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whether tds on capitalised expenses

aasita (ACA) (387 Points)

19 August 2009

do we have to deduct tds on capitalised expenses?for eg. we have spent 1500000 for interior decorator .but we have capitalised this expenses so no tds is deducted.There doesnot arise ? of diallowing expenses as we are not claiming expenses.But was there liability to deduct TDS?

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27 Replies

MR. R....halpfull hand is back (.) (297 Points)
Replied 19 August 2009

T.D.S is not deducted

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llllVICTORllll (Internal Auditor) (511 Points)
Replied 19 August 2009

as far a i know, TDS provisions Doesnot give any difference to capital and revenue expenses, Its just matter of work provided, if your client has recieved techinical service(interior decoration) from any particular company or person, then TDS should be deducted under Sec 194J at 10%.

CA CS Amit Borade (Chief Accountant) (2828 Points)
Replied 19 August 2009

TDS should be deducted.

If not deducted then Auditor has to show this in 3CD & CARO " Default in payment of Statutory Dues".

1 Like

aasita (ACA) (387 Points)
Replied 19 August 2009

but will dep. be disallowed?what are consquences for the same?what will be disallowed?or will

there be penalty for client which is 100%.?

aasita (ACA) (387 Points)
Replied 19 August 2009

any ways if client is not claiming as expenses then y he should deduct tds?

and even if client had to deduct there is no question of disallowing as client has capitalised expenses?

in what manner it will affect client?

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Amey (Service) (137 Points)
Replied 19 August 2009

Client will not be able to claim depreciation for the capitalized asset.

TDS should be deducted as provisions states 'tax needs to be deducted for the professional or technical services received'. It does not metion that whether the service cost is charged off in the year in which it is incurred or claimed by way of depreciation through capitalization of service cost.

Please advice client to deduct tax as professional fees, rate being 10% plus applicable education cess.

Max Payne (employed) (2574 Points)
Replied 19 August 2009

Dear Aasita,

Please read the provisions of sections 40(a)(i) and 40(a)(ia).

You will not find the word expenditure.... You will see the word "any payment."

Hence, you have to deduct TDS.

llllVICTORllll (Internal Auditor) (511 Points)
Replied 19 August 2009

Originally posted by :Ranjith Warrier
"	as far a i know, TDS provisions Doesnot give any difference to capital and revenue expenses, Its just matter of work provided, if your client has recieved techinical service(interior decoration) from any particular company or person, then TDS should be deducted under Sec 194J at 10%.	"

yes, depreciation is allowed...TDS is deducted from the sundry creditor account and not the asset account(provided that you have an asset now to show in your balancesheet and that its not a expense to be written off in consequent years), so there is no problem in claiming the depreciation

aasita (ACA) (387 Points)
Replied 19 August 2009

ok i understood that.But i client is not claiming this as expenses but he has capitalised it.So there is no ? of disallowance but what are other consquences for this matter?will dep. be disallowed?

aasita (ACA) (387 Points)
Replied 19 August 2009

but how this thing will affect client?only penal provision attracted as tds not deducted.Payment made is more than 20lakhs?

there will be no disallowance as client is not claiming it as deduction but are capitalised.

i think penal provision would be attracted and there would be no disallowance.

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Ashley (cs) (178 Points)
Replied 19 August 2009

the same can be capitalise in books if you like or not . as far as TDS is concerned, it is better to deposit with interest now so as to avoid any prosecution or penalties later

have a good day

ash

CA CS Amit Borade (Chief Accountant) (2828 Points)
Replied 19 August 2009

FYI

If the person responsible for deducting or depositing the tax at source, does not pay or deposit the TDS then Interest u/s.201(1A) @ 12% p.a. from the date on which the tax was deductible to the date on which such tax is actually paid will be levied on the amount of such tax.

And now can understand very well

Penalty u/s.271C is leviable if the assessee fails to deduct the tax at source within the prescribed time. The penalty leviable is equal to the amount of tax the deductor failed to deduct.

PROSECUTION U/S.276B

If the deductor fails to deposit the tax deducted by him at source, he shall be punishable with rigorous imprisonment for a term from three months to seven years along with fine.

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 19 August 2009

Mr Gopalakrishnans view is correct

CA Kingsley (Audit Manager) (470 Points)
Replied 19 August 2009

yes. I agree with amit. TDS payments need not necessarily be done to expenses. Even to Capitalised payments & Advances (in case of 2(22)(e)), TDS should be made. Else, penalty, Interest etc will arise. Have you already paid all the amount? Is there any further payment due to them? If there is any payment due to them, tell me. I will tell you how to adjust.