Section 40(a)(ia) of IT Act 1961 deals with disallowance of certain payments where tax was not deducted in time.
But on careful reading of the section it is found that disallowances will arise only on expenses which are "PAYABLE" and not paid. Whether the term "payable " includes expenses actually paid.
As per dictionary meaning "payable" refers to "Due or to be paid". In my opinion, the expenses which are paid and TDS was not deducted, Section 40(a)(ia) does not come in to operation.
Whereas, provision for audit fees was made in Accounts in excess of Rs.20,000 and TDS was not deducted, the Provision for Audit fees will be shown as "Payable" in Liabilities side of Balance Sheet. In this situation Section 40(a)(ia) will come into play.
Is it Correct?
While referring to settled case laws in interpretation of statutes, the meaning of statute is to be construed as it appears in common parlance.
05 September 2008
Liability to pay an expense preceds the moment it is paid. Hence, the payment of an expense without deduction of TDS will be covered by the provision.
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