My earlier statement was wrt disallowance and not on interest and penalty provisions.
Payment to contractors with out deducting tds
Page no : 2
Jishnu Surendran
(Finance Manager)
(312 Points)
Replied 08 October 2015
What do you mean by capitalisation ? There is no provision as I know it to exempt payments to contractors if we capitalise it.
Jyothis
(Article)
(1127 Points)
Replied 08 October 2015
By capitalisation,i mean amount paid to contractors for construction of building, which is capitalise/accounted as fixed asset.
So disallowance u/s 40a(ia) on account of disallowance cannot be invoked since same is not accounted as an expense.
My doubt is whether IT authority impose penalty/interest u/s 201 on account of non deduction of tds u/s 194C.
Can disallowance & interest u/s 201 can be penalised to an assesse together/one at a time.
VIPINKUMAR K TIWARI
(Financial Professional)
(196 Points)
Replied 08 October 2015
If contractor pur consolidated bill then tds will be on full amount either will be only on labour. For non deduction it will attact peanality of 1% of interest pm.
Jishnu Surendran
(Finance Manager)
(312 Points)
Replied 08 October 2015
Lets understand disallowance first as such is targeted only against expenditure claimed as expense in IT returns, thus if there is no such claim, gladly no disallowance. Allowability of Depreciation is entirely a different concept as even if we do not claim depreciation on fixed asset, then the assessing officer is bound to assess your income only after considering the same. So non-deduction of TDS does in no way affect the allowability of depreciation.
When there is a specific provision in the act to deduct TDS on the same non-deduction can cause yourself being considered as an 'assessee in default' and becoming liable for penalty and other legal proceedings.
Lets consider disallowance in an instance : You pay Rs. 100,000 to a contractor for repairing or may be refurnishing your business premises and you do not claim the same under ' Repairs ' or any other head in IT returns, no disallowance arises even if you havent deducted tax, as you havent claimed the expense against your revenue. But the department can levy penalty and initiate legal provisions for non complying with section 194C of the Act.
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