Retrospective effect of overruling precedent under section 40(a)(ia) required fresh adjudication of disallowance.

Section 40(a)(ia) was interpreted to cover both amounts "payable" and amounts already "paid" where tax was not deducted or deposited as required. The Supreme Court's later construction was treated as declaring the law retrospectively, so the Tribunal's order, which rested solely on an overruled precedent, could not be sustained. The High Court set aside that order and remitted the matter for fresh adjudication under the correct legal position.

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Issues: Whether the Tribunal's order, founded on a precedent later overruled by the Supreme Court, could be sustained and whether the matter required fresh adjudication in the light of the correct interpretation of section 40(a)(ia) of the Income-tax Act, 1961.

Analysis: The dispute turned on the scope of section 40(a)(ia), particularly whether the disallowance applied only to sums "payable" or also to sums already "paid". The earlier view relied upon by the Tribunal had been overruled by the Supreme Court, which held that the provision covers both payable and actually paid amounts where tax deduction at source was not made or not deposited in the manner required. The later declaration of law was treated as operating retrospectively, because a judicial ruling declares what the law has always meant, unless a contrary prospective direction is given. Since the Tribunal's decision rested solely on the overruled precedent, the foundation of its order could not stand.

Conclusion: The Tribunal's order was unsustainable and was set aside, with the matter remitted for fresh adjudication in accordance with the law declared by the Supreme Court.

Final Conclusion: The appeals succeeded to the extent that the earlier appellate order was annulled, but the substantive tax dispute was left open for reconsideration by the Tribunal.

Ratio Decidendi: A judicial decision overruling an earlier interpretation of a statutory provision applies retrospectively, and any order resting exclusively on the overruled view must be reopened and decided afresh on the basis of the correct legal position.

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