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TDS

rupinder dhand (b. C.A.,ADVOCATE) (32 Points)

25 October 2008

HI DEARS,

A BUSINESS LOAN IS TAKEN FROM A NBFC BY X NAME FIRM AND FIRM HAS LIABILITY TO DEDUCTE THE TDS U/S 194A BUT MY QUERY IS THAT THE FIRM HAS NOW IN MONEY PROBLEM SO THATS WHY THE INSTALMENT PAID BY HIS SISTER CONCERN Y FIRM, AND THE EXPENDITURE OF INTEREST IS TO BE BOOKED BY THE X FIRM, THE QUESTION IS THAT WHO WILL LIABLE TO DEDUCT THE TDS IS x OR y.

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Prabeer (B. COM (H) CA & CS Final) (5484 Points)
Replied 25 October 2008

Hello Sir,

Section 194A states that ‘any person, not being an individual or HUF, who is responsible for paying to a resident any income by way of interest, other than interest on securities, is required to deduct income tax thereon at the rates in force at the time of credit of such income to the account of payee or interest payable account or suspense account or at the time of payment thereof, in cash or by issue of a Cheque or draft or by any other mode, whichever is earlier’.

As you have mentioned that the expenditure of interest will be booked by ‘X’ Firm thus I’m considering the payment made by ‘Y’ is a kind of loan provided by ‘Y’ to ‘X’ Firm. Thus concluding with the fact that the deduction of TDS is a liability of ‘X’ Firm & not of ‘Y’ Firm.

Regards,

Prabeer Sarkar.