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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 ..... case Ld. CIT(A)- 1 has grossly erred in law and facts in confirming additions of Rs. 1,02,633/- on a/c of non deduction of Tax on payment of interest to following creditors :- S. No. Name of the Concern to whom interest paid Amount of interest 1 Smt. Priti Soni 22,545/- 2. Shri Rajendra Kumar Bhukmarya 27,500/- 3. Sarita Koolwal 32,588/- 4. Smt. Meera Devi Kumawat 20,000/- Total 1,02,633/- 4. That making special disallowance was not justified and lawful where books of accounts are rejected and income is esteemed by way of lumpsum additions. 5. No show cause notice That on the facts and in the circumstances of the case Ld. CIT(A) I has grossly erred in law and facts in not issuing proper & valid show cause notice before making additions/ disallowances. 6. That on the facts and in the circumstances of the case Ld. CIT(A) I has grossly erred in law and facts in withdrawing Interest u/ s 244A and charging interest u/s 234D." 2. In this case, the assessee e-filed its return on 30/09/2011 declaring total income of Rs. 29,03,830/-. Assessment U/s 143(3) of the Income Tax Act, 1961 (in short the Act) was finalized on 19/02/2014. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the year and no interest was payable at the year end and thus provisions of section 40a (ia) are not applicable and it placed reliance on the case of Vector Shipping Services P Ltd (2013) 357 ITR 642 (All) and other judicial pronouncements. (ii) It may be mentioned that the Hon'ble P & H High court in the case of P.M.S. Diesels Vs CIT (2015) 93 CCH 110 PHHC / (2015) 277 CTR 0491 (P&H) after considering the cases of CIT vs. M/s Vector Shipping Services (P) Ltd., (2013) 262 CTR (All) 545, V.M. Salgaocar & Bros. (P) Ltd., etc. vs. CIT, etc. (2000) 243 ITR 383 (SC), ACIT vs. Merilyn Shipping & Transporters 136 ITD 23 (SB) (Vishakhapatnam), Tube Investments of India Ltd. and another vs. ACIT, (TDS) and others, (2010) 325 ITR 610 (Mad)held that: "The provisions of section 40(a) (ia) of the Income Tax Act, 1961, are applicable not only to the amount which is shown as payable on the date of balance sheet, but it is applicable to such expenditure, which become payable at any time during the relevant previous year and was actually paid within the previous year. In the result the question is decided in favour of revenue and against the assessee.'' (iia) The same view was taken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cover not only to the amount which are payable as on 31st March of a particular year but also which are payable at any time during the year. (Para7.5) ITAT 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. The Hon'ble Jurisdictional High Court has not examined the impugned issue at all and simple passing reference was made with regard to the order of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports and the relief was granted to the Assessee on merit. Therefore, the ratio laid down in the case of Merilyn Shipping transports, which has been suspended by Hon'ble Andhra Pradesh High Court, has not been approved by the Hon'ble Allahabad High Court. Therefore, subordinate judicial forum are not required to follow the ratio or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in mind the provisions of Sections 194C and 200. Once it is found that the aforesaid Sections mandate a person to deduct tax at source not only on the amounts payable but also when the sums are actually paid to the contractor, any person who does not adhere to this statutory obligation has to suffer the consequences which are stipulated in the Act itself. Certain consequences of failure to deduct tax at source from the payments made, where tax was to be deducted at source or failure to pay the same to the credit of the Central Government, are stipulated in Section 201 of the Act. This Section provides that in that contingency, such a person would be deemed to be an assessee in default in respect of such tax. While stipulating this consequence, Section 201 categorically states that the aforesaid Sections would be without prejudice to any other consequences which that defaulter may incur. Other consequences are provided under Section 40(a)(ia) of the Act, namely, payments made by such a person to a contractor shall not be treated as deductible expenditure. When read in this context, it is clear that Section 40(a)(ia) deals with the nature of default and the consequences thereof. Def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t earlier. The liability to deduct tax at source, in the case of an assessee following the cash system, arises only when the payment is made and in the case of an assessee following the mercantile system, when he credits such sum to the account of the party entitled to receive the payment. 28. The government has nothing to do with the dispute between the assessee and the payee such as a contractor. The provisions of the Act including Section 40 and the provisions of Chapter XVII do not entitle the tax authorities to adjudicate the liability of an assessee to make payment to the payee/other contracting party. The appellant's submission, if accepted, would require an adjudication by the tax authorities as to the liability of the assessee to make payment. They would then be required to investigate all the records of an assessee to ascertain its liability to third parties. This could in many cases be an extremely complicated task especially in the absence of the third party. The third party may not press the claim. The parties may settle the dispute, if any. This is an exercise not even remotely required or even contemplated by the section." 16) As mentioned above, the Punjab & ..... X X X X Extracts X X X X X X X X Extracts X X X X
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