Disallowance U/S 40(a)(i) of the Income-tax Act, 1961

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srinivasa (Querist)
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12 November 2008 One of my client is an 100% EOU and hence his income from export turnover is totally exempt. However, he has not deducted TDS on Freight charges paid.

Is the expenditure is subject to tax if disallowed. In such a case is he liable to tax/interest/penalty.

Kindly clarify

P. srinivasa

Deepak Agrawal

Deepak Agrawal (Expert)
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12 November 2008 Since its income is profit which is exempt, even if we add back and treat it as income, no tax will be charged on it due to 100%EOU.

No interest or penalty

CA Sanjeev Kr Jain

CA Sanjeev Kr Jain (Expert)
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13 November 2008 agreed that there would be no impact of disallowance but as per tds provisions you will be treated as assessee in default and deptt can recover the tds amount, interest, and penalty which may be up, to the amount of tds involved

Guest

Guest (Expert)

13 November 2008 i agree with the view of Sri S.K.Jain.
assessee has to pay the tds amount+ intt.+ penalty , as the assessee is liable to be treated as assessee in default.

srinivasa

srinivasa (Querist)
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14 November 2008 I agree that the assessee is liable to interest and penalty. Under which provision the assessee is liable to the TDS amount. Since the deductee would have paid the taxes on his income and recovery of TDS amounts to double taxation.

Kindly clarify.

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