Clarification - S.40a(ia)- 'any subsequent year'

[DEV KUMAR KOTHARI]

Proviso to S.40a(ia)- 'any subsequent year' vis a vis year in which tax is paid- see the likely controversy: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted— (A) xx (B) xx such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.] Any subsequent year should normally mean any year which comes afterwards. Particualrly when lateron expression used is 'year in which tax has been paid. Therefore, TDS can be deducted or tax deducted can be paid in any year afterwards, the year in which tax is deposited, related sum shall be allowed. There appears, as of now, no limitation for the period allowed for deposit of TDS. A revenue minded view can be 'any subsequent year' means the year following and no further. However, that does not reason to logic becasue otherwise word used could be subsequent year or following year and then with reference to year of payment also the same expression must be used. However, there is scope of litigation by revenue on this issue, thus a clarification is desirable. Readers are requested to send their views.

[ASHWIN GALA]

I DON'T THINK THERE IS ANY SCOPE OF LITIGATION. THE PHRASES 'ANY SUBSEQUENT YEAR' & 'YEAR IN WICH SUCH TAX HAS BEEN PAID' ARE VERY CLEAR.

AI Summary

Tax deduction timing: payment or deduction in any subsequent year permits allowance of the related expenditure. The proviso to s.40a(ia) allows deduction of a previously disallowed sum where tax on it has been deducted in any subsequent year or in the year in which such tax has been paid, and the ordinary meaning of 'any subsequent year' covers any year following the relevant year rather than only the immediately following year; a narrow interpretation could invite revenue challenge though an opposing view finds the language clear.