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Tds on sponsorships

Shashi Kiran (CA Final) (60 Points)

07 November 2012

Hello all

should a sponsor making payment of his sponsorship deduct TDS on the amount paid? If yes under what section?

And if the sponsorship is for a period of more than one year, when should the credit for the TDS deducted be claimed by the person receiving the sponsorship???

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6 Replies

Deepak Gupta (CA Student) (15922 Points)
Replied 07 November 2012

Whether deduction of tax is required to be made under section 194C for sponsorship of debates, seminars and other functions held in colleges, schools and associations with a view to earn publicity through display of banners, etc., put up by the organisers ?
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The agreement of sponsorship is, in essence, an agreement for carrying out a work of advertisement. Therefore, provisions of section 194C shall apply.
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Circular : No. 715, dated 8-8-1995.

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Shashi Kiran (CA Final) (60 Points)
Replied 07 November 2012

Thanks for the info Deepak... But, When should the credit for such TDS be taken by the receiver if the sponsorship is for more than one year...

CA. Abhishek K. Pandey (Manager (Advance)) (901 Points)
Replied 07 November 2012

Originally posted by : Shashi Kiran
	Thanks for the info Deepak... But, When should the credit for such TDS be taken by the receiver if the sponsorship is for more than one year...

Yes, its need to be deducted. TDS will be availed in the same FY.

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Shashi Kiran (CA Final) (60 Points)
Replied 14 November 2012

Sir

But in a case where the entire sponsorship is received in the first year itself for a long period of time(say 20 years), how can the TDS credit be claimed in the first year.

Will it not contradict with the Matching Conept, as Sponsorship received at a time wil be shown as liability and will be transferred to income over a period of 20 years(in current case) and TDS relating to this income is claimed totally this year........?

CA. Abhishek K. Pandey (Manager (Advance)) (901 Points)
Replied 15 November 2012

Originally posted by : Shashi Kiran
	Sir But in a case where the entire sponsorship is received in the first year itself for a long period of time(say 20 years), how can the TDS credit be claimed in the first year. Will it not contradict with the Matching Conept, as Sponsorship received at a time wil be shown as liability and will be transferred to income over a period of 20 years(in current case) and TDS relating to this income is claimed totally this year........?

There is no concept of deferred revenue expenditure under the Income Tax Act.

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Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 15 November 2012

Shashi and Abhishek

Please refer Rule 37BA(3).

Where tax has been deducted at source and paid to CG and income is assessable over a number of years, credit shall be allowed across those years in same proportion in which income is assessable to tax.

Hope your anxiety is clear now.

Regards,

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