CA. Deepak Narula (B.Com., ACA, DISA) (541 Points)
04 November 2010Hi All
In current situation the expense is not deductible u/s 40(a) if the TDS is not deducted by the payer or not deposited before the due date but now if the PAN is not quoted then TDS is required to be deducted @ 20%. My query is what if the payer doesn't decuct TDS @ 20% in absence of PAN and deducts at normal rate say 10%. Will the expense be disallowed proportaionately or fully?
Reply urgently.
Pavan Jain S
(Chartered Accountant)
(1575 Points)
Replied 04 November 2010
There are two approaches to same..... Conservative and aggressive. In my view, you can move forward with prop disallowance u/s 40(a) if the amount involved is material
shailendra
(Accounts Executive )
(128 Points)
Replied 04 November 2010
The issue has to be judged on the basis of the facts and circumstances
K.Sivakumar
(Chartered Accountant)
(60 Points)
Replied 04 November 2010
Hi Deepak & Pavan
I would like to go by the normal construction of meaning for the words in 40 (a). The words are reproduced for your easy reference.
Notwithstanding anything to the contrary in sections 30 to 88[38], the following amounts shall not be deducted in computing the income chargeable under the head “Profits and gains of business or profession”,—
89(a) in the case of any assessee—
90[(i) any interest (not being interest on a loan issued for public subscripttion before the 1st day of April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which is payable,—
(A) outside
(B) in
on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200 :
(ia) any interest, commission or brokerage, 91[rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, 92[has not been paid on or before the due date specified in sub-section (1) of section 139 :]
Please check the highlighted Phrase. I feel, since the thrust of this section is only on Non - Deduction of TDS or Non payment of TDS which is deducted, we should not extend the law for which it is not specific. So according to me, since TDS is deducted (even though at a wrong rate) and (assume) remitted with in the time lines specified, there cannot be any disallowance.
Thanks
Sivakumar.K
Pavan Jain S
(Chartered Accountant)
(1575 Points)
Replied 04 November 2010
'tax is not deducted' used in the phrase need not be construed as total deduction. Kindly adopt constructive approach. If you are liable for TDS @ 20% and if u deduct @ 1%, it doesnt mean that the expense is fully allowable. If strict sense of interpretation is adopted, the disallowance will be attracted unless 100% taxes are deducted
Parth - CA,CS,CMA
(Learner)
(406 Points)
Replied 04 November 2010
@ Pavan Jain
U cant adopt constructive approach to that degree while interpreting fiscal laws.
Sumit Jain
(CA)
(4760 Points)
Replied 04 November 2010
proportionate disallowed
and proportionally allowed
50% will be allowed because
10% deduction is 20% of the (50% of total).
sahana Murthy
(Student)
(123 Points)
Replied 05 November 2010
Hi
The concept of proportionate dis allowance has been done away with. Hence Where TDS is deductible @ 20% but was deducted at 10% amounts to short deduction, which calls for dis allowance of the payment in full.
Regards
Sahana Murthy
CA.Madhusudan B.P.
(Chartered Accountant)
(1157 Points)
Replied 06 November 2010
Sec 206AA inserted effectively from 01.04.2010 onwards deals with requirement to furnish PAN for those transaction which attracts TDS.
The provisions of Sec 40(a) deals with non deductable & the sec is very wide to cover Interest/royalty/fee for techinical services payable to outside India etc.,salary payable outside India {Sec 40(a)(iii)},PF payment without TDS{Sec40(a)(iv), Etc.,
In my opinion, if the provisions of Sec 40(a) are not complied, the disallowance is full & not partial. Unlike the provision of elsewhere Sec 40(A)(3) which specifically mentioned as 20 % is disallowed, there are no such reference or mentioned in this Sec 40(a).
If TDS deducted but not paid on or before due date for filing of Income tax return, the whole amount is disallowed & ALLOWED IN THE YEAR OF PAYMENT
Lawshttps://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=ITAC&schT=&csId=bb6f99ac-a648-4546-a24a-c47c9ef3e6b0&rdb=sec&yr=75996b99-a798-4098-bca8-e66ee23fe426&sec=40&sch=&title=Taxmann - Direct Tax Laws
93[Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.]
ramana murty
(Chartered Accountant)
(27 Points)
Replied 20 November 2010
perfect. there is no specific mention allowance of proportionate deduction. Either full or none. Pay in full avoid disallowance.Dont pay full TDS disallow.
CA Ghanshyam Joshi
(CA, Dip IFR (ACCA UK))
(3229 Points)
Replied 25 November 2010
I agree with the views given by Madhusudan Sir.
Manoj BG
(Tax Professional and in Service)
(1795 Points)
Replied 25 November 2010
Hi All,
Definately 100% disaallowance, if the TDS has to be deducted at the higher rate on account of no pan available of deductee and tds deducted at the lower rate.
Section 206AA is a penal provisions which specifies that if deductor would not obtain PAN no of deductee, deductor has to deduct TDS at the higher of following two ::
1. Applicable rate of TDS
2. 20%
This provision provides for the relacement of applicable TDS rates with penalised rates if the penalised rate is higher. Thus for the purpose of TDS provisions, if sec. 206AA is applicable and the rate prescribed therein is higher than the applicable rate, the same rate would be applicable rate of TDS and TDS should be deducted as per that rate accordingly. Thus, TDS not deducted at that rate and decducted at the lower rate, the same amounts to applicability of sec 40(a(ia) and accordingly WHOLE OF THE EXPENDITURE would be get disallowed.
regards,
manoj
raichada dhruv
(Article )
(28 Points)
Replied 20 December 2010
Mr. 'A' let out property on rent to Mr. 'B' for the period October'10 to September'11. Mr. 'B' Deducted rent for the whole one year (i.e. from Oct.'10 - Sep.'11) and deposited the same.
In November'10 Mr. 'A' sold the flat to Mr. 'C'. The TDS is paid but the income is not arising in subsequent moths (i.e. after November' 10).
How can MR. 'A' deal with the present situation. Is there any way from which he can claim refund in current F.Y. 2010-11 for the whole TDS deducted.
How can the remaining 11 months TDS be recollected. If possible PLZ provide he provision or section for the same.
Sharad Chandra Jha
(Audit Manager)
(22 Points)
Replied 26 August 2011
Dear Sir
If any bill of Freight regarding previous year 08-09 is not submitted in financial year 08-09.It is submitted in financial year 10-11.Then this expenditure is allowed or disallowed.TDS has been deducted or not .Please suggest
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