2012 (3) TMI 402 - ITAT VISAKHAPATNAM

Addition u/s 40(a)(ia) - Term "Payable" in section 40(a)(ia) refers to entire payment on which TDS is to be made or not? - Whether the term "payable" in section 40(a)(ia) refers to the entire payment on which TDS was required to be made in terms of various sections referred to in this section contained in Chapter XVII-B or it refers only to amounts payable with reference to those sections which, as per assessee, remain outstanding as on the 31st March - HELD THAT:-

S. V. Mehrotra (Accountant Member) - In our considered opinion, there is no ambiguity in the section and term "payable" cannot be ascribed narrow interpretation as contended by the assessee. Had the intention of the Legislature were to disallow only items outstanding as on the 31st March, then the term "payable" would have been qualified by the phrase as outstanding on the 31st March. The provisions of section 40(a)(ia) of the Income-tax Act, 1961, are applicable not only to the amount which is shown as payable on the date of balance-sheet, but it is applicable to such expenditure, which become payable at any time during the relevant previous year and was actually paid within the previous year - Decision against Assessee.

Mahavir Singh (Judicial Member) - Having different opinion from the learned Accountant Member, Shri S. V. Mehrotra he concluded that the Legislature consciously replaced the words "amounts credited or paid" with the word "payable" in the final enactment. By changing the words from "credited or paid" to "payable", the legislative intent has been made clear that only outstanding amounts or the provisions for expenses liable for TDS under Chapter XVIIB of the Act is sought to be disallowed in the event there is a default in following the obligations casted upon the assessee under Chapter XVII-B. In the present dispute before us, the word "payable" used in section 40(a)(ia) is to be assigned strict interpretation, in view of the object of legislation, which is intended from the replacement of the words in the proposed and enacted provision from the words "amount credited or paid" to "payable" - Decision in favour of Assessee. According to him, the provisions of section 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on the dated 31st March of every year and it cannot be invoked to disallow which had been actually paid during the previous year, without deduction of TDS.

Order of third member - D. Manmohan (Vice-President) - Disagreeing with the view taken by Shri S. V. Mehrotra, Accountant Member, he has 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) has to be given its natural meaning and, going by strict interpretation, he said that section 40(a)(ia) is applicable only to expenditure which is payable as on 31st March of every year and cannot be invoked to disallow the amounts which have already been paid during the previous year, without deducting tax at source. He therefore agreed with the view taken by Shri Mahavir Singh, Judicial Member and answer the question accordingly. - Decision in favour of Assessee.