Law: Income Tax Act, 1961

Section: 40(a)(i),200

Section 40(a)(i), read with section 200, of the Income-tax Act, 1961 - Business disallowance - Interest, etc., payable outside India - Whether where assessee had deducted tax at source out of royalty paid by it within relevant financial year but deposited same subsequently in next financial year but within limitation of time specified under Chapter XVII-B, read with section 200(1), royalty payment would be allowable in hands of assessee - Held, yes FACTS The assessee claimed deduction of tax deducted at source out of the royalty paid by it. The Assessing Officer held that merely by passing a book entry to show that the tax had been deducted on royalty payable, the assessee could not claim deduction under section 40(a)( i) and disallowed the claim. On appeal, the Commissioner (Appeals) held that the conditions of section 40(a)(i ) were fully satisfied as the tax was deducted within the relevant previous year and paid within prescribed period in accordance with Chapter XVII-B. However, as the payment particulars were not examined properly, he restored the matter to the Assessing Officer. On further appeal, the Tribunal deleted the addition of the amount that was paid within the time allowed under Chapter XVII-B but disallowed the amount that was paid beyond the prescribed period under Chapter XVII-B. On appeal: HELD For the Court to determine the fact that appeal before the Court involves a substantial question of law, the case should essentially fall with either of the following class of cases, viz., (i) it is of general public importance; or (ii) it directly or substantially affects the rights of the parties; or (iii ) it is an open question in the sense that it is not finally settled by the Supreme Court; or (iv) it is not free from difficulty, and (v) it calls for discussion of alternative views. In the instant case, the reading of the provisions of section 40(a) was so clear and unambiguous that it called for no elaborate discussion on the interpretation of the said provisions. The language of the section ex facie left no doubt that the approach taken by the Tribunal was in consonance with the settled principles of interpretation of statutes. Section 40…

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