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2015 (8) TMI 760 - AT - Income TaxDisallowance under Section 40(a)(ia) - whether tax has to be deducted on the amount paid by the assessee and not only the amount payable by the assessee? - Held that - It is an admitted fact that the point of deduction of tax at source is at the time of payment or credit of the amount to the account of the payee. No provision of Income-tax Act requires the assessee to deduct tax at source in respect of the amount which was not paid. In other words, in respect of the amount which remains payable or to be credited, the Income-tax Act does not require deduction of tax. Therefore, if the assessee has not paid or credited any amount to the account, then there is no question of deduction of tax under any of the provision of the Income-tax Act. The contention of the assessee that the tax has to be deducted only on the amount remains payable on the last date of financial year and the deduction need not be made on the amount already paid, is contrary to provisions of Income-tax Act which requires deduction of tax. If the contention of the assessee is accepted, this Tribunal is of the considered opinion that the entire provisions of Income-tax Act which require the assessee to deduct tax would be meaningless. 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. Of course, as long as the other requirement 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 & Transports vs ACIT 2012 (4) TMI 290 - ITAT VISAKHAPATNAM , does not lay down correct law. - Decided against assessee.
Issues Involved:
1. Disallowance under Section 40(a)(ia) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Disallowance under Section 40(a)(ia) of the Income-tax Act, 1961: The primary issue in this appeal is the disallowance under Section 40(a)(ia) of the Income-tax Act, 1961. The Revenue's appeal challenges the order of the Commissioner of Income Tax (Appeals)-IV, Chennai, which pertains to the assessment year 2008-09. The CIT(Appeals) had relied on a prior Tribunal decision (ITO v. Theekathir Press) to conclude that tax needed to be deducted only on the amount remaining payable on the last date of the financial year. Since the transport charges of Rs. 15,02,082/- were already paid, the CIT(Appeals) found no question of disallowance under Section 40(a)(ia). The Departmental Representative argued that tax should be deducted on the amount paid by the assessee, not just the amount payable. Conversely, the respondent's counsel supported the CIT(Appeals)' interpretation, citing the Tribunal's decision in Theekathir Press. The Tribunal considered the rival submissions and relevant material. It noted that the point of deduction of tax at source is at the time of payment or credit of the amount to the payee's account. The Income-tax Act does not require tax deduction for amounts not paid or credited. The Tribunal found the assessee's contention-that tax deduction is only required for amounts payable on the last date of the financial year-contrary to the provisions of the Income-tax Act, which require deduction of tax on both paid and payable amounts. The Tribunal referenced its own detailed examination in I.T.A. Nos. 336 & 337/Mds/2015 (Shri V. Pandarinathan v. ITO), where it was observed that the Allahabad High Court's decision in Vector Shipping Services (P) Ltd. did not examine the legality of the Special Bench's decision in Merilyn Shipping and Transport. It was noted that the Calcutta High Court (CIT v. Crescent Export Syndicates) and Gujarat High Court (CIT v. Sikandarkhan N. Tunvar) found the Special Bench's decision unsustainable in law. The Tribunal preferred the detailed reasoning of the Calcutta and Gujarat High Courts over the Allahabad High Court's passing reference, which was not elaborately reasoned. The Tribunal further referenced the Cochin Bench's decision in Thomas George Muthoot v. ACIT, which aligned with the Calcutta and Gujarat High Courts' judgments. The Tribunal emphasized that when different High Courts express different opinions on a point of law, the judgment with elaborate reasoning should be preferred. The Tribunal concluded that the judgments of the Calcutta and Gujarat High Courts should be followed, rejecting the Special Bench's decision in Merilyn Shipping and the Allahabad High Court's decision in Vector Shipping Services. The Tribunal upheld the orders of the lower authorities, confirming the disallowance under Section 40(a)(ia). The Kerala High Court's decision in Thomas George Muthoot v. CIT also supported this view, stating that Section 40(a)(ia) applies to amounts payable at any time during the year, not just those remaining payable on the last day of the financial year. In conclusion, the Tribunal set aside the CIT(Appeals)' order and restored the Assessing Officer's order, allowing the Revenue's appeal. Order pronounced on 14th August, 2015 at Chennai.
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