TDS on contract

This query is : Resolved

seema singla (Querist)
Follow

21 June 2010 A construction pvt. ltd co. raises two bills for building constructed for a public co. Teh publci co.deducts TDS @ 2% on the first bill but did not deduct for the second and the final bill.
What is the result of the transaction?????
What problems the public co and the con. co. can face. Please guide me.

Ca Aashish Upadhyay

Ca Aashish Upadhyay (Expert)
Follow

21 June 2010 Dear Seema

The non deduction of TDS would disallow company to claim expenses for the payment in the year in which the payment have been made. However the co. may deposit the TDS with interest in the current year and only then it may claim that expenses in the current Year!

seema singla

seema singla (Querist)
Follow

22 June 2010 Thanks for the ans., sir
I want to know what expenses of the public co. will be disallowed as building is an fixed asset and it is of capital nature. So, what can be disallowed and any other consequences it has to face.
Futher, the co. raising the bill will not have to face any problem regarding non-deduction of TDS by the payer co. Am I right?
Please tell me in detail.

Shyam Lal Naik

Shyam Lal Naik (Expert)
Follow

22 June 2010 You are right.

So far the company raising the bill is concerned, there is no default on its part and hence no consequences.

So far the public company is concerned, the building being a capital asset/expenditure, there is no question of disallowance. However, he may be compeled to deduct TDS and remit the same along with interest. Further penalty may also be imposed, unless there is reasonable cause.

Ca Aashish Upadhyay

Ca Aashish Upadhyay (Expert)
Follow

23 June 2010 It might be possible that the copmpany may not depreciation on the building in question on which the TDS not deducted.!

Shyam Lal Naik

Shyam Lal Naik (Expert)
Follow

23 June 2010 In case of non deduction of TDS, expenditure are disallowed. Depreciation is not an expenditure. It is an allowance. Question of disallowance of depreciation does not arise, in my view.

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