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2014 (5) TMI 931 - AT - Income TaxDeletion made u/s 40(a)(ia) of the Act Failure to deduct TDS u/s 194C of the Act Works contract - Payments made to service provider for carrying out the work of the maintenance services The CIT(A) has adjudicated the issue following the order of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports and decided the issue in favour of the assessee without adjudicating the appeal on merit the order of the CIT(A) is set aside - the CIT(A) has not given any finding on merit, the matter is required to be remitted back to the CIT(A) to adjudicate the issue on merit as to whether the provisions of section 194C are applicable and as to whether the provision of section 40(a)(ia) is applicable in respect of such amounts, which are payable as on 31st of March of the year - the provision of section 40(a)(ia) would cover not only to the amounts which are payable as on 31st March of a particular year but also which are payable at any time during the year Decided in favour of Revenue. Applicability of M/s Merilyn Shipping & Transports Vs. ACIT; Range-1, Vishakhapatnam 2012 (4) TMI 290 - ITAT VISAKHAPATNAM Held that - The view expressed or the ratio laid down by the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports has been overruled - it cannot be said that the Hon ble Jurisdictional High Court has approved the view taken by the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports, the same has to be followed by the Tribunal situated within the jurisdiction of Hon ble Allahabad High Court - The Hon ble Jurisdictional High Court has not examined the issue at all and simple passing reference was made with regard to the order of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports and the relief was granted to the assessee on merit - the ratio laid down in the case of Merilyn Shipping & Transports, which has been suspended by Hon ble Andhra Pradesh High Court has not been approved by the Hon ble Allahabad High Court - subordinate judicial forum are not required to follow the ratio order laid down in the case of Merilyn Shipping & Transports, as it was overruled by the other High Court. - Decided in favor of revenue.
Issues Involved:
1. Deletion of addition made by the AO under Section 40(a)(ia) for non-deduction of TDS under Section 194C. 2. Reliance on the judgment of the Special Bench in the case of Merilyn Shipping & Transports. 3. Interpretation of the term 'payable' under Section 40(a)(ia). 4. Applicability of Section 194C to the payments made to Wipro G.E. Medical Systems. Issue-wise Detailed Analysis: 1. Deletion of Addition Made by the AO under Section 40(a)(ia) for Non-Deduction of TDS under Section 194C: The Commissioner of Income-tax (Appeal), Lucknow deleted the addition of Rs.33,14,317/- made by the AO under Section 40(a)(ia) on the grounds that the assessee failed to deduct TDS under Section 194C on payments made to M/s Wipro G. E. Medical Systems. The CIT(A) relied on the judgment of the Special Bench in the case of Merilyn Shipping & Transports, which stated that Section 40(a)(ia) is not applicable if the payment was made during the year and no amount remained payable at the end of the financial year. 2. Reliance on the Judgment of the Special Bench in the Case of Merilyn Shipping & Transports: The CIT(A) relied heavily on the judgment of the Special Bench in the case of Merilyn Shipping & Transports, which was followed by the Mumbai Bench in the case of Underwater Services Co. vs. Income Tax Officer. However, the Tribunal noted that the order of the Special Bench was stayed by the Hon'ble Andhra Pradesh High Court. The Tribunal also referenced judgments from the Hon'ble Calcutta High Court and the Hon'ble Gujarat High Court, which overruled the view taken by the Special Bench in Merilyn Shipping & Transports. 3. Interpretation of the Term 'Payable' under Section 40(a)(ia): The Tribunal discussed various judgments, including those from the Hon'ble Calcutta High Court and the Hon'ble Gujarat High Court, which held that Section 40(a)(ia) covers amounts payable at any time during the year, not just those payable at the end of the financial year. The Tribunal emphasized that the term 'payable' includes amounts paid during the year, aligning with the Departmental View as clarified by the CBDT in its circular dated 16/12/2013. 4. Applicability of Section 194C to Payments Made to Wipro G.E. Medical Systems: The Tribunal noted that the CIT(A) did not provide any findings on the applicability of Section 194C to the payments made to Wipro G.E. Medical Systems. The matter was previously set aside by the Tribunal to determine whether the contract between the assessee and Wipro G. E. Medical Systems was a work contract or a service contract. The CIT(A) was directed to adjudicate this issue on merit. Conclusion: The Tribunal set aside the order of the CIT(A) and restored the matter for adjudication on merit. It held that the provisions of Section 40(a)(ia) cover amounts payable at any time during the year, not just those payable at the end of the year. The appeal of the Revenue was allowed for statistical purposes, and the matter was remanded to the CIT(A) for further consideration on the applicability of Section 194C and the nature of the payments involved.
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