Strict textual reading of section 40(a)(ia) confines disallowance to year-end payables, not amounts already paid without TDS.

Section 40(a)(ia) was construed strictly as a disallowance provision and, on its plain text, was held to apply only to amounts outstanding as payable on 31 March. The retention of the word "payable" in the enacted provision, read in its ordinary sense and in the context of Chapter XVII-B, meant that sums actually paid during the previous year were outside its scope. The TDS machinery provisions and section 43(2) were not treated as enlarging the statutory reach beyond the language used. Accordingly, disallowance under section 40(a)(ia) was confined to year-end payables without TDS deduction.

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Issues: Whether section 40(a)(ia) of the Income-tax Act, 1961 applies only to expenditure shown as payable on 31 March or also to expenditure that was paid during the previous year.

Analysis: The provision was introduced to enforce compliance with tax deduction at source, but the enacted text retained the word "payable" after omitting the broader words used in the Bill. The word was construed in its ordinary and grammatical sense, and in the statutory context of Chapter XVII-B. On that construction, the disallowance mechanism was held to operate only on amounts outstanding as payable at year-end. Amounts actually paid during the previous year were held to fall outside the section. The rule in section 43(2) and the TDS machinery provisions were not treated as enlarging the scope of section 40(a)(ia) beyond its text.

Conclusion: Section 40(a)(ia) applies only to amounts payable as on 31 March and does not extend to amounts already paid during the previous year without TDS deduction.

Ratio Decidendi: A taxing provision creating a disallowance must be given a strict textual construction, and where the legislature has used the word "payable" without qualifying it to include amounts already paid, the provision cannot be expanded by interpretation to cover paid sums.

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