In Brief
Palam Gas Service failed to deduct tax at source from payments made to sub-contractors for LPG transportation. The assessee contended that Section 40(a)(ia) of the Income Tax Act applies only to amounts 'payable' but not yet paid, not to amounts already paid. The Supreme Court, reviewing conflicting High Court precedents, held that Section 40(a)(ia) applies regardless of whether amounts are payable or already paid. The Court found that tax deduction obligations under Section 194C apply upon payment or credit, and the failure to comply attracts disallowance of expenditure under Section 40(a)(ia). The appeal was dismissed, endorsing the views of the Punjab & Haryana, Madras, and Calcutta High Courts while overruling the Allahabad High Court's contrary interpretation.
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