TDS deduction from contractor bill

This query is : Resolved

varun gupta (Querist)
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15 May 2009 A company has hired a contractor for some services and the monthly bill comes around Rs 3700-4000. On this basis, in APr 08 company persumes that total payment during the yr won't be more than 50000 and hence it is not deducting the TDS from the contractors bill. But the bill amt raised in Feb 09 & Mar 09 to some extent and total payment for 2008-09 crosses Rs 50000/-. Now will the co. be treated as on fault and the whole exp will be disallowed and something can be done?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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15 May 2009 Company is a defaulter. Penalty provisions u/s 271C is attracted. Expenses will be disallowed. To avoid this deduct the tax and pay it now along with interest.

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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15 May 2009 If the payment crossed the threshold limit in Feb'09, the company must have deducted tax on whole payment made during year by deducting the tax from that speific payment.

Now the solution is to pay tax with interest as opined by Mr.Warrier with interest thereon.

The expenses will be allowed in F.Y 2009-10 and not in 2008-09.