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TMI Blog2013 (5) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case and in law, the ld. CIT Bathinda erred in giving sanction for filing second appeal as he himself has decided the appeal in favour of the respondent assessee as CIT(A) Bathinda. 2. That on the facts and in the circumstances of the case and in law, the appeal of the revenue is not maintainable as the same was decided by the Ld. CIT(A) on the admission of the AO in his remand report that crushing charges of Binola are the part of the trading/manufacturing account and the CIT(A) has given a clear finding that it would fall u/s 28 which section is not there in section 40(a)(ia) of the Income Tax Act, 1961. This finding of the CIT(A) has not been challenged/disputed by the Revenue. 3. That the payment made by the respondent assessee for crushing charges of Benola to Shri Balaji Oil Mills, Bhucho fall u/s 194I not u/s 194C as the respondent assessee has taken the whole factory on rent and during the relevant assessment year section 194I (Rent) was not the part of section 40(a)(ia) of the Act. 4. That the department has not proved with cogent evidence that M/s. Shri Balaji Oil Mills, Bhucho is a contractor in relation to the respondent assessee, so we are not li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the assessment framed by the I.T.O., Ward-II(1), Bathinda on 28.02.2007 u/s 143(3) of the I.T. Act, 1961 is cancelled u/s 263 of the Act and the A.O. is directed to frame fresh assessment, in the light of the observations made by the undersigned in the foregoing paragraph 7. The revision order dated 31.03.2009 has attained finality undisputedly on legality whereas consequential the fresh notice under section 143(2) dated 22.05.2009 was issued and served whereby the proceedings were continued and concluded under section 143(3) of the Act vide order dated 02.10.2009 at an assessed income of ₹ 15,59,270/- with the under-stated findings: As stated earlier in the foregoing paragraphs, the assessee failed to deduct TDS out of the crushing charges paid to M/s Shree Balaji Oil Mills, Bhuchoo as per provisions of section 194C, the total payments for which were debited to assessee s profit loss account at ₹ 14,61,285/-. As such the expenses debited to profit loss account at ₹ 14,61,285/- on account of crushing charged paid to the said concern are not allowable as per provisions of section 40a(ia) of the Income Tax Act. Accordingly, these expenses are disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 2004 certain opinion of the authors and in consequence thereto the remand report of the A.O. vide letter No.2677 dated 31.03.2010 was called for, for which was prayed for upholding AO s order dated 02.10.2009. Having noticed the aforesaid points raised by the assessee and in the remand report, the ld. CIT(A) allowed the grounds treating the appeal partly allowed through order dated 06.05.2010 at pages 10 11 of his order by giving the following findings: I have considered the arguments of learned counsel for the appellant and the remand report of the A.O. on this issue as well as the aforesaid judgment of the Hon'ble Supreme Court and hold that the A.O. should have seen the true nature and quality of the receipt and not the head under which it is entered in the accounts books of the appellant during the course of assessment proceedings and should have recasted the Profit and Loss Account and Trading Account, in view of his own admission that the crushing charges are the part of trading/manufacturing account. Accordingly, these crushing charges would fall under the provisions of Section 28 which do not find place in the provisions of Section 40(a)(ia). Accordingly, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the payments are due and outstanding. Therefore, after going through the facts and provisions of Law and respectfully following the judgment of the Hon'ble Bench (discussed (supra)), I agree with the appellant and therefore, hold that provisions are applicable only in respect of the expenditure which remained payable at the end of the year. After perusing the records, I find that as per the Balance sheet at the end of the year, only a sum of ₹ 1649262/- remained payable out of ₹ 86238103/-. Therefore, the maximum disallowance which could be made u/s 40(a)(ia) should be ₹ 1649262/-. The appellant has claimed that out of this most of the amounts payables are on account of goods supplied by the payee, amounting to ₹ 1631597/-, but the appellant has failed to establish that this payable amount is against the purchase of goods. Hence, this plea of the appellant is not accepted. On these facts and in view of the legal position, I sustain the disallowance of ₹ 1649262/- as an expenditure disallowance u/s 40(a)(ia) of the Income Tax Act, 1961. The appellant gets a relief of ₹ 6974551/-. On the other hand the A.O. contended that the word pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned CIT(A) has erred in deleting the addition of ₹ 14,35,040/- made by the A.O. without considering the facts discussed in the assessment order as well as remand report dated 26.04.2010 submitted before him. 11. The Ld. counsel for the assessee has placed on record paper book containing 20 pages dated 23.05.2013 for substantiating the contentions primarily devoted to the grounds of cross objections dated 01.08.2010 addressing to the granting of allowance and upholding the findings of the ld. CIT(A) and additionally a valiant attempt made to buttress the arguments by relying upon the decision of Coordinate Bench in the case of Teja Constructions vs. ACIT (2010) 36 DTR 220 (Hyd. Trib) and N. Ramachandra Reddy, ITA No.1372 of 2007 Coordinate Bench order dated 6th March, 2009 noticed in paragraph 13 of Teja Constructions case whereby no facet of controversy of the assessee has been raised taking through various documents and material facts shifting the burden of proof is on the revenue qua non bringing of evidence on record that Shri Balaji Oil Mills is a contractor in relation to respondent-assessee, hence none liability for deduction under section 194C of the Act. 12. Per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (supra), we are of the view that the arguments have not been concluded to the logical end while the said order with greatest respect of the ITAT is dated 23.10.2009 before the constitutional virus were under challenge as revealed through the judgments being by the Hon ble High Court of Allahabad in the case of Dey s Medical (U.P.) P Ltd. (supra) which is dated 15.02.2008 and judgment of Hon ble Madras High Court in the case of Tube Investments of India Vs. ACIT (supra) which is dated 29.09.2009 and decision of ITAT, Special Bench in the case of Merilyn Shipping Transports dated 29.03.2012 whereby at the time of case disposal before us, we have the benefit of additional judgment of Hon ble Gujrat high Court in the case of CIT-IV vs. Sikandarkhan N Tunvar and Hon ble Calcutta High Court in the case of CIT vs. Crescent Export Syndicate (supra). Thus, we are bound to follow the law prevalent at the relevant date and time. Even otherwise, controversy raised stands answered against the assessee and therefore the departmental appeal is allowed to that extent whereby the said aspect of the findings by the Hon ble High Court of Calcutta in the case of CIT vs. Crescent Export Syndicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar no amount is outstanding then the very object of identification of payees will get frustrated. (v) The legislative intent of the introduction of section 40(a)(ia) is in the larger perspective of augmenting the very TDS provisions themselves. It is not merely related to the collection of TDS only. (vi) The intention of the legislature is not to tax the payer for its failure to deduct the tax at source. The object of introduction of section 40(a)(i) as well as section 40(a)(ia) is to ensure that one of the modes of recovery as provided in Chapter XVII-B is scrupulously implemented without any default, in order to augment the said mode of recovery. Hon ble Madras High Court, inter alia, observed at para 69 of its judgment as under:- With the proviso to section 40(a)(ia) the deduction in the subsequent year by rectifying the default committed in the matter of TDS in the previous year, a defaulting assessee cannot be heard to say that irrespective of the deliberate default committed by it in implementing the provision relating to TDS, it should be held that a higher tax liability is mulcted on it . Hon ble Madras High Court, inter alia, observed in para 83 of its judgment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 justify that this fiction cannot be extended any further and, therefore, cannot be invoked by Assessing Officer to disallow the genuine and reasonable expenditure on the amounts of expenditure already paid ? Does this not amount to deliberately reading something in the law which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missus 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Calcutta high Court in the case of CIT vs. Crescent Export Syndicate (supra) and which findings are while noticing the judgment of Hon ble Supreme Court in A.S. Krishna vs. State of Madras reported in AIR 1957 SCC 297 (supra). 17. That the said argument is hereby rejected and even the Hon ble Supreme Court in the case of V.N. Shrikhande (Dr.) vs. Anita Sena Fernandes (2011) 1 SCC 53 at para 22 while noticing the judgment in the case of RBI v. Peerless General Finance Investment Co. Ltd; (1987) 1SCC 450 at para 33 where it has been held as under: In RBI vs. Peerless General Finance Investment Co. Ltd. Chennapa Redyy, J. referred to the rule of contextual interpretation and observed : (SCC p.450 para 33): 33. Interpretation must depend on th text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read first as a whole and then section by section, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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