Disallowance under section 40(a)(i) should be limited to sum chargeable to tax and not total remittance: CBDT

Section 40(a)(i) stipulates that any interest, royalty , fees for technical services or other sum chargeable to tax, payable either in India to a non-resident/foreign company or payable outside India, shall not be allowed as a deduction if there has been a failure in deduction or in payment of tax deducted in respect of such amounts. Doubts have been raised about interpretation of the term 'other sums chargeable', i.e., whether this term refers to the whole sum being remitted or only the proportion representing the sum chargeable to income-tax. The CBDT has clarified that for the purpose of making disallowance of 'other sum chargeable' under section 40(a)(i), the appropriate portion of the sum which is chargeable to tax shall form the basis of such disallowance. P.S. :The CBDT has clarified that disallowance is not to be made on basis of whole sum remitted to non-resident/foreign company without deduction of tax as section 40(a)(i) contemplates disallowance of only that portion of sum which is chargeable to tax and on which TDS default is made by payer.