M/S PALAM GAS SERVICE vs COMMISSIONER OF INCOME TAX

The Supreme Court interpreted Section 40(a)(ia) of the Income Tax Act, 1961, determining that the provision applies to amounts that are 'payable' to contractors or sub-contractors, and not merely to amounts that have been paid. The Court held that if tax has not been deducted at source on payments made, such payments cannot be claimed as deductions in computing taxable income. The appeal was dismissed, affirming the Revenue's decision to disallow the deductions for the Assessment Year 2006-2007.