Whether disallowance u/s 40(a)(ia) for non-deduction of tax at source can be made even when the expenditure is not debited to profit and loss account?

Last updated: 18 January 2023
Quick Summary
This judgement clarifies whether disallowance under Section 40(a)(ia) of the Income Tax Act can be made for failure to deduct tax at source if the expenditure has not been debited to the profit and loss account. The court ruled that Section 40(a)(ia) is applicable only when an expense has been claimed as a deduction in the profit and loss account. If the expenditure was not debited or claimed, then this section does not apply.

Court :
Kolkata High Court

Brief :
When the amount is credited to suspense account or any account, by whatever name called, then it is treated as amount credited to the account of the payee and tax has to be deducted at source. Hence, tax has to be deducted at source even on provisions made in the books of account to which TDS provisions are applicable.

Citation :
ITAT/338/2016 IA No.GA/2/2016 (Old No.GA/2607/2016)

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