ITAT VISAKHAPATNAM (SPECIAL BENCH)
Merilyn Shipping & Transports
v.
Assistant Commissioner of Income-tax
Date of Decision – 29.03.2012
Question: “Whether Section 40(a)(ia) of the Income Tax Act can be invoked only to disallow expenditure of the nature referred to therein which is shown as payable as on the date of the balance sheet or it can be invoked also to disallow such expenditure which become payable at any time during the relevant previous year and was actually paid within the previous year.”
Held that section 40(a)(ia) cannot be invoked in respect of amounts actually paid within the previous year without deduction of TDS. Section 40(a)(ia) applies only to amounts outstanding as of 31st March of every year (Majority view). Section 40(a)(ia) would apply only to amounts outstanding as of 31st March of every year on which TDS not deducted and not to amounts paid during previous year without deduction of TDS for following reasons:
• Legislature by consciously replacing words from ‘credited’ or ‘paid’ in Finance (No.2) Bill,2004 to ‘payable’ in Finance (No.2) Act, 2004 has made it clear that only outstanding amount or provision for expenses which are liable for TDS, are to be disallowed in event there is default in not following TDS provisions under Chapter XVII-B of Act
