In Brief
A gas service company claimed deductions for payments made to sub-contractors without deducting tax at source. The Income Tax Department disallowed the deductions under Section 40(a)(ia) of the Income Tax Act. The dispute centred on whether that section applies only when payment amounts are 'payable' (still due) or also when amounts have been actually paid. The Supreme Court held that Section 40(a)(ia) applies to both situations—payments actually made and amounts still payable. The mandatory TDS provisions under Chapter XVII-B require deduction at the time of payment or credit, and failure to comply results in disallowance of the expenditure. The Court overruled the Allahabad High Court's contrary view and endorsed the interpretation of the Punjab & Haryana, Madras, and Calcutta High Courts, dismissing the appeal with costs.
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