COMMISSIONER OF INCOME TAX, KOTTAYAM vs. SHRI.T.T.KURUVILLA

ITA/58/2013HC KeralaKLHC01025943201330 June 2016Author: HONOURABLE MR.JUSTICE ANTONY DOMINIC8 pages
AI SummaryRemanded

What were the facts?

The Revenue filed appeals against the orders of the Income Tax Appellate Tribunal (ITAT) for the assessment year 2006-2007. The ITAT had allowed the assessees' appeals, holding that Section 40(a)(ia) of the Income Tax Act was inapplicable to freight payments. This was based on the ITAT's Special Bench decision in Merilyn Shipping & Transport v. Addl. Commissioner of Income Tax, which accepted the assessees' contention that the payments were made in the previous year, thus rendering Section 40(a)(ia) inapplicable. The Assessing Officer had made additions on freight payments for the assessees' failure to deduct tax at source (TDS) on these charges.

What did the High Court hold?

The High Court held that the Tribunal's order, which was based solely on the Merilyn Shipping & Transport case, was unsustainable. The Court noted that the Gujarat High Court in Commissioner of Income Tax v. Sikandarkhan N. Tunvar and this very Court in another appeal (ITA No. 278/14) had found the Merilyn Shipping & Transport decision to be incorrect. The Court reasoned that Section 40(a)(ia) applies when there is a default in deducting tax at source on payments made, and its applicability is not restricted to amounts remaining payable on the last day of the financial year. The Court set aside the Tribunal's orders and remitted the matters for fresh consideration. The assessees were permitted to raise the contention regarding Section 194(C)(3) before the Tribunal, and if factual adjudication was necessary, the Tribunal could remit the matter to the Assessing Officer.

What were the issues?

1. Whether the Tribunal was correct in holding that Section 40(a)(ia) of the Income Tax Act was inapplicable because the payments were made by the assessees in the previous year. The Revenue contended that the Tribunal's reliance on the Merilyn Shipping & Transport case was incorrect, as this decision was subsequently overruled by the Gujarat High Court in Commissioner of Income Tax v. Sikandarkhan N. Tunvar and by the Kerala High Court itself in another case. The assessees argued that Section 40(a)(ia) was not attracted if payments were made in the previous year. The assessees also raised a contention regarding Section 194(C)(3) as it stood prior to its substitution by the Finance Act 2 of 2009, arguing they had no liability to deduct tax under that provision.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194(C)(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE SMT. JUSTICE P.V.ASHA THUR AY, THE 30TH DAY OF JUNE 2016/9TH ASHADHA, 1938 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 ALONG WITH I.T.A.NOS.77 & 109 OF 2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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/08-09 DT.30-4-2010. ANNEXURE C: ITAT'S ORDER NO.325/COCH/2010 DT.20-7-2012. ANNEXURE D1: ORDER OF THE SPECIAL BENCH OF VISHAKAPATANAM TRIB

The order continues below.

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