[aaykarbhavan] Clash over ‘Paid v. Payable’ after Merilyn Shipping's case is a matter of serious concern, says HC pending disposal

 IT : Issue of applicability of section 40(a)(ia) only to expenditure which is payable as on 31st March of year under consideration or to expenditure which had already been paid during year itself, requires serious consideration

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[2013] 34 taxmann.com 133 (Gujarat)

HIGH COURT OF GUJARAT

Commissioner of Income-tax, Rajkot - II*

v.

Odedara Construction

AKIL KURESHI AND MS. SONIA GOKANI, JJ.

TAX APPEAL NO. 51 OF 2013†

MARCH  20, 2013 

Section 40(a)(ia) of the Income-tax Act, 1961 - Business disallowance - Interest, etc. paid to a resident without deduction of tax at source [Year in which allowable] - Tribunal placing reliance on decision of a Special Bench in case of Merilyn Shipping & Transports v. Addl. CIT [2012] 136 ITD 23/20 taxmann.com 244 (Visakhapatnam), held that section 40(a)(ia) would apply only to expenditure which is payable as on 31st March of year under consideration and not to expenditure which had already been paid during year itself - Whether being an issue of recurring nature, ratio requires a serious consideration - Held, yes [Para 3] [Pending final disposal]

CASES REFERRED TO

 

Merilyn Shipping & Transports v. Addl. CIT [2012] 136 ITD 23/20 taxmann.com 244 (Visakhapatnam) (SB) (para 2).

Pranav G. Desai for the Appellant.

ORDER

 

Akil Kureshi, J. - Revenue has challenged the judgment of the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal') dated August 31, 2012. The following questions, besides other, have been presented for our consideration :

"(i)		Whether in the facts and circumstances of the case and in law, the Appellate Tribunal is justified in holding that the provisions of section 40(a)(ia) of the Act applies only to that expenditure which is payable as of 31st March and not to the expenditure which has already been paid during the year itself ?
(ii)		Whether in the facts and circumstances of the case and in law, the Appellate Tribunal is justified in holding that there is no violation of provisions of Section 194C of the Act if the assessee did not deduct TDS at the prescribed rate as per section 194-I of the Act and therefore the AO has erred in invoking the provisions of section 40(a)(ia) of the Act in view of the fact that the expenditure is not payable as of 31st March, but has already been paid during the year itself ?"

2. The Tribunal placing reliance on the decision of a Special Bench in the case of Merilyn Shipping & Transports v. Addl. CIT [2012] 136 ITD 23/20 taxmann.com 244 (Visakhapatnam), held that section 40(a)(ia) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), would apply only to the expenditure which is payable as on 31st March of the year under consideration and not to the expenditure which had already been paid during the year itself.

3. We are of the opinion that the ratio requires a serious consideration. Also being an issue of recurring nature, we may hear the Tax Appeal finally at this stage itself. For such purpose, issue notice for final disposal, returnable on April 17, 2013.

4. It is pointed out to us by the Revenue that the decision of the Special Bench in the case of Merilyn Shipping & Transports (supra) has been carried in appeal before the Andhra Pradesh High Court and the Andhra Pradesh High Court has admitted the Tax Appeal and stayed the decision.

SB

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Regards

Prarthana Jalan

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