Section 40(a)(ia) and 35(2AB)

Hi Vijay - i understand that there is "not withstanding" clause in section 40(a)(ia) but 40(a)(ia) only deals with disallowance of expenses which are payable to the vendor and on which tax is deducted at source. Whereas section 35(2AB) is not having any reference to deposit of TDS or other compliances. It only require "incurrence" of expenses.

Can you give some case law or other reference material that you are referring to ?

Dear Harry,

Here are 2 provision of Income Tax are contradicting each other

There are 2 principle of Interpreting of Law here:

i)                    Principle of generalia specialibus non derogant : As per this principle provision which is more specific has to give effect over the provision which is general. In our case

a)      Sec 40 (a) says Disallowing Professional fees (including professional fees paid for Scientific Research) if TDS is not deducted. It is General Provision

b)      Sec 35(2AB) : Weighted average deduction for expenditure incurred on Scientific Research. It is Special Provision

Hence, as per this Rule we have to give effect sec 35(2AB) over sec 40 (a)

ii)                  Notwithstanding Principle : As per this principle if any sec starts with “Notwithstanding…….” Then such provision has to give effect over the provision of the Act.

Hence, as per this Rule we have to give effect sec sec 40 (a) over sec 35(2AB).

In my opinion, we can give effect to both provision. First allow Rs.2000 then Disallow rs.1000 u/s 40 (a) ----- (Principle of Harmonised interpretation)

PLEASE SHARE YOUR VIEW ALSO

Sec 40(a)(ia) NOTHWITHSTANDING ANYTHING CONTAINED UNDER SECTION 30 TO 38

'the AMOUNT PAYABLE to contractor,etc.........on which TDS has to be deducted.......shall not be allowed as deduction'.

Harmonious interpretation would be that part expenditure of Rs1000/- alone shaal be disallowed U/s 40(a)(ia) and Rs1000/- shall be allowed U/s 35(2AB).