Disallowance of Expenses U/s 40(a)(ia)

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Onkar Singh (Querist)
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23 May 2009 Sir,

As per sec 40(a)(ia)

Any interest, commission or brokerage, rent,royalty,fees for professional services or fees for technical services or contract money which is PAYABLE, to a resident
on which tax is deductible at source under Chapter XVII B and such tax has not been deducted or, after deduction, has not been paid during the pervious year, or in subsequent year before the expiry of the time precribed under section200(1), shall be disallowed as a deduction in computing the income from business or profession.

My quary is that if the expenses is actully paid during the financail year without deducting Tds then also Sec 40(a)(ia) is applicable.

C.A.Javid Patel

C.A.Javid Patel (Expert)
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23 May 2009 yes when actualyy paid and not deducted tax then also the expenditure is disallowed.

jaiprakash Falor

jaiprakash Falor (Expert)
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23 May 2009 If the tax under the heads mentioned in the query is deductible but
TDS is not deposited then the same shall not be allowed as deduction provided that TDS deductible up to the month of February is required to be deposited before the end of the previous year in case of TDS deductible in the Month of March then the same is to be deposited before the due date for filing the return of inocme for allowance of expenditure claimed. The time limit for the payment of TDS for the purpose of allowance of such expenditure is being amended

Jiwan singh

Jiwan singh (Expert)
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25 May 2009 Yes section 40a (ia) is applicable

Onkar Singh

Onkar Singh (Querist)
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25 May 2009 Sir,
In Singhania it is given in reply to a question :-

Whether sec 40(a)(ia) is applicable in respect of expenses actually "paid" without TDS :-

The para says as follows :-
Tax is deductible under sec 193,194A,194C,194H,194I and 194J either at the time of payment or at the time of giving credit to the recipient. Howerver, sec 40(a)(ia) is applicable only in respect of TDS defaults if amount is payable. If amount is actually paid and tax is not deducted under the above sections, section 40(a)(ia) is not applicable. Section 40 (a)(ia) has to be subjected to strict interpretation. Going by the rule of strict interpretation, the default with reference to actual "payment" of expenditure would not entail disallowance.

Kindly express your views on the above mention matter. I think the author has a point and we can argue our case with the concerned authorities as sec 40(a)(ia) is very strict and is applicable in case of genuine and bona fide mistakes.

chetan soni

chetan soni (Expert)
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25 May 2009 Sec 40(a)(ia) stictly says that TDS needs to be done as per chapter XVIIB. And as per chapter XVIIB TDS needs to be done at the time of payment of credit whichever is earlier.

Hence, disallowances will be attract.

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