Milan Agrawal (Chartered Accountant) (207 Points)
08 September 2012Dear All,
What would be the accounting treatment of TDS demand of earlier years paid by an assessee, provided that, the parties from whom TDS would have been deducted are no more reflected in Books of Accounts and hence, the TDS cannot be adjusted from their accounts and therefore, the entire TDS demand burden would be borne by the assessee himself.
Whether it would be treated as Expense(if allowable expenditure) or Drawings(if not allowed)?
Thanks & Regards.
Varshit Shah
(Self Employed)
(676 Points)
Replied 08 September 2012
Dear Milanji ,
Can you pls tell me such demand is towards Interest on late payment or such demand was raised on no deduction of TDS during assessment ? ( No deduction means Exp. subject to TDS but no TDS deducted + Int. der on)
Varsh*t
Milan Agrawal
(Chartered Accountant)
(207 Points)
Replied 08 September 2012
Dear Varsh*t,
The demand is towards non deduction of TDS.
Varshit Shah
(Self Employed)
(676 Points)
Replied 08 September 2012
Okie Milan No issue. As per my knowledge you have to give following effect.
1.) As it is the damand towards Non deduction of TDS : That means , earlier you have claimed entire expenditure in P/L account. So there is no logic of debiting the same expenditure account again. That will amount to duplication of expense booking. In normal course of business you can ask for TDS amount (Only TDS amount , No int. amount ) from the Creditors. But there is a open fact that No party will give such amount.
You have to pass these entries :
1.) Creditors A/c..........Dr
to TDS A/c
2.) Int. on TDS (As exp. in P/L - Disallowable exp. as per IT Act)......Dr
To TDS A/c
3.) TDS A/c...........Dr
To Bank / Cash Account
After this you have to file Correction statement of TDS for the respective quarter of that year providing the details of TDS paid by demand.
If no big amount is involved then u can show that you have collected such amount in cash.
Varsh*t
Milan Agrawal
(Chartered Accountant)
(207 Points)
Replied 08 September 2012
Dear Varsh i t,
Please refer to my original query. The creditors are not in link with my client's business anymore. There transactions are over and also they have received their full settlement. So there is no sense in debiting them as they will never come to pay us that amount of TDS. Therefore, the entire tds burden is on my client.
Hence, whether it is to be treated as expense or drawings?
Varshit Shah
(Self Employed)
(676 Points)
Replied 08 September 2012
Dear Milan
There were some practical logic behind my opinion.
1.) Why to route through Creditors?
Because you will come to know partywise each n every TDS transaction. You will have proper track records of such demand partywise. With this in my earlier comment i have already mentioned that very few party will give you cash.
2.) Why i have not mentioned Exp. a/c or Drawing account ?
Because as if you got the demand of such TDS , you can not debit such amount to expenses saying that it is your client's burden to pay. Somewhere it is the mistake of your client that they forgot to deduct TDS. It is towards non-compliance of statute. So you can not debit to expenses account & claim as deduction.
Drawings include such item in which Proprietor is directly involved. like amount withdrawn for personal use , goods used for personal use. Such amount you can not trf. to drawings bcoz such exp. is related to business. To just adjust the accounting entries we can not use any account. Accounting principle will get affected if we do so.
3.) Why i have mentioned cash recd. from party?
I also provide accounting service to my client. so i have written such things from practical aspects. Cash is the only way where you can settle your accounts. This will not affect your profitibility statement. Even in some cases if you will try u may get amount from the party.
This is purely my opinion.
Moosa Tamijuddin
(Finance and Project Controller)
(115 Points)
Replied 03 July 2018
Dear Varsh*t,
This is a new query and I need your valuable assistance.
Mine is an IT company selling Microsoft Licences and our own Vertical solutions. We received the TDS Demand from IT for the year 2011-12, 2012-13 and 2013-14 on three defaults. One was for short payment, second for late payment penalty of TDS, second was for Interest on these. The total amount for all the three years is around Rs 97,000 only.
Please advise how to treat this amount in 2017-18 accounts because the annual audit is not yet over.
Thanks for your assistance.
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