T d s not deducted on sub contract charges paid

This query is : Resolved

m prasad (Querist)
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02 October 2011 ONE OF MY CLIENT PAID SUCONTRACT CHARGES THROUGH CHEQUES AND HE HAS NOT DEDUCTED TDS ON SUB CONTRACT CHARGES PAID WEATHER THE AMOUNT OF SUB CONTRACT CHARGES PAID IS ALLOWED AS DEDUCTION OR NOT THE AMOUNT WAS PAID BY CHEQUS AND THE SBU CONTRACTORS ARE HAVING PAN NOS AND THEY ARE FILING THEIR RETURNS KINDLY CLARIFY

CA Ayush Agarwal

CA Ayush Agarwal (Expert)
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02 October 2011 Not Allowed if TDS Not Deducted till 31/03/11 and paid 30/09

CA Hardik Bunha

CA Hardik Bunha (Expert)
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02 October 2011 hi,
if you have not deducted tds then this contract amount(PAID BY CHEQUE) should be capitalised as PRE-OPERATIVE CHARGES. IF YOU SHOWN CCONTRACT AMOUNT AS EXP. THIS WILL BE DISALLOWED AND YOU WILL LIABLE TO PENALTY.
IF U SHOWN AS PRE-OPERATIVE CHARGES IN B/S THEN NOTHING WILL BE DISALLOWED AND NO PENALTY.
FOR GOOD CALCULATION PASS ENTRY AS FOLLOWS
PRE-OPERATIVE CHRGES.......DR.
TO BANK....................CR.

FOR SUCCEDDING YEAR PASS J,V, AS FOLLOWS
CONTARACT EXP............DR.
TO PRE-OPERATIVE CHARGES....CR.
(you should shown contaract exp. after deduct tds. actually not.) Difference amount will be discount......
ENJOY MY FRIEND.....HaPpy NaVrAtRi

Ankit

Ankit (Expert)
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04 October 2011 Hi..
If the Sub contractors are filing the return and paying the balance amount of Tax then deptt can't recover the TDS amount from you but you will have to pay Interest U/s 201.
However answer to the question as to whether the same can be claimed as an expense is not clear. Sec 40(a)(ia) says that if you have not deducted and paid TDS till filing of your return then the expense shall not be allowed in that year but will be allowed in the year in which you have paid TDS. Now since you are not liable to pay TDS you cannot claim the same as expense.
Well this is the situation as on date. Hope there is more clarity on this in coming years.

Refer to the following link for more detailed discussion on the same

https://www.bcasonline.org/articles/artin.asp?738