Disallowance of Expenditure for non-payment of TDS
Presently, in respect of any interest, commission, brokerage, rent, royalty, fees for professional services or fees for technical services etc., if an assessee does not deduct tax at source or after deducting does not pay the tax so deducted within the stipulated time, the relevant expenditure is disallowed under section 40(a)(ia). The stipulated time limit for the purpose of calculation of disallowance is March 31 of the previous year in cases where tax is deductible during the months of April to February in a given previous year and it is the due date of filing the return of income in cases where tax is deductible in the month of March.
The section is now amended to provide that the stipulated time limit for the relevant expenditure to be allowable shall be the due date of filing the return of income irrespective of the month in which the tax was deductible during the relevant previous year.
It is further provided that if tax is deducted and paid in any subsequent year or if it has been deducted in the previous year but is paid in any subsequent year after the due date of filing return of income, then the deduction for the relevant expenditure shall be granted in such subsequent year of payment.
The above amendments are introduced with effect from A.Y. 2010-11.
This is a very welcome provision. Hence now onwards, the disallowances under section 40(a)(ia) will fall in line with section 43B and hence any expenditure as referred above will be allowed as deduction from the total income if the TDS applicable on the same is paid on or before the due date of filing the Income Tax Return as specified under section 139(1).
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