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Salary disallowance under section 40a(ia)

saksham khemka (student) (35 Points)

04 April 2016

Is salary paid to resident individuals in F. Y 2012-13 without deducting TDS is disallowed under section???

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12 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 05 April 2016

if the payee is under cover of mandatory audit, then only TDS is mandatory

saksham khemka (student) (35 Points)
Replied 05 April 2016

The assessee's books were tax audited under section 44AB....but under what provision expenditure could be disallowed

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 05 April 2016

section 40(a)(ia)

saksham khemka (student) (35 Points)
Replied 05 April 2016

But sir with due respect as per the section 40(a)(ia) does not included the salary paid to the residents as per the income tax 2012... As per i know... The salary was included in budget 2014... So what about of F. Y 2012-13

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 05 April 2016

from 13-14 the limit is fixed to 30% of disallowance, earlier it was 100%

there are two major factors to divide the applicability,

whether the deductor was liable to issue form 16 or form 16A

if form 16 then, there is employee / employer relations which can be established through other employment records, such as EPF/ ESIC/ Profession tax deduction and payment

if form 16A then department would not consider any fact, unless the TDS is deducted and paid

saksham khemka (student) (35 Points)
Replied 05 April 2016

But earlier to 13-14 the payments covered under 40a (ia) does not includes salary to residents.... Cant we take benefit of dis...???

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 05 April 2016

if you have employment records of releted persons ( to be covered under TDS form 16 then approach,

if form 16A, then what record you can establish to claim the person as employee and salary payable? mere payment does not establish the employment and if employment is questioned then salary is out of scope.

saksham khemka (student) (35 Points)
Replied 05 April 2016

We are having proper PF and PT records. There is no question on employment but the AO has disallowed the expense of salary of employees having salary more than Rs. 300000 under section 40a(ia), which does not includes salary to residents.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 05 April 2016

produce the summery of challans of EPF with challans , and make it reconcile with the salary data in P/L account, that would work,

though the expenditure may get allowed, case of non deduction of TDS and non filing of return will proceed on.

saksham khemka (student) (35 Points)
Replied 05 April 2016

Thank you so much ... What would be required to get the expense allowed ?? Surely section 40a (ia) applicable for F. Y 2012-13 does not inculdes salary paid to residents??

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 05 April 2016

genuineness of expenses is always questioned, irrespective of any section imposed,

if the expense is genuine and legal, and notice of disalloance is issued under some section, then reply would go to that section based only.

if no notice is issued then only reconcilation of expenses with proof is enough.

for a safeguard, the employer may have back dated letter(s) from employee (s) requesting the employer not to deduct TDS, as they would like to pay their tax dues and file return by themself. (15G/15H will not work in back date cases)

saksham khemka (student) (35 Points)
Replied 05 April 2016

In the concerned case the AO has disallowed the expenses in the assessing order. Order mentions that the amount is disallowed under section 40a(ia). Tds defaults and penalty would be applicable, i agree but such big amount of expenses would get allowed... Not a bad wayout!!