2011 (3) TMI 240

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....ent year 2006-07, claiming the following substantial questions of law:-   "i) Whether on the facts and circumstances of the case, Hon'ble ITAT, Chandigarh has erred in setting aside the decision of CIT(A), Chandigarh which upheld the addition made by the AO on account of interest paid to Mrs. Gargi Goel being expenditure pertaining to period prior to the Asstt. Year under consideration i.e. AY 2006- 07 under the provisions of section 40(a)(ia) when the provisions of section 40(a)(ia) clearly provide that what is to be allowed in subsequent year is only what is disallowed in the relevant year?   ii) Whether on the facts and circumstances of the case, the Hon'ble ITAT has erred in allowing the late payments of employees contri....

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.... 5. The Tribunal while deciding question No.1 in favour of the assessee observed that in terms of proviso to Section 40(a)(ia) of the Act, where the assessee in any subsequent years deducts tax at source and pays before the due dates then such expenditure is admissible as a deduction in the year in which such tax has been paid. It was further noticed that the assessee had deducted and paid tax at source on the interest expenditure relating to the period 1.4.2004 to 31.3.2005 during the period ending 31.3.2006 and within the specified due dates and was thus entitled to deduction in terms of Section 40(a)(ia) of the Act. The finding recorded by the Tribunal reads as under:-   "7. Section 40 of the Act starts with a non obstante cla....

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....in section 40(a)(ia) of the Act at the closing of the year ending 31.3.2005. However, such tax was deducted and paid during the period ending 31.3.2006. In view of the provisions of the Act, which mandated that where payment of specified items of expenditure are exigible to deduction to tax at source and where such tax has not been deducted, then the assessee is not entitled to the claim of deduction in respect of such expenditure on which TDS has not been deducted and paid within the previous year. The proviso to the said sub section further mandates that in case of payments of TDS in subsequent year's then the claim of the assessee is to be allowed in the year when the tax deducted has been paid in the account of the treasury. In the fact....