Disallowances u/s 40
This query is : Resolved
22 May 2013
Dear experts
We have disallowed rent in our computation in A.Y. 09-10 for non payment of T D S & in A.Y. 1011 we have paid the said T D S before filling of income tax return i.e. on 24/9/10 & taken the deduction of expenses in A.Y. 1011. Can A.O. challenge this deduction of expenses. If yes Pl advice remedy for the same where return of A.y. 11-12 is processed u/s 143(1)by department
We have disallowed rent in our computation in A.Y. 09-10 for non payment of T D S & in A.Y. 1011 we have paid the said T D S before filling of income tax return i.e. on 24/9/10 & taken the deduction of expenses in A.Y. 1011. Can A.O. challenge this deduction of expenses. If yes Pl advice remedy for the same where return of A.y. 11-12 is processed u/s 143(1)by department
02 August 2013
Dear Experts
pl advice about the qurries
pl advice about the qurries
21 July 2024
In your situation, where you have disallowed rent in the computation for A.Y. 09-10 due to non-payment of TDS and subsequently paid the TDS before filing the income tax return for A.Y. 10-11, there are certain considerations to keep in mind regarding the treatment and potential challenges from the Assessing Officer (AO).
### Scenario Recap:
1. **AY 09-10**: Rent expenses were disallowed because TDS was not paid.
2. **AY 10-11**: TDS on rent was paid before filing the return. Rent expense was claimed as deduction.
3. **AY 11-12**: Return processed under section 143(1) by the department.
### Potential Challenge by AO:
The AO could potentially challenge the deduction of rent expenses in A.Y. 10-11, especially if there was a delay or discrepancy in the payment of TDS or if there were procedural issues.
### Remedial Actions:
Here’s what you can consider to address any potential challenges:
1. **Documentary Evidence**: Ensure you have proper documentation showing that TDS on rent was indeed paid before filing the return for A.Y. 10-11. This includes TDS certificate, proof of payment, and acknowledgment.
2. **Legal Position**: According to tax laws, the deductibility of expenses is based on the conditions prevailing in the relevant assessment year. Since you paid the TDS before filing the return for A.Y. 10-11, you should argue that the expenses were rightly claimed as deduction.
3. **Response to AO**: If the AO raises an issue during the processing of the return for A.Y. 11-12, you will likely receive a notice under section 143(2). Respond to the notice promptly and provide all necessary documents and explanations supporting the deduction of rent expenses.
4. **Reasonable Cause**: If there was a genuine reason for the delay in paying TDS for A.Y. 09-10 and the subsequent rectification in A.Y. 10-11, explain this to the AO. Reasons such as genuine oversight, procedural delays, or legal interpretations can sometimes mitigate penalties or disallowances.
5. **Consultation with Tax Advisor**: Given the specific details and potential complexities, it’s advisable to consult with a tax advisor or a chartered accountant who can review your case comprehensively. They can provide tailored advice based on the specifics of your situation and assist in preparing a robust response to the AO’s queries.
### Conclusion:
While the AO may scrutinize the deduction of rent expenses in A.Y. 10-11 due to the previous disallowance in A.Y. 09-10, your compliance with paying the TDS before filing the return for A.Y. 10-11 strengthens your case. Ensure you have all necessary documentation and seek professional guidance to effectively handle any challenges from the AO regarding this matter.
### Scenario Recap:
1. **AY 09-10**: Rent expenses were disallowed because TDS was not paid.
2. **AY 10-11**: TDS on rent was paid before filing the return. Rent expense was claimed as deduction.
3. **AY 11-12**: Return processed under section 143(1) by the department.
### Potential Challenge by AO:
The AO could potentially challenge the deduction of rent expenses in A.Y. 10-11, especially if there was a delay or discrepancy in the payment of TDS or if there were procedural issues.
### Remedial Actions:
Here’s what you can consider to address any potential challenges:
1. **Documentary Evidence**: Ensure you have proper documentation showing that TDS on rent was indeed paid before filing the return for A.Y. 10-11. This includes TDS certificate, proof of payment, and acknowledgment.
2. **Legal Position**: According to tax laws, the deductibility of expenses is based on the conditions prevailing in the relevant assessment year. Since you paid the TDS before filing the return for A.Y. 10-11, you should argue that the expenses were rightly claimed as deduction.
3. **Response to AO**: If the AO raises an issue during the processing of the return for A.Y. 11-12, you will likely receive a notice under section 143(2). Respond to the notice promptly and provide all necessary documents and explanations supporting the deduction of rent expenses.
4. **Reasonable Cause**: If there was a genuine reason for the delay in paying TDS for A.Y. 09-10 and the subsequent rectification in A.Y. 10-11, explain this to the AO. Reasons such as genuine oversight, procedural delays, or legal interpretations can sometimes mitigate penalties or disallowances.
5. **Consultation with Tax Advisor**: Given the specific details and potential complexities, it’s advisable to consult with a tax advisor or a chartered accountant who can review your case comprehensively. They can provide tailored advice based on the specifics of your situation and assist in preparing a robust response to the AO’s queries.
### Conclusion:
While the AO may scrutinize the deduction of rent expenses in A.Y. 10-11 due to the previous disallowance in A.Y. 09-10, your compliance with paying the TDS before filing the return for A.Y. 10-11 strengthens your case. Ensure you have all necessary documentation and seek professional guidance to effectively handle any challenges from the AO regarding this matter.
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