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Issues: Whether disallowance under section 40(a)(ia) of the Income-tax Act, 1961 could be made while computing income under the head "Capital Gains".
Analysis: Section 40 opens with a non obstante clause but its operation is confined to amounts not deductible in computing income chargeable under the head "Profits and gains of business or profession". The statutory text does not extend the disallowance under section 40(a)(ia) to computation under other heads of income. The commission expenditure in question was considered in the context of sale of property and the resulting capital gains computation, not business income. On that basis, the disallowance made for alleged non-deduction of tax at source could not be sustained under section 40(a)(ia).
Conclusion: The disallowance under section 40(a)(ia) was held to be inapplicable to the computation of capital gains and the addition was deleted in favour of the assessee.
Ratio Decidendi: Section 40(a)(ia) applies only to income computed under the head "Profits and gains of business or profession" and cannot be invoked to disallow expenditure while computing income under another head such as capital gains.
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