SC dismisses Revenue SLP against Allahabad HC ruling in Vector Shipping Services (P) Ltd; HC held disallowance u/s 40(a)(ia) for TDS default applicable only to expenses remaining payable at year end, not to expenses paid during year; HC also observed that Revenue can't take benefit from observations in Special Bench ruling in Merilyn Shipping suggesting that Section 40(a)(ia) was introduced with a view to augment revenue through TDS mechanism : SC
The SC ruling was delivered by Three Judge Bench of Chief Justice, Justice Madan B Lokur and Justice Kurian Joseph.
Attorney General Mukul Rohatgi along-with Advocates Rupesh Kumar, Sahil Tagotra and Anil Katiyar argued on behalf of the Revenue.
Taxsutra Note:
In Vector Shipping Services (P) Ltd's case [TS-352-HC-2013(ALL)], TDS default was in respect of salaries. HC had observed that salaries were paid by another person, on assessee's behalf after TDS & circumstances in which such salaries were routed through that person were sufficiently explained.
Chennai ITAT in MRF Ltd [TS-137-ITAT-2014(CHNY)] and Bangalore ITAT, in Cross Tab Marketing Services Pvt Ltd [TS-236-ITAT-2014(Bang)] , following Vector Shipping ruling, held that Sec 40(a)(i) disallowance applies only to amounts ‘payable’ and not to amounts which are already ‘paid’ during the year. Agra ITAT in Gupta Overseas [TS-699-ITAT-2013(AGR) held that analysis of IT Dept view in Circular No 10/DV/2013 read with Vector Shipping ruling led to a conclusion that Allahabad HC had approved Merilyn Shipping SB ratio on Sec 40(a)(i) disallowance.
However, Mumbai ITAT in Rishti Stock and Shares Pvt. Ltd [TS-359-ITAT-2013 (MUM)] rejected Allahabad HC ruling in Vector Shipping stating that it was not on question of law raised before HC, but a mere ‘obiter dicta’. Lucknow ITAT in Ama Medical & Diagnostic Center [TS-208-ITAT-2014 (LKW)] also rejected jurisdictional Vector Shipping ruling as not binding stating that it only made a simple passing reference to Merilyn decision, did not approve Merilyn ratio, and relief was ultimately granted on merit.
Vector Shipping Services (P) Ltd. [TS-401-SC-2014]
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