The Tax Publishers2012 TaxPub(DT) 1009 (Visakhapatnam-Trib) : (2012) 044 (II) ITCL 0454 : (2012) 136 ITD 0023 : (2012) 146 TTJ 0001 : (2012) 070 DTR 0081 : (2012) 016 ITR (Trib) 0001

INCOME TAX ACT, 1961

--Business Disallowance under section 40(a)(ia)--Payment to residents without deduction of taxApplicability of provisions--The provision of section 40(a)(ia) of the Act was introduced in order to ensure compliance of TDS but assigned the term payable” in the provision of section 40(a)(ia) of the Act. On a comparison between the proposed and enacted provision, the only conclusion, which can be reached, is that Legislature consciously replaced the word amount credited” or Paid” with the word Payable” in the final enactment and such change was not done without any purpose. It is a basic presumption that an enactment was brought in by the Legislature is well thought of and properly worded in order to give meaning to its intent by changing the words from credited” or paid” to Payable”. The legislative intent has been made clear that only the outstanding amount or the provision for expense liable for TDS is sought to be disallowed in the event there is a default of TDS. No doubt the object of section 40(a)(ia) of the Act is to ensure that the TDS provision as provided in chapter XVII-B implemented without any default. As per section 40(a)(ia) of the Act any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services Payable” on which tax is not deducted or the tax is deducted but the same is not paid within the time allowed such amount shall be disallowed while computing the income. The section speaks of the amount Payable” on which the tax is not deducted and therefore it should apply only if any amount is Payable”, but if the amount is already paid the provisions of this section should not apply.

Income Tax Act, 1961 Section 40(a)(ia)

IN THE ITAT, SPECIAL BENCH, VISAKHAPATNAM

D. MANMOHAN, V.P. (MZ), MEHROTRA, A.M. & MAHAVIR SINGH, J.M.

Merilyn Shipping & Transports Visakh. v. ACIT

ITA No. 477/Viz/2008

A.Y. 2005-06

29 March, 2012

Decision:In assessees favour.

Assessees by : Subramanyam,

Revenue by T.L. Peter & Smt. D. Komali,

Interveners by : B. Ramakrishnan, G.V.N. Hari and Y. Suryachandra Rao,

ORDER

D. Manmohan, V.P.

I have gone through the orders passed by the learned Accountant Member, Shri S.V. Mehrotra as well as the learned Judicial Member, Shri Mahavir Singh. I am not able to persuade myself to agree with the view taken by Shri S.V. Mehrotra, Accountant Member. I have gone through the detailed reasons given by Shri Mahavir Singh while coming to the conclusion that the word Payable used in section 40(a)(ia) of the Income Tax Act, 1961 has to be given its natural meaning and, going by strict interpretation, I am of the firm view that section 40(a)(ia) of the Act is applicable only to expenditure which is payable as on 31st March of every year and cannot be invoked to disallow the amounts which already been paid during the previous year, without deducting tax at source. I therefore agree with the view taken by Shri Mahavir Singh, JM and answer the question accordingly. The matter may now be placed before the Division Bench for passing appropriate orders, in the above listed case, in the light of the majority view of the Members consisting of the Special Bench.

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