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TMI Blog2012 (9) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. 2. Briefly stated the facts of the case are that the assessee claimed deduction for charter hire charges amounting to Rs.8,67,20,000. The said amount was payable to its sister-concern i.e. M/s. Samson Maritime Limited (hereinafter called "SML"). During the course of assessment proceedings the assessee was required to show as to whether any deduction of tax at source was made from such payment in terms of section 194C. In the alternative, the assessee was also required to explain as to whether any deduction of tax at source was made from the payment of charter hire charges to SML u/s 194-I, the relevant part of which became effective from 13th July, 2006. The assessee explained that no payment was made nor any amount was credited to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer did not accept the view taken by the Tribunal in earlier year as regards the nonapplicability of section 194C on the charter hire charges, it was held that such amount was in the nature of contract payment and the total amount payable to SML for the period from 01.04.2006 to 03.11.2006 totaling Rs.5.41 crore was liable to be disallowed u/s 40(a)(ia). 3. In the first appeal, the learned CIT(A) observed that section 194C could not be applied because of the view taken by the Tribunal in the preceding year. He however took note of the amendment carried out to the provisions of section 194-I. As Explanation extending the scope of Rs.Rent' to machinery and plant etc. was inserted from 13.07.2006, the learned CIT(A) held that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to SML towards charter hire charges and consequently no disallowance u/s 40(a)(ia) can be made on that account. 5. As regards the applicability of section 194-I, it is observed that the term "Rent" has been defined in Explanation to section 194-I. The provisions as it stand now, was substituted by Taxation Laws (Amendment) Act, 2006 with effect from 13.07.2006 extending the scope of "rent" to any payment by whatever name called for the use inter alia of machinery or plant or equipment. In the pre-substituted explanation the term "rent" did not encompass any payment under any arrangement for the use of machinery, plant or equipment. Earlier it extended only to the payment for the use of any land or any building together with fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hire charges and as such no disallowance could be made. In other words, it was contended that since the credit as well as payment for the period 13.7.2006 to 02.11.2006 were made towards charter hire charges from 03.11.2006 onwards, there could be no applicability of section 194-I and resultantly no disallowance could be made u/s 40(a)(ia). In support of this contention the learned AR relied on the order passed by the Mumbai bench of the Tribunal in the case of M/s. Pranik Shipping & Services Limited v. ACIT in ITA No.5962/Mum/2009 dated 25.01.2012. The learned Departmental Representative opposed this contention by arguing that the liability to pay arose on monthly basis during the period 13.07.2006 to 02.11.2006 and as such the manner in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable, the question of disallowance u/s 40(a)(ia) is also ruled out. A copy of account of SML is placed on pages 4 to 13 of the paper book. Page no.14 of the paper book is the analysis of the ledger account of SML in the books of account of the assessee. From these pages it can be seen that the opening balance payable to SML as on 01.04.2006 was Rs.1.60 crore. The charter hire charges for the period 01.04.2006 to 12.07.2006 amounted to Rs.2.26 crore thereby making total liability at Rs.3.87 crore. The assessee made payments totaling Rs.3.66 crore from 03.04.2006 to 31.10.2006. The charter hire charges for the period 13.07.2006 to 02.11.2006 totaling Rs.2.48 crore were credited on or after 03.11.2006 and charter hire charges for the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 40(a)(ia) cannot be applied. 8. There is another reason to hold that no disallowance can be made u/s 40(a)(ia). It is seen from the account of SML that the charter hire charges for the period 13.07.2006 to 02.11.2006 amounting to Rs.2.48 crore was fully paid up to 30.03.2007. Recently the Special bench of the Tribunal in case of M/s. Merilyn Shipping & Transports VS. ACIT (ITAT Vishakhapatnam)(SB) has held that disallowance section 40(a)(ia) applies only to amounts "payable" as at the close of the year and not to amounts already "paid" during the year". Since the amount of charter hire charges for the period 13.07.2006 to 02.11.2006 were paid during the year and no amount was payable at the end of the year, the disallowance u/s 40(a)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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