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BILL DISCOUNTING & TDS

Assessee (advocate) (108 Points)

01 November 2007

sir, if i am discounting my bill thru financer and inwhich i passes my trade(property of bill) to financer and hence the financer directly collect payment from my seller. In this process, the financer cut some amount as a bill discounting and remaining amount pay to me. so, my query is wheter i should deduct tax on charged debited to my profit and loss account under the head of 'bill discount'. in recent judgement of of Kanha Vanaspati Ltd..v.Additional Commissioner of Income-tax, Range-50, New Delhi, kindly clarify considering this judgement. the main problem is how can i deduct tax as i am not directly paying anything in form of bill discounting as the financer cut the same charges and then after giving me a remaining payment

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7 Replies

Rathod. (Trainee) (26 Points)
Replied 02 November 2007

good

Rathod. (Trainee) (26 Points)
Replied 02 November 2007

good

Kapil Goel (ACA Chartered Accountant) (32 Points)
Replied 02 November 2007

Dear Friend, In relation to your bill discounting query, to my knowlede, there is one favorable ruling of Madras ITAT which states that on discounting charges no TDS is required u/s 194A (86 ITD 283) which seems to have not been considered in Del ITAT Kanha Vanaspati case. Further, in this connection, CBDT Circular No. 647 dated 22 March 1993 and 86 of 1972 may be usefully referred to. Regards Kapil Goel ACA LLB

Assessee (advocate) (108 Points)
Replied 04 November 2007

thanks i am discounting my bill of Rs. 50,00,000/- thru a private party mr.A and he is deducting Rs.50,000/- as a bill discounting and send me a Cheque of Rs. 49,50,000/- should i require to deduct tax u/s. 194A on rs. 50,000/- whether it covers under definition of Interest ?

Dushyant Chouhan (Chartered Accountant) (28 Points)
Replied 22 November 2007

Cheque Discounting charges are different from Interst and hence not liable to TDS. (ITO V/s A S Babu Shah (2003) 86 ITD 283 (Mad.)

Assessee (advocate) (108 Points)
Replied 22 November 2007

here we are not cheque discounting but bill discounting and as per latest judgement in case of of Kanha Vanaspati Ltd..v.Additional Commissioner of Income-tax, Range-50, New Delhi, it has been stated that TDS is applicable on bill discounting bcoz it is interest in indirect form it is different matter u called by whatever name either financial charge, bill discounting, service charge but it is eligible for tds u/s.194A