In current situation the expense is not deductible u/s 40(a) if the TDS is not deducted by the payer or not deposited before the due date but now if the PAN is not quoted then TDS is required to be deducted @ 20%. My query is what if the payer doesn't decuct TDS @ 20% in absence of PAN and deducts at normal rate say 10%. Will the expense be disallowed proportaionately or fully?
04 November 2010
Looking into the scheme of law and reading the section it seems that in the above case TDS has been deducted on proportianate amount and hence deduction must be allowed proportianately i. e. disallowable proportianately only.
I think, the expenditure does not call for disallowance due to short deductin. Disallowance can happen only when it falls within the defaults mentioned in the said section.
However, due to short deduction, the AO can ask the assessee to make good the short deduction along with penalty and interest
04 November 2010
In the given case it depends on AO. He may allow expenditure fully or proportionately. But most logically the expenses can be disallowed proportionately only and not fully on account of short deduction.
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