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Serious issue - sec 199 rw rule 37ba

yuvak (Practising CA) (144 Points)

16 April 2012  

Hi Friends,


My client is facing a typical TDS issue....

He had entered into a long term lease agreement for his premises (some 10 year back). After initial 3 years, there arose dispute between my client and the lessee regarding lease terms and the leasee stopped paying lease rentals to my client. However, my client continued to account for the lease as recceivable (as per the agreement) and offered this amount to tax. Now, the disputed is settled and the leasee agrees to pay a one time settlement lease rental  and record the same in his books for FY 2012-13. He also intends to deduct TDS on the entire settlement amount u/s 194I. My client has already offered to tax a significant portion of the settlement amount in earlier years.


We are concerned that Sec 199 rw rule 37BA will cause following problems for us:

1. TDS credit will only be available for 'proportionate income' being offered to tax in the corresponding assessment year.

2. Offering entire settlement amount as income for AY 2013-14 will resulting into double taxation of same income as well as significant rise in my client's taxable income.

IS there any way out??????


 2 Replies

nimish solanki (IPCC CLEARED) (108 Points)
Replied 16 April 2012

Hello Yuvak,

As the income of your client has already been taxed in earlier years, same will not be taxed again.

However the only way to save the TDS is to ask the lessee not to deduct TDS. As amended in this budget  if TDS is not deducted, expenditure will not be disalloweed if is proved that deductee has paid the tax on same.

Hence you can request the lessee not to deduct TDS by assuring him that expense will not be disallowed in his hand.

The income recived over and above income recognized in previous year will alone be taxed.


K.Senthil Raja (Practicing Chartered Accountant)   (32 Points)
Replied 23 April 2012

The best way may be to file Form 13 with the ITD ( For nil deduction / lesser deduction of TDS ) and get a certificate and produce it to the company

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