whether tds on capitalised expenses

no this party was for renovation and may be this party will not come in future.Now tell how to adjust?

Hi Aasita,

Deduction of tax & disallowance of expenditure are two independant matters.  If tax is not remitted, the company is liable for payment of tax even if not deducted and also liable for penalty. 

In case the payment is an expenditure, the same will not be allowable.  In case the payment is capitalised, no question of disallowance.  However, if the tax is not deducted and accordingly not remitted, the company will be in default and will be liable to remit the TDS.

Hence, it is advisable to pay TDS even if not collected.  Once the payment is made, you can negotiate with the contractor for payment of TDS and issue him the TDS certificate.

Regards/Dharmaraju

 In that case, TDS deductable should be Rs 191666 . ie {1500000*11.33/(100-11.33)}. 

Strictly speaking, it is not tds deductable. The assessee should Pay Rs 191666 from his own pocket to avoid penalty & interest. 

would like to thank all of you for replying my query so fastly and so accurately.This is reason why like caclub.

thanks once again

Have to be Deducted TDS.

under the income tax act there is no provision for capital & revenue as per sec 194 j  tds is charged @ 10% on professional whether service is capitalised or not .........

Kind attention Asita,

Tax is deductable on Income earned by the deductee. It has nothing to do with what treatment is given by the decutor. In your case income has been earned by the interior dedoration, hence liable for TDS provisions. What treatment you are giving to such expenditure is immeterial. Hence the payment was subject for TDS.

Payments made without deducting tax is subject to diallowance by IT authories. But as you mentioned that you are not claiming deduction in repect of such expenditure, then you are on safer side.

Thanks

Tds Deducted ,

dear aasita

1. sec 194J require deduction of tax from any payment or credit to a person on account of professional services which inter alia includes interior decoretor regardless of treatment of such payment by payer i.e. whether he treat it as capital/revenue expenses.

2. if he fails to deduct tax then followin consequences will arise 

   * section 40(a)(ia)

      any interest, commission or brokerage, rent, royalty,fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 then no deduction for such sum shall allowed under any provisions of the act .

Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.

no deduction for such sum shall allowed under any provisions of the act .means depriciation shall not be allowed .

  * beside he will be liable for penalty u\s 271 for a sum equal to amount in default

an individual is liable to deduct tds on intt on unsecured loan taken on his personal name ...also he is a prop of a business covered u/s 44ab

if we deducted tds on capital exp and not deposited the same with department any consiqunce arise on income of statement and i know the dep is allowable irrespective of tds complince and i also want to on case low relating to this topic.

Dear All,

Read all the replies to this topic and quite convinced with some of them. Here my logic says that TDS provisions in the Act is aimed to collect tax at the point any income is paid and disregarding it will cause a punishment through disallowing the equivalent amount in your income tax computaion.

Section 40(a)(ia) is very clear to this aspect as non deduction of any sum chargeable under profit and gains of business or profession on which TDS is deductible is disallowed. The other logic that we have capitalized it and not claiming it as an expediture itself does not hold good since it is claimed through depreciation through out the asset life. 

Here the assessee will be an assessee in default and the amount shall also be disallowed without any second thought.

I have appeared in a case under commissioner appeals similar to this issue and soon I will post the order where it was disallowed u/s 40(a)(ia).

sincerely yours