Deduction Of Tax

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This query is : Resolved

CA Nitin Wadhwani (Querist)

30 August 2008 Company X Ltd avails services for repair of machinery on 30 March 2008. The service provider raises a bill dated 30 March 2008 on Co X Ltd for the services availed which is received by the Co X Ltd on 2 April.
The Co. X Ltd after being fully satisfied with the services availed gives credit to the party on 12 May 2008 and makes the payment on 23 June 2008 and subsequently deposites the TDS on 12 July 2008.
Is the policy followed by the Co X Ltd correct as per the Act?
Can a Company book an expense of a date different from the date of Invoice received from the service provider for the same?
What should be the correct accounting for these types of transactions?

Answer: No

TDS Is To Be Deducted At The Time Of Payment or Credit to the party whichever is earlier.
Since in your case credit in done on 12.05, TDS is to be deposited by 07.06 or else 1% Interest Per Month or Part Thereof Is to be Paid For Delayed Payment.

Ranjit Ahluwalia

Ranjit Ahluwalia (Expert)

30 August 2008 TDS is to be decuted on 30th March as the services were already provided by that day. On30th March, you can book this expense as Accrued Expense, and TDS can be deposited by 31st May (Extended period of time allowed on expenses accrued on the last date of fiancial year. As 30/03/08 was sunday, it can be safely assumed that Bill accrued only on 31st March and therefore you have two months time to deposit the TDS. This position will apply to all other bills also which are made on monthly basis. For example a security servuce provider may be rasing bill for Month of March any time after 31st March but still it needs to accrued in month of March as expense

CA Nitin Wadhwani

CA Nitin Wadhwani (Querist)

02 September 2008 TDS Is To Be Deducted At The Time Of Payment or Credit to the party whichever is earlier.
Since in your case credit in done on 12.05, TDS is to be deposited by 07.06 or else 1% Interest Per Month or Part Thereof Is to be Paid For Delayed Payment.

TDS Is To be Deducted On "Payment or Credit" Whichver is earlier and not on 30.03.2008

plz read the question and then answer.