Commissioner of Income-tax –IV VS. Sikandarkhan N Tunvar [2013] 33 taxmann.com 133 (Gujarat) Dated 2nd May, 2013.

Facts:

• The Assessing Officer in his order of assessment dated 30-11-2009 disallowed the entire expenditure on the ground that the assessee had admittedly not deducted the tax at source though payments were made to transporters which exceeded to Rs. 20,000 in a single trip and aggregated above Rs. 50,000 in the year.

• CIT (A) dismissed assessee's appeal against the disallowance under section 40(a)(ia) . On further appeal to ITAT, assessee succeeded.

• Relying on the decision of Special Bench of the Tribunal (Visakhapatnam) in the case of M/s. Merilyn Shipping & Transports v. ACIT, the Tribunal deleted the entire disallowance. The Tribunal believed that the word "payable" used in Section 40(a)(ia) of the Act would make the provision applicable only in respect of expenditure payable on 31st March of a particular year and that such provision cannot be invoked to disallow the amounts which had already been paid during such year even though tax may not have been deducted at source.

• Hence the present appeal by Revenue to HC.

Issues:

• Whether disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 could be made only in respect of such amounts which are payable as on 31st March of the year under consideration?

• Whether decision of Special Bench of the Tribunal in the case of M/s. Merilyn Shipping & Transports v. ACIT (supra) lays down correct law?

Held:

• The term used in section 40(a)(ia) is interest, commission, brokerage etc. is payable to a resident or amounts payable to a contractor or sub-contractor for carrying out any work.

• The language used is not that such amount must continue to remain payable till the end of the accounting year. Any such interpretation would require reading words which the legislature has not used.

• 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 the statutory provision was before and what changes the legislature brought about and compare the effect of the two.

• The other occasion for applying the principle, noticeable 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.

• The Tribunal committed an error in applying the principle of conscious omission in the present case. Firstly, there is serious doubt whether such principle can be applied by comparing the draft presented in Parliament and ultimate legislation which may be passed. Secondly, the statutory provision is amply clear.

• Section 40(a) (ia) would cover not only to the amounts which are payable as on 31st March of a particular year but also which are payable at any time during the year. Of course, as long as the other requirements of the said provision exist.

• In the result, Revenue's appeal allowed.