Consequences of failure to deduct TDS
This query is : Resolved
09 February 2011
Dear sir,
Our company is paying Lumpsum royalty to a Foreign company for importing Technical knowhow.
As per section 206AA we need to deduct tax @ 20%. Foreign compnay is not ready to apply for PAN or is not ready for deduction of Tax. Our company have to pay TDS from its own pocket. Due to some financial problems, our company is unable to pay the same & hence have decided to pay to foreign party without payment of TDS and incurr disallowance for this expense.
Will interest u/s 201 or penalty u/s 221 be attracted? We are ready to incurr disallowance of the expenditure for Income Tax purpose. We do not want to incur any interest or penalty for the same.
Please guide me as soon as possible..
Our company is paying Lumpsum royalty to a Foreign company for importing Technical knowhow.
As per section 206AA we need to deduct tax @ 20%. Foreign compnay is not ready to apply for PAN or is not ready for deduction of Tax. Our company have to pay TDS from its own pocket. Due to some financial problems, our company is unable to pay the same & hence have decided to pay to foreign party without payment of TDS and incurr disallowance for this expense.
Will interest u/s 201 or penalty u/s 221 be attracted? We are ready to incurr disallowance of the expenditure for Income Tax purpose. We do not want to incur any interest or penalty for the same.
Please guide me as soon as possible..
09 February 2011
In this case not Section201,only Sec271C is applicable.Please find the reference of relevant sections given below:
Section 271C[(1) If any person fails to—
(a) deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B; or
(b) pay the whole or any part of the tax as required by or under—
(i) sub-section (2) of section 115-O; or
(ii) the second proviso to section 194B,
then, such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct or pay as aforesaid.
201. 93[(1) Where any person, including the principal officer of a company,—
(a) who is required to deduct any sum in accordance with the provisions of this Act; or
(b) referred to in sub-section (1A) of section 192, being an employer,
does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax:
Provided that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax.
Section 271C[(1) If any person fails to—
(a) deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B; or
(b) pay the whole or any part of the tax as required by or under—
(i) sub-section (2) of section 115-O; or
(ii) the second proviso to section 194B,
then, such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct or pay as aforesaid.
201. 93[(1) Where any person, including the principal officer of a company,—
(a) who is required to deduct any sum in accordance with the provisions of this Act; or
(b) referred to in sub-section (1A) of section 192, being an employer,
does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax:
Provided that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax.
09 February 2011
Thanks for your reply.
Is it any way possible to escape Penalty or Prosecution?
Is it any way possible to escape Penalty or Prosecution?
09 February 2011
You have to deposit tax on behalf of the payee along with interest for the delay.
This is the only way out.
This is the only way out.
Guest
Guest
(Expert)
09 February 2011
If you do so as advised by Mr. Bafna, the respective expenditure will also be allowed in the year of payment.
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