For FY 12-13, we had given consultancy of 561800/- for which our client paid us 505620 after 10percent TDS, but this 56180 TDS was not deposited to govt. After constant follow up, we declared this as income and paid taxes on it. But since the client had deducted and not paid 56180 to govt, we have to receive this from them. Is it okay if we take this in cheque from them?? The client says this is a general practice.
Or we have to ask them to deposit this amount and then revise return .
Dear Megha,
You can very well take this amount in cheque as the same is already disclosed in tax return and financials.,
Thanks for the reply.
But what will be the tax implications on the other party's side. Will this not call for a disallowance of this amount for non-deduction of TDS.??
You can take full income in your books (i.e. Gross Income) no harm in it. However, to other party a notice can be served by TDS ITO imposing pentaly u/s. 271 for keeping the government tax with them for more than 12 months. As in your case they have deducted TDS but not deposited with the department.
I think you have two alternatives,i.e., either you can take cheque from your client for the TDS amount or ask your client to deposit TDS along with interest [u/s-201(1A)] @ 1.5% p.m. from the date TDS deductble to date of filing return by you & revise TDS return to claim expenditure for F.Y. 2012-13 in F.Y. 2013-14 [as expenditure already have been disallowed for the F.Y. 2012-13 u/s-40(a)(ia)]. In both the cases, as u have already included such income & paid taxes, your client will not be considered as assessee in default, provided a certificate is furnished by your client in Form No.26A duly certified by CA as per proviso of sec-201(1) & thus can avoid interest u/s-220 & penalty u/s-221 but not interest u/s201(1A))]
In both the cases you will be able to claim you TDS either from client (Option 1) or from Dept. after filing ITR for A.Y 2014-15 (Option 2). Hope your doubts are cleared now.
Thank you for the replies. It is clear now.
CAclubindia
