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Tds is adjustable/refundable or not?

CA Sahil Garg (Searching for Job) (171 Points)

26 November 2012

Suppose ABC Co. paid an advance of Rs. 495000 to XYZ Co. for a contract on 30.04.2012 after deducting TDS of Rs. 5000. On 01.05.2012 ABC Co. paid that TDS to the Govt. But on 02.05.2012, the contract cancelled between both the parties & XYZ Co. returned the all money. So in this situation, can ABC Co. claim refund of TDS paid on that contract? Or TDS paid is adjustable against any other TDS liability?????

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24 Replies

CA Manish (Job) (5264 Points)
Replied 26 November 2012

The excess TDS paid can be adjusted against the future TDS liability (the sec must be the same i.e. the nature of payment)in the same financial year .

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CA. Subhash Dangi (Chartered Accountant) (1784 Points)
Replied 26 November 2012

Once the TDS is deducted and remitted to Govt Authority on behalf of service provider/deductee, there is no question of adjustment or refundable if it is one time transaction.

In this case TDS of Rs.5000/- has beed deducted and remitted and the contract is cancelled by recovering the all dues. Therefore ABC Co. neither claim any refund of TDS from IT Dept nor any adjustment with other liability.

The option for you to recover the money from XYZ Co separately by issuing Form 16A as u deducted & remitted the TDS.

ANJALI NEGI (Chartered Accountant) (1263 Points)
Replied 26 November 2012

First of all i would like to make u clear that its not the deductor (ABC&Co.) can claim the refund or adjustment but its the deductee( XYZ&Co.) whose TDS has been deducted can claim it/ adjust against other TDS laibility.

As per ur query, XYZ&Co. is liable to refund the full amount of Rs.500000 to ABC&Co.

ABC&Co. can claim refund / adjust the same.

CA Manish (Job) (5264 Points)
Replied 26 November 2012

Originally posted by : ANJALI NEGI
	First of all i would like to make u clear that its not the deductor (ABC&Co.) can claim the refund or adjustment but its the deductee( XYZ&Co.) whose TDS has been deducted can claim it/ adjust against other TDS laibility. As per ur query, XYZ&Co. is liable to refund the full amount of Rs.500000 to ABC&Co. ABC&Co. can claim refund / adjust the same.

Why XYZ is liable to refund Rs 5,00,000/-.

ANJALI NEGI (Chartered Accountant) (1263 Points)
Replied 26 November 2012

Manish sir can u elaborate ur answer regarding same sec & same nature of payment....

Its the deductee (Contrator xyz&co.) only who can claim the refund because in his respect the TDS has been deducted.

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CA Sahil Garg (Searching for Job) (171 Points)
Replied 26 November 2012

TDS deposited by ABC Co. to Govt. will be shown in 26AS of XYZ Co., so XYZ will claim its credit in Income Tax. So it will be benefit for XYZ.

The company who suffered the loss is ABC Co. according to my point of view.

CA Manish (Job) (5264 Points)
Replied 27 November 2012

Originally posted by : ANJALI NEGI
	Manish sir can u elaborate ur answer regarding same sec & same nature of payment.... Its the deductee (Contrator xyz&co.) only who can claim the refund because in his respect the TDS has been deducted.

According to me practically xyz wont be ready to refund Rs 500000/- because it has only received rs 495000/- so it will refund Rs 495000 only. If xyz refund rs 500000/- then it have to wait till the filing of IT return and processing of return and issuance of its refund which will take long time.

The easy and shortest way to resolve these types of problem practically is that xyz will refund rs 495000/- only. abc which has deposited rs 5000/- as tds u/s 194C i.e. payment to contractor can adjust the same against its future tax liability under the same section. Since it is may month it means abc havent file the tds return which means it has not yet given the credit of tds to the xyz so it can use this tds against future liability.

Even if abc has filed the tds return and given credit to xyz then the abc can file revise return and cancel the credit given to xyz and show the excess amount in challan and that challan can be carried forward to next quarter return which can be adjusted agianst the future liability.

The above ans. is based on that the xyz is ready to refund only rs 495000 which it has received. If xyz refund rs 500000/- i.e. including tds then abc can give the credit to xyz for the tds deducted.

In both the case none of the party will suffer loss.

I hope all the doubts regarding the query are cleared.

1 Like

ANJALI NEGI (Chartered Accountant) (1263 Points)
Replied 27 November 2012

As mentioned in question,,
XYZ and co. ~ hereinafter called as contractor for some type of services
and ABC and co. ~ hereinafter called as contractee or benificiary
now i would say, as you said abc and co. ll gave some credit to xyz co (i.e. for RS. 5000)....for the same amount deducted by him
, for this i can say, only IT authorties can give such credit to the same..
neither the ABC and co. nor XYZand co have any power or right to give or take any such credit to each other...

and as per my veiw point, the contractor (i.e XYZ) wil be liable to refund the whole amount, i.e 5,00,000 to the said contractee,, ABC Co.

Nithin Chettoor (Assistant Manager) (388 Points)
Replied 27 November 2012

The liability for XYZ would be to refund the entire amount of contract, ie. 5,00,000 including the TDS deducted as thats the fair means. The deducted amount of TDS by ABC will be claimed as refund from Income tax government either as an adjustment to their tax liability or as a refund.

Besides, XYZ would have accounted for entire 5,00,000 as their income from contracts as there is a requirement to show the gross income received and then show Rs.5000/- as TDS payable for the deducted amount. In order to cancel the entire entry, he has to give back the entire 5,00,000 as cash and reverse the TDS payable to TDS receivable.

CA Manish (Job) (5264 Points)
Replied 27 November 2012

Dear Nithin please give entries for your ans.

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ANJALI NEGI (Chartered Accountant) (1263 Points)
Replied 27 November 2012

In the books of ABC and co.

1.) XYZ and co. Dr. Rs. 5,00,000

To Bank a/c Rs. 495000

To TDS Payable A/c Rs. 5000

2.) TDS Payable A/c Dr. Rs 5000

To Bank A/c Rs.5000

In the books of XYZ and Co.

1.) Bank A/c Dr. Rs. 495000

TDS Receivable A/c Rs 5000

To ABC and Co. Rs. 500000

2.) Income Tax payable A/c Dr. Rs 5000

To TDS Receivable A/c Rs 5000

In my opinion, above entries should be passed in the books of both the parties.

Plz correct me if incase iam wrong,, and do specify the reason while correcting...

CA Sahil Garg (Searching for Job) (171 Points)
Replied 27 November 2012

Originally posted by : CA Manish Malu
	Originally posted by : ANJALI NEGI Manish sir can u elaborate ur answer regarding same sec & same nature of payment.... Its the deductee (Contrator xyz&co.) only who can claim the refund because in his respect the TDS has been deducted. According to me practically xyz wont be ready to refund Rs 500000/- because it has only received rs 495000/- so it will refund Rs 495000 only. If xyz refund rs 500000/- then it have to wait till the filing of IT return and processing of return and issuance of its refund which will take long time. The easy and shortest way to resolve these types of problem practically is that xyz will refund rs 495000/- only. abc which has deposited rs 5000/- as tds u/s 194C i.e. payment to contractor can adjust the same against its future tax liability under the same section. Since it is may month it means abc havent file the tds return which means it has not yet given the credit of tds to the xyz so it can use this tds against future liability. Even if abc has filed the tds return and given credit to xyz then the abc can file revise return and cancel the credit given to xyz and show the excess amount in challan and that challan can be carried forward to next quarter return which can be adjusted agianst the future liability. The above ans. is based on that the xyz is ready to refund only rs 495000 which it has received. If xyz refund rs 500000/- i.e. including tds then abc can give the credit to xyz for the tds deducted. In both the case none of the party will suffer loss. I hope all the doubts regarding the query are cleared. I am almost satisfy with your answer, the only query that is still in my mind is that if iABC has filed return, is there any option to carry forward that TDS while revising the return???

CA Manish (Job) (5264 Points)
Replied 27 November 2012

dear Sahil I have also specified that in my above ans .

You have to show the excess in the return it means agains that challan there wont be any detail in the deductee sheet. so the credit of the tds is not give in this return to any one.

In the next return you have to again enter that challan in the return and this time you have to mention the deductee to whom you want to give the credit.

CA Sahil Garg (Searching for Job) (171 Points)
Replied 27 November 2012

Originally posted by : CA Manish Malu

dear Sagar I have also specified that in my above ans .

You have to show the excess in the return it means agains that challan there wont be any detail in the deductee sheet. so the credit of the tds is not give in this return to any one.

In the next return you have to again enter that challan in the return and this time you have to mention the deductee to whom you want to give the credit.

Is it practically possible?

I mean have you filed such reutn in which there is no deductee detail of any challan