section 40(a)(ia)

TDS default on Payment of any Nature other Then Salary, to A Non-Resident / Foreign Company

Income Tax - In this article, I am going to have a discussion on Section 40(a)(i) of the Income Tax Act, 1961. Which deals with disallowance of certain business expenditure in case of TDS default is made by the Payer at the time of making payments to a non-resident or foreign company. ...

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Digital Technology (DigiTech) & E-commerce Taxation

Income Tax - Digital Technology (DigiTech) & E-commerce Taxation Indian e-commerce and DigiTech industry have been grown to a new height in the past decade. We have seen exponential rise in the way people look at business and the modus operandi of managing a business. From high investments in space and layouts, people have diverted to high investm...

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TDS on Expense Provision for which no invoice been received

Income Tax - One of the most disputed arguments between assessee and income tax department is that whether payments made towards specified expenditure attracts disqualification u/s 40(a) (ia) and applicability of this section to provisions made at the year end and its implications. Following are the views expressed by the author in this respect. The ...

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Interest, Penalty, Prosecution & Other Consequences of TDS Defaults

Income Tax - 1. Prosecution etc. : U/s. 276B If a person deducts tax at source etc. but fails to pay the same to the credit of Central Government as prescribed, he can be sentenced to rigorous imprisonment for a term not less than 3 months and extendable upon 7 years with fine as well. Moreover, u/s 276BB, similar punishment is provided for a person ...

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S. 40(a)(ia) Disallowance for Non Deduction & Short Deduction of TDS

Income Tax - Under section 40(a)(ia) of the Act, in case of payments made to resident, the deductor is allowed to claim deduction for payments as expenditure in the previous year of payment, if tax is deducted during the previous year and the same is paid on or before the due date specified for filing of return of income under section 139(1) of the Ac...

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Section 40(a)(ia): Disallowance of expenditure for non-deduction of tax at source on payment made to resident

Income Tax - Section 40(a)(ia) is amended via Finance (No. 2) Act, 2014 to restrict the amount of disallowance for non-deduction of tax to 30% of expenditure. The proviso is also amended to the effect that 30% of such sum shall be allowed as a deduction in computing the income of the previous year in which tax has been paid....

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Change in provisions related to disallowance of expenditure on account of non-compliance with TDS provisions : Budget 2010-11

Income Tax - The existing provisions of section 40(a)(ia) of Income-tax Act provide for the disallowance of expenditure like interest, commission, brokerage, professional fees, etc. if tax on such expenditure was not deducted, or after deduction was not paid during the previous year....

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TDS not deductible on Agency Commission paid to Overseas Agents not having PE in India

DCIT Vs Shamrock Pharmachemi Pvt.Ltd. (ITAT Mumbai) - DCIT Vs Shamrock Pharmachemi Pvt.Ltd. (ITAT Mumbai) We find that assessee is engaged in the business of trading activity of import and export of pharmaceutical ingredients, chemicals and intermediates. We find that the assessee debited a sum of Rs. 4,18,50,792/- in its profit and loss account toward...

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Section 195 TDS Applicable on Software Purchase Expenses incurred by Distributor

Kaseya Software India Private Limited Vs DCIT (ITAT Bangalore) - The issue under consideration is whether the CIT(A) is correct in stating that TDS u/s 195 applicable on software expenses without appreciating the fact that appellant was merely acting as a distributor and not having right to have a copy of the software?...

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Depreciation on Imported Software Not Considered as Royalty & Not Liable for Disallowance u/s 40(a)(ia)

Wifi Networks Pvt. Ltd Vs DCIT (ITAT Bangalore) - The issue under consideration is whether depreciation on ‘imported software’ will be considered as royalty and liable for disallowance under section 40(a)(ia) for want of TDS?...

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ITAT Restored Case to AO Regarding TDS Applicability u/s 194A on Financial Charges Paid for Car Loan

Samir Synthetics Mills Vs DCIT (ITAT Ahmedabad) - The issue under consideration is whether the disallowance u/s 40(a)(ia) is justified for non deduction of TDS u/s 194A on financial charges paid for car loan?...

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Profit Enhanced due to disallowance u/s 40(a)(ia) allowed for Dedcution u/s 10AA

JCIT Vs Mphasis Ltd. (ITAT Bangalore) - The disallowance of the expenditure u/s 40(a)(ia) would automatically enhance the taxable income of the assessee and the assessee is eligible for the deduction u/s 10A of the Income-tax Act on the enhanced income....

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Disallowance for failure to withhold tax- Sec.195 rw Sec. 40(a)(i)

Circular No. 3/2015-Income Tax - (12/02/2015) - Circular No. 3/2015 Section 40(a)(i) of the Act stipulates that in computing the income chargeable under the head "Profits or gains of business or profession", any interest, royalty, fees for technical services or other sum chargeable under this Act either payable in India to a non-resident (not bei...

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S. 195 AOs to tax taxable part of sum paid to NR for TDS default

Instruction No. 02/2014 - (26/02/2014) - Sub: Deduction of tax at source under Section 195 read with Sections 201 of the Income-tax Act, 1961 relating to payment made to a non-resident-reg. Section 195 of the Income-tax Act (hereafter referred to as 'the Act') provides that any person, responsible for paying to a non-resident not being ...

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CBDT circular on Section 40(a)(ia)-TDS Disallowance

Circular No. 10/DV/2013-Income Tax - (16/12/2013) - Circular No. 10/DV/2013-Income Tax It has been brought to the notice of the Board that there are conflicting interpretations by judicial authorities regarding the applicability of the provisions of section 40(a)(ia) of the Income-tax Act,...

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Recent Posts in "section 40(a)(ia)"

TDS not deductible on Agency Commission paid to Overseas Agents not having PE in India

DCIT Vs Shamrock Pharmachemi Pvt.Ltd. (ITAT Mumbai)

DCIT Vs Shamrock Pharmachemi Pvt.Ltd. (ITAT Mumbai) We find that assessee is engaged in the business of trading activity of import and export of pharmaceutical ingredients, chemicals and intermediates. We find that the assessee debited a sum of Rs. 4,18,50,792/- in its profit and loss account towards export commission paid to overseas age...

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Section 195 TDS Applicable on Software Purchase Expenses incurred by Distributor

Kaseya Software India Private Limited Vs DCIT (ITAT Bangalore)

The issue under consideration is whether the CIT(A) is correct in stating that TDS u/s 195 applicable on software expenses without appreciating the fact that appellant was merely acting as a distributor and not having right to have a copy of the software?...

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Depreciation on Imported Software Not Considered as Royalty & Not Liable for Disallowance u/s 40(a)(ia)

Wifi Networks Pvt. Ltd Vs DCIT (ITAT Bangalore)

The issue under consideration is whether depreciation on ‘imported software’ will be considered as royalty and liable for disallowance under section 40(a)(ia) for want of TDS?...

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ITAT Restored Case to AO Regarding TDS Applicability u/s 194A on Financial Charges Paid for Car Loan

Samir Synthetics Mills Vs DCIT (ITAT Ahmedabad)

The issue under consideration is whether the disallowance u/s 40(a)(ia) is justified for non deduction of TDS u/s 194A on financial charges paid for car loan?...

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Profit Enhanced due to disallowance u/s 40(a)(ia) allowed for Dedcution u/s 10AA

JCIT Vs Mphasis Ltd. (ITAT Bangalore)

The disallowance of the expenditure u/s 40(a)(ia) would automatically enhance the taxable income of the assessee and the assessee is eligible for the deduction u/s 10A of the Income-tax Act on the enhanced income....

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TDS not deductible on Trade Offers Provided to Distributors

Nokia India Pvt. Ltd Vs Acit (ITAT Delhi)

Assessee made the detailed submissions inter alia contending that the provision of section 194H, 194C, 194J were not applicable to the case because the payment was not for any contractor of services or work, there was no relationship of agency....

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Depreciation cannot be disallowed under section 40(a)(ia)

Wipro Limited Vs. Addl CIT (ITAT Bangalore)

Wipro Limited Vs Addl. CIT (ITAT Bangalore) Claim of depreciation on software- Depreciation claimed by the assessee on the amount of software capitalized was disallowed invoking provisions of section 40(a)(ia) for non-deduction of tax at source. Held, depreciation is a statutory allowance and hence it cannot be considered as expenditure. ...

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No section 14A Disallowance if There is No Exempt Income

Tata Sky Limited Vs. ACIT (ITAT Mumbai)

Tata Sky Limited Vs. CIT (ITAT Mumbai) The issue under consideration is whether the disallowance of expenditure under section 14A is justified if there is no exempt income? In the instant case, the assessee has invested in various investments which, yield exempt income. Further, the assessee has not made suo moto disallowance of expenditu...

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No disallowance of discount for Non-Deduction of TDS

Dish Tv India Limited Vs. ACIT (ITAT Mumbai)

Whether disallowing expenditure in the nature of discount under section 40(a)(ia) for non-deduction of tax u/s 194J by considering it as commission is justified in law?...

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Marketing Expense for Issuance of Handsets on Free of Cost is allowed as Business Expense

Nokia India Pvt. Ltd. Vs ACIT (ITAT Delhi)

The issue under consideration is whether the marketing expenditure incurred on account of issuance of handsets on free of cost basis is allowed as business expense or not?...

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ITAT remand back Matter to AO for Re-Examination of Relocation Expense & Related TDS Compliance

American Express (I) P. Ltd. Vs DCIT (ITAT Delhi)

The issue under consideration is whether disallowance of relocation expenses u/s 40(a)(i) of the Act and non granting of tax deducted at source with respect to that expense is justified in law?...

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Section 40(a)(ia) amendment is Curative & is Retrospective

CIT Vs Archean Granites Private Ltd. (Madras High Court)

whether Tribunal is right in holding that amendment made to Section 40(a)(ia) by Finance Act, 2010 would apply retrospectively though the amendment is made with effect from 01.4.2010? ...

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Amendment to Section 40(a)(ia) by Finance Act 2010 was retrospective

CIT Vs Archean Granites Private Ltd. (Madras High Court)

CIT Vs Archean Granites Private Ltd. (Madras High Court) The purpose of the amendment made by the Finance Act, 2010 is to solve the anomalies that the insertion of section 40(a)(ia) was causing to the bona fide tax payer. The amendment, even if not given operation retrospectively, may not materially be of consequence to the […]...

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TDS default on Payment of any Nature other Then Salary, to A Non-Resident / Foreign Company

In this article, I am going to have a discussion on Section 40(a)(i) of the Income Tax Act, 1961. Which deals with disallowance of certain business expenditure in case of TDS default is made by the Payer at the time of making payments to a non-resident or foreign company. ...

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Posted Under: Income Tax |

Supreme Court Judgment on Disallowance under Section 40(a)(ia)

Shree Choudhary Transport Company Vs ITO (Supreme Court)

Shree Choudhary Transport Company Vs ITO (Supreme Court) 1. As to whether Section 194C of the Act does not apply to the present case? Whether the appellant had specific and identified trucks on its rolls or had been picking them up on freelance basis, the legal effect on the status of parties had been the […]...

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No TDS on payments to NRI for Purchase of Raw Materials

Honda Cars India Ltd Vs DCIT (ITAT Delhi)

The issue under consideration is whether the provisions of deduction of tax at source (TDS) would be applicable in case of payments made to non-resident Indian for the purchase of raw materials?...

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No TDS on ocean freight paid to non-resident shipping companies

Shri Suresh Khatri Vs ITO (ITAT Lucknow)

Shri Suresh Khatri Vs ITO (ITAT Lucknow) Ground Nos. 1 to 3 of the appeal relate to the disallowance of Rs.6,42,437/- for non deduction of tax at source u/s 40(a)(ia) of the Act on payment of ocean freight, made to non-resident shipping companies. The assessee is a proprietary concern and engaged in the business of […]...

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Digital Technology (DigiTech) & E-commerce Taxation

Digital Technology (DigiTech) & E-commerce Taxation Indian e-commerce and DigiTech industry have been grown to a new height in the past decade. We have seen exponential rise in the way people look at business and the modus operandi of managing a business. From high investments in space and layouts, people have diverted to high investm...

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Posted Under: Income Tax |

Amendment in Section 40(a)(ia) vide Finance Act, 2010 are retrospective

A.Y. Garment International Private Ltd. Vs DCIT (Karnatka High Court)

A.Y. Garment International Private Ltd. Vs DCIT (Karnatka High Court) Whether the Tribunal was justified in law in holding that the amendment made by Finance Act, 2010 in the provisions of Section 40(a)(ia) of the Income-tax Act, 1961 is not retrospective in operation on the facts and circumstances of the case? The issue whether the [&hel...

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No liability on assessee to deduct merely based on provisions

AT& T Communication Services India Pvt Ltd Vs DCIT (ITAT Delhi)

 The fact that provision made at the end was reversed in the beginning of next accounting year showed that there was no income accrued. Mere entries in books of account did not establish accrual of income in the hands of payee and hence there was no liability on assessee-company to deduct merely on the provisions made at year end....

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Payment of Foreign Agency Commission not liable for TDS in India

M/s. Divya Creations Vs ACIT (ITAT Delhi)

The issue under consideration is whether the TDS will be applicable on payment of Foreign Agency Commission?...

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Reopening of assessment merely on Internal Audit Objection Not Justified

Lionbridge Technologies P. Ltd. Vs ACIT (ITAT Mumbai)

Whether the re-opening of assessment u/s 147 initiated by AO is justified in law? Re-opening of assessment on basis of Internal Audit Objection Not Justified....

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Section 195 TDS applicable only when amount is chargeable to tax in the hands of recipient

C.U.Inspections (I) Pvt. Ltd Vs DCIT (ITAT Mumbai)

C.U.Inspections (I) Pvt. Ltd Vs DCIT (ITAT Mumbai) Mere fact that the payment in question is not reimbursement of expenses to the holding company would not per se expose the expenditure to disallowance u/s 40(a)(ia) of the Act. It has been noticed supra that the disallowance u/s 40(a)(ia) is activated when there is failure on […]...

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Amendment to Section 40(a)(ia) restricting disallowance to 30% is retrospective

Muradul Haque Vs ITO (ITAT Delhi)

Muradul Haque Vs ITO (ITAT Delhi) Finance (No.2) Act has made amendment to section 40(a)(ia) of the Act w.e.f. 01.04.2015. Various benches of the Tribunals including the Delhi Benches of the Tribunal, have held the amendment made by Finance (No 2) Act to be curative in nature. We further finds the coordinate bench of the […]...

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No TDS on harvesting charges paid on behalf of farmers as agent

Parry Sugar Industries Limited Vs DCIT (ITAT Bangalore)

The issue under consideration is whether the disallowance made u/s 40(a)(ia) of the Act for non-deduction of tax at source from the payment made towards Harvesting charges is justified in law?...

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No Disallowance U/s. 40(a)(ia) if retainer-ship expense shown by recipient in their return

Demarte Silk and Sarees Vs ITO (ITAT Chandigarh)

The issue under consideration is whether A.O. is correct in disallowing the expense of retainership debited in P & L on the basis of non deduction of TDS u/s 194C when the Same was shown as salary by recipient in their Income Tax return?...

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In absence of Applicability of TDS, no Section 40(a)(ia) disallowance

ACIT Vs Alfran Construction Pvt. Ltd. (Bombay at Goa High Court)

Section 194 C of the IT Act deals with deduction of tax at source when it comes to payment to contractors. In the present case, since neither the Assessee nor M/s. Prabhu Construction can be styled as contractors, it is obvious that the provisions of Section 194C of the IT Act were not attracted. Hence Section 194C will not be invoked in ...

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No TDS on export freight to shipping agent of non-resident

PCIT Vs  Summit India Water Treatment (Gujarat High Court)

In the given case, the respondent assessee has filed its return of income for the assessment year 2013-­14. The Principal Commissioner of Income Tax invoked power of revision under Section 263 of the Act, 1961 on the ground that without deducting TDS on the export freight, the assessee company had paid export freight to Inter Ocean Shipp...

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TDS on Expense Provision for which no invoice been received

One of the most disputed arguments between assessee and income tax department is that whether payments made towards specified expenditure attracts disqualification u/s 40(a) (ia) and applicability of this section to provisions made at the year end and its implications. Following are the views expressed by the author in this respect. The ...

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Posted Under: Income Tax |

Interest, Penalty, Prosecution & Other Consequences of TDS Defaults

1. Prosecution etc. : U/s. 276B If a person deducts tax at source etc. but fails to pay the same to the credit of Central Government as prescribed, he can be sentenced to rigorous imprisonment for a term not less than 3 months and extendable upon 7 years with fine as well. Moreover, u/s 276BB, similar punishment is provided for a person ...

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Posted Under: Income Tax | ,

S. 40(a)(ia) Disallowance for Non Deduction & Short Deduction of TDS

Under section 40(a)(ia) of the Act, in case of payments made to resident, the deductor is allowed to claim deduction for payments as expenditure in the previous year of payment, if tax is deducted during the previous year and the same is paid on or before the due date specified for filing of return of income under section 139(1) of the Ac...

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Posted Under: Income Tax |

Income Tax treatment of amount paid towards Software Purchase

The question as to whether the expenditure incurred towards purchase of computer software should be treated as revenue or capital in nature. Law has been well settled since 2012, still there different treatments in industry to treat the same as revenue or capital. So through this Article, I am trying to conclude whether the amount [&helli...

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Posted Under: Income Tax |

No Section 194C TDS on reimbursement of vehicle expenses

Sri. Singonahalli Chikkarevanna Gangadharaiah Vs. ACIT (ITAT Bangalore)

Where a vehicle was provided by assessee to the concerned parties and assessee was to bear the vehicle expenses actually incurred by the cab owners which will be reimbursed by the parties concerned, reimbursement of actual expenses incurred by assessee could not be treated as payment subject to TDS under section 194C....

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No TDS on interest for delayed payment of purchase price of goods

Of late, in a number of cases, an issue has arisen whether tax is deductible at source, in respect of interest payable for delay in payment of purchase price of goods. There are occasions in the case of a manufacturing or trading concern where the concern is required to pay interest for delay in payment of the price of goods purchased. At...

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Posted Under: Income Tax |

TDS: Some Practical and Procedural Issues

Tax deduction at source is considered as a major tool to curb tax evasion and Governments have, wherever possible, introduced TDS provisions in tax laws both in direct taxation and indirect taxation. In this article the author is trying to throw light on some practical and procedural issues in Income Tax – TDS....

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No Disallowance for non deduction of TDS u/s 194H /194J in absence of principal-agent relationship & technical services

Nokia India Pvt. Ltd. Vs DCIT (ITAT Delhi)

Disallowance under Section 40(a)(ia) for non deduction of TDS u/s 194H and 194J on account of trade offers amounting to INR 834,92,63,976 provided by assessee to its distributors (HCL Info systems Ltd as well as other distributors) was not justified as there was absence of a principal-agent relationship thus, benefit extended to distribut...

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Disallowance u/s 40(a)(ia) not applicable to Short-Deduction of TDS

A.K. Industries Vs ACIT (ITAT Kolkata)

Impugned disallowance u/s 40(a)(ia) does not apply in a case involving short deduction of TDS. ITAT therefore go by the very reasoning and direct the Assessing Officer to delete the impugned disallowance....

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Section 40(a)(ia) not gets attracted for lesser deduction of TDS

DCIT Vs Chandabhoy & Jassobhoy (ITAT Mumbai)

DCIT Vs Chandabhoy & Jassobhoy (ITAT Mumbai) Section 40(a)(ia) can be invoked only in the event of non deduction of tax (TDS) but not for lesser deduction of tax.  Hence, this will not be the reason to disallow the expense u/s 40(a)(ia) just because of less deduction since section 40(a)(ia) can be invoked only in […]...

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No interest allowance u/s 40(a)(ia) if deductee furnished Form 15G or 15H

JCIT Vs Karnataka Vikas Grameena Bank (ITAT Bangalore)

Disallowance of interest paid to persons who furnished Form 15 G and Form 15 H  should not be made u/s 40a(ia) for non deduction of TDS as the requirement of filing of Form 15G and 15H with the prescribed authority viz., CIT was only procedural and that could not result in a disallowance u/s 40a(ia)....

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Section 44AD Presumptive Income 6% / 8% -Practical Issues

Section 44AD in Income tax act is the presumptive income section under which prescribed percentage of turnover will be deemed as your income. Till AY 2016-17, prescribed percentage was 8%....

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Posted Under: Income Tax |

Private healthcare sector: Income tax incentives, Provisions & Judgments

Private healthcare sector: Income tax incentives, Legal Provisions and Judgments This article covers various sections related to healthcare sector such as Section 10(23C), Section 44A, Section 44AB, Section 11, Section 12, Section 35AD, Section 194I, Section 194h, Section J and many more along with various related case laws. Legal Provisi...

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Posted Under: Income Tax |

Payment to parent company for copyrighted software on principle to principle basis cannot be treated royalty

Aveva Information Technology India (P) Ltd. Vs DCIT (ITAT Mumbai)

Payment to parent company for copyrighted software on principle to principle basis cannot be treated royalty and TDS not applicable on payment to parent company not having PE in India....

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Assessee cannot be treated as defaulter for Shortfall TDS deduction

Hall Offshore Limited Vs ACIT (ITAT Delhi)

There is nothing in section 40(a)(ia) to treat assessee as a defaulter where there is shortfall in deduction of TDS and if the shortfall is due to any difference of opinion as to taxability of any item or the nature of payment falling under various TDS provisions, the assessee can only be declared to be an assessee-in-default under sectio...

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if assessee complies with section 194C(6), no disallowance U/s. 40(a)(ia)

DCIT Vs Murugarajendra Oil Industry (P) Ltd. (ITAT Bangalore)

When Transport Operators furnish their PAN to the person responsible for making payments to them, the Transport Operators would be outside the purview of TDS u/s 194C and that immunity from TDS u/s. 194C(1) in relation to payments to transporters, applies transporter and non-transporter contractees alike....

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Section 195(1) & 40(a)(ia) talks about tax deduction where sum is chargeable to tax

JLC Electromet Pvt. Ltd. Vs ACIT (ITAT Jaipur)

Coming to the provisions of section 40(a)(ia) of the Act, the said section also provides that any interest, royalty, fees for technical services or other sum chargeable under this Act 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 ...

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Referral fees to foreign concern for introducing clients is not a fee for technical services

M/s Knight Frank (India) (P) Ltd. Vs ACIT (ITAT Mumbai)

Services rendered by foreign concern for introducing a client did not make-available any technical knowledge, experience, skill, know-how or processes to assessee, therefore, related payment did not fall within the realm of "Fees for included services" as envisaged in Article 12 of the Indo-US, DTAA and payment made to foreign concern con...

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Salary cannot be disallowed for mere non furnishing copies of appointment order, attendance register

Manne Hareesh Vs ITO (ITAT Hyderabad)

Manne Hareesh Vs ITO (ITAT Hyderabad) During the course of scrutiny assessment proceedings, it was observed by the Ld. AO that the assessee has debited in his P & L Account an amount of Rs. 2,40,000 towards Accounting Charges. On query, it was explained by the assessee that the outstanding amount of Rs. 2,40,000 was […]...

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No Section 40(a)(ia) for Non TDS deduction if Payee paid tax to government

Sai Pushpa Sharada Alliance Vs ITO (ITAT Pune)

Second proviso to section 40(a)(ia) is retrospective in nature and in such circumstances, if payee has paid tax to government account then payer cannot be held liable for non-deduction of TDS....

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Disallowance U/s. 40(a)(ia) cannot be made for non-compliance with requirements of Section 194C(7)

CIT Vs M/s. Sri Parameswari Spinning Mills Private Limited (Madras High Court)

Whether the Tribunal is correct in not confirming the disallowance under Section 40(a)(ia) made by the Assessing Officer when the assessee did not comply with requirements of Sub-Section 7 of Section 194C read with Rule 31A?....

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Consequences for TDS non compliances

1. Disallowance of expenditure; u/s 40(a)(i) of and section 40(a)(ia), if Tax not deducted / not deposited till the due date of filing of return; a. Payment to Non-resident ;100% expenses disallowed b. Payment to resident ;30% expenses disallowed However, if tax is deducted or deposited in subsequent year, the expenditure so disallowed s...

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Posted Under: Income Tax |

TDS not dedutible on charges paid to Banks for providing payment gateway

PCIT Vs Make My Trip India Pvt. Ltd. (Delhi High Court)

Services provided by the payment gateway is such that the charges collected by it has to be necessarily treated as fees and not as a commission. The payment in fact is made by one principal to another and it is only being facilitated by the payment gateway by providing a service....

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Retrospective amendment cannot change tax withholding liability, with retrospective effect

DCIT Vs Amol Dicalite Ltd. (ITAT Ahmedabad)

Retrospective amendment in law does change tax liability in respect of an income, with retrospective effect, but it cannot change tax withholding liability, with retrospective effect....

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No TDS on commission payment made to overseas agents

Pr. CIT Vs Komal Amin Exports Pvt Ltd (Gujarat High Court)

When the commission paid to the non-resident agents was neither received or deemed to be received in India nor accrued or was deemed to accrue in India, no income was chargeable to tax under the provisions of the Act. When the payment made by assessee to the overseas agent for services rendered abroad was not income chargeable to tax in I...

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Lorry Booking Agent not liable to deduct TDS on freight charges

Sunil Kumar Vs ITO (ITAT Delhi)

Assessee had incurred only office expenditure and no expenditure relating to transportation of goods such as loading, unloading charge etc., has been debited, we are of the considered opinion that the assessee actually engaged himself not in the transportation business, but only facilitating or arranging transportation for various parties...

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Payment for bandwidth charge utilization was royalty & TDS applicable

CIT Vs Infosys Technologies Ltd. (Karnataka High Court)

CIT Vs Infosys Technologies Ltd. (Karnataka High Court) Payment for bandwidth charge utilization was royalty and TDS was required to be deducted under section 195 of Income Tax Act, 1961 and on failure to deduct TDS, the disallowance under section 40(a)(i) was rightly made by the Assessing Officer. FULL TEXT OF THE HIGH COURT ORDER [&hell...

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Applicability of TDS U/s. 194C on Payment made to truck owners

ITO Vs Shri Anil Kumar Nevatia (ITAT Kolkata)

ITO Vs Shri Anil Kumar Nevatia (ITAT Kolkata) The ld. DR vehemently argued that the assessee had used the same truck numbers for transporting its goods and hence explanation of the assessee that payments were made only to the truck drivers and that no oral or written contract was entered into with the truck owners […]...

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Reimbursable expense cannot be disallowed for Non-deduction of TDS

Pr. CIT Vs DLF Commercial Projects Corporation (Delhi High Court)

Pr. CIT Vs DLF Commercial Projects Corporation (Delhi High Court) Neither the provisions of section 194C nor section 194J obliges the person making the payment to deduct anything from contractual payments such as those made for reimbursement of expenses, other than what is defined as “income”. The law thus obliges only amounts...

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Payment for delayed allotment of plot of land cannot be construed as ‘interest’

Pr. CIT Vs West Bengal Housing Infrastructure Development Corporation Limited (Calcutta High Court)

The issue which falls for decision therefore is whether payment for delayed allotment of a plot of land by the Housing Board to an allottee will fall under the definition of ‘interest’ under section 2 (28A) of the Act....

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Disallowance U/s. 40(a)(ia) for income assessed as Income from other sources

Shri Digamber Jain Bees Panthi Ajmeri Amnay Panchayat Bada Dhada Vs ITO (ITAT Jaipur)

Shri Digamber Jain Bees Panthi Ajmeri Amnay Panchayat Bada Dhada Vs ITO (ITAT Jaipur) When the income of the assessee has been assessed under the head ‘Income from other sources’ and there is no provision U/s 56 to 58 of the Act to make a disallowance U/s 40(a)(ia) of the Act prior to the amendment […]...

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TDS not deductible on Payment Gateway Charges paid to Banks

Pr. CIT Vs Make My Trip India Pvt. Ltd. (Delhi High Court)

Pr. CIT Vs Make My Trip India Pvt. Ltd. (Delhi High Court) Central Government, by notification dated 31stDecember, 2012 has notified that no TDS shall be made on the following payments to the banks listed in the Second Schedule to the Reserve Bank of India Act: (i) bank guarantee commission; (ii) cash management service charges; […...

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No law barring Partners to draw Remuneration from multiple Firms

Ms. Sachi Sarees Vs ACIT (ITAT Kolkata)

Ms. Sachi Sarees Vs ACIT (ITAT Kolkata) There is no law which prohibits a person to work in more than one partnership firms and draw remuneration therefrom. All that Section 40(b) requires is that the remuneration should be paid to a working partner and there is no prohibition either in the Income-tax Act, 1961 or […]...

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No TDS U/s. 194J on charges paid to unqualified professional

Nikhil Chandra Mitra Vs ITO (ITAT Kolkata)

Nikhil Chandra Mitra Vs ITO (ITAT Kolkata) Disallowance of Rs.60,000/- made on account of accounting charges by invoking the provisions u/s 40(a)(ia) of the Act.  The assessee submits that the person whom the amount was paid was not a qualified professional and he was an accountant writing the accounts and hence 194J of the Act, [&hellip...

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No disallowance u/s 40(a)(ia) on payment to film distributors u/s 40(a)(ia) if not subject to TDS

ITO Vs M/s. Eylex Films Pvt. Ltd. (ITAT Ahmedabad)

Payment to the film distributors is not subject to TDS and therefore disallowing expense by invoking the provisions of Section 40(a)(ia) is not justified...

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Disallowance U/s 40(a)(ia) cannot be made for shortfall due to difference of opinion as to taxability

DCIT Vs Morgan Stanley (I) Capital (P) Ltd. (ITAT Mumbai)

DCIT Vs Morgan Stanley (I) Capital (P) Ltd. (ITAT Mumbai) Conclusion: Where there was any shortfall due to any difference of opinion as to taxability of any item or nature of payments falling under various TDS provisions, assessee could be declared to be an assessee-in- default under section 201, however, no disallowance could be made [&h...

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Disallowance u/s. 40(a)(ia) are outside the jurisdiction of section 154

Sri Sachin Sharma Vs ACIT (ITAT Ranchi)

Sri Sachin Sharma Vs ACIT (ITAT Ranchi) A perusal of provisions of section 194C of the Act shows that a person is liable to deduct TDS when a contract for work is of an amount more than Rs.30,000/- or where payment for work is made to a person more than Rs.75,000/- during the financial year. […]...

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Provisions of Section 68 Cannot be applied to Sundry Creditor

DCIT Vs Allied Infra suppliers (ITAT Cuttack)

The provisions of section 68 cannot be applied to sundry creditors and the assessee cannot be applied to sundry creditors and the assessee cannot be asked to prove the 3 ingredients of cash credits in respect of sundry creditors....

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Section 40(a)(ia) can’t be invoked in absence of amount claimed as expenditure

CIT Vs M/s Dedicated Healthcare Services (TPA) India Pvt. (Bombay High Court)

Section 40(a)(ia) can be applied only when amount sought to be disallowed has been claimed as an expenditure/deduction. In absence of the amount having been claimed as expenditure while determining the income, dis allowance would not be attracted....

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Retrospective application of CBDT Circular clarifying no TDS to be deducted for Bank Guarantee Commission

Onkareshwar Properties (P) Ltd. Vs ACIT (ITAT Delhi)

No disallowance u/s 40(a)(ia) could be made for non deduction of TDS on bank commission / guarantee fee as CBDT vide Circular No. 56/2012 had clarified that no TDS was required to be deducted on bank guarantee commission, etc. and the same was retrospective applicable....

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No TDS on Payment to Amazon for Web-Hosting as same is not Royalty

EPRSS Prepaid Recharge Services India Pvt. Ltd. Vs ITO (ITAT Pune)

EPRSS Prepaid Recharge Services India Pvt. Ltd. Vs ITO (ITAT Pune) Tribunal further observed that there was no amendment in the DTAA between the two countries analogous to the Explanation 5 to section 9(1) of the Act and accordingly Amazon was not chargeable to tax in respect of Web hosting charges received from the assessee […]...

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TDS deductible on delayed pay-in-charges payable to sharebroker for making delayed payment

M/s. Shree Ganeshaya Trading Pvt. Ltd. Vs ITO (ITAT Mumbai)

M/s. Shree Ganeshaya Trading Pvt. Ltd. Vs ITO (ITAT Mumbai) Delayed pay-in-charges payable by the assessee to sharebroker for making delayed payment of purchase consideration for purchase of shares is infact „interest‟ within meaning of Section 2(28A) of the 1961 Act and the assessee was required to deduct income-tax at source on such...

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Expense can’t be disallowed for Wrong Statement given by truck owner

Shri Anil Khandelwal Vs ITO (ITAT Indor)

Shri Anil Khandelwal Vs ITO (ITAT Indor) Once the condition of further proviso of Section 194C(3) of the Act are satisfied, the liability of the payee to deduct tax at source would cease. Examining the facts of the instant appeal we find that the assessee received Form 15I from the truck owner namely Shri Kishorilal Birla […]...

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Amendment to Section 40(a)(ia) has Retrospective Effect

Perfect Circle India Pvt Ltd Vs Pr. Commissioner of Income Tax (Bombay High Court)

Perfect Circle India Pvt Ltd Vs Pr. CIT (Bombay High Court) The Revenue would content that the benefit of this proviso would be available to the assessee only prospectively w.e.f. 1.4.2013. Various Courts, however, have seen this proviso as beneficial to the assessee and curative in nature. The leading judgment on this point was of [&hell...

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No TDS on export commission to non-residents for services rendered outside India

ACIT Vs Goodrick Group Ltd. (ITAT Kolkata)

Where payment of commission on exports to non-resident was not taxable in India due to services rendered outside India, the same was not subject to TDS under section 195....

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ITAT on Disallowance of Payments of interest to NBFC without TDS deduction

Shekhar Dadarkar Vs DCIT (ITAT Mumbai)

TDS provisions were applicable to interest payments made to NBFCs, however, if payees had shown interest income in their respective returns and paid income tax thereon, no disallowance could be made in view of second proviso to section 40(a)(ia)....

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Disallowance U/s. 40(a)(ia) not justified for Freight charges paid but not claimed as expense

CIT Vs Shree Choudhary Transport (Rajasthan High Court)

Where assessee was earning booking charges for facilitating transport of goods and was merely a conduit in passing the freight to the truck owners, who were actually plying trucks, disallowance under section 40(a)(ia) was not justified because freight payment was not even claimed by assessee as an expense in its profit and loss account....

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Section 40(a)(ia) applies only when there is no TDS deduction

Scrabble Entertainment Ltd Vs ACIT (ITAT Mumbai)

Once there was compliance to TDS provisions, even if there was short deduction of TDS or TDS had been deducted under different sections, there was no scope for AO to disallow expenditure under section 40(a)(ia) as provisions under section 40(a)(ia) is applicable only when there is no TDS deduction....

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No disallowance U/s. 40(a)(ia) where net profit was estimated

Power Liners Vs. ACIT (ITAT Jaipur)

Once the income of the assessee was estimated after rejection of books of account, then, the AO could not make disallowance on the same books of account for the purpose of disallowance by invoking provisions of section 40(a)(ia) or general disallowance under section 37(1). Hence, the disallowance made by the AO was deleted....

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No disallowance U/s. 40(a)(ia) for shortfall in TDS Payment due to difference of opinion

M/s. Power Max (India) Pvt. Ltd. Vs DCIT (ITAT Kolkatta)

Where there was any shortfall due to difference of opinion or taxability of any items or the nature of payment falling under various TDS provisions, assessee could be declared to be assessee-in-default under section 201, but no disallowance could be made under section 40(a)(ia) and therefore, disallowance made was to be deleted....

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No TDS on mere facilitating transportation of goods by hiring lorries

I.T.O. Vs Bajaj Roadways (ITAT Kolkata)

I.T.O. Vs Bajaj Roadways (ITAT Kolkata) Assessee had merely hired the lorries and there was no contract between assessee and the concerned payees, i.e., truck owners. Since the assessee did not delegate its liability of transportation of goods to the truck owners by way of any contract or sub-contract, therefore, the payments made by the ...

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Disallowance justified for non deduction of TDS on Provision for Audit Fees

Citadel Fine Pharmaceuticals (P.) Ltd. Vs Asstt. CIT (ITAT Chennai)

Since assessee had made provision for audit fees to account of payee, provisions of section 194J were clearly attracted and non-deduction of tax at source would automatically invite disallowance under section 40(a)(ia)....

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TDS not deductible on reimbursement of management charges to overseas HO

Lloyd’s Register Quality Assurance Ltd. (India Branch Office) Vs DDIT (ITAT Mumbai)

Where assessee (Indian branch office) had reimbursed the payments towards management charges to its overseas head office, addition under section 40(a)(ia) was unjustified because it was against the object of Indo-US DTAA....

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S. 195 TDS provisions applies only when remittance results in taxable income

Barclays Bank PLC Vs ADIT (ITAT Mumbai)

Where overseas HO was not liable to pay any tax on interest remitted by assessee, there was no obligation to deduct TDS under section 195(1) on such remittance because TDS provisions are attracted only when such remittance results in taxable income....

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Disallowance U/s. 40(a)(i) on Commission payment to non-resident agents without TDS

DCIT Vs. Maan Aluminium Ltd. (ITAT Delhi)

Where assessee made payment of commission to non-residents outside India for procuring export orders, income of non-resident agents could not be considered to accrue or arise in India and therefore, there was no liability of assessee to deduct tax at source....

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TDS not deductible on incentives in the nature of Discount

DCIT Vs M/s. Creative Technotex (P.) Ltd. (ITAT Kolkata)

DCIT Vs M/s. Creative Technotex (P.) Ltd. (ITAT Kolkata) Assessee contended that during the year commission was paid to the parties and incentive was also paid to several persons, who physically collect the money from different places as per the direction of the team employed. According to the assessee, this is not commission but incentiv...

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Amounts not deductible U/s. 40(a) of income Tax Act, 1961

Under the Income tax Act, 1961 Profit or gain from Business or profession is considered income and such income is chargeable to tax. The expenses incurred in relation to business can be deducted from the revenue from Business or profession. However, there is certain restriction on such deduction of expenses....

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Posted Under: Income Tax |

Non-Compliance of TDS Provision where Payment is made to a Resident

Section 40(a)(ia) of Income Tax Act, 1961 deals with non compliance of provision of TDS where payment is made to a Resident. 30% cent of any sum payable to a resident on account of interest, commission or brokerage, Rent, Royalty, fees for professional services or, fees fir technical services payable to a resident, or amounts payable to a...

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Posted Under: Income Tax |

Wrong Name on Assessment Order of non existent Company can’t be cured by section 292B

ACIT Vs M/s. Mahagun Realtors (P) Ltd, (ITAT Delhi)

ACIT  Vs M/s. Mahagun Realtors (P) Ltd, (ITAT Delhi) AO has passed the assessment order u/s 153A of the Act in case of Mahagun Realtors Pvt. Ltd (represented by Mahagun India Pvt. Ltd after amalgamation) despite the fact that the above company has merged with Mahagun India Pvt. Ltd by the order of the Hon’ble […]...

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TDS not deductible on reimbursement of expenses under Income Tax Law

Klaus Multiparking System Pvt. Ltd. Vs ACIT (ITAT Pune)

Klaus Multiparking System Pvt. Ltd. Vs ACIT (ITAT Pune) As per bills raised by ‘S’ assessee had merely reimbursed octroi charges in addition to payment of transportation charges to said ‘S’. It was not requirement of law to deduct tax at source out of reimbursement of expenses, therefore, assessee could not be held to be […...

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No TDS on Soft Purchased and capitalised in books required to be made

Vogue Vestures Pvt. Ltd. Vs Dy. CIT (ITAT Bangalore)

Vogue Vestures Pvt. Ltd. Vs Dy. CIT (ITAT Bangalore)  This issue was now covered by the decision of the Punjab and Haryana High Court in the case of CIT v. Mark Auto Industries Ltd (2013) 358 ITR 43 (P&H). wherein the High court held that in absence of any requirements in law for making deduction of […]...

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TDS not deductible on payments on behalf of clients as C&F Agent

M/s. KGL Network (P) Ltd. Vs The ACIT (ITAT Delhi)

M/s. KGL Network (P) Ltd. Vs ACIT (ITAT Delhi) Assessee-company made payments on behalf of its clients as Clearing and Forwarding (C&F)Agent which were reimbursed to the assessee-company. The  assessee-company did not make claim of deduction in the P & L A/c. Similar claim of assessee-company has been allowed in earlier and subs...

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No TDS required to be deducted U/s 194H on bank guarantee commission

DCIT Vs PRL Projects & Infrastructure Lt. (ITAT Delhi)

ITAT had held that there is no principal-agent relationship between the bank issuing the bank guaranee of the assessee. The ITAT Mumbai Bench had further noted that while it is termed as |guarantee commission|, the same is not in the nature of commission...

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Disallowance on account of Non-deduction of TDS – Section 40(a)(ia)

The provisions of Section 40(a)(ia) of the Act were brought on Statute by Finance Act 2004, w.e.f. 01.04.2005, i.e the same is applicable for assessment year 2005-06 and subsequent assessment years....

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Posted Under: Income Tax |

Bill discounting charges cannot be considered as Interest for TDS U/s. 194A

Omkara Impex & Merchandise P. Ltd. Vs. ITO (ITAT Ahemdabad)

Discounting charges are outside the purview of interest expenses, therefore, in our considered view, the question of making any disallowance on account of non-deduction of TDS on such discounting charges does not arise. ...

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Disallowance U/s. 40(a)(i) on commission to foreign agents paid outside India

Eaton Industrial Systems (P) Ltd. Vs Dy. CIT (ITAT Pune)

Eaton Industrial Systems (P) Ltd. Vs DCIT (ITAT Pune) Where assessee-company paid sales commission foreign of agents for securing export orders from the buyers abroad the services were not rendered by such foreign agents in India, and no part of the said income had arisen in India, therefore, TDS was not required to be deductible [&hellip...

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Consequences for Non Payment or Late Payment of TDS

In Recent past we noticed that department has taken late payment of TDS very seriously and in addition to imposing Interest and Penalty for Late Payment, they also start initiating Criminal Prosecution against those responsible for Deduction and Payment of TDS....

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Posted Under: Income Tax | ,

TDS U/s. 194C is not applicable to transactions of purchase of goods

Eshan Minerals Pvt. Ltd Eshan Minerals Pvt. Ltd Vs DCIT (ITAT Pune)

TDS requirement under section 194C is not applicable to transactions of purchase of goods, therefore, no disallowance under section 40(a)(ia) could be made....

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TDS not deductible on Reimbursement of conversion expenses without profit element

ACIT Vs Veera Associates (ITAT Visakhapatnam)

Assessee filed return of income declaring total income of 3,90,370/- on 3.10.2007. The assessment was completed u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as the Act) on 31.12.2009 determining the total income at 6,90,370/-. Subsequently, the case was reopened u/s 147 of the Act by issue of notice u/s 148 of the Act for n...

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TDS on fees paid for marketing service rendered outside India

Onprocess Technology India Pvt. Ltd. Vs DCIT (ITAT Kolkata)

It was submitted by the assessee that the fees were paid for marketing service rendered outside India and hence, did not become chargeable to tax in India requiring tax deduction u/s. 195 of the Act....

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Sec. 195 No TDS deductible if sum is not chargeable to tax

PCIT Vs. Nova Technocast Pvt Ltd (Gujarat High Court)

Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal, Rajkot Bench dated 28th August 2017, raising the following question for our consideration ...

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