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TMI Blog2017 (8) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, mere suspicion should not be made a basis for addition. Also agree with this view that an allegation remains allegation unless it is proved. Suspicion may be strong but it cannot take place of reality, therefore, direct to delete this addition. - Decided in favour of assessee. Non-deduction of tax on payment of interest paid to creditors - TDS on paid or payable - amount payable at the end of FY or any time during the year - Held that:- Controversy regarding TDS on paid and payable has been settled down by the decision of the Hon'ble Supreme Court in the case of M/s Palam Gas Services Vs. CIT [2017 (5) TMI 242 - SUPREME COURT] wherein held it cannot be held that the word 'payable' occurring in Section 40(a)(ia) refers to only those cases where the amount is yet to be paid and does not cover the cases where the amount is actually paid. If the provision is interpreted in the manner suggested by the appellant herein, then even when it is found that a person, like 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. During the year under consideration, the assessee declared boring receipts of ₹ 29,30,40,106/-. The Assessing Officer made addition of ₹ 6,00,000/- on lump sum basis. The ld. CIT(A) has confirmed the lump sum addition of ₹ 6,00,000/- made by the Assessing Officer. 3. I have heard both the sides on the issue of confirming the trading addition of ₹ 6,00,000/- raised in the grounds No. 1 and 2 of the appeal. It is pertinent to note that the net profit rate declared for the year under consideration was better than the earlier year i.e. for the A.Y. 2010-11, it was 17.43% and for the year under consideration, it was 18.93%. The Assessing Officer has not specified the defects in the books of account and he has simply stated that the labour charges vouchers were self made and quantitative and qualitative consumption of raw material could not be worked out or verified in absence of day to day stock register, therefore, he made a lump sum addition. In my considered view, when the assessee has declared better NP rate than the earlier year then the Assessing Officer was not justified in making lump sum trading addition without giving specific defects in the expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxman 258 (Calcutta) wherein it was held that: "It is noticeable that Section 40(a) is applicable irrespective of the method of accounting followed by an assessee. Therefore, by using fhe 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 applicable both in the situation of actual payment as well of the credit of the amount. It becomes very clear from the fact that the phrase, 'on which tax is deductible at source under Chapter XVIIB', was not there in the Bill but incorporated in the Act. This was not without any purpose." (iib) The Hon'ble High Court of Himachal Pradesh in the case of Palam Gas Service Vs CIT, (2014) 89 CCH 0123 HPHC / (2015) 370 ITR 0740 (HP) held that: "Lastly, insofar as the plea taken by the appellant that no disallowance can be made under Section 40 (a) (ia) as the freight charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the other High Court. (Para8)" (iii) It may be mentioned that vide circular no. 10 of 2013 dated 16.12.2013 it has been stated by the CBDT that: "4. After careful examination of the issue, the Board is of the considered view that the provision of section 40(a)(ia) of the Act would cover not only the amounts which are payable as on 31st March of a previous year but also amounts which are payable at any time during the year. The statutory provisions are amply clear and in the context of section 40(a)(ia) of the Act the term "payable" would include "amounts which are paid during the previous year". (iv) Here it may be mentioned that as per the proviso to section 201 inserted w.e.f 01.07.2012, the appellant would not be treated as assessee in default, if the payee (i) has furnished its return of income u/s 139; (ii) has taken into account such sums for computing income in such return of income; and (iii) has paid the tax due on the income declared by it in such return of income and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed (Form N. 26A) (v) The appellant has not filed any certifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sections 194C and 200, which provisions are in the aforesaid Chapter). When the entire scheme of obligation to deduct the tax at source and paying it over to the Central Government is read holistically, it cannot be held that the word 'payable' occurring in Section 40(a)(ia) refers to only those cases where the amount is yet to be paid and does not cover the cases where the amount is actually paid. If the provision is interpreted in the manner suggested by the appellant herein, then even when it is found that a person, like 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Madras and Calcutta High Courts taking identical view and by extensively quoting from the said judgments. 17) Insofar as judgment of the Allahabad High Court is concerned, reading thereof would reflect that the High Court, after noticing the fact that since the amounts had already been paid, it straightaway concluded, without any discussion, that Section 40(a)(ia) would apply only when the amount is 'payable' and dismissed the appeal of the Department stating that the question of law framed did not arise for consideration. 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, (1989) 4 SCC 187. 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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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