Need to deduct TDS on capital expenditure?

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Querist : Anonymous

Querist : Anonymous (Querist)

04 August 2010 My client is a firm. It has not deducted any tax for the FY:2009-10 claiming expenses incurred is towards capital expense.Is my client correct?
Please clarify with the help of case law, if any.

CA Sanat Pyne

CA Sanat Pyne (Expert)
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04 August 2010 You have every obligation to comply with TDS provisions even on capital expenditure. If you are in the process of erecting the buildings and factory, you must necessarily comply with the provisions of TDS like contractual payments,professional payments,interest payments,rents of ally types etc., you must be more careful while making payments to NON Residents since all types of payments get attracted to TDS, in the light of recent amendments to Section 9 in the recent finance Act 2007.
Dis allowance of expenditure for non deduction might not pose a problem,but non compliance shall hit you very hard. BEWARE if you are complacent and non compliant you are sure to pay very dearly.

CA. Pradeep Nayak

CA. Pradeep Nayak (Expert)
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04 August 2010 Tax should be deducted at source if the nature of payment is covered within the witholding tax provisions of the Act.

It is immaterial whether the assessee is booking it as a revenue expenditure or has capitalised in his books.

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