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Tds is on Expense or Asset under 194C

Eswar Reddy S (CFO- at NHTF) (58263 Points)

07 March 2022

Local Authority made payment to contractors for laying roads , foot paths etc .

Generally Budget will be given to expenses for making payments & the above payments booked under Expense..

Is 194C applicable on expenses or Assets ?

or

Is 194C applicable on payment to contractors irrespective of nature ?

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17 Replies

sabyasachi mukherjee (27155 Points)
Replied 07 March 2022

I am organizing a training session . Come and join.

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Eswar Reddy S (CFO- at NHTF) (58263 Points)
Replied 07 March 2022

Even I have organised many sessions.But that is not the answer for above question.

Answer the question.Else keep quite

1 Like

CA Surya Sekar (CFO ) (1347 Points)
Replied 07 March 2022

Tds will be on the payment made to contractors.

It can be asset or expenses for the payer

3 Like

Eswar Reddy S (CFO- at NHTF) (58263 Points)
Replied 07 March 2022

Expenses without Tds disallowed

Section 40(a)(ia) deals with the disallowance of 30% of any sum payable to a resident on which TDS hasn't been deducted or after deduction, not paid to Govt. on or before the due date of filing of ITR.

Will the capital expenditure disallowed under above section ?

1 Like

CA Surya Sekar (CFO ) (1347 Points)
Replied 07 March 2022

Okay. I have understood your query.

Capital Expenditure without Tds . Is it disallowed ?

If this is the query then it is disallowed.

Payments without may be disallowed & need not be expenses..

Generally revenue exp without tds will be disallowed

2 Like

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sabyasachi mukherjee (27155 Points)
Replied 07 March 2022

Tds is deductible at the rates mentioned as per Sec 194 C .1 % and 2% as per the nature of assesse. Pan is mandatory.
These are triffle issues, so obviously now these type of practical questions does not require any introduction.I hope the querist is satisfied. I hope a legal agreement is in force between the parties.

Eswar Reddy S (CFO- at NHTF) (58263 Points)
Replied 07 March 2022

I have asked different query but you gave irrelevant answer..

Understand the question first.

Completely frustrated with the answer given by Sabyasachi ..I have not asked rates of Tds in this query.

CA Surya has given reply to the point.

CA Surya Sekar (CFO ) (1347 Points)
Replied 07 March 2022

Your query is debatable..You may support using caselaw..

Generally revenue expenditure is disallowed if tds provisions are not complied..

But section payments without tds will be disallowed..

As you said budget is allocated for exp , consider initially under exp and comply with Tds provisions & then pass a journal entry to transfer from expense to Asset

This is my opinion & other members are welcome to give different opinion

2 Like

sabyasachi mukherjee (27155 Points)
Replied 07 March 2022

The way the querist answers the question either he does not know relevant sections.
Irrespective of the nature of capital expenditure or revenue expenditure its deductible. If you organised many workshop you must know it.
The section specifically mentions at the time of credit or payment which is earlier. We are all frustrated with the nature of reciprocation he wants.
No case law is required to make him understand. There are numerous case laws.

Eswar Reddy S (CFO- at NHTF) (58263 Points)
Replied 07 March 2022

You don't know the difference between capital expenditure & revenue expenditure .

Is capital expenditure deductible in Profit and loss account ?

First study professional courses..

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CA Surya Sekar (CFO ) (1347 Points)
Replied 07 March 2022

Reddy Saab,

Don't comment on other members..If your query is not resolved then post the query again..

JJJ (Need help) (673 Points)
Replied 07 March 2022

It's irrelevant why you made the payment. The amount and type of service received will determine TDS applicability.

So to answer your question, "194C applicable on payment to contractors irrespective of nature"

As for the budget part of the question, it's not clear. Because no one's expenditure or income are changed when TDS is applied.

The payer still spends the exact amount (only split into two payments, one directly to the recipient's bank account and the second part indirectly as income tax credit). Similarly, the recipient suffers no loss and still receives the entire amount, only split into two parts: one as cash in the bank and the second part as tax credit.

The only impact of TDS is on cash flow and possible loss of (insignificant) interest.

vishnu bandla (160 Points)
Replied 08 March 2022

Query is highly tricky ..Waiting for further comments

3 Like

Manish (CA) (1128 Points)
Replied 10 March 2022

Originally posted by : Eswar Reddy S
	Expenses without Tds disallowed Section 40(a)(ia) deals with the disallowance of 30% of any sum payable to a resident on which TDS hasn't been deducted or after deduction, not paid to Govt. on or before the due date of filing of ITR.Will the capital expenditure disallowed under above section ?