The Aforesaid Contention Of The Assessees Was On The Basis That Thespecial Bench Of The Tribunal Itself In The Case Ofmerilyn Shipping& Transport v. Addl. Commissioner Of Income Tax (2012) 70 Dtr 81Had Accepted The Said Contention. It Is Aggrieved By These Orders Ofthe Tribunal, The Revenue Has Filed These A

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC &THE HONOURABLE SMT. JUSTICE P.V.ASHA THURSDAY, THE 30TH DAY OF JUNE 2016/9TH ASHADHA, 1938 ITA.No. 58 of 2013 AGAINST THE ORDER IN ITA 325/2010 of I.T.A.TRIBUNAL, COCHIN BENCH, DATED 20-07-2012 APPELLANT/RESPONDENT:-: THE COMMISSIONER OF INCOME TAX, KOTTAYAM. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI (TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT:-: SHRI.T.T.KURUVILLA, ALLEPPEY PARCEL SERVICE, VAZHICHERRY JUNCTION, ALAPPUZHA. R1 BY ADV. SRI.T.M.SREEDHARAN (SR.) R1 BY ADV. SRI.V.P.NARAYANAN R1 BY ADV. SMT.BOBY M.SEKHAR R1 BY ADV. SMT.DIVYA RAVINDRAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 30-06-2016 ALONGWITH I.T.A.NOS.77 & 109 OF 2013, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: ITA.No. 58 of 2013 APPENDIX PETITIONER'S ANNEXURES: ANNEXURE A: ASSESSMENT ORDER U/S 143(3) DATED 26-12-2008. ANNEXURE B: CIT (APPEALS) ORDER NO.ITA-34/APY/CIT(A)-IV/KTM/08-09DT.30-4-2010. ANNEXURE C: ITAT'S ORDER NO.325/COCH/2010 DT.20-7-2012. ANNEXURE D1: ORDER OF THE SPECIAL BENCH OF VISHAKAPATANAMTRIBUNAL. ANNEXURE D2: ORDER OF THE CALCUTTA BENCH OF THE TRIBUNAL. // TRUE COPY // P.A. TO JUDGE ANTONY DOMINIC & P.V.ASHA, JJ. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - I.T.A.Nos.58, 77 & 109 of 2013 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Dated this the 30[th] day of June, 2016 Antony Dominic, J. JUDGMENT These appeals are filed by the Revenue challenging the orders of the Income Tax Appellate Tribunal, Cochin Bench in ITANos.325/10, 400/11 and 401/11. The assessment year relevantfor these cases is 2006-2007. 2. The common facts of the case are that the assessees filed the appeals aggrieved by the order passed by the Commissioner ofIncome Tax (Appeals) upholding the additions made by theAssessing Officer on freight payments, under Section 40a(ia) of theIncome Tax Act. This was on the ground that the assessee did notdeduct tax at source on the freight charges paid by them. Acceptingthe contention of the assessees that the payment in question weremade in the previous year and that, therefore, Section 40a(ia) wasinapplicable, the Tribunal allowed the appeals. The acceptance of : 2 : the aforesaid contention of the assessees was on the basis that theSpecial Bench of the Tribunal itself in the case ofMerilyn Shipping& Transport v. Addl. Commissioner of Income Tax (2012) 70 DTR 81had accepted the said contention. It is aggrieved by these orders ofthe Tribunal, the Revenue has filed these appeals. 3. We heard the Senior Counsel for the Revenue, learned Senior Counsel appearing for the assessee in ITA 58/13 and thelearned counsel for the assessee in the other two cases. 4. The question of law raised in these appeals is whether the Tribunal was correct in holding that Section 40a(ia) wasinapplicable since the payments were made by the assessees in theprevious year. Insofar as this question raised is concerned, as wehave already stated, the only basis on which the Tribunal hasallowed the appeals is the order passed by the Special Bench of theTribunal in Merilyn Shipping & Transport case (supra). This order I.T.A.Nos.58, 77 & 109 of 2013 : 3 : passed by the Tribunal has already been held to be incorrect by theGujarat High Court in the judgment Commissioner of Income Tax v.Sikandarkhan N. Tunvar [2013] 357 ITR 312 (Guj). Considering analmost similar case, this court has followed the Gujarat High Courtjudgment in the judgment in the I.T.A.No.278/14, where this courtheld thus: Tribunal was correct in holding that Section 40a(ia) wasinapplicable since the payments were made by the assessees in theprevious year. Insofar as this question raised is concerned, as wehave already stated, the only basis on which the Tribunal hasallowed the appeals is the order passed by the Special Bench of theTribunal in Merilyn Shipping & Transport case (supra). This order I.T.A.Nos.58, 77 & 109 of 2013 : 3 : passed by the Tribunal has already been held to be incorrect by theGujarat High Court in the judgment Commissioner of Income Tax v.Sikandarkhan N. Tunvar [2013] 357 ITR 312 (Guj). Considering analmost similar case, this court has followed the Gujarat High Courtjudgment in the judgment in the I.T.A.No.278/14, where this courtheld thus: “Another contention that was pressed into service wasthat the appellants had already paid the amount andtherefore, the provisions of Section 40(a)(ia),applicable only in respect of the amount which remainsto be payable on the last day of the financial year, is notattracted. Therefore, according to the appellants,disallowance cannot be sustained. This contention wassought to be substantiated by relying on the judgmentof the Allahabad High Court in Commissioner ofIncome Taxv. Vector Shipping Services (P) [(2013)357 ITR 642 (All)]. Primarily, this contention should beanswered with reference to the language used in thestatutory provision. Section 40(a)(ia) makes it clearthat the consequence of disallowance is attracted whenan individual, who is liable to deduct tax on anyinterest payable to a resident on which tax is deductibleat source, commits default. The language of theSection does not warrant an interpretation that it is I.T.A.Nos.58, 77 & 109 of 2013 : 4 : attracted only if the interest remains payable on thelast day of the financial year. If this contention is to beaccepted, this Court will have to alter the language ofSection 40(a) (ia) and such an interpretation is notpermissible. This view that we have taken is supportedby judgments of the Calcutta High Court in CrescentExports Syndicate and another[ITAT 20 of 2013]and the Gujarat High Court in the case ofCommissioner of Income Taxv. Sikandadarkhan NTunvar[ITA Nos.905 of 2012 & connected cases],which have been relied on by the Tribunal. 5. This itself shows that the order passed by the Tribunal placing reliance entirely on the judgment in the Merilyn Shipping &Transport case (supra) is unsustainable and has to be reversed. 6. The assessees placed reliance on Section 194(C)(3) as it stood prior to its substitution by Finance Act 2 of 2009 andaccording to the assessees, going by the said provision they had noliability to deduct tax. However, we find that such a contention was : 5 : not raised or considered by the Tribunal and, therefore, we are notinclined to consider the contention now urged before us. 7. According to us, having regard to the judgment of theGujarat High Court in Merilyn Shipping & Transport case (supra)and the judgment of this court in I.T.A.No.278/14, the orders of theTribunal has to be set aside and the matter has to be remitted tothe Tribunal for fresh consideration. It is also clarified that if theassessees so desire, it would be open to them to claim the benefit ofSection 194(C)(3) as it stood prior to its substitution by FinanceAct 2009 before the Tribunal, if necessary by producing additionalmaterials also. It is also ordered that on consideration of the saidcontention, if the Tribunal finds that factual adjudication isnecessary, it would be open to the Tribunal to remit the matter tothe Assessing Officer for reconsideration. : 6 : 8. Accordingly, setting aside the orders passed by the : 6 : 8. Accordingly, setting aside the orders passed by the Tribunal in ITA Nos.325/10, 400/11 and 401/11 and answeringthe question of law raised in favour of the Revenue, these appealsare disposed of remitting the matter to the Tribunal for freshconsideration. The Tribunal shall consider the matter in the lightof the aforesaid observations and pass fresh orders. Appeals are disposed of. Sd/- ANTONY DOMINIC JUDGE jes Sd/- P.V.ASHA JUDGE