Reading Income-tax Act is a pleasure. You may think that you know all about a section but suddenly you come across one particular interpretation and a whole new perspective emerges. And that is the real joy.
Yesterday I was going through Section 40(a)(ia) . It says that if the interest etc. is payable and TDS is not deducted then the same will be disallowed for computation of business profit. Now for purposes of business computation, paid includes payable. However, nowhere payable is defined to include paid. So, one person said that if interest is actually paid then S.40 will not come into picture and no matter TDS is deducted or not, the interest will have to be allowed. Now, this sort of interpretation renders the whole spirit of the section defeated. Yet, the argument is quite fundamental and counter logic is not very convincing. I was perplexed for whole day.
Then thanks to the brain of my CD, I got the answer. And it was quite appealing. No matter interest was actually paid, it must first be payable. Now just because it is paid doesn’t mean that it was never payable. The section doesn’t envisage that interest must remain payable for the whole PY. What it requires is that it should be payable at least for one second in the PY, which it always will be notwithstanding the actual payment. Thus, it is argued that even paid will also come in the purview of the section. And I am now a relaxed man.