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Cenvat credit @ 12.36% or i.t deduction @ 30% or both - an i

Saurabh Maheshwari (B.com,ACA) (5923 Points)

20 August 2012

Consider the following situation-

Reliance Financial Services Ltd.(RFSL) has received some services 9 in the nature of input services) of Rs.10 lacs (exclusive of ST) from Sumedha Financial Services ltd. (SFSL) . RFSL has accounted the same transaction in its books as under

In the books of RSFL

Consultancy Services A/c nDr. 1000000

Cenvat credit Receivable (incl EC& SHEC) 123600

To Sumedha Finan Serv Ltd. 1123600

Now, my question is that , what is the Amt. the RFSL is likely to get deduction under I.T. Act , wheather such deduction will include ST charged by SFSL ?

If the deduction allowed under I.T Act includes ST , then their is double benefit to assesse i.e Cenvat credit + I.T deduction.

Please clarify the entire situation?

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3 Replies

suneet (CA FINAL) (421 Points)
Replied 20 August 2012

rfsl will get deduction of Rs 10,00,000.00 as pet it act . rfsl will use Rs 123600 for payment of services provided by them , for example if service tax payable in some months is Rs. 12,40,000 ,. rfsl will use 12,36,000 and pay the balance that Rs. 4000

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suneet (CA FINAL) (421 Points)
Replied 20 August 2012

or if you do not want cenevat input you can debit whole amount of rs 1123600 in expense a/c

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CA. Subhash Dangi (Chartered Accountant) (1784 Points)
Replied 20 August 2012

TDS is to be deducted on entire amount of services inclusive of ST.

TDS is direct tax which is statutory obligation of deductees to deduct tax at source on certain payments and same should be remiteed to IT authority under TDS provisions of IT Act,

Service tax is indirect tax chargable to all taxable services and same should be remitted within due date.

In both cases, the assessee plays a mediatory role on behalf of Govt as these are statutory in nature.

Coming to ur question the assessee will not get double benefit by claiming cenvat and TDS. The assessee will get only Cenvat credit based on the service tax paid on input services for which he is legally bound to get.

Regarding tax i.e., TDS is deducted on behalf of client and the customoer alone will get credit of TDS deducted on payments but not the assessee i.,e RFSL in your case.

However the allowablility of such expenses or payment of such services will be decided based on actual remittance TDS for the relevant AY.

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