Paid vs Payable?
THE uses of word "Payable", in Section 40(a)(ia) of the Act has created controversy as to whether payable includes amounts paid during the year. Special Bench of ITAT in the case of Merilyn Shipping & Transport vs. Addl CIT reported in 2012-TIOL-184-ITAT-VIZAG-SB decided the issue against the Revenue and after comparing the proposed and enacted provision which is intended from the replacement of the words in the proposed and enacted provision from the words ‘amount credited or paid' to ‘payable' has held that it has to be concluded that provisions of Section 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow expenditure which has been actually paid during the previous year, without deduction of TDS. The AP High Court has granted interim stay/suspension of the order of the Special Bench. ( )
Recently another High Court virtually overruled Merilyn Shipping observing, "we are of the opinion that Section 40(a) (ia) would cover not only to the amounts which are payable as on 31th March of a particular year but also which are payable at any time during the year. Of course, as long as the other requirements of the said provision exist. In that context, in our opinion the decision of the Special Bench of the Tribunal in the case of M/s. Merilyn Shipping & Transports vs. ACIT, does not lay down correct law".
We will bring you this case tomorrow.