QUERY: Assessee is requiring to deduct Tax before payment of any expenditure outside India. If he fails to do so then he can’t claim such payment as expenditure.
In one of the earlier case, it was held by the Madras High Court, that if assessee fail to deduct TDS on payment made by him to the party but receiver voluntary pay the advance tax on such receipt then also assessee who make the payment can claim such expenditure, irrespective of the fact that he fail to deduct TDS.
Court says that the ultimately objective behind the deduction of TDS is to collect Advance Tax which is fulfilled.
If suppose an Indian Co. makes a payment to a Foreign Co. the actual gross invoice amount without deducting TDS ( As there is an agreement between them regarding payment of invoice amount without deducting TDS). Thus, the Indian Co. Calculate Tax on such invoice amount as per DTAA and pay Tax out of own pocket. My query is that from the following which one assesse can claim as total expenditure.
a) The total Invoice amount as well as TDS amount. or
b) Only the Invoice amount.
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