|CORAM:||Chandra Poojari (AM), N.R.S. Ganesan (JM)|
|CATCH WORDS:||TDS disallowance|
|COUNSEL:||Arun Raj S|
|DATE:||November 21, 2014 (Date of pronouncement)|
|DATE:||December 2, 2014 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 40(a)(ia) second proviso is not retrospective & so payment of TDS before due date of ROI does not prevent disallowance. Law laid down in Vector Shipping cannot be followed|
(i) The next question arises for consideration is whether the second proviso to section 40(a)(ia) as incorporated by Finance Act, 2012 is retrospective in operation or prospective in operation. We are conscious that some of the benches of this Tribunal in the country has taken the view that the second proviso to section 40(a)(ia) is retrospective in operation, therefore, applicable to earlier period also. However, the jurisdictional High Court in the case of Prudential Logistics & Transports in ITA No. 01 of 2014 judgment dated 13th January, 2014, found that the second proviso is not applicable for earlier assessment years. In fact, the Kerala High Court has observed as follows:
“5. Reading of Section 40a(ia) along with 2nd proviso and Section 201(1) along with proviso, it would mean that the mandate or requirement on the part of the payer to deduct tax at source is not so strict if they are able to show that the payee or the recipient of the amounts has paid tax in accordance with the provisions of Section 201(1) and the proviso.
6. This was not the claim made by the assessee before the Assessing Officer. The claim was on a different stand, initially reflecting the amounts as loan in the account books though shown as freight charges in the returns and later explained that it was not the loan amount but freight charges. It was never the case of the assessee that there was no mandate subsequent to amendment, to deduct tax as TDS in the light of above provisions. The assessment year in question is 2007-08 and the amendment giving breathing space to payer of amounts is with effect from 01/04/2013. Therefore, the said benefit is not applicable to the assessee. Even otherwise, on factual situation, the very fact that these amounts were claimed as loan initially, till the scrutiny came up for consideration before assessing authority would only indicate the real intention of the assessee firm i.e not to disclose this amount as freight charges but something else as repayment of loan.”
(ii) In view of the above judgment of the jurisdictional High Court, it is binding on this Tribunal that second proviso which was introduced by Finance Act, 2012 is not applicable for the assessment years under consideration.
(iii) The next contention of the assessee is that the assessee has already paid the amount, provisions of section 40(a)(ia) is applicable only in respect of the amount which remains to be payable on the last day of the financial year. The ld.representative placed his reliance on the decision of the Special Bench of this Tribunal in Merilyn Shipping & Transports vs Addl. CIT (2012) 70 DTR 81 and also the judgment of the Allahabad High Court in CIT vs M/s Vector Shipping Services (P) Ltd I.T.A No.122 of 2013 judgment dated 09-07-2013 and submitted that the SLP filed by the revenue in the Apex Court against the judgment of the Allahabad High Court in M/s Vector Shipping Services (P) Ltd is dismissed by the Apex Court. It is well settled principles of law that the law laid down by the Apex Court is binding on all courts and authorities including this Tribunal under Article 141 of the Constitution of India. It is also equally settled principle that a dismissal of SLP without any discussion is not the law declared by the Apex Court. The Apex Court thought it fit that it was not a fit case to be admitted for consideration. Therefore, while dismissing the SLP, the Apex Court did not declare any law. Hence, we cannot say that the Apex Court has declared the law declaring that section 40(a)(ia) is applicable only in respect of the amounts remains to be payable at the last day of the financial year.
(iv) We have also carefully gone through the judgment of the Allahabad High Court in CIT vs M/s Vector Shipping Services (P) Ltd. The Allahabad High Court, after reproducing the relevant paragraph from the order of CIT(A) and referring to the decision of the Special Bench of this Tribunal in Merilyin Shipping & Transports found that the Tribunal has not committed an error. It is obvious that there is no discussion about the correctness or otherwise of the decision rendered by the Special Bench of this Tribunal in Merilyn Shipping & Transports. However, we find that the Gujarat High Court in the case of CIT vs Sikandarkhan N Tunvar considered the decision of the Special Bench of this Tribunal in Merilyn Shipping & Transports (supra) and specifically disagreed with the principles laid down by the Special of this Tribunal in Merilyn Shipping & Transports (supra). The Calcutta High Court also in the case of Crescent Exports Syndicate & Another considered elaborately the judgment of the Special Bench of this Tribunal in Merilyn Shipping & Transports and found that the decision rendered by the Special Bench of this Tribunal is not the correct law. It is well settled principles of law that when different High Courts expressed different opinions on a point of law, then, normally, the benefit of doubt under the taxation law would go to the assessee. It is also equally settled principles of law that the judgment which discusses the point in issue elaborately and gives an elaborate reasoning has to be preferred when compared to the judgment which has no reasoning and discussion. Admittedly, the Calcutta High Court and Gujarat High Court have discussed the issue elaborately and the specific reasoning has also been recorded as to why the Special Bench is not correct. Therefore, this Tribunal is of the considered opinion that the judgments of the Calcutta High Court Crescent Exports Syndicate & Another and Gujarat High Court in Sikandarkhan N Tunvar have to be preferred when compared to the Allahabad High Court in M/s Vector Shipping Services (P) Ltd.
It is surprising to note why the assessee depends on Section 40(a)(ia) while the interest paid to depositors are otherwise exempted from TDS as per Section 194A(3).