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TDS Not Deducted

Rajeev (CA Final Student) (77 Points)

29 August 2009

Please anybody help me to solve this problem.

Our company had a contract agreement(section 194C)for the AY 2006-07 which has an effect of TDS.But the company fail to deduct the TDS for that AY.Financial Statements for AY 2006-07 are audited. Now the contractor wants TDS certificate. Company is now wants to pay the TDS for the AY 2006-07 with interest. How can i account this transaction with no questions raised by Statutory Auditors

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2 Replies

Satish (CA Final Student) (479 Points)
Replied 29 August 2009

First of all, how the contractor can demand the TDS certificates when there was no deduction of tax at source?? Secondly, the item of expenditure should have been disallowed as an expenditure in the AY 2006-07 in view of non deduction of tax at source. If so, now you can make an adjustment in current years financial statement as a "PRIOR PERIOD ADJUSTMENT". For such you need to either receive an amount equal to TDS from the contractor (as he has received the same because of non deduction earlier) and pay it to the credit of Government. Alternatively, you can pay the TDS from your pocket & debit it to prior period adjustment account. In any case you cannot get deduction of the same.