The CBDT has issued a Circular No. 10/DV/2013 dated 15.12.2013 in which it has analyzed the controversy created by recent judgements on the question whether the term “payable” in s. 40(a)(ia) includes the amounts that have already been paid during the year or it refers only to the amounts outstanding as at the year end. It is noted that while the Special Bench of the Tribunal in Merilyn Shipping 136 ITD 23 (SB) and the Allahabad High Court in Vector Shipping has taken the view that the disallowance in s. 40(a)(ia) does not apply to amounts that are already paid, a contrary view has been taken by the Calcutta High Court in Crescent Export Syndicate/ Md. Jakir Hossain Mondal and the Gujarat High Court in Sikandarkhan Tunvar.
The CBDT has expressed the view that the disallowance u/s 40(a)(ia) would apply even to the amounts that have already been paid during the year. It is also clarified that if the High Court takes a view contrary to that taken by the CBDT, the CBDT’s view would not apply in that jurisdiction though steps should be taken to decide whether a SLP should be filed or legislative amendments made.