TDS on provisions

This query is : Resolved

sumit gupta (Querist)
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30 April 2009 The company whose audit i m doing pays to a contractor who provide workers like security guards, gardener etc.
for march the company has booked the expense for workers on contract.
The company has not provided any TDS on such bill.
They are saying that they will provide Tds for only those provisions whose bills are fix & confirmed and party to which it has to be paid is also confirmed. They are saying that the bill of the labour supplier is not fix as they will get the bill after the contractor deduct the amount for the leave of the workers.
Are they correct in doing so?

Are they correct in saying that the Tds on provisions is to provided only when the bill amount is fix and party to whome it will be paid is fixed?
Plz Reply. Urgent.

CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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01 May 2009 Until the Contractor will nat raise the invoice you cannot make his account credit in your books. So no TDS if bill was not raised or no payment has been made.

TDS is not applicable on provisions. further the provision will not affect the contractor account in your books.

taxindiaconnect

taxindiaconnect (Expert)
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01 May 2009 As per 194c of the Act the company crediting the amount to the vendor account of to suspense account has to deduct TDS also on that provision. Thus your client should be advised to provide for the TDS on expenditure. However if the expenditure is being provided on the last day of the financial year i.e. 31st March 2009 in your case, the last date of payment of TDS is 31st may 2009

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Ca. Rajesh Dhama

Ca. Rajesh Dhama (Expert)
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01 May 2009 tds is required to be deducted at the time of payment or credit which ever is earlier. In this case because company pay to contractor so tds should be deducted and also company is booking expenditure so in absent of payment tds should be deducted at the time of booking of exenditure on the amount of expenditure which is booked.

CA Sanjeev Kr Jain

CA Sanjeev Kr Jain (Expert)
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02 May 2009 CA Rajesh Dua is very correct, if expenses is provided for in books than tds is to be deducted irrespective of fact bill is recd or not also payment is made or not

Mukund

Mukund (Expert)
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03 May 2009 If the company made provision of such expenses by dr to expenses a/c & credit to suspenses a/c on 31-03-09, but before filling of return if the company pay the said provision amount to the vendor or contractor then TDS should be deducted at the time of Payment & it is allowed as Last date of Payment of TDS in case of Provision is 30-09-09 ie last date of Filling Audit Return