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2016 (8) TMI 742 - HC - Income TaxApplication of Section 40a(ia) - whether the payments were made by the assessees in the previous year - Held that - Having regard to the judgment of the Gujarat High Court in Merilyn Shipping & Transport case 2012 (4) TMI 290 - ITAT VISAKHAPATNAM the orders of the Tribunal has to be set aside and the matter has to be remitted to the Tribunal for fresh consideration. It is also clarified that if the assessees so desire, it would be open to them to claim the benefit of Section 194(C)(3) as it stood prior to its substitution by Finance Act 2009 before the Tribunal, if necessary by producing additional materials also. It is also ordered that on consideration of the said contention, if the Tribunal finds that factual adjudication is necessary, it would be open to the Tribunal to remit the matter to the Assessing Officer for reconsideration.
Issues involved:
Challenge to orders of Income Tax Appellate Tribunal regarding additions made on freight payments under Section 40a(ia) of the Income Tax Act for the assessment year 2006-2007. Detailed Analysis: 1. Issue of Applicability of Section 40a(ia): The primary issue raised in the appeals was whether the Tribunal correctly held that Section 40a(ia) was inapplicable due to the payments being made in the previous year. The Tribunal allowed the appeals based on the decision in the Merilyn Shipping & Transport case. However, the Gujarat High Court in Commissioner of Income Tax v. Sikandarkhan N. Tunvar held that the Tribunal's order was incorrect. The Kerala High Court, in a similar case, followed the Gujarat High Court judgment, emphasizing that Section 40a(ia) is not limited to amounts remaining payable at the end of the financial year. Consequently, the Tribunal's reliance on the Merilyn Shipping & Transport case was deemed unsustainable, leading to the reversal of the Tribunal's decision. 2. Contention on Section 194(C)(3): The assessees argued that they had no liability to deduct tax under Section 194(C)(3) before its substitution by Finance Act 2 of 2009. However, this contention was not raised or considered by the Tribunal. The High Court declined to entertain this argument at this stage, as it was not previously addressed and urged before them. 3. Remittal to Tribunal for Fresh Consideration: In light of the Gujarat High Court's judgment and the court's own decision in a related case, the High Court set aside the Tribunal's orders and remitted the matter back to the Tribunal for fresh consideration. The assessees were given the opportunity to claim the benefit of Section 194(C)(3) as it stood before the 2009 amendment by presenting additional evidence if necessary. The Tribunal was instructed to conduct a factual adjudication if required and could refer the matter back to the Assessing Officer for reconsideration. 4. Disposal of Appeals: Ultimately, the High Court disposed of the appeals by setting aside the Tribunal's orders in ITA Nos. 325/10, 400/11, and 401/11, ruling in favor of the Revenue. The Tribunal was directed to re-examine the issue considering the court's observations and pass fresh orders accordingly. In conclusion, the judgment addressed the issues of the applicability of Section 40a(ia), the contention on Section 194(C)(3), and the remittal of the matter to the Tribunal for fresh consideration, ensuring a thorough analysis of the legal aspects involved in the case.
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