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2014 (11) TMI 1 - AT - Income TaxLiability to deduct TDS - Disallowance u/s 40(a)(ia) Held that - There are conflicting judicial opinions amongst the Calcutta High Court and Gujarat High Court on one side and the Allahabad High Court on the other side - when there are conflicting judicial opinions, it is a practice to follow the view which is favourable to the assessee as decided in COMMISSIONER OF INCOME TAX-IV Versus SIKANDARKHAN N TUNVAR 2013 (5) TMI 457 - GUJARAT HIGH COURT - in case of omission to deduct tax even the genuine and admissible expenses are to be disallowed - But they sought to remove the rigour of the law by holding that the disallowance shall be restricted to the money which is yet to be paid 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. Dismissal of SLP by Supreme Court Held that - It is well settled principles of law that dismissal of Special Leave Petition is not the law laid down by the Apex Court - What is binding is the law laid down by the Apex Court under Article 141 of the Constitution of India - A mere dismissal by one word, the Apex Court does not lay down any law thus, the order of the CIT(A) is upheld Decided against assessee.
Issues Involved:
1. Disallowance under section 40(a)(ia) of the Income Tax Act. 2. Applicability of section 40(a)(ia) to amounts paid versus amounts payable. 3. Conflicting judicial opinions on the interpretation of section 40(a)(ia). Detailed Analysis: 1. Disallowance under section 40(a)(ia) of the Income Tax Act: The primary issue in both appeals is the disallowance made under section 40(a)(ia) of the Income Tax Act. The assessee did not dispute the liability to deduct tax but argued that section 40(a)(ia) should not apply to amounts already paid during the financial year. The assessee relied on the Special Bench decision in Merilyn Shipping & Transports vs Addl CIT and the Allahabad High Court decision in CIT vs M/s Vector Shipping Services (P) Ltd, which supported the view that section 40(a)(ia) applies only to amounts payable as of the last date of the financial year. 2. Applicability of section 40(a)(ia) to amounts paid versus amounts payable: The Tribunal examined whether section 40(a)(ia) applies only to amounts payable at the end of the financial year or also to amounts paid during the year. The Calcutta High Court in Crescent Exports Syndicate & Another and the Gujarat High Court in CIT vs Sikandarkhan N Tunvar found that section 40(a)(ia) applies to both amounts paid and payable. These courts held that the provision's language does not restrict its application only to amounts payable as of the last date of the financial year. The Tribunal noted that the Calcutta High Court criticized the Special Bench's interpretation, which confined disallowance to amounts remaining payable at the year's end. 3. Conflicting judicial opinions on the interpretation of section 40(a)(ia): The Tribunal acknowledged conflicting judicial opinions from different High Courts. While the Allahabad High Court upheld the assessee's contention in M/s Vector Shipping Services (P) Ltd, the Calcutta and Gujarat High Courts provided more detailed reasoning, supporting the view that section 40(a)(ia) applies to both paid and payable amounts. The Tribunal preferred the judgments of the Calcutta and Gujarat High Courts due to their comprehensive reasoning and detailed analysis. Conclusion: The Tribunal concluded that the Special Bench decision in Merilyn Shipping & Transports does not express the correct position of law. It held that section 40(a)(ia) applies to both amounts paid and payable. The Tribunal dismissed the assessee's appeals, confirming the lower authorities' disallowance under section 40(a)(ia). The Tribunal emphasized that the dismissal of the Special Leave Petition by the Supreme Court does not constitute a law laid down by the Apex Court and is not binding. Order: The appeals filed by the assessee were dismissed, and the orders of the lower authorities were confirmed. The judgment was pronounced in the open court on October 17, 2014.
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