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TDS debited to P&L a/c

Deepak Patel (CA Final) (136 Points)

19 October 2011

hello frnds..

can any1 tel me wat if TDS Account is debited to P & L A/C instead of Current Liabilities??

Whether it will b disallowed & added back to income or is allowable expense...

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11 Replies

Mihir (Wealth Manager) (5293 Points)
Replied 19 October 2011

You mean, you were liable to deduct TDS from payment made to someone and have not deducted TDS and not created a liability?

It depends on the nature of payment, the purpose.

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valji (Accounts manager-MBA) (2150 Points)
Replied 19 October 2011

agree with mihir TDS is your liablity ,also give TDS certificate to whom the TDS is deducted

Deepak Patel (CA Final) (136 Points)
Replied 19 October 2011

yes i was liable for deducting tds n instead of showing tds under current liab i debited to p and l a/c..

Vikas (CA) (1135 Points)
Replied 20 October 2011

first...since u paid tds on time so no disallowance.... secondly...u showed it to pnl ac meaning either u showed it as income or reduced it from exp...resulting in higher profit..making u pay more taxes....so my friend there can not b any tax liability as u paid more..... even though method was wrong and needs rectification....

Aravind.. (CA) (1262 Points)
Replied 20 October 2011

Interest on tds debited to Profit & Loss is inadmissible or not? An assessee routes TDS via profit & Loss account. As TDS paid is not an expense to the assessee, the expense is disallowed. Is my view correct. Clear me in this regard.

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Rakesh (Executive- Commercial & CMA final student) (179 Points)
Replied 20 October 2011

Hi..first of all ur accounting is wrong..even if u forgot to show TDS as current liablity then u should have shown it as income rather than debiting to P&L a/c.

Now you have to reverse the entry & show it as current liability..

& for sure your income is gonna increase due to this n u have to pay income tax to that extent..I hope this will clarify your problem..

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 20 October 2011

First of all the query seems to be incorrect. When you deduct TDS it is your liability i. e. it has credit balance. If you transfer the same to P & L A/c then it would credited to the P & L A/c and not debited. So the query itself is not clear to respond.

If you wish to say that the TDS other assessees have deducted has been debited to the P & L A/c then the TDS would not be an allowable expenses.

Also the TDS you have bymistakely credited to the P & L A/c needs to be paid and so will revese in the next year and hence it would be deducted from income this year and not allowable next year when you debit on payment of TDS.

Deepak Patel (CA Final) (136 Points)
Replied 20 October 2011

Thanx Frnds.....

amitmehta_ca (CA, CMA) (99 Points)
Replied 20 October 2011

Dear Deepak,

Your query seems to be re;ating to adjustment made for TDS paid which was not earlier deducted by the client while making payment and there is no further transaction or way to recover the TDS. So client must have paid the TDS and debited the standing amount of TDS to P&L. Exp-: Bill amount Rs. Lac Payment made Rs. 1 lac so to save whole expenditure to get disallowed client can make payment of TDS as rs 1 lac/0.9 - Rs. 1 lac ie. 11111. Now this amount will stand in tds account to nulify this amount it is being debioted to P&l A/C.

2nd case could be that the payment of INterest i.e. Late payment of TDS with interest as interes is disallowed.

Hope others will agree with this point.

radhika (mumbai) (26 Points)
Replied 07 September 2012

intt on tds default can be debited in profit & loss a/c or not

plz give ans with reasons? it's urgent

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Vikas (CA) (1135 Points)
Replied 10 September 2012

There is no specific sec. gorverning disallowance of interest on TDS but there are various judgements that disallow such expenditure, stating that income tax itself is not allowed under Sec.40(a)(ii) of the Act, hence in no way the same can the interest be allowed.

Commissioner Of Income-Tax vs Chennai Properties And Investment Ltd 239 ITR 435 Mad places reliance on the following

→ Ferro Alloys Corporation Ltd. v. CIT [1992] 196 ITR 406, Bombay HC : Interest on the such Taxes which are incidental to the business are allowed under Sec.37 but Income Tax itself is not allowed under Sec.37 [Sec.40(a)(ii)]

Hope this suffices your requirement.