Law:

Section:

Section 40(a)(iii), read with sections 200 and 40(a)(i), of the Income-tax Act, 1961 - Business disallowance - Salary, payable outside India (Delay in deposit of TDS) - Assessment year 1991-92 - Whether where assessee had deducted tax at source from salary paid overseas to its non-resident employees and had paid same to Government account, merely because tax was not paid within time-limit prescribed under section 200(1), said payment could not be disallowed by invoking section 40(a)(iii) - Held, yes - Whether where legislature wanted to make payment of tax within specified time a necessary pre-condition it would have expressly indicated so - Held, yes - Whether condition to deposit TDS within prescribed time could not be read into sub-clause(iii) of clause (a) section 40 as unlike language of item(B) of sub-clause(i) of clause (a) of section 40, same had not been specifically enacted - Held, yes[Paras 18 & 20 ][In favour of assessee] Circulars and Notifications : Circular No. 685 dated 17-6-1994;Circular No. 686 dated 12-8-1994 FACTS Facts â–  The assessee was a non-resident banking company and its principal place of business was situated outside India. The assessee also carried on banking business in India through its branches situated within the country. â–  During the relevant period, the assessee seconded some of its employees from overseas to its branches in India. These expatriate employees were employed for the business carried on in India. They received a part of their remuneration by way of salaries and perquisites in India which were duly reflected in the Profit and Loss Account drawn up by the assessee in respect of its Indian operations. The assessee also deducted tax at source on so much of the remuneration that was payable to the aforementioned expatriate employees in India. Undisputedly, such TDS was deposited with the Government. â–  In addition to the above remuneration, the assessee's head office situated overseas also made certain payments to and/or for the benefit of such expatriate employees. However, the assessee did not account for such payments, which were in the nature of salaries, allowances and perquisites, in…