query on tax deduction at source

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This query is : Resolved

venkithari (Querist)

21 June 2007 query 1. A Chartered Accountant bills a client for Rs. 1 lakhplus servicve tax.Whether TDS is to be made on Rs. 1 lakh or including Service Tax

2. As per the IT Act if TDS is not made for certain payments the expenditure will be disallowed.My client has made TDS but there is a short deduction because surcharge was not included while calculating TDS.In this case whether the entire expense will be disallowed or only proportionate disallowance has to be done.Kindly clarify

Anup Singh

Anup Singh (Expert)

22 June 2007 1.First of all tds is deducted on gross amount, i.e including service tax.
2.As far as short deduction of tds is concerned only propotionate exp will be disallowed as it seem of interpretion of sec 40a(ia)

Abhisek Konar

Abhisek Konar (Expert)

23 June 2007 whether tax is to be deducted on the gross amount or the net amount has been an issue of debate at various occassions and i personally feel that deduction is to be done on the amount net of service tax as 194J tells us to deduct tax on the FEES paid

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