Grossingup of tda u/s 195

Dear Deepak,

Can you elaborate the details which were mentioned in the notice issued by Govt. As i doubt that how can government demand the difference 10% of TDS where it has been deducted as per DTAA. 

And secondly, please clarify that regarding which expense you are asking to claim as expenditure...

Thanks in advance

ITD Demanded balance 10% due to non availabity of PAN.

Supplier given 100/- as his fees. We have paid full 100/- to them and TDS is paid from our pocket. The grossuped amount, we merged in respective expenses i.e. Professional Fees. Now the difference 10% paid to ITD debited to Professional Fees in FY 2014-15.

Supplier Bill             100/-

Grossed Up             111/-

TDS 10%                   11/-

Net Paid to supplier  100/-