Dismissing the appeal of the Revenue the Court held that the interpretation of the word “deducted” assumes significance in order to decide the applicability of section 40 of the Act. The word “deduction” has been defined to mean the process of taking an amount of money away from a total. An amount can be deducted in computing the business or professional income by taking away the amount from the total profits and gains of such business and profession. While preparing the profit and loss account of a business or profession an amount can be deducted from the professional or business income by debiting the profit and loss account prepared in connection with such profession or business with such amount. Such amount may also be deducted while computing the profits and gains of business or profession for the purpose of arriving at the business or professional income chargeable to tax. Therefore, if the disputed amount is neither debited from the profit and loss account of the business or profession nor has been deducted while computing the profits and gains of business or profession, section 40 of the Act does not come into operation as such amount cannot be said to have been deducted in computing the income chargeable under such head. Therefore, if an assessee has paid any amount on account of fees for technical services outside India or in India to a non-resident but has not debited such amount to the profit and loss account and has also not claimed it as deduction in computing the income chargeable under the head “Profits and gains of business or profession”, no disallowance in respect thereof can be made by invoking the provisions of section 40(a)(ia) of the Act. (AY. 2007-08)