Section 40(a)(ia)

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Akhilesh Somani (Querist)
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16 April 2013 X ltd ( payer) pays. Commission of rs 175000 to Mr A ( payee) during FY 12-13 but TDS is not deducted upto march 2013. Suppose Mr A has paid tax due on income declared by him in his ROI on 31st July 2013.
Whether X Ltd eligible to deduction of expenditure. If yes then in which AY 2013-14 or 14-15

CA Ankit Oberoi

CA Ankit Oberoi (Expert)
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17 April 2013 If TDS is not deducted in current previous year and the tax is deducted in any subsequent year, the expenditure will be deducted in the year in which TDS will be deposited by the assessee with the Government.

Thus X ltd is eligible for deduction of expenditure in the AY 2014-15

CA Prashant Shrivastava

CA Prashant Shrivastava (Expert)
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17 April 2013 If X Ltd can show the evidence that Mr. A has shown the above commission income and paid his tax liability completely, the expenditure will be allowed to X Ltd.

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Akhilesh Somani

Akhilesh Somani (Querist)
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17 April 2013 Please tell me on which year he will get deduction ? Please give me the answer in respect of given example by me , so it will be easy get it clear .

Anand

Anand (Expert)
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19 April 2013 In my view X will be eligible for deduction on expenses paid to A, only in AY 2014-15 because he will be deemed to have deducted and paid the tax in FY 2013-14, being the year in which return is filed by A.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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02 June 2013 Amounts not deductible.
40(ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139

Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.

Under this section kindly mark the word payable to a resident this means if you have already paid the sums and if you have not deducted the tax then your expenses cannot be disallowed as the words payable is appearing in the provisions of Section 40A(ia).

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