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TDS on Machinery rent

LAXMIKANT JAIPURKAR (Practicing Company Secretary/Tax Consultant) (403 Points)

29 June 2009

If one party uses the machinery in a year without fixing the rate.

It pays the amount to the machinery owner as deposit during the year from time to time without considering the rent aspect.

At the end of year both the parties mutually agrees to transfer the deposit account to the rent payable account and fixes the rent.

When the TDS on rent is payable ? Is it on 7th April or till the filing of the return.

In my opinion, the entry of rent is to be treated as book entry as the rent was not fixed and the amount paid was not shown in the rent payable account during the year. The transfer from the deposit account to rent payable account is also through journal entry.

Pl. give your opinions.

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7 Replies

CA Vinay Saraf (CA) (148 Points)
Replied 29 June 2009

Originally posted by :LAXMIKANT JAIPURKAR
"	If one party uses the machinery in a year without fixing the rate. It pays the amount to the machinery owner as deposit during the year from time to time without considering the rent aspect. At the end of year both the parties mutually agrees to transfer the deposit account to the rent payable account and fixes the rent. When the TDS on rent is payable ? Is it on 7th April or till the filing of the return. In my opinion, the entry of rent is to be treated as book entry as the rent was not fixed and the amount paid was not shown in the rent payable account during the year. The transfer from the deposit account to rent payable account is also through journal entry. Pl. give your opinions. on deposit tax would de dedutable if at the time of giving the deposit it was agreed between the parties that the rent payable will be adjusted with depsoit if there no just contract as tax would be deucted at the time modification of the contract or adjustments	"

ca tarun sharma (SERVICE) (277 Points)
Replied 29 June 2009

in my opinion tds is to be deducted at the time of credit the amount in party account or payment whichever is earlier even if the limit of expense exceeds at the last day of previous year same in this case the tds should have been deducted at the time of payment and paid within due date now if tds is deposited the interest will be charged @ 12 p.a from the date of payment of expense till the date of patment of Tds & if it is paid after the previous year then the amount of expense shall be disallowed but the Tds on amount paid in the month of march can be deposited before due date of return

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(Guest)

Yupp.. Mr. Tarun is right!!!

Hitesh Kothari (Chartered Accountant M.No. - 134239) (326 Points)
Replied 29 June 2009

Hi Laxmikant,

In My view,

If Rent is adjusted against deposit made on monthly basis then TDS has to be paid 7th of following the month of adjustment along with Interest on delay in payment of TDS.

If at the end of year only it has been decided to adjust then TDS should be paid before 7th April.

Thanks & Regards

Hitesh

Ashish Sharma (Partner) (30 Points)
Replied 30 June 2009

In my opinion, the TDS is to be deducted as per the dates of the payment. For the payments made before March, the deposit has to be before 31st March to claim deduction of expense.

For payments made in March, the last date will be 31st May.

TDS is not to be deducted according to the date booked as expense, but as per the payments.