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TMI Blog2014 (8) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... t allowing deduction of the same as per section 36(1)(va) - CIT-A deleted the addition - Held that:- This issue is squarely covered against the Revenue and in favour of the assessee by the decision in case of CIT V Nuchem Ltd.[2010 (2) TMI 959 - PUNJAB AND HARYANA HIGH COURT] wherein following decision of CIT V. Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT] it was held that if the payments have been made before the due date of filing of return then such payments have to be allowed. Perusal of the assessment order clearly show that provident fund dues were paid before the due date of filing of return Addition on account of depreciation on electric installation - assessee had claimed depreciation @ 25% in respect of electrical equipments which was reduced to 10% by following earlier assessment year - CIT-A deleted the addition - Held that:- Even on electrical installations depreciation is to be allowed @ 25%. In view of this order which have been followed by the CIT(A), we confirm her order. Addition u/s 40(a)(ia) - Held that:- We are of the opinion that Section 40(a)(ia) would cover not only to the amounts which are payable as on 31st March of a particular year but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case and in law, Ld. CIT(A) has erred in deleting the addition of ₹ 556641/- made by the A.O. by treating employees contribution towards EPF as income as per provisions of section 2(24)(x) and not allowing deduction of the same as per section 36(1)(va) of the Income Tax Act, 1961. 4. That on the facts and circumstances of the case and in law, Ld. CIT(a) has erred in deleting the addition made by the.O. on account of depreciation on electric installation amounting to ₹ 68219/-. 3. Ground No. 1 - After hearing both the parties we find that during assessment proceedings the Assessing Officer noticed that the assessee has shown prior period income of ₹ 618088/- but out of same the assessee has reduced prior period expenses of ₹ 238344/- and net income was credited to profit and loss account. On enquiry it was submitted that prior period expenses related to medical expenses amounting to ₹ 9265/-, salary wages - 167837/- and traveling expenses - 61240/-. However, according to the Assessing Officer nothing was said about allow ability of these expenses and therefore the Assessing Officer disallowed a sum of ₹ 238344/-. 4. On appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me and observed that the assessee has not taken any loan for purchase of land, therefore disallowance was not justified and addition was deleted by her. 10. Before us. the Ld. D.R. for the revenue supported the order of the Assessing Officer. 11. On the other hand, the Ld. Counsel for the assessee supported the impugned order. 12. After considering the rival submissions we find that after reproducing the provisions of section 36(1)(iii) the Ld. CIT(A) decided this issue vide para 18 which is as under: 18. In this case, the A.O. no where tried to establish that the appellant has taken loan for the purchase of land and has paid interest thereon. It is quite clear that if any secured loan is taken for any fixed asset proper agreement is done and hypothecation of the assets purchased against the loan is also made. Thus, if the appellant had purchased land from borrowed funds, such documents would be there which could clearly establish payment of interest. The provisions of section 36(1)(iii) would become applicable only when the interest is paid in respect of capital borrowed, but when no capital is borrowed the question of disallowing the interest would not arise. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm the same. 17. Ground No. 4 - After hearing both the parties we find that the assessee had claimed depreciation @ 25% in respect of electrical equipments which was reduced to 10% by following earlier assessment year. 18. On appeal the Ld. CIT(A) following the decision of the Tribunal in case of ACIT V Rana Polycot Ltd. ITA No. 26/Chd/2007, deleted the addition. 19. Before us. the Ld. D.R. for the revenue supported the order of the Assessing Officer. 20. On the other hand, the Ld. Counsel for the assessee submitted that in the case of sister concern of the assessee M/s. Rana Polycot Ltd., the Tribunal has held in ITA No. 1016/Chd/2008 that even on electrical installations, the depreciation is to be allowed @ 25%. 21. After considering the rival submissions we find that the Tribunal has already held in case of DCIT V. M/s. Rana Polycot Ltd. (supra) that even on electrical installations depreciation is to be allowed @ 25%. In view of this order which have been followed by the LD. CIT(A), we confirm her order. 22. In the result, appeal of the revenue is dismissed. Cross Objections No. 20/Chd/2011 23. In this appeal the assessee has raised the following groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered by us in case of Hi Tech Foods V ITO (supra) and it was observed at para 22 to 27 as under: 22 We have heard the rival submissions carefully and find that the decision of Special Bench has been specifically over ruled by Hon'ble Gujarat High Court by discussing the issue in detail in case of CIT V. Sikandarkhan N Tunwar and others (supra). We further find that in case of C IT V. Vector Shipping Services, the is sue was different. In that case the question posed before the Hon'ble High Court reads as under: Whether on the facts and in the circumstances of the case, the Hon'ble ITAT has rightly confirmed the order of the ld. CIT(A) and thereby deleting the disallowance of ₹ 1,17,68,621/- made by the Assessing Officer u/s. 40(a)(ia) of the IT Act by ignoring the fact that the company M/s. Mercator Lines Ltd. had performed ship management work on behalf of the assessee M/s. Vector Shipping Services (P) Ltd and there was a Memorandum of Undertaking signed between both the companies and as per the definition of memorandum of undertaking, it included contract also. In that case some expenses were disallowed u/s. 40(a)(ia) because not tax was deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V. ACIT (supra) grounds of controversy between the parties with respect to allow ability or other wise of such expenditure was not examined by the Tribunal. For the purpose of these appeals, therefore, we frame following substantial question of law: 1 Whether disallowance u/s. 40(a)(ia) of the I.T. Act could be made only in respect of such amounts which are payable as on 31st Mach of the year under consideration? 2 Whether decision of Special Bench of the Tribunal in the case of M/s. Merilyn Shipping Transporters V. ACIT (supra) lays down correct law? 27 Hon'ble Gujarat High Court after considering the submissions of both the parties referred to the provision of Chapter XVII A of the Act dealing with the Tax Deduction Provisions. After this reference was made to Section 40(a)(ia) through which it was provided that tax has not been deducted on certain payments and the same will not be allowable. The Hon'ble High Court discussed the implementations of this provision and decision of Special Bench in case of Merilyn Shipping Transporters V. ACIT (supra) and observed and held as under: 17. In plain terms Section 40(a)(ia) provides that in case of any interest, com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Judicial Member speaking for majority adopted a stricter interpretation. Heavy reliance was placed on the Finance Bill of 2004, which included the draft of the amendment in Section 40 and the ultimate amendment which actually was passed by the Parliament. It was observed that from the comparison between the proposed and the enacted provision it can be seen that the legislature has replaced the words amounts credited or paid with the word payable in the enactment. On such basis, it was held that this is a case of conscious omission and when the language was clear the intention of the legislature had to be gathered from language used. In their opinion the provision would apply only to amounts which are payable at the end of the year. Having said so, curiously, it was observed that the proviso to Section 40(a)(ia) of the Act lays down that earlier year's provision can be allowed in subsequent years only if TDS is deducted and deposited and, therefore, Revenue's fear is unfounded as the provision of Section 40(a)(ia) of the Act covers the situation. 21. In the present case, we have no hesitation in accepting the contention that the provision must be construed strictly. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word has been frequently understood to mean that which may, can or should be paid and is held equivalent to due. 23. Despite this narrow interpretation of section 40(a)(ia), the question still survives if the Tribunal in case of M/s. Merilyn Shipping Transports vs. ACIT (supra) was accurate in its opinion. In this context, we would like to examine two aspects. Firstly, what would be the correct interpretation of the said provision. Secondly, whether our such understanding 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have given. If the language used by the Parliament conveyed such a meaning, we would not have hesitated in adopting such an interpretation. We only highlight that we would not readily accept that the legislature desired to bring about an incongruous and seemingly irreconcilable consequences. The decision of the Supreme Court in the case of Commissioner of Income-Tax, Gujarat vs. Ashokbhai Chimanbhai (supra), would not alter this situation. The said decision, of course, recognizes the 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 of 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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular amendment was proposed or accepted or rejected is often a matter of controversy, as it happened to be in this case, and without the speeches bearing upon the motion, it cannot be ascertained with any reasonable degree of certainty. And where the Legislature happens to be bicameral, the second Chamber may or may not have known of such reason when it dealt with the measure. We hold accordingly that all the three forms of extrinsic aid sought to be resorted to by the parties in the case must be excluded from consideration in ascertaining the true object and intention of the Legislature. 29. In yet another Constitution Bench judgment in the case of A.K. Gopalan vs. State of Madras reported in AIR 1950 SC 27, it was observed as under:- 17.....The result appears to be that while it is not proper to take into consideration the individual opinions of members of Parliament or Convention to construe the meaning of the particular clause, when a question is raised whether a certain phrase or expression was up for consideration at all or not, a reference to the debates may be permitted. 30. In the case of Express Newspaper (Private) Ltd. and another vs. The Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a serious error in merely comparing the language used in the draft bill and final enactment to assign a particular meaning to the statutory provision. 32. It is, of course, true that the Courts in India have been applying the principle of deliberate or conscious omission. Such principle is applied mainly when an existing provision is amended and a change is brought about. While interpreting such an amended provision, the Courts would immediately inquire what was the statutory provision before and what changes the legislature brought about and compare the effect of the two. The other occasion for applying the principle, we notice from various decisions of the Supreme Court, has been when the language of the legislature is compared with some other analogous statute or other provisions of the same statute or with expression which could apparently or obviously been used if the legislature had different intention in mind, while framing the provision. We may refer to some of such decisions presently. In the case of Bhuwalka Steel Industries Ltd. vs. Bombay Iron and Steel Labour Board reported in AIR 2010 (Suppl.) 122, the Apex Court observed as under:- The omission of the words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting business of banking fall within the meaning of ! banking company/- defined in the Banking Regulation Act, 1949, observed as under:- 59. The RDB Act was passed in 1993 when Parliament had before it the provisions of the BR Act as amended by Act No. 23 of 1965 by addition of some more clauses in Section 56 of the Act. The Parliament was fully aware that the provisions of the BR Act apply to co-operative societies as they apply to banking companies. The Parliament was also aware that the definition of/banking company/in Section 5(c) had not been altered by Act No. 23 of 1965 and it was kept intact, and in fact additional definitions were added by Section 56(c). Co-operative bank was separately defined by the newly inserted clause (cci) and primary co-operative bank was similarly separately defined by clause (ccv). The Parliament was simply assigning a meaning to words; it was not incorporating or even referring to the substantive provisions of the BR Act. The meaning of/banking company/must, therefore, necessarily be strictly confined to the words used in Section 5(c) of the BR Act. It would have been the easiest thing for Parliament to say that/banking company/shall mean/ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est Bengal Land Reforms and Limitation Act, 1963 applied or not, observed as under:- 8....Prior to 15-2-1971, an application under Section 8 was required to be made to the Revenue Officer specifically empowered by the State Government in this behalf. This phrase was substituted by the phrase Munsif having territorial jurisdiction by the aforementioned amendment. Even after this amendment when an application is required to be made to Section 8 of the Act either to apply Section 5 of the Limitation act or its principles so as to enable a party to make an application after the expiry of the period of limitation prescribed on showing sufficient cause for not making an application within time. The Act is of 1955 and for all these years, no provision is made under Section 8 of the Act providing for condonation of delay. Thus, when Section 5 of the Limitation Act is not made applicable to the proceedings under Section 8 of the Act unlike to the other proceedings under the Act, as already stated above, it is appropriate to construe that the period of limitation prescribed under Section 8 of the Act specifically and expressly governs an application to be made under the said section and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... former case it has been laid down by this court that when a special leave petition is dismissed this court does not comment on the correctness or otherwise of the order from which leave to appeal is sought. But what the court means is that it does not consider it to be a fit case for exercise of its jurisdiction under article 136 of the Constitution. That certainly could not be so when an appeal is dismissed though by a non-speaking order. Here the doctrine of merger applies. In that case, the Supreme Court upholds the decision of the High Court or the Tribunal from which the appeal is provided under clause (3) of article 133. This doctrine of merger does not apply in the case of dismissal of a special leave petition under article 136. When an appeal is dismissed the order of the High Court is merged with that of the Supreme Court. We quote the following paragraph from the judgment of this court in the case of Supreme Court Employees' Welfare Association v. Union of India, AIR 1990 Hon'ble Supreme Court 334; [1989] 4 SCC 187 (at page 344 of AIR 1990 S.C.): 22. It has been already notice that the special leave petition filed on behalf of the Union of India against the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court again in case of Kunhayammed and others V State of Kerala and another, 245 ITR 360 (S.C.). Head Note reads as under: Article 136 of the Constitution of India confers a special jurisdiction on the Supreme Court which is sweeping in nature. It is a residuary power in the sense that it confers an appellate jurisdiction on the Supreme Court subject to special leave being granted in such matters as may not be covered by the preceding articles. Even in the field covered by the preceding articles, jurisdiction conferred by article 136 is available to be exercised in an appropriate case. It is an untrammeled reservoir of power incapable of being confined to definitional bounds; the discretion conferred on the Supreme Court being subjected to only one limitation, that is, the wisdom and good sense or sense of justice of the judges. No right of appeal is conferred upon any party; only a discretion is vested in the Supreme Court to interfere by granting leave to an applicant to enter in its appellate jurisdiction not open otherwise and as of right. The jurisdiction conferred by article 136 is divisible into two stages; the first stage is up to the disposal of the pray ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eave is granted, the doctrine of merger dos not apply. From above it becomes clear that if an SLP is dismissed then it cannot be said that the Hon'ble Supreme Court has laid down any law. Now in the present case the SLP in case of CIT V Vector Shipping Services (supra) following order has been passed by the Hon'ble Supreme Court: Heard Mr. Mukul Rohtagi, Ld. Attorney General, for the petitioner Delay in filing and refilling special leave petition is condoned Special leave petition is dismissed Therefore it is a case of simple dismissal of SLP and cannot be said to have laid down any law. In view of this discussion and the earlier discussion we have preferred to follow the decision of Hon'ble Gujarat High Court in case of CIT V. Sikandarkhan N. Tunvar Ors, (supra) instead the decision of Hon'ble Allahabad High Court in case of CIT V Vector Shipping Services (supra), we decide this issue against the assessee and confirm the order of Ld. CIT(A). 30. Ground No. 2 - After hearing both the parties we find that the Assessing Officer had disallowed excessive expenses on repair and maintenance by restricting the disallowance of repair and maintenance to 1% o ..... 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