Section 40(a)(ia) applies only to year-end payables, not amounts already paid without TDS.

Section 40(a)(ia) was interpreted to apply only to expenditure remaining payable at year-end, because the word "payable" was given its ordinary and strict meaning. On that reading, amounts already paid during the year without deduction of tax at source were not covered by the disallowance provision. The factual position still required verification, however, because the record did not clearly show whether the January and February 2009 payments had been made before 31 March. The matter was therefore remitted for examination of whether the disputed sums were outstanding or had already been discharged.

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Issues: Whether section 40(a)(ia) of the Income-tax Act, 1961 applies only to amounts remaining payable as on the last day of the accounting year and not to sums already paid during the previous year without deduction of tax at source.

Analysis: The Tribunal applied the Special Bench ruling in Merilyn Shipping and Transports and held that the word "payable" in section 40(a)(ia) must be given its ordinary and strict meaning. On that construction, the disallowance provision is attracted only to expenditure outstanding as payable on 31 March and not to amounts already discharged during the year. However, the record did not clearly establish whether the January and February 2009 amounts had been paid before the year-end, so the factual position required verification by the Assessing Officer.

Conclusion: Section 40(a)(ia) was held applicable only to amounts remaining payable at year-end, and the matter was restored to the Assessing Officer for examination of whether the disputed payments had already been made.

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