this not amount to deliberately reading something in ....
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....sus omissus would be extremely necessary due to the inadvertent omission on the part of the legislature. But, that is certainly not the case here. We shall now endeavour to show that no other interpretation is possible. The key words used in Section 40(a)(ia), according to us, are "on which tax is deductible at source under Chapter XVII-B". If the question is "which expenses are sought to be disallowed?" The answer is bound to be "those expenses on which tax is deductible at source under Chapter XVII-B. Once this is realized nothing turns on the basis of the fact that the legislature used the word 'payable' and not 'paid or credited'. Unless any amount is payable, it can neither be paid nor credited. If n amount has neither been paid nor credited, there can be no occasion for claiming any deduction. The language used in the draft was unclear and susceptible to giving more than one meaning. By looking at the draft it could be said that the legislature wanted to treat the payments made or credited in favour of a contractor of subcontractor differently than the payments on account of interest, commission or brokerage, fees for professional services or fees for technical servi....
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....nces 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 work. (b) These amounts are such on which tax is deductible at source under XVIII-B. (c) Such tax has not been deducted or after deduction has not been paid on or before due date specified in sub-Section (1) of Section 39. For the purpose of current discussion reference to the proviso is not necessary. 24. What this Sub-Section, therefore, requires is that there should be an amount payable in the nature described above, which is such on which tax is deductible at source under Chapter XVII-B but such tax has not been deducted or if deducted not paid before the due date. This provision nowhere requires that the amount which is payable must remain so payable throughout during the year. To reiterate the provision has certain strict and stringent require....
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....g 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 31st March of the year under consideration. Merely because, accounts are closed on that date and the computation of profit and loss is to be judged with reference to such date, does not mean that whether an amount is payable or not must be ascertained on the strength of the position emerging on 31st March. 25. This brings us to the second aspect of this discussion, namely, whether this is a case of conscious omission and therefore, the legislature must be seen to have deliberately brought about a certain situation which does not require any further interpretation. This is the fundamental argument of the Tribunal in the case of M/s Merilyn Shipping & Transports vs. ACIT (supra) to adopt a particular view. 26. While interpreting a statutory provision the Courts have often applied Hyden's rule or the mischief r....
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.... to be payable on the last day of the financial year, is not attracted. Therefore, according to the appellants, disallowance cannot be sustained. This contention was sought to be substantiated by relying on the judgment of the Allahabad High Court in Commissioner of Income Tax v. Vector Shipping Services (P) [(2013) 357 ITR 642 (All)]. Primarily, this contention should be answered with reference to the language used in the statutory provision. Section 40(a)(ia) makes it clear that the consequence of disallowance is attracted when an individual, who is liable to deduct tax on any interest payable to a resident on which tax is deductible at source, commits default. The language of the Section does not warrant an interpretation that it is attracted only if the interest remains payable on the last day of the financial year. If this contention is to be accepted, this Court will have to alter the language of Section 40(a)(ia) and such an interpretation is not permissible. This view that we have taken is supported by judgments of the Calcutta High Court in Crescent Exports Syndicate and another [ITAT 20 of 2013] and the Gujarat High Court in the case of Commissioner of Income Tax v. Sikan....
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....ion of the Assessing Officer that the companies were not in existence and accommodation entries were made is not justified. According to the Ld. counsel, the entire addition of Rs.3,00,00,000/- ought to have been deleted by the CIT(Appeals). Therefore, the CIT(Appeals) is not justified in confirming the addition to the extent of Rs.169,00,000/-. 9. On the contrary, Sh. A.B. Koli, the Ld. Departmental Representative, submitted that the assessee has not furnished any evidence to support the share application money said to be received to the extent of Rs.3,00,00,000/-. Even copies of the forms of share application money were not filed. The face value of share money was Rs.10/- and the assessee claims that the same was allotted at Rs.990/- per share. The transaction clearly establishes the dubious nature. Even the companies said to have invested the funds are not traceable and not in existence. Therefore, according to the Ld. D.R., the Assessing Officer found that the investment of Rs.3,00,00,000/- in the name of share application money is nothing but undisclosed income of the assessee. Referring to the bank statement filed by the assessee, copy of which is available in the paper-book....
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.... withdrawn within a short span of time. The Assessing Officer, however, found that the money withdrawn was used for purchase of fixed asset being residential plot in the name of the Directors and a car was also purchased in the name of the spouse of the Director. The Assessing Officer further found that a sum of Rs.38,00,000/- was advanced to another group of company, namely, M/s Jolie Fashions India Pvt. Ltd. as share application money. Therefore, it is obvious that the money deposited in the bank account was used for the personal expenditure of the Directors. 12. We find that the CIT(Appeals) found that there was a contradiction between the claim of the assessee and the evidence available with regard to share application money received. Referring to the money received from M/s Intelecom Ltd., the assessee claims that a sum of Rs.21,00,000/- said to have received. However, the affidavit shows a receipt of Rs.25,00,000/-. From the order of the CIT(Appeals), it appears that the Government website of the Department of Corporate affairs shows a different address than the one to which the letters were sent by the Assessing Officer. Therefore, this Tribunal is of the considered opinion....