Ditect tax amendment questions

Ankit Singla (B.Com (Hons.), CA) (88 Points)
Replied 11 September 2010

Case 1

Tds should be deducted as single bill exceeds the limit of Rs.20000 @ 2.06%

Tds payable should be deposited before 5th of the next following month in which Tds is deducted.

Case 2

This is a case of advertising contractor so Tds should be deducted @ 1.03% as single bill exceeds the limit of Rs.20000.

Tds payable on both bills is Rs.412 and should be deposited by the deductor before 07.10.09

Case 3

In case of transport contractor,w.e.f. 1.10.09 if contractor furnishes the PAN to deducter then no Tds will be deducted otherwise Tds @ 20% should be deducted And the time for deduction is same as in case of other contractor when the payment/bill amount exceeds Rs.20000 in single contract and Rs.50000 in aggregate p.a.

arti55 (student) (66 Points)
Replied 11 September 2010

well i think ankit has drawn good ..............

i just need to add one thing here in the Ans as Mr A is CA..............in that case i think 44AB has to be considered...........i mean i need to make some assumption...

Vicky (CA, LCS,MCOM,) (136 Points)
Replied 12 September 2010

HI RESPECTED VIDDHI

As per sec 194(C),tds shd be deducted at the time of credit or payment made to contractors whichever is earlier at the prescribed rates.

1.tds will be deducted in all the cases because as per sec 194(C) tds is not required to be dedu cted only if amt payable does not exceeds:1)20000 in case of a single contract.2)50000 in case of aggregate of contracts during a year.(however no tds is required to be deducted if he was not liable for tax audit in the immediately preceeding financial year or payment is made under a contract for personal purposes,even if he is subject to tax audit in preceeding year.

2..there would be no surcharge or cess in respect of all non salary payments made to resident tax payers w.e.f 1-4-09…..accordingly the foll will be tds rates and tax liability :1)(april-sept)(25000+20000)=45000*2%=900.(tds is also required to be deducted on material component as the definition of work is amended w.e.f 1-10-2009).2)30000*1%=300….3)nil if pan furnished ,if not furnished 75000*1%=750…..total tax liability=1200(if pan furnished in third case,if not furnished then 1950).

3.as per sec 200,where amt is credited to account of receipient on the last day of accounting year tds deducted shd be paid within 2 months from the last day of accounting year.i.e.31^st may.in any other case tds deducted shd be paid within 7 days from the last day of month in which tax was deducted…according will be the answer based on the dates of credit or payment made to contractors(question does not mentions the date on which credit or payment is made)if tds is not paid within the time limits specified in sec 200, sec 220 and 221 WILL follow.sec 40(a)ia disallowances MAY also follow.

priyank agrawal (CA ) (26 Points)
Replied 12 September 2010

TDS IS NOT REQUIRED TO BE DEDUCTED ON MATERIAL COMPONENT IF T IS SHOWN SEPARATELY IN INVOICE.IF GROSS AMOUNT IS CHARGED FOR SERVICE AND MATERIAL THEN TDS IS REQUIRED TO DEDUCTED ON FULL AMOUNT

viddhi (owner) (51 Points)
Replied 14 September 2010

Sec 194C Extract

As per sec 194C as substituted w.e.f 1.10.09 by the finance(no. 2) Act, 2009 specified person shall deduct tax at source @ 1% if the payee is an individual or HUF and @ 2% in case of any other person.

Specified person includes any person being an individual or HUF or an AOP & BOI, if such person –

A. does not fall under any of the preceding sub-clause.

B. is liable to audit if accounts under clause (a) or clause (b) of sec 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the accounts of the contractor

Assuming Mr. A is here specified person and has not paid any sum for personal purpose and hence his status would be:

1. In this case Mr. A paid to contractor Rs. 45,000 under 2 contracts

i. Applying Sec 194C(3) the invoiced sum shall be reduced by the material cost i.e, Rs.25,000-20,000 = Rs. 5,000 Tds would have not been deducted on Rs 5,000 as the amount paid does not exceed Rs. 20,000 in a single payment

ii. Tds would have not been deducted on Rs 20,000 as the amount paid does not exceed Rs. 20,000 in a single payment or 50,000 in the aggregate during the financial year.

2. No TDS shall be deducted for the payment of Rs. 10,000 to the contractor whereas TDS is to be deducted u/s 194C at the rate of 1% on 30,000 as one time payment exceeds Rs. 20,000.

3. With effect from 1.10.2009 no tax is required to be deducted in case of payment made for plying, hiring or leasing of goods carriage if payee furnishes his PAN.

If PAN not furnished then 1% if single payment exceeds Rs 20,000 or in aggregate exceeds 50,000.

PAN furnished: No TDS

PAN not furnished : 75,000*1%

Total TDS payable to the Govt:

1. No TDS

2. 30,000*1% = Rs.300 has to be remitted Within the 7th of the next month.

3. 75,000*1% = Rs.750 has to be remitted before 31 May 2010

Surcharge,EC,SHEC not applicable in any of the case

viddhi (owner) (51 Points)
Replied 14 September 2010

we thank all the students for visit and even trying the ques.......well i think still a practical approcah missing in students......well we hv answered......hope this will clear a lot of doubts

wit for the next ques......

will upload today........

request to students appering in nov 2010 plz we asking ques out of amendments n viewng last time paper there was around 40 marks coverage from the amendments so take that serious guys....

all the very best

viddhi (owner) (51 Points)
Replied 14 September 2010

Q2. A search on Mr. B is initiated on 1.10.2007. some jewellery is found in the course of such search and it is claimed that jewellary has been acquired

a. by utilizing the income of F.Y 2006-07 and Mr. B has not filed the return

b. by utilizing the income of F.Y 2005-06 and Mr. B has filed the return.

c. by utilizing the income of F.Y 2007-08

can panelty u/s 271(1)(c) be imposed on Mr. B in above 3 case. deal the cases n state your advice

Ankit Singla (B.Com (Hons.), CA) (88 Points)
Replied 14 September 2010

Hi Viddhi

Before answering your 2nd ques let me have some clearance about yours answers of Q1.

Case 1

Tds should be deducted on whole amount of invoice including the material amount

Exception is only when the material used is purchased from the same customer for whom the contract is done.

Case 2

You have not mentioned that the two contracts are of different contractors.

Otherwise tds should be deducted on 10000 also.

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Case 3

If the transport contractor doesn't furnishes the PAN to the deductor, then Tds should be deducted at the highest rate of 20%

Also Tds should be deducted at the time of credit or payment whichever is earlier. So in this case tds should be deducted in the period of Oct-Mar depending on the date of credit and should be paid by the 7th of next following month in which tds is deducted.

One more thing 31st May is the last date to deposit the tds of provision booked at 31st March , other tds for the month of March should be paid before 7th of April.

Education cess & Sec.&Higher Ed. cess is applicable in the first two cases (before 1.10.09)

Vicky (CA, LCS,MCOM,) (136 Points)
Replied 14 September 2010

Q2. A search on Mr. B is initiated on 1.10.2007. some jewellery is found in the course of such search and it is claimed that jewellary has been acquired

a. by utilizing the income of F.Y 2006-07 and Mr. B has not filed the return

b. by utilizing the income of F.Y 2005-06 and Mr. B has filed the return.

c. by utilizing the income of F.Y 2007-08

can panelty u/s 271(1)(c) be imposed on Mr. B in above 3 case. deal the cases n state your advice

explanation 5A to sec 271(1)(c)(applicable for search initiated on or after 1-6-2007)

in course of search u/s 132,if assessee is found to be the owner of any money,bullion,jewellery or other things or owner of any income based on any entry in books,documents,records,etc and

assessee claims that such assets have been acquired by him by utilisng wholly or in part,his income of any previous year

which has ended before the date of search and due date of filing ROI has expired and assessee has not filed ROI or filed ROI without disclosing such income

then he is deemed to have concealed the particulars of income even if such income is declared in a ROI furnished on or after date of search.

Based on above the foll are the replies(search initiated on 1-10-2007)

a)as assessee has not filed ROI for FY-2006-07 and as due date for filing ROI has expired(31^st july/30^th sept) before the date of search penalty will be imposed u/s 271(1)(c)

b)as assessee has filed ROI for FY-2005-06 without disclosing such income(out of which jewellery is acquired), penalty will be imposed u/s 271(1)(c) .it is assumed that assessee has not disclosed such income for FY-2005-06 out of which he claims jewellery found in course of search is acquired.

c)in this case explanation 5A to sec 271(1)(c) is not applicable.Therefore penalty u/s 271(1)(c) cannot be imposed.However in this case SEC 271AAA is applicable

Ankit Singla (B.Com (Hons.), CA) (88 Points)
Replied 15 September 2010

very well answered by Ronit

viddhi (owner) (51 Points)
Replied 15 September 2010

this is an ans to ankit for his doubts in Q1.

In case 1: there is 2 contracts read the language clearly........one time payment or in aggregate.............one time payment exceeded in case of 25,000 i.e, contract II.

In first case material cost is sepertly mention this is hint that material taken from same customer............if not then it would be clearly mentioned in the que.

In case 2: he paid 10,000 on 1 sep and 30,000 on 30 sep hence while making frst payment it was not exceeding min limit as well aggregt not exceeding 50,000.hence tds only on 30,000

In case 3 :

In this case 20% as u said is applicable from 1.April.2010

If u read out sec carefully...............it says

Person engaged in the business of hiring ,plying, leasing goods carriage vehicals etc.

from 1.oct.2009 onwards

-contractor -----upto 30 sep 2009(2%)----------

nil(in both the cases)

-subcontractor----upto 30 sep 2009 (nil)-------

viddhi (owner) (51 Points)
Replied 15 September 2010

Ans 2. Extract of Sec 271(1)(c) -----explanation 5A

Explanation 5A applies to cases where A search is initiated on or after1.6.2007. If any asset is found in the course of such search and it is claimed that such asset has been acquired by utilizing the income of any P.Y., OR if any income based on any entry in any books of account ,document or transactions is found in such search and it is claimed that such entry represents his income for any P.Y. which has ended before the date of search and the due date for filing of return has expired and the assessee has not filed the return then notwithstanding that such income is declared in the return filed on or after the date of search, the assessee shall be deemed to have concealed the particulars/ furnished inaccurate particulars of such income.. The immunity available earlier is no more applicable as per this Explanation

a. As per Explanation 5A it does not refer to all the previous years ending before the date of search since it restricts to that year in respect of which due date for filing of return has expired and the return has not been filed. Hence provisions of Explanations 5A will apply.

b. if source of unaccounted asset relates to the previous year in respect of which the return has already been filed, the provisions of Explanation would not apply. In such case, the issue will have to be decided as per the main provisions of section 271(1)(c).

c. This provision would not apply to ‘B’ claiming that jewellery was acquired out of the income of year in respect of which due date for filing of the return is not yet expired and the return is yet to be filed. In such cases, unaccounted income can be declared in the original return which may be filed after the search. The precaution to be taken is that there is sufficient nexus between the asset found and income of such year.

Note :There is another lacuna in the explanation . It may be that unaccounted assets are found acquisition of which can not be related to any year ending before the date of search. In such case, ‘A’ can be assessed only u/s 69A in the year ending on or after the date of search and the provisions of Explanation 5A would not apply. Consequently, penalty may not be leviable if the same is declared in the original return.However, it may be noted that quantum of penalty would be in accordance of the provisions of section 271AAA

Note: It is important to note that the provisions of Explanations 5 & 5A are applicable to search cases and have no application where requisition is made u/s 132A.

Ankit Singla (B.Com (Hons.), CA) (88 Points)
Replied 15 September 2010

Hi viddhi

Case 1

invoicing separetely material cost doesn't mean that material is purchased from the same customer, it may be due to contract between them that invoice made should be of fixed labour charges and material cost occured.

If material is from the same customer then it should be mentioned in the ques.

Case 2

I know Rs.10000 is paid on 1.09.09 and Rs.30000 after that but practically at the time of deducting tds on Rs.30000 we should deduct tds on Rs.10000 also.

As limit to be liable for tds is not an exemption.

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Case 3

I agree that if PAN is not furnished to the deductor then tds should be deducted @ 20% w.e.f 1.04.10

Tds should be deducted at normal rates applicable if PAN is not furnished by the transport contractor w.e.f.1.10.09 & before 1.04.10.

Hi Viddhi

You are giving a great contribution to overcome the deep points of concepts

Keep it up

Thanks & Regards

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