CASE BRIEF

CASE NAME AND CASE LAW:

M/S Palam Gas Service vs. Commissioner of Income Tax [Civil
Appeal No. 5512 of 2017]
FACTS:
The taxpayer was engaged in the business of purchase and sale
of LPG cylinders. It sub-contracted the work for transportation of
LPG to three persons for which total payment was made without
withholding any tax on the same under section 194C of the
Income Tax Act, 1961. The assessing officer disallowed the
expenditure claimed by the taxpayer in its tax return under section
40(a)(ia) of the Act.
ISSUES:
Whether under section 40(a)(ia) of Income Tax Act, 1961 word
payable includes paid also?
Whether TDS is required to be deducted when amount is actually
paid?
JUDGEMENT:
The SC on 3 May, 2017 by its division bench of A.K. Sikri and
Ashok Bhushan, JJ. held that section 40(a)(ia) covers not only
those cases where amount is payable but also when it is paid. If
assessee follows cash system of accounting, then tax is required
to be deducted at the time of making of payment and if mercantile
system is followed then at the time of credit to the account of
payee.