2017 (5) TMI 242 - SUPREME COURT

Interpretation of Section 40(a)(ia) - Disallowance due to non deduction of tax at source (TDS) - Amount payable at the end of FY or any time during the year - Whether the provisions of Section 40(a)(ia) shall be attracted when the amount is not 'payable' to a contractor or sub-contractor but has been actually paid? - Held that:- When the entire scheme of obligation to deduct the tax at source and paying it over to the Central Government is read holistically, it cannot be held that the word 'payable' occurring in Section 40(a)(ia) refers to only those cases where the amount is yet to be paid and does not cover the cases where the amount is actually paid. If the provision is interpreted in the manner suggested by the appellant herein, then even when it is found that a person, like the appellant, has violated the provisions of Chapter XVIIB (or specifically Sections 194C and 200 in the instant case), he would still go scot free, without suffering the consequences of such monetary default in spite of specific provisions laying down these consequences.

The Punjab & Haryana High Court [2015 (5) TMI 617 - PUNJAB & HARYANA HIGH COURT] has exhaustively interpreted Section 40(a(ia) keeping in mind different aspects.

Allahabad High Court [2013 (7) TMI 622 - ALLAHABAD HIGH COURT], while interpreting Section 40(a)(ia), did not deal with this aspect at all, even when it has a clear bearing while considering the amplitude of the said provision. - No doubt, the Special Leave Petition thereagainst was dismissed by this Court in limine. However, that would not amount to confirming the view of the Allahabad High Court.

The view taken by the High Courts of Punjab & Haryana, Madras and Calcutta is the correct view and the judgment of the Allahabad High Court in CIT v. Vector Shipping Services (P) Ltd., did not decide the question of law correctly. - Decided in favor of revenue.