Case Law Details
Brief of the Case
Delhi High Court held In the case of ANZ Grindlays Bank Ltd. vs. DCIT that absence of a provision similar to sec. 40(a) (i) does not mean that the Assessee would also be disentitled to claim deduction on account of salaries in the year to which such expenses pertained even though the Assessee has subsequently discharged its obligation to deposit the tax. In our view, this added condition that the tax must be deducted and paid within time, cannot be read in Section 40(a) (iii). The plain language of the Section 40(a) (iii) does not permit such interpretation. If the parliament so desired, it would have specifically enacted so. The Parliament has expressly enacted that deduction in respect of payments made under sub-clause (i) of clause (a) of Section 40 would not be available where such payments were made in India to a non-resident in respect of which tax had not been paid “before the expiry of time prescribed. However, no such condition for depositing the tax paid within a prescribed time was introduced in sub clause (iii) of clause (a) of Section 40.
Facts of the Case
The controversy involved in the present appeal relates to the denial of deduction of expenses by virtue of provision of Section 40(a) (iii) for failure on the part of the Assessee to deduct and deposit Tax Deducted at Source (TDS) within the prescribed time. The following question of law was framed in this context –
“Whether the Income Tax Appellate Tribunal was right in law in holding that salaries paid to ex-patriate employees overseas on which tax was paid in accordance with CBDT Circular dated 685 dated 17/20 June 94 and Circular 686 dated 12.8.94, is not permissible as a deduction in computation of taxable business income in view of the provisions of Section 40 (a) (iii) of the Income Tax Act, 1961 read with Article 7 of the Indo UK Double Taxation Avoidance Treaty?”
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