section 40(a)(ia)

Form 26A – Why, What and How

Income Tax - The section 201(1) of Income Tax Act, 1961 talks about when assesse is not treated as assesse in default. That is, when he had complied certain conditions and furnished the Form 26A. Let’s see what this form is and how it is furnished. Legal Aspects – Analysis of Section 201(1) read with its proviso and […]...

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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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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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No TDS on discount/commission on sale of prepaid sim cards & Roaming Charges

Vodafone Idea Ltd. Vs ITO (ITAT Delhi) - Vodafone Idea Ltd. Vs ITO (ITAT Delhi) At the outset, we find merit in the contention of the Ld. Counsel of the Assessee that in the absence of any adverse judgment by the Hon’ble Jurisdictional High Court, i.e., the Hon’ble High Court of Punjab & Haryana, there being divergence of judicial ...

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ITAT Judgment on TDS on surrogacy payments

Kiran Infertility Central Private Limited Vs ITO (ITAT Hyderabad) - We first of all advert to the impugned Section 40(a)(ia) r.w.s.194C and 194J issue of surrogacy payments in case of Shri S.Sesha Sai since the other recipient has never appeared to support the impugned claims till date. The CIT(A)’s identical lower appellate discussion affirming the Assessing Off...

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Section 40(a) not applicable in case of charitable trust or institution

R. K. Associates Vs ITO (ITAT Bangalore) - R. K. Associates Vs ITO (ITAT Bangalore) The question for consideration is as to whether the provisions of Section 40(a)(ia) is applicable for computing the income chargeable under the head “Profits and gains of business or profession” or computation of income under any other heads of income als...

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No tax to be deducted on License Fee paid to Foreign Entities

Celltick Mobile Media (India) Pvt. Ltd Vs DCIT (ITAT Mumbai) - Assessee was not liable to deduct TDS on license fees paid to Israel entity as it had already furnished certificate from a chartered accountant, return of income and computation of income under section 139 and income of assessee was not taxable in India and assessee had already filed the relevant i...

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TDS not deductible on Amounts paid to non-resident manufacturers for resale/use of computer software

Altisource Business Solutions Private Limited Vs ACIT (ITAT Bangalore) - Altisource Business Solutions Private Limited Vs ACIT (ITAT Bangalore) Amounts paid by the assessee to the non-resident computer software manufacturers / suppliers as consideration for the resale / use of computer software, is not payment of royalty for use of copyright in the computer software. Hen...

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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)"

No section 40(a)(ia) disallowance  on cost sharing reimbursements without TDS deduction

DCIT Vs Pfizer Products(India) Pvt Ltd. (ITAT Mumbai)

DCIT Vs Pfizer Products (India) Pvt Ltd. (ITAT Mumbai) In terms of the agreement with M/s. Pfizer Ltd., assessee was sharing services of certain employees and other facilities which belonged to M/s. Pfizer Ltd. The reimbursement of such expenses due or paid to M/s. Pfizer Ltd. amounts to Rs.14,51,77,000/- and has been included under the [...

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No TDS on discount/commission on sale of prepaid sim cards & Roaming Charges

Vodafone Idea Ltd. Vs ITO (ITAT Delhi)

Vodafone Idea Ltd. Vs ITO (ITAT Delhi) At the outset, we find merit in the contention of the Ld. Counsel of the Assessee that in the absence of any adverse judgment by the Hon’ble Jurisdictional High Court, i.e., the Hon’ble High Court of Punjab & Haryana, there being divergence of judicial opinion on the subject […]...

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ITAT Judgment on TDS on surrogacy payments

Kiran Infertility Central Private Limited Vs ITO (ITAT Hyderabad)

We first of all advert to the impugned Section 40(a)(ia) r.w.s.194C and 194J issue of surrogacy payments in case of Shri S.Sesha Sai since the other recipient has never appeared to support the impugned claims till date. The CIT(A)’s identical lower appellate discussion affirming the Assessing Officer’s action disallowing assessee’s...

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Section 40(a) not applicable in case of charitable trust or institution

R. K. Associates Vs ITO (ITAT Bangalore)

R. K. Associates Vs ITO (ITAT Bangalore) The question for consideration is as to whether the provisions of Section 40(a)(ia) is applicable for computing the income chargeable under the head “Profits and gains of business or profession” or computation of income under any other heads of income also. Section 40 clearly stipulates that ...

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No tax to be deducted on License Fee paid to Foreign Entities

Celltick Mobile Media (India) Pvt. Ltd Vs DCIT (ITAT Mumbai)

Assessee was not liable to deduct TDS on license fees paid to Israel entity as it had already furnished certificate from a chartered accountant, return of income and computation of income under section 139 and income of assessee was not taxable in India and assessee had already filed the relevant information u/s 201(1) which showed that ...

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TDS not deductible on Amounts paid to non-resident manufacturers for resale/use of computer software

Altisource Business Solutions Private Limited Vs ACIT (ITAT Bangalore)

Altisource Business Solutions Private Limited Vs ACIT (ITAT Bangalore) Amounts paid by the assessee to the non-resident computer software manufacturers / suppliers as consideration for the resale / use of computer software, is not payment of royalty for use of copyright in the computer software. Hence, the consideration paid to non-reside...

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TDS not deductible on Fee to Offshore CA Firm having no PE in India for return filing services

Sundaram Business Vs Income Tax Officer (ITAT Chennai)

Sundaram Business Services Limited Vs ITO (ITAT Chennai) As regards professional charges paid to M/s. TWB Pty Ltd., a company of Chartered Accounts, although payment made to said company is not covered under Article 14, but said payment is covered under Article 7 of DTAA between India and USA because the business profits of an […]...

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TDS not deductible on Reimbursement without any Profit Element

BYK Asia Pacific Pte. Limited Vs ACIT (ITAT Pune)

BYK Asia Pacific Pte. Limited Vs ACIT (ITAT Pune) On going through the documents/material as discussed above, it is evident that Seminar expenses, Training expenses, Printing expenses and Staff welfare expenses are amounts paid by the Indian BO to the Singapore HO, which satisfy the twin conditions of `reimbursement’ as discussed supra,...

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Form 26A – Why, What and How

The section 201(1) of Income Tax Act, 1961 talks about when assesse is not treated as assesse in default. That is, when he had complied certain conditions and furnished the Form 26A. Let’s see what this form is and how it is furnished. Legal Aspects – Analysis of Section 201(1) read with its proviso and […]...

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Posted Under: Income Tax |

ITAT deletes Section 40(a)(ia) disallowance on provision for expenses

IDBI Bank Ltd. Vs DCIT (ITAT Mumbai)

IDBI Bank Ltd. Vs DCIT (ITAT Mumbai) During the Assessment Year (AY) 2009-10, the taxpayer made provision for expenses under the head ‘repairs and maintenance’ amounting to Rs. 6 million on which tax was not deducted at source. The taxpayer also made provision for ‘operation and maintenance charges’ amounting to Rs.7 million on wh...

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