Delay in deposit of TDS by an assessee
This query is : Resolved
23 September 2024
Dear Sirs : As per thumb rule TDS to be deducted at the time of credit or payment whichever is earlier. My querry is that an assessee had deposited TDS amount after 90days from date of invoice THAN can assessing officer disallow the purchases on which TDS return is late filed ? Can you suggest the rectification to be done, if TDS has been deducted (u/s 194 Q) at the time of payment to suppliers which is 90 days from date of supply / tax invoice. Regards
24 September 2024
Disallowance under section 40a(ia) is attracted when tds deducted is paid after due date of filing return. 70% of tds deductible expense/purchase shall be disallowed. What is the due date of payment of tds whether it is done before due date of filing the IT return for the relevant financial year?
15 December 2024
The disallowance under Section 40(a)(ia) is more directly related to non-deduction of TDS rather than the delay in its deposit. Disallowance would not apply automatically for late payment of TDS if TDS was correctly deducted at the time of payment or credit. While there is no direct disallowance for late TDS deposit under Section 40(a)(ia) if TDS was deducted and paid late, you are liable for interest on the delay in payment.
18 December 2024
Section 40(a)(ia) of the Act reads as under:
"…any interest, commission or brokerage, rent, royalty, fees for professional services or fees for
technical services payable to a resident or amounts payable to a contractor or sub-contractor, being
resident, for carrying out any work (including supply of labour for carrying out any work), on
which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or,
after deduction, has not been paid on or before the due date specified in sub-section (1) of section
139...".
Section 40(a)(ia) also speaks about payment of tds on or before due date.
"…any interest, commission or brokerage, rent, royalty, fees for professional services or fees for
technical services payable to a resident or amounts payable to a contractor or sub-contractor, being
resident, for carrying out any work (including supply of labour for carrying out any work), on
which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or,
after deduction, has not been paid on or before the due date specified in sub-section (1) of section
139...".
Section 40(a)(ia) also speaks about payment of tds on or before due date.
18 December 2024
Case 2: TDS is deductible (and is so deducted) during the current financial year but it is not deposited on or before the due date of submission of return of income under section 139(1)
30% of such expenditure is disallowed in Current Year ... But....
If tax is deposited with the Government after the due date of submission of return of income as per the provisions of Sec 139(1), the expenditure (which is disallowed in the current year) will be
deductible in that year in which tax will be deposited.
Case 3- TDS is deductible (and is so deducted) during the current financial year and it is deposited on or before the due date of submission of return of income under section 139(1).
There will be no disallowance.
Not Applicable as the expenditure was fully allowed in the Current Financial Year.
Refer : Page 4 & 5.... Handbook on Disallowance of Expenses under the head Income from Business and Profession
Direct Taxes Committee
The Institute of Chartered Accountants of India
(Set up by an Act of Parliament)
New Delhi
First Edition : February, 2023
Link not allowed here being more no. of digits
30% of such expenditure is disallowed in Current Year ... But....
If tax is deposited with the Government after the due date of submission of return of income as per the provisions of Sec 139(1), the expenditure (which is disallowed in the current year) will be
deductible in that year in which tax will be deposited.
Case 3- TDS is deductible (and is so deducted) during the current financial year and it is deposited on or before the due date of submission of return of income under section 139(1).
There will be no disallowance.
Not Applicable as the expenditure was fully allowed in the Current Financial Year.
Refer : Page 4 & 5.... Handbook on Disallowance of Expenses under the head Income from Business and Profession
Direct Taxes Committee
The Institute of Chartered Accountants of India
(Set up by an Act of Parliament)
New Delhi
First Edition : February, 2023
Link not allowed here being more no. of digits
18 December 2024
Link :: https://kb.icai.org/pdfs/PDFFile664ad 8a91 twentyone c33.89 fortynine5356.pdf
Check if it can be cracked by some tricks...
Check if it can be cracked by some tricks...
18 December 2024
Yes sir. Well aware of this provisions. But your reply said "The disallowance under Section 40(a)(ia) is more directly related to non-deduction of TDS rather than the delay in its deposit. ".
Disallowance under this section relates to delay in payment as well. That is what i wanted to substantiate
Disallowance under this section relates to delay in payment as well. That is what i wanted to substantiate
18 December 2024
Agreed, in our practical experience we have not encountered any such disallowance for late payment, hence the statement.
18 December 2024
Much respect to your experience sir. But the section specifically mentions about payment as well. Just wanted to reinstate the provisions of the section for the users understanding.
18 December 2024
Do you mean what the ICAI has stated is against the provision of the section?
What has been stated above is as per the ICAI literature.
What has been stated above is as per the ICAI literature.
18 December 2024
Sir i would like to quote that your first reply explicitly stated that the section deals largely with non-deduction rather than late payment. But your kind self has quoted scenarios/cases which indicates where there is a delay in payment (before/after due date of filing return) 30% of the expenses are disallowed under specific circumstances. What I'm trying to explain that we cannot construe that section deals only with non-deduction not delay in payment.
I'm explaining only with reference to your statement "The disallowance under Section 40(a)(ia) is more directly related to non-deduction of TDS rather than the delay in its deposit"
I'm explaining only with reference to your statement "The disallowance under Section 40(a)(ia) is more directly related to non-deduction of TDS rather than the delay in its deposit"
18 December 2024
Dear Friends : This section in question is 194Q which is categorilly different than other TDS sections. 0-1 % deductions has no meaning when E invoicing is in force + AIS portal is showing all purchases and sales. Thank you very much for above debate in good spirit
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18 December 2024
Differences in opinion are inevitable, and discussions are meant to broaden the knowledge of all participants/ members. The first view is based on a straightforward interpretation of the act, while the second opinion takes into account practical considerations. Both perspectives are valid for understanding, not for ranking..
Second view has ben supported with ICAI literature, and herewith caselaw:
1. CIT Vs. Virgin Creations (Calcutta High Court)- Court has held that amendment made in section 40(a)(ia) by Finance Act, 2010 is retrospective in nature and would apply from 01.04.2005. The said amendment provides that no dis allowance under section 40(a)(ia) could be made where the TDS has been paid before the due date of filing of return of income. This is first ruling of any High Court on this issue.
Refer: https://taxguru.in/income-tax/section-40a-ia-retrospective-operation.html
2. Assistant Commissioner of Income Tax Vs. Shri M.K. Gurumurthy (ITAT Bangalore) Appeal Number : ITA No. 717/Bang/2011
Refer: https://taxguru.in/income-tax/disallowance-40aia-tds-paid-due-date-income-tax-return.html
3. Similar view has been taken in the Third Member decision in the case of Kanel Oil & Export Inds. Ltd. v. JCIT [2009] 121 ITD 596 (Ahd) (TM)
Finally to sum up let me say that both aspects are two sides of same coin!!!
Good Luck....
Second view has ben supported with ICAI literature, and herewith caselaw:
1. CIT Vs. Virgin Creations (Calcutta High Court)- Court has held that amendment made in section 40(a)(ia) by Finance Act, 2010 is retrospective in nature and would apply from 01.04.2005. The said amendment provides that no dis allowance under section 40(a)(ia) could be made where the TDS has been paid before the due date of filing of return of income. This is first ruling of any High Court on this issue.
Refer: https://taxguru.in/income-tax/section-40a-ia-retrospective-operation.html
2. Assistant Commissioner of Income Tax Vs. Shri M.K. Gurumurthy (ITAT Bangalore) Appeal Number : ITA No. 717/Bang/2011
Refer: https://taxguru.in/income-tax/disallowance-40aia-tds-paid-due-date-income-tax-return.html
3. Similar view has been taken in the Third Member decision in the case of Kanel Oil & Export Inds. Ltd. v. JCIT [2009] 121 ITD 596 (Ahd) (TM)
Finally to sum up let me say that both aspects are two sides of same coin!!!
Good Luck....
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