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TMI Blog2015 (3) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt, as the SLP filed by the Department has been dismissed. Therefore, the order of the Tribunal is required to be recalled and the appeal be decided in terms of law laid down by the Hon'ble jurisdictional High Court in the case of Vector Shipping Services (P) Ltd. (supra). 3. The ld. D.R., on the other hand, has submitted that while adjudicating the issue, the Tribunal has taken into account the judgment of the Hon'ble jurisdictional High Court in the case of Vector Shipping Services (P) Ltd. (supra); the order of the Special Bench of the Tribunal in the case M/s Merilyin Shipping & Transports vs. ACIT, 70 DTR 81 and other judgments of the different High Courts, in which contrary view was taken. While adjudicating the issue, the Tribunal has categorically observed that in the case of Vector Shipping Services (P) Ltd., the Hon'ble High Court has simply made a passing reference, as the impugned issue was not raised before the Hon'ble High Court. The Tribunal has reproduced the judgment of the Hon'ble jurisdictional High Court in the case of Vector Shipping Services (P) Ltd. and the judgments of other High Courts in order to analyze the legal position. The ld. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tio laid down by the Tribunal in the case of Merilyn Shipping & Transports was raised before the Hon'ble High Court. The question of law before the Hon'ble High Court is as under: "(a) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT has rightly confirmed the order of the CIT(A) and thereby deleting the disallowance of Rs. 1,17,68,621/- made by the Assessing Officer under section 40(a)(ia) of the I.T. Act, 1961 by ignoring the fact that the company M/s Mercator Lines Ltd. had performed ship management work on behalf of the assessee M/s. Vector Shipping Services (P) Ltd. and there was a Memorandum of Understanding signed between both the companies and as per the definition of memorandum of understanding, it included contract also." 7.4 The main thrust of the argument before the Hon'ble High Court was that M/s Mercator Lines Ltd. had deducted TDS on salaries paid by it on behalf of the assessee. Under such circumstances, the assessee was not required to deduct TDS on reimbursement being made by it to M/s Mercator Lines Ltd. Besides reference was also made about the order of the Special Bench in the case of Merilyn Shipping & Transports whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the employees paid by M/s. Mercator Lines Ltd. and the circumstances under which such salaries were paid by M/s. Mercator Lines Ltd., for M/s. Vector Shipping Services, the assessee were sufficiently explained. It is to be noted that for disallowing expenses from business and profession on the ground that TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year. We do not find that the Tribunal has committed any error in recording the finding on the facts, which were not controverted by the department and thus the question of law as framed does not arise for consideration in the appeal." 7.5 The impact of the judgment of Hon'ble Allahabad High Court and other High Courts was also examined by the different benches of the Tribunal and they have categorically held that the Hon'ble Allahabad High Court has decided the issue referred to it on different footing and has made a passing reference about the decision rendered by the Special Bench. Therefore, we are of the view that the Hon'ble Jurisdictional High Court has not examined the impugned issue i.e. whether disallowance u/s 40(a)(ia) of the Act could be made only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ......................................................... .......................................................................................... 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. The decision in the case of Merilyn Shipping and Transports v. Addl. CIT was rendered by the Special Bench by a split opinion. Learned Accountant Member who was in minority, placed heavy reliance on a decision of the Madras High Court in the case of Tube Investments of India Ltd. v. Asst. CIT (TDS) reported in [2010] 325 ITR 610 (Mad). The learned judge did notice that the High Court in such case was concerned with the vires of the statutory provision but found some of the observations made by the court in the process useful and applicable. The learned judge rejected the theory of narrow interpretation of the term "payable" and observed as under (pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a subcontractor for carrying out any work. The language used is not that such amount must continue to remain payable till the end of the accounting year. Any such interpretation would require reading words which the Legislature has not used. No such interpretation would even otherwise be justified because, in our opinion, the Legislature could not have intended to bring about any such distinction nor the language used in the section brings about any such meaning. If the interpretation, as advanced by the assessees is accepted, it would lead to a situation where the assessee who though was required to deduct the tax at source but no such deduction was made or more flagrantly deduction though made is not paid to the Government, would escape the consequence only because the amount was already paid over before the end of the year in contrast to another assessee who would otherwise be in similar situation but in whose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the issue in the light of the Finance Bill 2004, relevant provisions of the Act and various judicial pronouncements and the detailed order of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports and have finally concluded that majority view expressed in the Merilyn Shipping & Transports are not acceptable. 7.10 The relevant observations of their Lordships are as under: "We already have quoted extensively both the majority and the minority views expressed in the aforesaid case. The main thrust of the majority view is based on the fact "that the Legislature has replaced the expression "amounts credited or paid" with the expression 'payable' in the final enactment. "Comparison between the pre-amendment and post amendment law is permissible for the purpose of ascertaining the mischief sought to be remedied or the object sought to be achieved by an amendment. This is precisely what was done by the Apex Court in the case of CIT Vs. Kelvinator reported in 2010(2) SCC 723. But the same comparison between the draft and the enacted law is not permissible. Nor can the draft or the bill be used for the purpose of regulating the meaning and purport of the enacted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... othing turns on the basis of the fact that the legislature used the word 'payable' and not 'paid or credited'. Unless any amount is payable, it can neither be paid nor credited. If an amount has neither been paid nor credited, there can be no occasion for claiming any deduction. The language used in the draft was unclear and susceptible to giving more than one meaning. By looking at the draft it could be said that the legislature wanted to treat the payments made or credited in favour of a contractor or sub-contractor differently than the payments on account of interest, commission or brokerage, fees for professional services or fees for technical services because the words "amounts credited or paid" were used only in relation to a contractor or sub-contractor. This differential treatment was not intended. Therefore, the legislature provided that the amounts, on which tax is deductible at source under Chapter XVII-B payable on account of interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services or to a contractor or sub-contractor shall not be deducted in computing the income of an assessee in case he has not deduced, or after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139..." 3. In the case of Merilyn Shipping & Transports v. Addl. CIT , it was held by Special Bench of ITAT, Vishakhapatnam, that the provisions of section 40(a)(ia) of the Act would apply only to the amount which remained payable at the end of the relevant financial year and could not be invoked to disallow the amount which had actually been paid during the previous year without deduction of tax at source. The order of the Special Bench has since been put under interim suspension by the Andhra Pradesh High Court. 3.1 The Hon'ble Calcutta High Court and Hon'ble Gujarat High Court in the case of Commissioner of Income-tax, Kolkata-XI v. Crescent Exports Syndicate and Commissioner of Income-tax-IV v. Sikandarkhan N Tunvar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC. The CTC shall examine the said judgement on priority to decide as to whether filing of SLP to the Supreme Court will be adequate response for the time being or some legislative amendment is called for. 6. The above clarification may be brought to the notice of all officers." 8. Keeping in view the aforesaid judgments of various High Courts and the Tribunal, we are of the considered opinion that the view expressed or the ratio laid down by the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports has been overruled. Therefore, it cannot be said that since the Hon'ble Jurisdictional High Court has approved the view taken by the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports , the same has to be followed by the Tribunal situated within the jurisdiction of Hon'ble Allahabad High Court. Had the impugned issue been examined and adjudicated by the Jurisdictional High Court, it would have been respectfully followed by the Tribunal irrespective of the fact that contrary view have been expressed by the different High Courts. The Hon'ble Jurisdictional High Court has not examined the impugned issue at all and simple passing re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e apparent from record either suo moto or on an application made. What can be rectified under this section is a mistake which is apparent and patent. The mistake has to be such for which no elaborate reasons or inquiry is necessary. Where two opinions are possible, then it cannot be said to be an error apparent on the face of the record". 7. In the case of CIT Vs. Suman Tea and Plywood Industries (P) Ltd., 226 ITR 34 their Lordships of Calcutta High Court have expressed similar observations after holding that "under section 254(2) of the Incometax Act, an order, which has been passed by the Tribunal reaches finality the moment the same is passed; cannot be touched thereafter. By section 254(2) of the Act, the Tribunal, however, has been authorized to rectify mistakes in its orders, which are apparent on the face of the records. The expression `mistake apparent on the record' means a mistake either clerical or grammatical or arithmetical or of like nature, which can be detected without there being any necessity to re-argue the matter or to re-appraise the fact as appearing from the records." In another case CIT Vs. Golal Chand Agarwal; 202 ITR 14 their Lordships of Calcutta High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. A decision on a debatable point of law is not a mistake apparent from record. Their Lordships have further held that if a statement of any person has been recorded without producing him in the witness box, the authorities should not act upon that statement without affording the assessee an opportunity to cross-examine the witness, but that is a matter not for rectification but it is a matter relating to the merits of the case as to whether the Tribunal has gone wrong in not considering the affidavit of a particular person and has acted upon the statement of the same person which was recorded by the ITO without being permitted to cross examine by the assessee. This is not a matter in which the apparent error is involved but it is a matter more of merit and cannot be rectified within the scope of rectification. The powers of the Tribunal while making a rectification were again examined by the Apex Court in the case of CIT Vs. Hero Cycles Pvt. Ltd.; 228 ITR 463 in which their Lordships have held that rectification can only be made when a glaring mistake of fact or law committed by the officer passing the order becomes apparent from record. Rectification is not possible if the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X
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