04 May 2009
My friend is doing the business of transportation. He pays the freight to unknown truck owner (100% in cash as they not accept the cheque) around Rs. 100000/- daily for delivery of the goods and charged Rs. 105000/- from the client as freight.
Problems: 1. Paying freight Rs. 30 lakhs in cash in a month. 2. Not deducting the TDS
What can happen? Can he file his ITR showing net income as commission?
05 May 2009
No, He has to follow the Income tax regulation regarding TDS and cash payment. Its not a commission its a business of transportation , how he will prove it as commission?
05 May 2009
As per rule 6 DD any expendtire paid in in excess of Rs 20000 is liable to be disallowed. The only saving grace is that the peraon making payment in cash, if paying it to different persons during the day, and ench payment does not is not Rs 20K, nothing will be diasllowed. However TDS need to be deducted u/s 194C. In case of non compliance of non deeduction of TDS the entire expenditure would get disaloowed u/s 40(a)(i). To avoid the disallownace due to non deduction, your client should deposit the TDS of it's own ( If truck drivers deny to get the TDS deducted) by grossing up the TDS payments. The business can be demonstrated as agency business if the client pays for freignt directly to the driver and your client bills his clients only for the service charges.
CAclubindia
