TDS matters

This query is : Resolved

Deepak makhija (Querist)
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11 May 2009 Dear All,

One of my assessee has not deducted TDS U/S 194C while making payment, however the contractee is a sick unit.
& my assessee has not even collected No TDS certificate from the contractee. in this case Assessee is in default, but on the other side if we look that if assessee would have dedcted TDS, the contractee has claimed it as refund.
in this situation the goverment has not lost any revenue,instead Govt would require to pay Interest on refund.
Now if A.O. has disallowed such expense can i defend on the above stated basis.
Has there any such incident taken place in the past, kindly provide the reference for the same.

Thanks & Regards...

ca hardik

ca hardik (Expert)
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11 May 2009 the view taken by you is not correct. In this situation government loosing interest that it can earn on the deposit of the TDS. and other side govt. has to pay interest on refund after the 3 months from the submission of the refund claim and that to only @6 pa. So, it's advisable to pay the whole amount of TDS with interest. there are no. of high courts decision available in this regard.

chetan soni

chetan soni (Expert)
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11 May 2009 Yes, you are right department has not lost revenue. But that doesn't mean that you should not follow the section & section notes. It is not mentioned anywhere.

Also note such kind of explanation will not entertained during scrutiny. It is better you himself do the disallowance of expenditure.

taxindiaconnect

taxindiaconnect (Expert)
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11 May 2009 There are case laws where the courts have held that the if the deductee has paid the tax in full, the deductor is not liable to interest u/s 201(1A) as the revenue is not at loss. I think that this makes sense for your to argue before the authorities that since revenue is not at loss as the deductee has paid tax on no tax is payable in the case of deductee, no disallowance should be made in the assessment of the deductor. You can seek help from the following cases -

CIT VS Rishikesh Apartments Co-op Housing Soceity Ltd. 119 Taxmann 239 Gujrat GC
and
CIT Vs Adidas India Limited 157 Taxmann 521.
If you need further help, let me know.

Deepak makhija

Deepak makhija (Querist)
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12 May 2009 Thanks & Ragards.
Deepak Makhija.

jegannath G

jegannath G (Expert)
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13 May 2009 your point of not deducting TDS is not correct. you can ask the supplier to approach TDS circle & get the exemption certificate.hence you deduct TDS even if it is sick company in order to avoid disallowance

jegannath G

jegannath G (Expert)
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