Dear All,
There is an Indian company engaged in the business of manufacturing scooters. It has a R&D facility in Mumbai and that R&D faciltiy takes certain professional services from a local service vendor (say some technical advisory). Rs. 1,000 is the bill. The payment to for such technical advisory is covered under section 194J of ITA and TDS on it works out to Rs, 100 (say).
Now in the return of income, the R&D facility is eligible for claiming 35(2AB) weighted deduction of 200% of the revenue expenditure incurred. Since the paymet made to such professional services is in connection with R&D, the R&D unit will claim Rs. 2000 as weighted deduction. But what happens if there is a default in TDS payment and the expense paid of Rs. 1000 is disallowable u/s 40(a)(ia) ?
The question is that the amount payable to vendor is Rs. 1000 on which there is a default, whereas the deduction u/s 35(2AB) is on expenses is Rs. 2000. Should the Indian company take deduction of 2000 and then take a disallowance of 1000 or will it take complete disallowance of 2000 and claim it only when TDS is paid.
REgards,
Harry
CAclubindia
