TDS under 194Q clarification

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This discussion clarifies the applicability of TDS under Section 194Q concerning an advance payment made for a business acquisition that later failed. The advance was intended for business acquisition but is now being repurposed for asset purchase. The key question is when TDS becomes applicable and if interest or penalties are due for not deducting it on the initial advance.

Srinivasan

Srinivasan (Querist)

12 September 2024 Company A made an advance payment of ₹3 crores to Company B for the acquisition of the latter’s business during FY 23-24, approximately 6-9 months ago. No TDS was deducted on this advance payment.

In August 2024, the deal to acquire the business failed, and Company A now intends to use the advance amount to purchase certain assets from Company B instead.

When does TDS under Section 194Q become applicable in this situation? Should TDS be deducted in August 2024, and if so, is there a need to pay any interest or penalties for the delay?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

13 September 2024 1. Yes.
2. No, not applicable as the deal happens in August itself.

Sowmya.G

Sowmya.G (Expert)

24 September 2024 TDS under section 194Q is applicable only for purchase of GOODS of value exceeding Rs 50 lakhs. Your scenario does not attract TDS under section 194Q. What is the nature of assets purchased?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

15 October 2024 Good Luck.

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