Tds not deducted but deposited by deductee

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Abhishek Sharma (Querist)
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15 September 2011 Dear Experts,

I have a query regarding the section 40a(ia), where expenses are disallowed if the TDS is not deducted. The deductor has failed to deduct the TDS during the f.y. As per this section the TDS is liable to be deducted by the deductor and in case of failure those expenses will be disallowed in the hands of deductor.
Now, my question is where the deductee has deposited the whole of the amount of tax on his income at the time of filing the return then also the expenses has to be disallowed in the hands of the deductor? because the deductee has deposited the whole amount by himself. whether the deductor is relieved from his duty to deduct tax where the deductee has deposited the tax on his receipts?

regards,
Abhishek Sharma