Section 40(a)(ia) covers not only the amounts which are payable as on 31st March of a particular year but also amounts payable at any time during the year. The language used in such provision doesn’t convey that such amount must continue to remain payable till the end of the accounting year.
In the instant case, the AO disallowed the entire expenditure incurred by assessee under section 40(a)(ia) on the ground that the assessee had, admittedly, not deducted the tax at source. CIT(A) dismissed assessee's appeal against such disallowance. On further appeal, the Tribunal deleted the entire disallowance, relying on the decision of the Special Bench of the Tribunal (Visakhapatnam) in the case of M/s. Merilyn Shipping & Transports v. ACIT [2012] 20 taxmann.com 244 (Viskhapatnam). Revenue filed the instant appeal against the order of Tribunal.
The HC held in favour of revenue as under:
1) The term used in section 40(a)(ia) is interest, commission, brokerage, etc., payable to a resident or amounts payable to a contractor or sub-contractor for carrying out any work. The language used doesn’t convey that such amount must continue to remain payable till the end of the accounting year. Any such interpretation would require reading into words which the Legislature has not used;
2) 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;
3) The Tribunal committed an error in applying the principle of conscious omission in the present case. Firstly, there was serious doubt whether such principle could be applied by comparing the draft presented in the Parliament and ultimate legislation which might be passed. Secondly, the statutory provision was amply clear.
4) Section 40(a) (ia) covers not only the amounts which are payable as on 31st March of a particular year but also amounts payable at any time during the year, of course, as long as the other requirements of the said provision exist. Thus, revenue's appeal was allowed – CIT v. Sikandarkhan N Tunvar [2013] 33 taxmann.com 133 (Gujarat)
In the instant case, the AO disallowed the entire expenditure incurred by assessee under section 40(a)(ia) on the ground that the assessee had, admittedly, not deducted the tax at source. CIT(A) dismissed assessee's appeal against such disallowance. On further appeal, the Tribunal deleted the entire disallowance, relying on the decision of the Special Bench of the Tribunal (Visakhapatnam) in the case of M/s. Merilyn Shipping & Transports v. ACIT [2012] 20 taxmann.com 244 (Viskhapatnam). Revenue filed the instant appeal against the order of Tribunal.
The HC held in favour of revenue as under:
1) The term used in section 40(a)(ia) is interest, commission, brokerage, etc., payable to a resident or amounts payable to a contractor or sub-contractor for carrying out any work. The language used doesn’t convey that such amount must continue to remain payable till the end of the accounting year. Any such interpretation would require reading into words which the Legislature has not used;
2) 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;
3) The Tribunal committed an error in applying the principle of conscious omission in the present case. Firstly, there was serious doubt whether such principle could be applied by comparing the draft presented in the Parliament and ultimate legislation which might be passed. Secondly, the statutory provision was amply clear.
4) Section 40(a) (ia) covers not only the amounts which are payable as on 31st March of a particular year but also amounts payable at any time during the year, of course, as long as the other requirements of the said provision exist. Thus, revenue's appeal was allowed – CIT v. Sikandarkhan N Tunvar [2013] 33 taxmann.com 133 (Gujarat)
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