As per Proviso to Section 40(a)(ia)
Where the assessee has failed to deduct TDS in accordance with chapter of TDS and he is not treated as an assessee in default under the first proviso to Section 201(1) then, for the purpose of Section 40(a)(ia) it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the redident payee and deduction of such expenditure shall be allowed accordingly.
Now my query is that in this case Expenditure is allowed in which year? In the previous year or in the previous year in which resident payee files the return.
Because as per section 40(a)(ia) for allowability of expenditure Tax should have been deducted by 31st march and deposited till the date of filing return under section 139(1). and as per proviso to that section when assessee failed to deduct tds but he is not deemed to be assesse in default then it shall be deemed that assessee deduct and paid the tds on the date on which resident payee files the return.
In my opinion expenditre should be allowed in the previous year in which resident payee fles the return.
Is this interpretation is right or wrong?
CAclubindia
