tds

Save Share

This query is : Resolved

CA S.IBRAHIM (Querist)

28 June 2009 IF CUSTOMER PAYS ADVERTISEMENT EXP ON BEHALF OF US THEN WHAT SHOULD BE THE TDS TREATMENT FOR THAT ADVERTISEMENT EXP IN OUR BOOKS?

CA.BHARAT BHUSHAN

CA.BHARAT BHUSHAN (Expert)

28 June 2009 If ur customer has paid to advertisement agency then liability for TDS is of ur customer and not urs. You need not to do anything but to reimburse the expenses.

If we do the technical analysis of section 194C, we got that the liability of TDS is of the person who is paying to the RESIDENT CONTRACTOR for DOING ANY WORK UNDER THE CONTRACT.Since, u donot have any contract with contractor and u r not paying to him directly, you are not liable for to deduct tax from contractor.

Message likes : 1 times

CA S.IBRAHIM

CA S.IBRAHIM (Querist)

30 June 2009 But here we are claiming exp in our books then we have to deduct the tax. If my coustomer dedudt the tax then what will be name of deductor?

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

27 July 2025 This is an important and practical question that often comes up in accounting and TDS compliance.

---

### ✅ **Scenario Recap:**

* Your **customer** pays **advertisement expenses on your behalf** (i.e., on your account).
* You **reimburse** the customer later.
* The **invoice for advertisement** is claimed **in your books**.
* The **TDS question** arises because you are claiming the expense in your books, **but you didn’t make the payment directly**.

---

### ✅ **TDS Analysis:**

#### 1. **Who is liable to deduct TDS?**

👉 As per **Section 194C or 194J** (depending on whether it's advertisement work or professional service), **the person making the payment** to the contractor/service provider is responsible to **deduct TDS**.

* In your case, **your customer** made the **direct payment** to the **advertising agency**, so **he should deduct TDS**.

#### 2. **But you are claiming the expense in your books** — now what?

* Since the **invoice** is booked in **your books**, **ideally you should be the one deducting TDS** if you had made the payment.
* However, **you didn’t make the payment**, so **you can’t deduct TDS** — that’s legally not possible.

---

### ✅ **Solution / Recommendation:**

#### 🔹 **Option 1: Your customer deducts TDS**

* The customer deducts TDS **in their name** while making payment to the advertising agency.
* You get a **copy of the TDS certificate (Form 16A)** from the customer **as support**.
* In your books:

* You **book the gross expense** (e.g., ₹1,00,000 for ad spend).
* Debit: **Advertisement Expense A/c ₹1,00,000**
* Credit: **Customer/Payable A/c ₹1,00,000**
* While reimbursing:

* Debit: **Customer/Payable A/c ₹1,00,000**
* Credit: **Bank A/c ₹1,00,000**

✅ **Note:** Since your customer already deducted TDS, you don’t deduct it again.

#### 🔹 **Option 2: You make the payment directly instead going forward**

* To **avoid complexity**, **you make payment directly** to the agency in future.
* You deduct **TDS in your name**, and avoid confusion.

---

### ⚠️ **Caution:**

If **neither you nor your customer** deducts TDS, and you claim the expense, **your expense may be disallowed under Section 40(a)(ia)** during assessment, leading to **additional tax liability**.

---

### ✅ **Summary:**

| Scenario | TDS Applicability |
| ------------------------------------------ | --------------------------------------- |
| Customer pays directly and deducts TDS | ✅ TDS by customer; you **don’t** deduct |
| You reimburse customer, claim expense | ✅ Keep TDS certificate as **proof** |
| Neither deducts TDS, but you claim expense | ❌ Risk of disallowance u/s 40(a)(ia) |

---

Let me know if you want a sample journal entry or draft clarification letter to the customer regarding TDS deduction.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now