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TMI Blog2008 (12) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be passed separately. 3. The only ground taken by the Revenue is as under: "1. Whether the learned CIT(A) was correct in allowing the relief under s. 40a(iii) of IT Act by accepting the plea that the tax deducted but was not paid in time in violation of the provisions contained in s. 40a(iii)?" 4. The amount of Rs. 1,24,69,040 being the salary paid to five non-resident employees was disallowed by the AO for the reason that the assessee failed to pay the amount deducted at source on salary within the time as prescribed under s. 200(1) r/w r. 30. In this connection, during the course of assessment proceedings, the AO asked the assessee as to why the expenditure on account of salary be not disallowed under s. 40(a)(iii) of the Act? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entatives, argued that since tax has been paid to the Government account, no such disallowance is called for as s. 40(a)(iii) does not intend to. The provision provides only for payment of TDS and no such date has been prescribed for payment. I have carefully considered the argument of the learned Authorised Representatives and found no force at all in the argument. The relevant provision reads as under: "(iii) any payment which is chargeable under the head 'Salaries', if it is payable- (A) outside India; or (B) to a non-resident, and if the tax has not been paid thereon nor deducted therefrom under Chapter XVII-B." The above provision has been brought on statute by Finance Act, 2003 and is applicable w.e.f. 1st April, 2004 i.e., fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to payment on tax beyond prescribed period. The above provision thus intends that if the TDS on salary is not paid within the time as prescribed by sub-s. (1) of s. 200 and corresponding r. 30, such expenditure is not allowable under s. 40(a)(iii). The learned Authorised Representative's argument is therefore, rejected and the entire amount of Rs. 1,24,69,040 claimed as expenditure on account of salary paid to above five non-resident employees is disallowed and added back to the income of the assessee company." 9. Learned counsel for the assessee, on the other hand., supported the order of the learned CIT(A) and reiterated the submissions that were made before the learned CIT(A). Learned counsel for the assessee invited our attention to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-resident, but the amendment by the Finance Act, 2003 did not bring about any change in the expression "If the tax has not been paid thereon nor deducted therefrom" under Chapter XVII-B occurring in sub-cl. (iii). At this stage, we find it proper to have a note of s. 40(a)(i) as amended by the Finance Act, 2003 w.e.f. 1st April, 2004, which reads as under: ".........(i) any interest (not being interest on a loan issued for public subscription before the 1st April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which is payable, (A) Outside India; or (B) In India to a non-resident, not being a company or to a foreign company, on which tax is deductible at source under Chapter XVII-B and such tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter XVIIIB and subsequently paid the same to the Government account. Thus, merely because the tax was not paid within time-limit prescribed under s. 200(1) of the Act. rigours of s. 40(a)(iii) cannot be attracted in the present case inasmuch as the assessee had deducted the tax at source from salary paid to non-residents and also paid the same to the Government account. 14. In the context of the provisions contained in the pre-amended s. 40(a)(i), the Tribunal, Delhi Bench in the case of Minda (HUF) Ltd. vs. Addl. CIT (2004) 82 TTJ (Del) 305 while interpreting the pre-amended provisions of s. 40(a)(i) of the Act, has observed that the legislature has used the conjunction as "or which means that any of the condition is fulfilled, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter XVII-B of the Act". Contradistinctioning the provisions contained in s. 40(a)(iii) with s. 40(a)(i), it would be noticed that the sub-cl. (iii) does not mention that the deposit has to be made before the expiry of the time prescribed under sub-s. (1) of the s. 200 of the Act as so mentioned in sub-cl. (i) of the s. 40(a). 17. In view of the discussions made above, we are, therefore, inclined to confirm the order of the learned CIT(A) in directing the AO to allow deduction of Rs. 1,24,69,040 being the salary paid to a non-resident, on which tax was deducted by the assessee and was also paid subsequently to the Government account. The order of the learned CIT(A) on this issue is, thus, upheld. 18. In the result, the ground taken b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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