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query in 40(a)(ia)

CA,CS Robin Sojrani (CA & CS ) (148 Points)

29 November 2007

If tax is deducted at source where it is not required to be deducted as per the provisions of Chapter XVII-B, but subsequently the tax is not deposited to the credit of Govt, whether the expense should be disallowed u/s 40(a)(ia).

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14 Replies

CA Abhash (Chartered Accountant) (324 Points)
Replied 29 November 2007

to my understanding, the expenses should not be disallowed because any expenses on which no tds liabilty arises, is not covered by chapter XVII and consequently is not the expense written in the section and thus should not be covered by 40a(ia). because as per the section ''any interest, commission or brokerage, 29[rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200 ''

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(Guest)

What is the treatment to be given , if an expenditure which is capitalized , on which TDS is not deducted OR On which TDS is deducted, but payment not made on time?

Manish Bajaj (CA) (47 Points)
Replied 30 November 2007

Hello, As per what I understand what is disallowed is the expense and once it is capitalised it no longer remains an expense. Hence I feel that the question of disallowance does not arise. Let me know if any other interpretation can be made...

CA. Dhirendra Singh (Chartered Accountant) (153 Points)
Replied 30 November 2007

The expenses should not be disallowed because any expenses on which no tds liabilty arises, is not covered by chapter XVII and consequently is not the expense written in the section and thus should not be covered by 40a(ia).

(Guest)

Section 40a(ia) talks of diallowance of expense on which tds has to be deducted but not deducted or if deducted not deposited to the exchequer, however it does not differentiate between revenue & capital expenditure. for an assessee both revenue and capital payment are expenditure. so i think that tds provions u/s 40a(ia) would apply even if an expenditure is capitalised

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(Guest)

IF a person is capitalising an expenditure which is subject to the provision of TDS, then such expense will not b coming in p&l a/c of that person, so where does arise the question of its sisallowalability?

(Guest)

Penalty will b levied u/s 271C equal to the amount of tax not deducted if provisions of the TDS are not complied with and question of disallowalability does not arise since expense is not being claimed on capitalisation.

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(Guest)

Why TDS is generally not deducted on brokerage to share brokers. If TDS has to be deducted wat will be disallowed? will de entire investment amount which includes brokerage be disallowed or is it only the brokerage amount?

manoj (Articled Student) (66 Points)
Replied 04 December 2007

Expenditure which is liable to TDS should be deducted and paid to the credit of the Central Government as per Sec 200(1) of the Income Tax Act, 1961. However, as said above the expenditure is to capitalized only in the year in which the corresponding TDS is deposited as per Sec 200(1).

(Guest)

Dear Sir, I am transport contractor. I got orders from Ongc and other petrolem companies. I did turnover of 3.5 crs out witch 2.5 paid to lorry supply office/lorry owners. I am filling my returns under Individual status. (1)Income tax officer issued show cause notice stating that as per sec 40(a)(ia). (2) Payments made exceeding Rs 50000/-. (3) Turnover exceeding 40 lakhs (4) The assessing officer stating u/s 194c(2) applicable. (5) Disallawance made during the Asst Year.2005-2006. I hire lorries from the various transport offices. I pay hire charges according to distance. I did not have any agreement. I take full responsibility of loading and unloading, time, and etc., commitments. More over i collect 5% commission from lorry owners by produceing/showing ageement before them The assessing officer disallowed entire amount paid to lorry owners. He express that TDS has to be made on payments, and he said it is a violation of act. Here I don’t get lorries for hire if I made TDS on payments. Lorry owner will not accept this type of payment. The assessing officer disallowed entire payments made to lorry owners. I am confused. In this connection I request you kindly provide latest judgment copies and case laws. I request kindly provide clarification/remedy to come out of this dangerours asst order. I am expecting satisfactory explanation before appeal authorities. Kindly replay to my mail ID:purna9394 @ yahoo.com.