WHETHER TDS APPLICABLE ?

This query is : Resolved

Gaurav Garg (Querist)
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03 April 2009 X LTD. IS A LISTED COMPANY AND IS REQUIRED TO PREPARE QUARTERLY RESULTS. IN THE PROCESS OF PREPARING QTR. RESULTS IT HAS MADE PROVISION FOR THE FOLLOWING EXPENSES WHICH HAVE BEEN INCURRED BUT NOT INVOICED BY VENDORS TILL THE END OF QUARTER:

FABRICATION RS. 2,50,000
WASHING EXP. RS. 1,10,000
SECURITY SERVICE RS. 1,56,000

ENTRY PASSED FOR THE PROVISION OF ABOVE EXPENSES IS:

FABRICATION DR. RS.2,50,000
WASHING EXP. DR. RS.1,10,000
SECURITY EXP. DR. RS.1,56,000
TO PROVISION FOR EXP.RS.5,06,000

NOW I WISH TO KNOW WHETHER TDS LIABILITY ARISE ON THE ABOVE PROVISION OR NOT ?

IN MY OPINION TDS IS NOT CHARGEABLE AS NO CREDIT HAS BEEN GIVEN TO ANY VENDOR OR SERVICE PROVIDER.

PLEASE ANSWER CLEARLY.

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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03 April 2009 Even if you credit to suspence account you have to deduct tds. Since payment or credit whichever is earlier has to be followed.

K V Subba Rao

K V Subba Rao (Expert)
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03 April 2009 In a few situations, exact quantum of expenditure may not be known due to negotiations being in progress and the like or certification of work carried out being not available etc. Nevertheless, for the purpose of accountal on accrual basis provisions are made in accounts on "estimate" basis.

Is it necessary that TDS should be remitted in such circumstances also especially during the course of year.

Intention of the statute in using word "suspense" appears to be to prevent evasion or avoidance in cases where Bill is received, admitted and passed but amount is credited to some liability account instead of Suppliers' account

I am aware, at our level, we shouldn't go by possible intention of statute but exactly by words used in statute.

Still, I would like to know from my professional colleagues actual practices

Gaurav Garg

Gaurav Garg (Querist)
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03 April 2009 THANK YOU VERY MUCH EXPERTS FOR ANSWERING MY QUERIES BUT I HAVE DOUBT IN MY MIND AS THERE IS NO CASE LAW ON THIS POINT TO MY KNOWLEDGE.

Gaurav Garg

Gaurav Garg (Querist)
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03 April 2009 DEAR EXPERTS,

I HAVE RESERVATION ABOUT THE TERM "SUSPENSE".
TO ME "SUSPENSE" MEANS "ANONYMOUS PERSONAL ACCOUNT". THAT IS CREDIT BEING GIVEN TO SUSPENSE A/C DUE TO UNCERTAINTY REGARDING CORRECT PARTY.

BUT HERE COMPANY DOES NOT GIVE CREDIT TO ANY PARTY RATHER IT CREDITS "PROVISION FOR EXP.".

WHETHER IT WILL ALSO BE COVERED BY TERM "SUSPENSE A/C".

FURTHER WHAT WILL HAPPEN IN CASE ESTIMATED AMOUNT OF PROVISION TURN OUT IN EXCESS OF ACTUAL AMOUNT ON RECEIPT OF INVOICES.

Mukund

Mukund (Expert)
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04 April 2009 AS PER MY KNOWLEDGE - TDS ON PROVISION FOR EXPENSES IF YOU KNOW CORRECT PARTY TO WHOM PAYMENT TO BE MADE THEN YOU HAVE TO DEDUCT TDS OTHER WISE AT THE TIME OF PAYMENT YOU HAVE TO DEDUCT TDS

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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04 April 2009 Dear Mr. Gaurav,

Tds is deducted only when bill is credited to party or payment is made to party whicher is ealier.
In case of Provision for expenses, no need of TDS Deduction.

Guest

Guest (Expert)

06 April 2009 TDS is to be deducted on each and every case.....whether u make provision or u give credit to a party.