The key words in s. 40(a)(ia) are “on which tax is deductible at source under Chapter XVII –B” and this makes it clear that it applies to all expenses. Nothing turns on the fact that the legislature used the word ‘payable’ and not ‘paid or credited’. Unless any amount is payable, it can neither be paid nor credited. If an amount has neither been paid nor credited, there can be no occasion for claiming any deduction. The Special Bench was wrong in making a comparison between the draft Bill and the enacted law to determine the intention of the Legislature. A comparison is permissible only between the pre-amendment and post amendment law to ascertain the mischief sought to be remedied or the object sought to be achieved by the amendment. The fact that the impact of s. 40(a)(ia) is harsh is no ground to read the same in a manner which was not intended by the legislature. The law was deliberately made harsh to secure compliance of the provisions requiring deductions of tax at source. It is not the case of an inadvertent error. For the same reason, the second proviso sought to become effective from 1st April, 2013 cannot be held to have already become operative prior to the appointed date. Consequently, the majority view in Merilyn Shipping & Transports is not acceptable

The department’s argument that the installation, commissioning & maintenance services were intricately connected with the international transactions of warranty support services and commission income and that their operating cost and operating revenue had to be considered while computing the profit level indicator is not acceptable because the installation/ commissioning and maintenance agreements were independent agreements unconnected with the transactions of warranty support services and commission income. This is shown by the fact that while the equipment was supplied to 40 customers by the AE, only three of them availed of the installation services from the assessee. Also, a corroborative circumstance for construing the transactions of installation/commissioning and maintenance as domestic transactions was that the TPO had made no adjustment in respect of these transactions. The transactions pertaining to the installation/commissioning and maintenance services were also not deemed international transactions u/s 92B(2) because none of the conditions stipulated therein of a prior agreement existing between the customers of the assessee and the AE have been established as a fact. Moreover, there is no finding that the terms of the transaction of installation/commissioning as well as maintenance had been determined in substance between the customers and the assessee by the AE. In the absence of such finding, it cannot be deemed that the transaction of installation/commissioning as well as provision of maintenance services by the assessee to its domestic customers in India were international transactions falling within s. 92B(2)

It appears that the writ petition is to settle scores which the Petitioner might have raised during the course of his conduct as representative of the assessees. The Petitioner has asserted that he is not able to meet the expectations and illegal demands raised by the Members but there are no details as to when and how the demands were raised. Not only the writ petition is bereft of any material particulars but also the Petitioner has no right to claim mandamus for restraining an authority constituted under the Act from discharging the functions entrusted to it by the Statute. The present writ petition is gross abuse of process of law and, therefore, it is dismissed.

In Merilyn Shipping 146 TTJ 1 (Viz) (SB) the majority held that as the Finance Bill proposed the words “amount credited or paid” and as the Finance Act used the words “amounts payable“, s. 40(a)(ia) could only apply to amounts that are outstanding as of 31st March and not to amounts already paid during the year. This view is not correct for two reasons. Firstly, a strict reading of s. 40(a)(ia) shows that all that it requires is that there should be an amount payable of the nature described, which is such on which tax is deductible at source but such tax has not been deducted or if deducted not paid before the due date. The provision nowhere requires that the amount which is payable must remain so payable throughout during the year. If the assessee’s interpretation is accepted, it would lead to a situation where the assessee who though was required to deduct the tax at source but no such deduction was made or more flagrantly deduction though made is not paid to the Government, would escape the consequence only because the amount was already paid over before the end of the year in contrast to another assessee who would otherwise be in similar situation but in whose case the amount remained payable till the end of the year. There is no logic why the legislature would have desired to bring about such irreconcilable and diverse consequences. Secondly, the principle of deliberate or conscious omission is applied mainly when an existing provision is amended and a change is brought about. The Special Bench was wrong in comparing the language used in the draft bill to that used in the final enactment to assign a particular meaning to s. 40(a)(ia). Accordingly, Merilyn Shipping does not lay down correct law. The correct law is that s. 40(a)(ia) covers not only to the amounts which are payable as on 31th March of a particular year but also which are payable at any time during the year

Though the assessee is not a dealer in foreign exchange, it entered into forward contracts with banks for the purpose of hedging the loss due to fluctuation in foreign exchange while implementing the export contracts. The transactions in foreign exchanges were incidental to the assessee’s regular course of business and the loss was thus not a speculative loss u/s 43(5) but was incidental to the assessee’s business and allowable as such. The fact that there may have been no direct co-relation between the exchange document and the precise export contract cannot be seen in isolation if there are in fact several separate contracts with the bankers (Soorajmull Nagarmull 129 ITR 169 (Cal) & Badridas Gauridu 261 ITR 256 (Bom) followed; M. G. Brothers 154 ITR 695 (AP) distinguished)

The question whether a particular activity of the assessee such as the interest generating activity should be taken into consideration in the determination of the ALP is a question which needs to be decided considering the nature of the business of the assessee and its’ “business model”. The Tribunal rightly held that as the earning of interest income was only the result of investment of surplus funds and was not a primary income-generating activity, the interest income had to be excluded from the “operating profit” for purposes of determination of ALP