TDS on provisions

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Ankur Jain (Querist)
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22 October 2007
Sir,
I am doing Tax Audit for a realty development company. The company had made adhoc provisions on 31.03.2007 for various expenses to be incurred in subsequent months for the various running projects, but the client has not credited TDS account for the liabilites created.

The client is reversing the provision account on 1.04.2007 and then subsequently on the receipt of the bills for various expenses, is booking the expenses and TDS account. The client is taking the stand that for the expenses booked before 31.05.2007, it has booked TDS and paid the same before due date and has filed TDS return.and as the liability was provided before 31.03.2007 (which is aggregate of the creditor and TDS account,but the TDS account was not hit),
the client is liable to claim the expenses for tax purposes.
Should the expenses which are credited during the period 1.04.2007 to 31.05.2007 be allowed or disallowed for the computation of Tax.

Please guide me for the same

Regards

Ankur Jain

R.V.RAO

R.V.RAO (Expert)
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22 October 2007 DEPENDING ON DATE OF THE BILL,EXP. BETWEEN 01-04-07 TO 31-05-07 ARE CURRENT YEAR ie 07-08 FINANCIAL YEAR EXP.WHICH IF THE CLIENT RECEIVES ACTUAL BILLS FOR THE SAME, HE CAN ACCOUNT THEM DURING CURRENT YEAR ACCOUNTING FOR APPLICABLE TDS.
BUT IF TDS AMOUNT CREDITED TILL 31-03-07 IS PAID TO GOVT. AND FILED A RETURN, IS A SUFFICIENT COMPLIANCE.
REGARDING PROVISIONS WHEN MADE DURING THE PREVIOUS YEAR, IT IS TRUE SOME COMPANIES DONT CREDIT TDS AND REVERSE SUCH DUMMY PROVISION( IT CAN BE A COMPLETE AND GENUINE PROVISION IF TDS IS CREDITED AT THE TIME OF CREDIT OR PAYMENT WHICH EVER IS EARLIER)
THE REASON IS A RECENT AMENDMENT IN TDS LAW THAT IF TDS IS NOT DEDUCTED OR DEPOSITED ( CONDITIONS APPLY), 100% OF THE EXP. IS DISALLOWED.
R.V.RAO