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TMI Blog2015 (9) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts of the case. We do not see any infirmity in the orders of the lower authorities. Accordingly, the orders of the lower authorities are confirmed. - Decided against assessee. - I.T.A No. 63 & 64/Coch/2014, I.T.A No. 70 to 72/Coch/2014, I.T.A No. 83 to 85/Coch/2014 - - - Dated:- 28-8-2014 - Shri N.R.S. Ganesan and Shri Chandra Poojari, JJ. For The Appellant : Shri R Srinivasan For The Respondent : Shri K.K. John, Sr DR ORDER Per N.R.S. Ganesan (JM) All the appeals of the two independent assessees are directed against the respective orders of the CIT(A). Since common issue arises for consideration in all the appeals we heard them together and are disposed of by this common order. 2. Shri R Srinivasan, the ld. Rpresentative for the assessee submitted that the assessing officer disallowed the payment of interest u/s 40(a)(ia) for non deduction of tax. According to the ld. Representative, all the assessees are partners in the respective firms and they have borrowed loans. The assessees have also paid interest. According to the ld. Representative, the partners and partnership firm are one and the same, therefore, any transction between the partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income by way of interest as aforesaid is credited to any account, whether called interest payable account or Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. 5. A bare reading of above provisions of section 194A clearly shows that individuals and HUFs are exempt from the provisions of 40(a)(ia) of the Act in respect of any interest paid to partnership firms or any person. However, proviso to section 40(a)(ia) makes an exemption to the main section. In this case, the business income of the assessee exceeded the limit prescribed u/s 44AB of the Act, therefore, the assessee, even though individual is liable to deduct tax while paying interest to the firm u/s 194A(1) of the I. T. Act. 6. Now coming to the contention of the assessee that the recipient firm has already paid the tax, this Tribunal finds no merit in such contention. The Apex Court, in Hindustan Coco Cola Beverages (P) Ltd (supra), after referring to the circular issued by the CBDT in circular No.275/201/95-IT(B) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration is whether the second proviso to section 40(a)(ia) as incorporated by Finance Act, 2012 is retrospective in operation or prospective in operation. We are conscious that some of the benches of this Tribunal in the country has taken the view that the second proviso to section 40(a)(ia) is retrospective in operation, therefore, applicable to earlier period also. However, the jurisdictional High Court in the case of Prudential Logistics Transports in ITA No. 01 of 2014 judgment dated 13th January, 2014, copy of which has been filed by the ld. DR, found that the second proviso is not applicable for earlier assessment years. In fact, the Kerala High Court has observed as follows: 5. Reading of Section 40a(ia) along with 2nd proviso and Section 201(1) along with proviso, it would mean that the mandate or requirement on the part of the payer to deduct tax at source is not so strict if they are able to show that the payee or the recipient of the amounts has paid tax in accordance with the provisions of Section 201(1) and the proviso. 6. This was not the claim made by the assessee before the Assessing Officer. The claim was on a different stand, initially reflect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pex Court has declared the law declaring that section 40(a)(ia) is applicable only in respect of the amounts remains to be payable at the last day of the financial year. 12. We have also carefully gone through the judgment of the Allahabad High Court in CIT vs M/s Vector Shipping Services (P) Ltd (supra), copy of which is filed by the assessee. The Allahabad High Court, after reproducing the relevant paragraph from the order of CIT(A) and referring to the decision of the Special Bench of this Tribunal in Merilyin Shipping Transports (supra) found that the Tribunal has not committed an error. It is obvious that there is no discussion about the correctness or otherwise of the decision rendered by the Special Bench of this Tribunal in Merilyn Shipping Transports (supra). However, we find that the Gujarat High Court in the case of CIT vs Sikandarkhan N Tunvar ITA Nos 905 of 2012, 709 710 of 2012, 333 of 2013, 832 of 2012, 857 of 2012, 894 of 2012, 928 of 2012, 12 of 2013, 51 of 2013, 58 of 2013 and 218 of 2013 judgment dated 02-05-2013 considered the decision of the Special Bench of this Tribunal in Merilyn Shipping Transports (supra) and specifically disagreed with the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 law. It is the finally enacted law which is the will of the legislature. The Learned Tribunal fell into an error in not realizing this aspect of the matter. The Learned Tribunal held that where language is clear the intention of the legislature is to be gathered from the language used . Having held so, it was not open to seek to interpret the section on the basis of any comparison between the draft and the section actually enacted nor was it open to speculate as to the effect of the so-called representations made by the professional bodies. The Learned Tribunal held that Section 40(a)(ia) of the Act creates a legal fiction by virtue of which even the genuine and admissible expenses claimed by an assessee under the head income from business and profession : if the assessee does not deduct TDS on such expenses are disallowed . Having held so was it open to the Tribunal to seek to ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omissus and we do not think that it is possible, particularly, in this case. The law of supplying the casus omissus by the courts is extremely clear and settled that though this Court may supply the casus omissus, it would be in the rarest of the rate case and thus supplying of this casus omissus would be extremely necessary due to the inadvertent omission on the part of the legislature. But, that is certainly not the case here. We shall now endeavour to show that no other interpretation is possible. The key words used in Section 40(a)(ia), according to us, are on which tax is deductible at source under Chapter XVII-B . If the question is which expenses are sought to be disallowed? The answer is bound to be those expenses on which tax is deductible at source under Chapter XVII-B. Once this is realized nothing 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 n 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 mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding of the language used by the legislature should waver on the premise that as propounded by the Tribunal, this was a case of conscious omission on the part of the Parliament. Both these aspects we would address one after another. If one looks closely to the provision, in question, adverse consequences of not being able to claim deduction on certain payments irrespective of the provisions contained in Sections 30 to 38 of the Act would flow if the following requirements are satisfied:- (a) There is interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to resident or amounts payable to a contractor or sub-contractor being resident for carrying out any work. (b) These amounts are such on which tax is deductible at source under XVIII-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he concept of ascertaining the profit and loss from the business or profession with reference to a certain period i.e. the accounting year. In this context, last date of such accounting period would assume considerable significance. However, this decision nowhere indicates that the events which take place during the accounting period should be ignored and the ascertainment of fulfilling a certain condition provided under the statute must be judged with reference to last date of the accounting period. Particularly, in the context of requirements f Section 40(a)(ia) of the Act, we see no warrant in the said decision of the 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 ascertained on the strength of the position emerging on 31t 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 ..... 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