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2017 (4) TMI 110 - AT - Income TaxDisallowance u/s 40(a)(ia) - whether section 40(a)(ia) can be invoked only with reference to the amount that has remained outstanding? - Held that:- Assessee has placed reliance upon CIT vs. Vector Shipping Services (P) Ltd. (2013 (7) TMI 622 - ALLAHABAD HIGH COURT). In the said case Hon’ble Allahabad High Court has upheld the finding that when the expenses incurred by the assessee is totally paid and not remained payable as at the end of the relevant accounting period, provisions of section 40(a)(ia) are not applicable. We are also aware that there are certain other Hon’ble High Court decisions wherein this proposition has not been upheld that provisions of section 40(a)(ia) are attracted only when the amount is payable. However, we note that there is no jurisdictional High Court decision on this issue. In such a situation we now have a Hon’ble Allahabad High Court decision which is in favour of the assessee as Hon’ble Apex Court in the case of CIT vs. Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME Court ] has to be followed. In the said decision the Hon’ble Apex Court has expounded that in case there are two views possible, the view in favour of the assessee should be followed. Thus Disallowance u/s 40(a)(ia) can be made only with respect to the sums which have remained unpaid. Since this aspect needs factual examination with reference to the records, we remit this issue to the file of the AO. The AO is directed to examine the amounts which have been paid and which have remained unpaid. The AO is directed to restrict the disallowance only with reference to those amounts which have remained outstanding. Needless to add the assessee should be granted adequate opportunity of being heard.
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