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TDS on Capital Expenses

Wsmahesh (CA and CWA qualified) (75 Points)

09 September 2008

Friends...

My query goes like this. If iam capitalising expenses say realted to construction of building with a cut of date of March 1st '08,(Capitalisation date) but fail to deduct TDS on expenses incurred. Will the same be disallowed for Income tax purpose. As per 40 (a) (ia) only expenses debited to Profit and Loss account is subject to TDS, here all expenses has been capitalised on March 1st. Can assessee seek refuge or can assessing officer disallow Depreciation on capitalised expenses.

Note - Forget Penalty on Non - payment of TDS.

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6 Replies

Viragshah (Articled Assistant) (24 Points)
Replied 10 September 2008

Originally posted by :Wsmahesh
"	Friends... My query goes like this. If iam capitalising expenses say realted to construction of building with a cut of date of March 1st '08,(Capitalisation date) but fail to deduct TDS on expenses incurred. Will the same be disallowed for Income tax purpose. As per 40 (a) (ia) only expenses debited to Profit and Loss account is subject to TDS, here all expenses has been capitalised on March 1st. Can assessee seek refuge or can assessing officer disallow Depreciation on capitalised expenses. Note - Forget Penalty on Non - payment of TDS.	"

As far as capitalisation of expenses is concerned, the assessee must have capitalised cost incurred for such project, machine, etc. Penalty or interest paid on delayed payment of TDS will route through profit & Loss account, which will be eventually disallowed. So no further disallowance can be made as far as depreciation is concerned, since ,the value on which depreciation is charged is exclusive of such delay penalty, interest, etc.

Wsmahesh (CA and CWA qualified) (75 Points)
Replied 10 September 2008

Originally posted by :Viragshah
"	Originally posted by :Wsmahesh " Friends... My query goes like this. If iam capitalising expenses say realted to construction of building with a cut of date of March 1st '08,(Capitalisation date) but fail to deduct TDS on expenses incurred. Will the same be disallowed for Income tax purpose. As per 40 (a) (ia) only expenses debited to Profit and Loss account is subject to TDS, here all expenses has been capitalised on March 1st. Can assessee seek refuge or can assessing officer disallow Depreciation on capitalised expenses. Note - Forget Penalty on Non - payment of TDS. " "As far as capitalisation of expenses is concerned, the assessee must have capitalised cost incurred for such project, machine, etc. Penalty or interest paid on delayed payment of TDS will route through profit & Loss account, which will be eventually disallowed. So no further disallowance can be made as far as depreciation is concerned, since ,the value on which depreciation is charged is exclusive of such delay penalty, interest, etc".	"

Hi Thanks for the reply. But adding on to this. Think iam capitalising the bills (even prior dated bills) as on March 1st. How can the Interest be applicable on the same. Can this be an escape route for the assessee

kamal (CWA) (125 Points)
Replied 11 September 2008

My query " if any person made payment to contractor for construction of his person resid. house, TDS libility will arrised on it ?

Wsmahesh (CA and CWA qualified) (75 Points)
Replied 11 September 2008

Originally posted by :Guest
"	Hi My query " if any person made payment to contractor for construction of his person resid. house, TDS libility will arrised on it ?	"

No. Unless he is subject to tax audit under 44AB. Otherwise individual need not deduct any tax when his house is constructed

kalpana hegde (chartered accountant) (32 Points)
Replied 11 September 2008

Hi,

Expenses should be capitalised. and added to asset? So t.d.s. should be deducted on expenses. No w t.d.s i s very important and You should not escape from this. So You can show this in the Balance Sheet. I think so.

Yogesh malpani (Articleship) (28 Points)
Replied 12 November 2008

Originally posted by :Wsmahesh
"	Friends... My query goes like this. If iam capitalising expenses say realted to construction of building with a cut of date of March 1st '08,(Capitalisation date) but fail to deduct TDS on expenses incurred. Will the same be disallowed for Income tax purpose. As per 40 (a) (ia) only expenses debited to Profit and Loss account is subject to TDS, here all expenses has been capitalised on March 1st. Can assessee seek refuge or can assessing officer disallow Depreciation on capitalised expenses. Note - Forget Penalty on Non - payment of TDS.	"