Audit fee income to be shown in which year ?
This query is : Resolved
05 October 2009
A firm of Chartered Accountants gets work of audit of accounts of a partnership firm for the financial year 2008-2009 in August 2009
As per Income Tax provisions, since the firm is maintaining accounts on mercantile system, it shows the expense of audit fee in that year ( FY 2008-09 ) by showing it as a liability, on 31.3.2009.
However, since the CA firm has undertaken the audit work in the FY 2009-2010 , it will show the income in that year itself.
The problem arises regarding deduction of TDS by the partnership firm. Since the TDS provisions state that the payer has to deduct and pay TDS on amounts paid , at the time of actual payment or credit in the books of account, whichever is earlier., the partnership firm will deduct TDS on the expense provided for , on 31.3.2009 and deposit the amount in the bank accordingly. The TDS certificate issued by the partnership firm in favour of the CA will show the year as FY 2008-09.
This means that the CA firm has to claim this TDS deduction in the return for the FY 2008=09. How can it do so when it has not shown the income in that year and it may have already filed its income tax return for the FY 2008-09 ( without this income ) . If the CA firm claims it in the return for the FY 2009-10, it will not be allowed by the Income Tax department , as per its guidelines.
Can someone throw some light on the correct method to be adopted to claim the TDS amount deducted from the professional fees ? Can the TDS certificate amount issued by the partnership firm be claimed by the CA firm in the return for the next year ( FY 2009-10).
As per Income Tax provisions, since the firm is maintaining accounts on mercantile system, it shows the expense of audit fee in that year ( FY 2008-09 ) by showing it as a liability, on 31.3.2009.
However, since the CA firm has undertaken the audit work in the FY 2009-2010 , it will show the income in that year itself.
The problem arises regarding deduction of TDS by the partnership firm. Since the TDS provisions state that the payer has to deduct and pay TDS on amounts paid , at the time of actual payment or credit in the books of account, whichever is earlier., the partnership firm will deduct TDS on the expense provided for , on 31.3.2009 and deposit the amount in the bank accordingly. The TDS certificate issued by the partnership firm in favour of the CA will show the year as FY 2008-09.
This means that the CA firm has to claim this TDS deduction in the return for the FY 2008=09. How can it do so when it has not shown the income in that year and it may have already filed its income tax return for the FY 2008-09 ( without this income ) . If the CA firm claims it in the return for the FY 2009-10, it will not be allowed by the Income Tax department , as per its guidelines.
Can someone throw some light on the correct method to be adopted to claim the TDS amount deducted from the professional fees ? Can the TDS certificate amount issued by the partnership firm be claimed by the CA firm in the return for the next year ( FY 2009-10).
06 October 2009
Sir obviously u can claim the tds in the year in which u offer the income to tax - Rule 37BA(sixth amendement rules 2009)
06 October 2009
IT IS USAULLY HAPPENS IN CASE OF COOPERATIVE SOCIETIES , WHERE I FOUND THAT AUDITORS FOR SUCH SOCIETY IS APPOINTED BY THE REGISTRAR OF COOPERATIVE SOCIETIES WHICH USUALLY APOINT THE CA AFTER THE CLOSE OF THE FINANCIAL YEAR & AS A RESULT OF WHICH AUDIT GET DELAYED,EVEN AFTER DUE DATE OF FILLING THE RETURN, IN THAT CASES SOCIETY USUALLY MAKE THE PROVISION OF AUDIT FEES BUT DO NOT DEDUCT THE TDS BY MENTIONING THE FACT THAT IT WILL BE DEDUCTED WHEN IT IS PAID IN FORM 3CD.
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