Jitendra Mansukhlal Shah vs. DCIT (ITAT Mumbai)

DATE: March 4, 2015 (Date of pronouncement)
DATE: March 31, 2015 (Date of publication)
AY: 2005-06, 2006-07
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S. 40(a)(ia): Merilyn Shipping 136 ITD 23 (SB) should be followed in view of approval by Allahabad HC and dismissal of SLP by Supreme Court. In any event as two views are possible, view in favour of assessee should be followed. Amounts already paid without TDS cannot be disallowed

The assessee, having made the payment, section 40(a)(ia) cannot be attracted because it speaks of the amount “payable” and it does not cover the amount already paid. The ITAT Chennai Benches have taken into consideration the decision of the ITAT Special Bench in the case of Merilyn Shipping & Transport 136 ITD 23 (SB), the order of which was suspended by the High Court but at the same time there was a subsequent judgement of the Hon’ble Allahabad High Court in the case of M/s. Vector Shipping Services (P) Ltd. wherein it was held that section 40(a)(ia) applies only to those amount which remains payable by the end of the previous year. In other words, in respect of payments already made section 40(a) (ia) is not attracted: – i. ACIT vs. M/s. Eskay Designs – ITA No.1951/Mds/2012 dated 09.12.2013. ii. ITO vs. Theekathir Press – ITA No. 2076/Mds/2012 & CO No. 155/Mds/2013 dated 18.09.2013. Though there are contrary decisions of the other Hon’ble High Courts, i.e. Hon’ble Calcutta High Court and Hon’ble Gujarat High Court, in the light of the decision of the Hon’ble Allabahad High Court it can be said the there can be two views possible in this matter in which event the one which is in favour of the assessee has to be followed in the light of the decision of the Hon’ble Supreme Court in the case of Vegetable Products Ltd. 88 ITR 192. Hon’ble Allahabad High Court in the case of CIT vs. Vector Shipping Services (P) Ltd.(supra) has held that for disallowing expenses from business and profession on the ground that TDS has not been deducted, amount should be payable and not which has been paid by end of the year. The said decision of Hon’ble Allahabad High Court was made subject to Special Leave Petition filed before Hon’ble Supreme Court and their Lordships vide their order dated 02/07/2014 in CC No.8068/2014 have dismissed the SLP. In view of above discussion, the decision relied upon by Ld. DR would have no application and we have to accept the claim of the assessee to the extent of labour payments are made during the year under consideration and to that extent no disallowance should be made.

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