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TMI Blog2013 (5) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... epting the contention that the provision must be construed strictly. The terms “payable” and “paid” are not synonymous. Word “paid” has been defined in Section 43(2) of the Act to mean actually paid or incurred according to the method of accounting, upon the basis of which profits and gains are computed under the head “Profits and Gains of Business or Profession”. In contrast, term “payable” has not been defined. The word “payable” has been described in Webster’s Third New International Unabridged Dictionary as requiring to be paid: capable of being paid: specifying payment to a particular payee at a specified time or occasion or any specified manner. In the context of section 40(a)(ia), the word “payable” would not include “paid”. In the context of requirements of Section 40(a)(ia) no warrant in the said decision of the Supreme Court in Ashokbhai Chimanbhai case [1964 (10) TMI 11 - SUPREME Court] to apply the test of payability only as on 31st March of the year under consideration. Merely because, accounts are closed on that date and the computation of profit and loss is to be judged with reference to such date, does not mean that whether an amount is payable or not must be asc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-Tax Act, 1961 ( the Act for short). Noticing that the question is recurring and would give rise to number of appeals before us, we had issued notice for final disposal in these appeals, consequent to which learned counsel for the assessees have appeared. For the purpose of this judgment, we may record facts from Tax Appeal No.905 of 2012. 2. Respondent assessee is engaged in the business of Transport Contractor and Commission Agent. He provides the service of transportation through trucks. For the Assessment Year 2007-08 he filed his return of income declaring total income of Rs.3,82,290/-. His return was taken in scrutiny. The Assessing Officer scrutinized the expenditure in the nature of payments made by the assessee to its sub-contractors. The Assessing Officer called upon him to explain the total payment of Rs.8.74 crores (rounded off) made by him to the subcontractors without deducting tax at source. The Assessing Officer in his order of assessment dated 30.11.2009 disallowed the entire expenditure on the ground that the assessee had admittedly not deducted the tax at source though payments were made to transporters which exceeded to Rs. 20,000/- in a single trip and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the Revenue contended that the Tribunal has committed serious error in holding that provision of Section 40(a)(ia) of the Act would apply only when the amount has remained payable till the end of the accounting year. They pointed out that the word payable has not been defined under the Act and the same would, in the context of the provision under consideration, include the expression paid . Any other interpretation would lead to absurd results. They contended that the interpretation which advances the true meaning of the provision should be adopted and not one which frustrates the provision. 7. In this respect reliance was placed on the following decisions:- (1) In the case of K.P.Varghese vs. Income-Tax Officer, Ernakulam, and another reported in [1981] 131 ITR 597, in which it was observed that It is a well recognized rule of construction that the statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. (2) In the case of Commissioner of Income-Tax, Bangalore vs. J.H. Golta reported in [1985] 156 ITR 323, in which it was observed that Where the plain literal interpretation of a statutory provision produces a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and narrowly. Even if the intention of the legislature may not have been to limit such provision, if the plain language of the section permits no other meaning, this Court cannot and would not expand the meaning of the section to cover any legislative imperfections or errors. 11. It was strongly contended that terms payable and paid are not synonymous. Section 40(a)(ia), therefore, when uses the expression payable , such term must be given its ordinary meaning and the expression paid , cannot be read into it. Counsel further submitted that the Finance Bill No.2 of 2004 under which Section 40 of the Act was proposed to be amended to include clause (a)(ia) originally used different language. In place of the word payable expression used was amount credited or paid . In the amendment, which was ultimately brought about, the said expression was consciously dropped. Thus, there was conscious omission on the part of the legislature. They, therefore, contended with all the more force that the term payable used in Section 40(a)(ia) of the Act would not include expression paid . They pointed out that term paid has been defined under section 43(2) of the Act whereas the wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to collection and recovery of the tax. Part-A thereof is general. Part-B of Chapter XVII pertains to deduction at source. Several provisions have been made in the said Chapter fastening the liability on the payee to deduct tax at source and deposit with the Government. For example, sub-Section (1) of Section 194A of the Act provides that any person, not being an individual or an Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than the income by way of interest on securities, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode whichever is earlier, deduct income tax at the rates in force. Likewise Section 194C of the Act provides that any person responsible for paying any sum to any resident (referred to as a contractor) for carrying out any work including supply of labour in pursuance of a contract between the contractor and the specified person, shall at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resident, or amounts payable to a contractor or sub-contractor for carrying out any work on which tax is deductible at source and such tax has not been deducted or after deduction has not been paid before the due date, such amounts shall not be deducted in computing the income chargeable under the head Profits and Gains of Business or Profession irrespective of the provisions contained in Sections 30 to 38 of the Act. Proviso to Section 40(a)(ia), however, enables the assessee to take such deduction in subsequent year, if tax is deducted in such year or though deducted during the previous year but paid after the due date specified in sub-Section(1) of Section 139 of the Act. 18. In such context, therefore, the question arises whether under Section 40(a)(ia) of the Act disallowance of the expenditure payment of which, though required deduction of tax at source has not been made would be confined only to those cases where the amount remains payable till the end of the previous year or would include all amounts which became payable during the entire previous year. 19. Decision in the case of M/s. Merilyn Shipping Transports vs. ACIT (supra) was rendered by the Special Bench by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee, cannot be liberally construed. Undoubtedly if the language of the section is plain, it must be given its true meaning irrespective of the consequences. We have noticed that the provision makes disallowance of an expenditure which has otherwise been incurred and is eligible for deduction, on the ground that though tax was required to be deducted at source it was not deducted or if deducted, had not been deposited before the due date. By any intendment or liberal construction of such provision, the liability cannot be fastened if the plain meaning of the section does not so permit. 22. For the purpose of the said section, we are also of the opinion that the terms payable and paid are not synonymous. Word paid has been defined in Section 43(2) of the Act to mean actually paid or incurred according to the method of accounting, upon the basis of which profits and gains are computed under the head Profits and Gains of Business or Profession . Such definition is applicable for the purpose of Sections 28 to 41 unless the context otherwise requires. In contrast, term payable has not been defined. The word payable has been described in Webster s Third New Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source under Chapter XVII-B. (c) Such tax has not been deducted or after deduction has not been paid on or before due date specified in sub-Section (1) of Section 39. For the purpose of current discussion reference to the proviso is not necessary. 24. What this Sub-Section, therefore, requires is that there should be an amount payable in the nature described above, which is such on which tax is deductible at source under Chapter XVII-B but such tax has not been deducted or if deducted not paid before the due date. This provision nowhere requires that the amount which is payable must remain so payable throughout during the year. To reiterate the provision has certain strict and stringent requirements before the unpleasant consequences envisaged therein can be applied. We are prepared to and we are duty bound to interpret such requirements strictly. Such requirements, however, cannot be enlarged by any addition or subtraction of words not used by the legislature. The term used is interest, commission, brokerage etc. is payable to a resident or amounts payable to a contractor or sub-contractor for carrying out any work. The language used is not that such amount must continue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of profit and loss is to be judged with reference to such date, does not mean that whether an amount is payable or not must be ascertained on the strength of the position emerging on 31st March. 25. This brings us to the second aspect of this discussion, namely, whether this is a case of conscious omission and therefore, the legislature must be seen to have deliberately brought about a certain situation which does not require any further interpretation. This is the fundamental argument of the Tribunal in the case of M/s. Merilyn Shipping Transports vs. ACIT(supra) to adopt a particular view. 26. While interpreting a statutory provision the Courts have often applied Hyden s rule or the mischief rule and ascertained what was the position before the amendment, what the amendment sought to remedy and what was the effect of the changes. 27. In the case of Bengal Immunity Co. Ltd. vs. State of Bihar and others reported in AIR 1955 SC 661, the Apex Court referred to the famous english decision in Hyden s case wherein while adopting restrictive or enlarging interpretation, it was observed that four things are to be considered, (1) what was the common law before making of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e do not propose to enter into any elaborate discussion on the question whether it would be competent to us in arriving at a proper construction of the expression fixing rates of wages to look into the Statement of Objects and Reasons attached to the Bill No.13 of 1955 as introduced in the Rajya Sabha or the circumstances under which the word minimum came to be deleted from the provisions of the Bill relating to rates of wages and the Wage Board and the fact of such deletion when the act came to be passed in its present form. There is a consensus of opinion that these are not aids to the construction of the terms of the Statute which have of course to be given their plain and grammatical meaning (See: Ashvini Kumar ghosh v. Arabinda Bose, 1953 SC R 1:(AIR 1952 SC 369) (Z24) and Provat Kumar Kar v. William Trevelyan Curtiez Parker, AIR 1950 Cal 116 (Z25). It is only when the terms of the statute are ambiguous or vague that resort may be had to them for the purpose of arriving at the true intention of the Legislature. 31. It can thus be seen that the debates in the Parliament are ordinarily not considered as the aids for interpretation of the ultimate provision which may be br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the legislature, only with the objective to provide protection to all the labourers or workers, who were the manual workers and were engaged or to be engaged in any scheduled employment. Therefore, there was a specific act on the part of the legislature to enlarge the scope of the definition and once we accept this, all the arguments regarding the objects and reasons, the Committee Reports, the legislative history being contrary to the express language, are relegated to the background and are liable to be ignored. 33. In the case of Agricultural Produce Market Committee, Narela, Delhi vs. Commissioner of Income Tax and anr. reported in AIR 2008 SC (Supplement) 566, the Supreme Court noticed that prior to Finance Act, 2002, the Income Tax Act did not contain the definition of words Local Authority . The word came to be defined for the first time by the Finance Act of 2002 by explanation/ definition clause to Section 10(20) of the Act. It was further noticed that there were significant difference in the definition of term local authority contained under Section 3(31) of the General Clauses Act, 1987 as compared to the definition clause inserted in Section 10(20) of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-operative bank as defined in Section 5(cci) and primary co-operative bank as defined in Section 5(ccv). However, the Parliament did not do so. There was thus a conscious exclusion and deliberate commission of co-operative banks from the purview of the RDB Act. The reason for excluding cooperative banks seems to be that co-operative banks have comprehensive, self-contained and less expensive remedies available to them under the State Co-operative Societies Acts of the States concerned, while other banks and financial institutions did not have such speedy remedies and they had to file suits in civil courts. 35. In the case of National Mineral Development Corporation Ltd. vs. State of M.P and another reported in AIR 2004 SC 2456, the Apex Court observed as under:- 29. The Parliament knowing it full well that the iron ore shall have to undergo a process leading to emergence of lumps, fines, concentrates and slimes chose to make provision for quantification of royalty only by reference to the quantity of lumps, fines and concentrates. It left slimes out of consideration. Nothing prevented the Parliament from either providing for the quantity of iron ore as such as the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 137 of the Limitation Act. 37. In our opinion, the Tribunal committed an error in applying the principle of conscious omission in the present case. Firstly, as already observed, we have serious doubt whether such principle can be applied by comparing the draft presented in Parliament and ultimate legislation which may be passed. Secondly, the statutory provision is amply clear. 38. In the result, we are of the opinion that Section 40(a) (ia) would cover not only to the amounts which are payable as on 31th March of a particular year but also which are payable at any time during the year. Of course, as long as the other requirements 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(surpa), does not lay down correct law. 39. We answer the questions as under:- Question (1) in the negative i.e. in favour of the Revenue and against the assessees. Question (2) also in the negative i.e. in favour of the Revenue and against the assessees. 40. All Tax Appeals are allowed. Decisions of the Tribunal under challenge are reversed. In the earlier portion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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