Ad-Free CAclubindia and Daily Updates on your mobile. Subscribe Now!

whether out of pocket TDS deposit is a allowed expenditure.?

CA Vishal kapoor (Partner) (320 Points)

23 June 2010

HI,

Whether out of pocket deposit of TDS is allowed expenditure??

If Not Then under which section or any case law???

Lets Say,

We made a payment 2 jobworker for the work carried out by him & forget to deduct TDS for the same.Now after filling the yearly return of TDS we want 2 deduct the TDS for the Same.

Now whether we can pay TDS out of our own Pocket & what about the TDS return Already submitted by us.?whether we revise our TDS return or some other remedy for the same??

Thanks

Vishal

Reply
Follow
Share

1 Replies

Amir (Learner) (4016 Points)
Replied 24 June 2010

Dear Vishal,

Often in case of agreement with Non residents, TDS is borne by the indian companies by grossing up the payment made to Non resident, in such cases the deduction is allowed in respect of (Payment to non resident + TDS deposited on their behalf)

But I feel this thing is allowed if done purposely & not merely for making up for the default of deduction.

Since an expenditure to be allowed must fulfil the requirements of sec 37(1) - i:e must be incurred "wholly" & "exclusively" for the business/profession.

"exclusively" means - Unless such motive is solely for promoting the business, the expenditure will not qualify for deduction.

Now, paying out of own pocket will not fulfill the condition of "exclusively" & hence the same will be dissalllowed.

You can pay TDS out of ur own pocket to safeguard from interest/penalties. But on payment whether the expenditure will be allowed as deduction or not is still not clear. Dont think there is any need to revise return since no mistake was there in the return filed earlier.