A company engaged in construction business booked Rs.10 lakhs as income in its books and a tds receivable of Rs.20000. The entire work was subcontracted to a subcontractor at Rs. 9 Lakhs and thereby booked expense for the same amount. The company did not deduct any Tds from subcontractor. As there was a doubt that whether this contract income and subcontract expense will materialise or not, so a note stating to the fact was given in its balance sheet of FY 2010-11.
Later on the contract did not materialise and neither any payment was received by the company nor any TDS.
Now, can the company be saved from disallowance under section 40(a)(ia) on the plea that neither the income nor the expense were actually materialised.
Kindly give your valuable suggestions. Also provide case laws, if any.
CAclubindia
