TDS

Hi

What is accounting treatment in following situation? Please explain me .

Suppose Mr A is liable for conducting Tax Audit ( F Y 06-07) . He paid Rs 20000/- as interest on unsecured loan to Mr X . But he has not deducted TDS on such transaction. After 3 years ( In F Y 08-09) Mr A had to face scrutiny. ITO noted that & Mr. A had to deposit such TDS.

Mr X is individual party . He had filed his return before arising scrutiny. Also he got his other refund .

In such situation I need your help :-

What is accounting treatment of such transaction in the books of both party. Also In which year it should be entered. 

How can Mr X claim for such refund ? 

Thanks

Pankaj Sonar

 

 

Replies (3)

pls help modarator ,no one hs replied me yet

Under the circumstances, at the most ITO can disallow the claim of Interest exp for Rs. 20,000 u/s 40(a)(ia).

Why to pay TDS? Mr X must have paid tax on his income in his return.

 

Yes, ITO can disallow the interest expense for F.Y. 2006-07 and Mr. A has to pay the tax on the increased income along with interest u/s 234, 220 and penalty, if levied u/s 221.

 

There is no need to pay the TDS, since it won't be practicable to recover the amount.

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