Tds on interest on late payment
This query is : Resolved
06 September 2012
Sir,
i have a query as below,
should a person deduct TDS on payment of Interest( Interest refers to the late payment made on the bill. Like there are some co. which mentions on the bill if there is delay for more than 10 days for the payment int. will be charged.if this amount is exceeding 5000/- then what should be done).
Please reply as fast as u can.
i have a query as below,
should a person deduct TDS on payment of Interest( Interest refers to the late payment made on the bill. Like there are some co. which mentions on the bill if there is delay for more than 10 days for the payment int. will be charged.if this amount is exceeding 5000/- then what should be done).
Please reply as fast as u can.
06 September 2012
No need to deduct income tax vide Parag Mahasukhlal Shah's case reported in (2011) 46 SOT 302.
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07 September 2012
Yes, Agree With Sir's Reply.
As seen from the order of the ITAT Ahmedabad Bench in the case of ITO v. Parag Mahasukhlal Shah [2011] 46 SOT 302 the Tribunal has held that a payment which has direct link and immediate nexus with the trading liability being connected with the delayed purchase payments will not fall within the category of interest as defined in section 2(28A). The payment made by the assessee in the present appeal being of similar nature also cannot be termed as interest as defined under section 2(28A). Even without entering into the controversy as to whether the payment made on overdue bills will come within the ambit of interest as defined in section 2(28A), the assessee is also bound to succeed on its alternative argument that the entire payment having been made during the previous year relevant to the assessment year under dispute no disallowance could be made under section 40(a)(ia) in view of the ITAT Special Bench decision in the case of Merilyn Shipping & Transports v. Addl. CIT [2012] 136 ITD 23. In the afore said view of the matter, the disallowance made under section 40(a)(ia) cannot be sustained. Therefore, the Assessing Officer is to be directed to delete the same.
But Also Keep in Mind That This is Not a Concluded Hearing.
As seen from the order of the ITAT Ahmedabad Bench in the case of ITO v. Parag Mahasukhlal Shah [2011] 46 SOT 302 the Tribunal has held that a payment which has direct link and immediate nexus with the trading liability being connected with the delayed purchase payments will not fall within the category of interest as defined in section 2(28A). The payment made by the assessee in the present appeal being of similar nature also cannot be termed as interest as defined under section 2(28A). Even without entering into the controversy as to whether the payment made on overdue bills will come within the ambit of interest as defined in section 2(28A), the assessee is also bound to succeed on its alternative argument that the entire payment having been made during the previous year relevant to the assessment year under dispute no disallowance could be made under section 40(a)(ia) in view of the ITAT Special Bench decision in the case of Merilyn Shipping & Transports v. Addl. CIT [2012] 136 ITD 23. In the afore said view of the matter, the disallowance made under section 40(a)(ia) cannot be sustained. Therefore, the Assessing Officer is to be directed to delete the same.
But Also Keep in Mind That This is Not a Concluded Hearing.
01 October 2012
As per 2(28A) "interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised...
So by making purchase debt is incurred and so tds needs to be deducted
So by making purchase debt is incurred and so tds needs to be deducted
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