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TMI Blog2017 (6) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... ated:- 2-6-2017 - Shri Inturi Rama Rao, Accountant Member, K. Narsimha Charry, Judicial Member For The Revenue : Smt. S. Praveena For The Assessee : None ORDER Per Inturi Rama Rao, Accountant Member. This is an appeal filed by the Revenue directed against the order of the learned CIT (A) Kurnool for the A.Y 2010-11. The Revenue has raised the following grounds of appeal: 1.Whether CIT(A) is right in deleting the addition of ₹ 1,19,15,3501- holding that the amendment made by Finance Act, 2012, in respect of the Provisions of Sec.40(a)(ia) which is effective from 01.04.2013 is retrospective in nature? 2. CIT(A) failed to appreciate that the Supreme Court in the case of Gem Granite Vs. CIT reported in 271 ITR 322 held that no retrospectivity unless expressly stated or clearly implied. 3. CIT(A) erred in not appreciating that the beneficial provision does not necessarily imply that the amendment is to be given retrospective effect, unless specifically made retrospective in operation as held by the Madras High Court in cases of CIT Vs. Pooshya Exports (P) Ltd., reported in 262 ITR 417, CWT Vs. Reliance Motor Co. Ltd., reported in 260 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record. The issue in this appeal is covered in favour of the Revenue by the decision of the Hon'ble Supreme Court in the case of Palam Gas Service vs. CIT (cited Supra) wherein the decision of the Special Bench in the case of Merilyn Shipping Transport (146 TTJ (1) and the Hon'ble Allahabad High Court decision CIT vs. Vector Shipping Services Ltd reported in 357 ITR 647 had been reversed. The relevant paragraphs of the judgment are reproduced below: 14. In the aforesaid backdrop, let us now deal with the issue, namely, the word payable in Section 40(a)(ia) would mean only when the amount is payable and not when it is actually paid. Grammatically, it may be accepted that the two words, i.e. payable and paid , denote different meanings. The Punjab Haryana High Court, in P.M.S. Diesels Ors. , referred to above, rightly remarked that the word payable is, in fact, an antonym of the word paid . At the same time, it took the view that it was not significant to the interpretation of Section 40(a)(ia). Discussing this aspect further, the Punjab Haryana High Court first dealt with the contention of the assessee that Section 40(a)(ia) relates only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessees. We do not see how this dual purpose of augmenting the compliance of Chapter XVII and bringing within the Department s fold tax payers is served by confining the provisions of Section 40(a)(ia) to assessees who follow the mercantile system. Nor do we find anything that indicates that for some reason the legislature intended achieving these objectives only by confining the operation of Section 40(a)(ia) to assessees who follow the mercantile system. 22. The same view was taken by a Division Bench of the Calcutta High Court in Commissioner of Income Tax v. Crescent Export Syndicate (supra). It was held: 12.3. It is noticeable that Section 40(a) is applicable irrespective of the method of accounting followed by an assessee. Therefore, by using the term payable legislature included the entire accrued liability. If assessee was following mercantile system of accounting, then the moment amount was credited to the account of payee on accrual of liability, TDS was required to be made but if assessee was following cash system of accounting, then on making payment TDS was to be made as the liability was discharged by making payment. The TDS provisions are applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant, has violated the provisions of Chapter XVIIB (or specifically Sections 194C and 200 in the instant case), he would still go scot free, without suffering the consequences of such monetary default in spite of specific provisions laying down these consequences. The Punjab Haryana High Court has exhaustively interpreted Section 40(a(ia) keeping in mind different aspects. We would again quote the following paragraphs from the said judgment, with our complete approval thereto: 26. Further, the mere incurring of a liability does not require an assessee to deduct the tax at source even if such payments, if made, would require an assessee to deduct the tax at source. The liability to deduct tax at source under Chapter XVII-B arises only upon payments being made or where so specified under the sections in Chapter XVII, the amount is credited to the account of the payee. In other words, the liability to deduct tax at source arises not on account of the assessee being liable to the payee but only upon the liability being discharged in the case of an assessee following the cash system and upon credit being given by an assessee following the mercantile system. This is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. No doubt, the Special Leave Petition there against was dismissed by this Court in limine . However, that would not amount to confirming the view of the Allahabad High Court (See V.M. Salgaocar Bros. (P) Ltd. v. Commissioner of Income Tax [2000 (243) ITR 383] and Supreme Court Employees Welfare Association v. Union of India [JT 1989 (3) SC 188]. 18. In view of the aforesaid discussion, we hold that the view taken by the High Courts of Punjab Haryana, Madras and Calcutta is the correct view and the judgment of the Allahabad High Court in CIT v. Vector Shipping Services (P) Ltd. [2013 (357) ITR 642] did not decide the question of law correctly. Thus, insofar as the judgment of the Allahabad High Court is concerned, we overrule the same. Consequences of the aforesaid discussion will be to answer the question against the appellant/assessee thereby approving the view taken by the High Court . 5. Even in the present case, the learned CIT (A) granted relief following the ratio laid down by the decision of the Special Bench in the case of Merilyn Shipping Transport (146 TTJ (1) as there was no amount of outstanding as at the end of the accounting year. Since the d ..... 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