tds & section 40(a)(ia) provisions income tax act, 1961 ca. manish shah shah & bhandari...
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TDS & Section 40(a)(ia) provisions
Income Tax Act, 1961
CA. Manish ShahShah & Bhandari
Chartered Accountants
Index
Nature of Payment
Section 192 to 196D
Other Provisions relating to TDS/TCS
Other Amendments
Intimation - Section 200A
Failure to Deduct / Pay- Section 201
CA. Manish Shah
Index
Interest - Section 201(1A)
Penalty – Section 221
Late Fees - Section 234E
Penalty - Section 271H
Provisions of Section 40(a)(ia)
Section 40(a)(ia)-Issues & Amendments
CA. Manish Shah
Nature of Payment
SectionSection Nature of PaymentNature of Payment
192192 SalariesSalaries
193193 Interest on SecuritiesInterest on Securities
194194 DividendDividend
194A194A Interest other than Interest on Securities Interest other than Interest on Securities
194B194B Lottery / Crossword PuzzleLottery / Crossword Puzzle
194BB194BB Winning From Horse RaceWinning From Horse Race
194C(1)194C(1) Payments to Contractors etc.Payments to Contractors etc.
194D194D Insurance CommissionInsurance Commission
194E194E Payments to Non Resident Sportsmen etc.Payments to Non Resident Sportsmen etc.
194EE194EE Payment from NSS etc.Payment from NSS etc.CA. Manish Shah
SectionSection Nature of PaymentNature of Payment
194F194F Payment from UnitsPayment from Units
194G194G Commission on Lottery Commission on Lottery
194H194H Commission or BrokerageCommission or Brokerage
194I194I RentRent
194J194J Fees for Professional or Technical ServiceFees for Professional or Technical Service
194LA194LA Payment of CompensationPayment of Compensation
194LB 194LB Interest on Infrastructure Debt FundInterest on Infrastructure Debt Fund
194LC194LC Payment of Interest on Infrastructure BondPayment of Interest on Infrastructure Bond
195195 Payments to NRIPayments to NRI
CA. Manish Shah
Contd…
SectionSection Nature of PaymentNature of Payment
196B196B Income from UnitsIncome from Units
196C 196C Income from Foreign Currency Bond/ShareIncome from Foreign Currency Bond/Share
196D196D Income of FII from SecuritiesIncome of FII from Securities
Contd…
CA. Manish Shah
CA. Manish Shah
Salary [Sec.192]
Nature of Payment :Salary to Any PersonExemption Limit :
•` 5,00,000/- Senior Citizen (80+)•` 2,50,000/- Senior Citizen (60-80 Years)•` 2,00,000/ - Any Other Employee
Deduction U/s 16, 80C, 80CCC, 80CCD, 80CCE, 80D, 80DD, 80E, 80G,80GG & Loss under head “House Property”.
CA. Manish Shah
Contd…
Employer is having option not to deduct tax on non-monetary perquisites provided to employee and instead pay tax himself.
Rate of Deduction :As applicable to Individual - Sch-1, Part III of Finance Act,2012 and E. Cess @ 2%, SHE Cess@ 1%.
Contd…
Tips recd. by employer and paid to employees is salary income liable for TDS
• ITC Ltd. 338 ITR 598
Unequal deduction of Tax. No interest U/s 201(1A).
• Enron Expat Services 327 ITR 626
CA. Manish Shah
CA. Manish Shah
Interest on Securities [Sec.193 ]
Rate of Deduction :
a. Companies : 10%
b. Firms, Co-op. Society : 10%
c. Individual/HUF/AOP/BOI : 10% No threshold limit for non deduction
except specified cases
CA. Manish Shah
Contd…
No Tax to be Deducted : Up to ` 2,500/- on Debentures of widely
held Co. to Individual. (` 5,000/- Wef 01/07/2012 also for HUF, provided payment by A/c Payee Cheque)
Up to ` 10,000/- on 8% RBI Taxable Bonds
CA. Manish Shah
Contd…
Any Security of State/ Central Govt.
Interest Payable to LIC, GIC & other Insurer.
Listed Securities by Cos.
CA. Manish Shah
Dividends [Sec.194]
Rate of Deduction : 10%
Exemption Limit : ` 2500/-
No TDS on 115-O Dividend
CA. Manish Shah
Interest other than Interest on Securities [Sec.194A ]
Rate of Deduction : Companies, Firms : 10% Individual/HUF/AOP/BOI : 10%
CA. Manish Shah
Contd…
No Tax to be Deducted: Up to ` 10,000/- when payer is a Banking
Co., Co-Op. Soc. (Banking Business), Post Office under notified scheme, Senior Citizen Scheme.
Up to ` 5,000/- in any other case. Listed Securities. Limit qua Branch in Case of Bank & Housing
Finance Cos.
CA. Manish Shah
Contd…
Paid by a firm to its Partners. Paid by Co-op. Society to its Members, Other
Co-op. Society. Paid by Central Govt. under provisions of
Direct Taxes. Paid to Banking Cos., Financial Corp, LIC etc. Interest on compensation awarded under Motor
Vehicles Act up to ` 50,000/-. Zero Coupon Bonds by Infra. Co./Fund. Certain Individual & HUF.
EMI Loan from Finance Co. • SRL Ranbaxy Ltd. 143 TTJ 265
In case of Motor Vehicle Compensation – Limit Qua Claimant
• National Insurance 238 CTR 201
In case of Motor Vehicle Compensation – Limit per year to be considered
• United India Insurance 56 TDR 407
CA. Manish Shah
Contd…
Contd…
Interest given as damages – S. 194A not applicable
• HP Housing Board 340 ITR 388
CA. Manish Shah
CA. Manish Shah
Winnings of Lottery/Crossword Puzzles [ Sec.194B]
Includes winnings from – lotteries/ crossword/ puzzles/ card games/ or any other game.
Exemption Limit – ` 10,000/- In case of Cash prize & prize in kind – Tax to
be deducted with reference to aggregate prize. No TDS– in case of bonus or commission
paid to agents or sellers of lottery tickets
CA. Manish Shah
Contd...
Rate of Deduction :Domestic Cos./Firms/Co-op. Soc. : 30%Non Domestic Cos. : 40%
Individual/HUF/AOP/BOI : 30%
Lower Deduction U/s 197 - Not Permissible
CA. Manish Shah
Winnings from Horse Races [ Sec. 194BB ]
Exemption Limit : ` 5,000/-
Obligation to deduct TDS applies only where such winnings are paid to a bookmaker or person to whom license has been granted by Govt. under any law for time being in force.
CA. Manish Shah
Contd..
Rate of Deduction :Domestic Cos./Firms/Co-op. Soc. : 30%Non Domestic Cos. : 40%
Individual/HUF/AOP/BOI : 30%
Lower Deduction U/s 197 - Not Permissible
CA. Manish Shah
Payment to Contractors [Sec.194C ]
Contractor includes sub-contractor carrying out any Work (including supply of Labour with or without Materials) & Work includes:
Advertising, Broadcasting & Telecasting incl. production of programmes.
Carriage of goods & passengers by mode of transport other than by railway
CateringManufacturing or Supply of Product by using
material purchased from customer
CA. Manish Shah
Contd...
Contractee includes• Town Development Authority• Specified Individual & HUF
Now no bifurcation between payment to Contractor/ Sub Contractor
Not applicable to Manufacturing Contract:• No TDS on value of material if stated in
invoice
CA. Manish Shah
Contd…
Exemption/Limit :` 30,000/- per credit/payment & ` 75,000/-
in aggregate.Payment to Contractor by Individual & HUF
for personal purpose.Payment to Transporter in case of PAN.
Reimbursement of Actual Expenses- Liable to TDS : (Ref. Circular No.715 dtd.08.08.95).
CA. Manish Shah
Contd..
Rate of Deduction : Contractor:
a. Individual, HUF : 1 % b. Others : 2 % Transport Contractor:
a. If PAN is Quoted : Nil b. If no PAN is Quoted : 20%
References:
CA. Manish Shah
Circular No. Circular Date
86 29/05/1972
93 26/09/1972
558 28/05/1990
681 08/03/1994
714 03/08/1995
715 08/08/1995
723 19/09/1995
13 31/03/2006
Contd..
CA. Manish Shah
ACC Ltd. 201 ITR 435 SC
Hindustan Coca Cola Beverage 293 ITR 226 SC & Circular No. 275/201/95-IT(b) dated 29/01/1997]
Birla Cement Works Ltd. 248 ITR 216 SC
Contract of work vis-à-vis Contract for Sale:• If dominant object is to transfer goods, it
would be contract of sale.• If dominant object is to carry out work, it
would be contract of work • E.g.: • 1.Office Renovation - Contract of work• 2.Uniform of Employees- Contract of
Sale
Contd..
CA. Manish Shah
Transport Contract:The exemption is very wide and it covers that any payment made to contract during course of business of plying, hiring , leasing of good carriage [goods carriage as per Explanation to S. 44AE(7)]
Contd..
CA. Manish Shah
Payment to Couriers -194C Payment to Restaurant, FD Agent – Not 194C Payment to Recruitment Agency – 194 J not
194C
(Ref. Circular No.715 dated 8/8/95) Supply of Printed Material (Ref. Circular No.715 dated 8/8/95- But refer decisions)
Contd..
CA. Manish Shah
Hiring of vehicle for Transportation of employees - S. 194C applicable.
• Accenture Services P. Ltd. 44 SOT 290
Act of commission agent or broker would be outside the purview of S. 194C
• SRF Finance Ltd. 211 ITR 861
Franchise agreement- Sharing of profit. • Career Launcher 139 TTJ 48
Contd..
CA. Manish Shah
Various Services provided by hotel does not involve ‘carrying out any work’- outside the purview of S. 194C
• East India Hotels 320 ITR 526
In case of cable operator, it is not broadcasting but it is telecasting.- S. 194C is applicable.
• Kurukshetra Darpans Pvt. Ltd. 169 Taxman 344
Contd..
CA. Manish Shah
If property passes to customer on delivery & material is not purchased from customer. Sec. 194C not applicable
• Glenmark Pharmaceuticals Ltd. 324 ITR 199
Labour payment through representative. Payment not exceeding ` 20,000/-. No TDS
• Lakshmi Protein 3 ITR (Trib.) 768
Contd..
CA. Manish Shah
Supply of corrugated boxes with labels• Dabur India Ltd. 283 ITR 197
Sale of Packing material. • Seagram Mfg. Pvt. Ltd. 221 CTR 509• Mother Dairy 40 SOT 9
Manufacturing agreements • Reebok India 306 ITR 124
Contd..
CA. Manish Shah
Contd…
Purchase of printed material• Markfed 304 ITR 17
Transportation of material, hiring of dumper- S. 194C applicable. Not S. 194I
• Shree Mahalakshmi Transport Co. 339 ITR 484 • Swayam Shipping Services P. Ltd. 339 ITR 647
Car hiring falls u/s 194C. Not S. 194I• AUDA 13 ITR 73 (Trib).
CA. Manish Shah
Combined transportation contract using truck of firm & partners. Payment by firm to partners.-S. 194C not applicable.
• Grewal Bros. 240 CTR 325
With sale of material, transport charges separately collected. – S. 194C Not applicable.
• Chand Hing Tannery 42 BCAJ March P. 32
Contd..
CA. Manish Shah
Contd…
Transporter- Accounts not auditable U/s 44AB – Payment made to him not liable U/s 194C
• Dhirubhai Dajibhai Patel 133 TTJ 1
Making of diaries and catalogues from own materials. S. 194C not applicable.
• Eastern Medikit 135 ITD 461
CA. Manish Shah
CA. Manish Shah
Insurance Commission [ Sec.194D ]
Tax to be deducted on payment whether by way of commission or otherwise for procuring Insurance Business including business relating :a. continuanceb. renewal or revival of policies.
Exemption Limit - ` 20,000/- p.a.
CA. Manish Shah
Contd…
Rate of deduction:
For Companies : 10%For Firms, Co-op Soc. : 10%For Individuals/HUF/AOP/BOI : 10%
CA. Manish Shah
Non- Resident Sportsmen or Association [ Se.194E ]
Tax to be deducted on payment to a non-resident foreign citizen sportsman (including athlete) & entertainer (Wef 01/07/2012) or non-resident sports association
No threshold limit. Rate of Deduction : 10% (Wef 01/07/2012 -
20%) Lower Deduction U/s 197 - Not Permissible
Contd…
Payment to Referee, Umpires is not a payment to sportsman
• Indicom 335 ITR 485
CA. Manish Shah
CA. Manish Shah
National Savings Scheme [Sec.194EE ]
Tax to be deducted on payment referred to in Sec.80CCA(2)(a)
Exemption Limit: ` 2500/- No tax to be deducted if payment made to
the heirs of the deceased assessee i.e.. original depositor
Rate of Deduction : 20% Lower Deduction U/s 197 - Not
Permissible
CA. Manish Shah
Repurchase of Units [Sec. 194F]
Tax to be deducted on payment referred to in Sec.80CCB(2)
No threshold limit.Rate of Deduction :
Resident – 20%
Non Resident – 20%Lower Deduction U/s 197 - Not Permissible
CA. Manish Shah
Commission on Sale of Lottery Ticket [Sec.194G]
Payment for commission, remuneration or prize on lottery ticket.
Exemption Limit: ` 1,000/-
Rate of Deduction : 10%
Contd…
Purchase of lottery ticket at a discount. Sec. 194G not applicable
• M. S. Hameed 249 ITR 186
CA. Manish Shah
CA. Manish Shah
Commission or Brokerage [ Sec. 194H ]
Commission or Brokerage includes income earned for services rendered in course of buying/selling of goods or assets, valuable article or thing, not being securities.
Commission or Brokerage does not include any income earned while rendering professional services, insurance service.
Exemption Limit - ` 5,000/- p.a.
CA. Manish Shah
Contd…
No deduction for commission or brokerage payable by BSNL & MTNL to their PCO franchises .(Instruction No. 3/2009)
Rate of deduction:
a.Co, Firms, Co-op Soc. : 10%
b.Individual/HUF/AOP/BOI : 10%
Contd…
Airline agent- Difference between ticket price is not Brokerage/ Commission.
• Qatar Airways 332 ITR 253 • ITL Tours & Travels 44 SOT 277
Sim card- prepaid/ recharge coupon - Commission - S. 194H applicable.
• Bharti Cellular 244 CTR 185• Vodafone Essar 141 TTJ 461
CA. Manish Shah
Roaming charges paid by mobile Co. to another mobile Co. - Not commission. S. 194H not applicable.
• Vodafone Essar 9 ITR 182 (Trib).
Incentive and discount to distributor – S. 194H not applicable.
• Jai Drinks 242 CTR 505
Contd…
CA. Manish Shah
Contd…
Commission to Stamp Vendors – Discount on sales. Sec. 194H not applicable.
• Ahmedabad Stamp Vendor Asso. 257 ITR 202
Agreement between DD and Advt. agent – Sec. 194H applicable.
• Prasad Bharati Doordarshan 189 Taxman 315
CA. Manish Shah
Contd…
Medical Collection Centre-Not Commission - S. 194H not applicable.
• SRL Ranbaxy Ltd. 143 TTJ 265.In this case, it was observed that hospital was not making payment to collection center but collection centers were making payment after deducting their margin.
Bank guarantee commission – S. 194H not applicable.
• Kotak Securities Ltd. 50 SOT 158CA. Manish Shah
CA. Manish Shah
Rent [ Sec. 194I ]
Rent includes: Payment made under lease/sub-lease/ tenancy
or any other agreement/ arrangement for use separately or together of :
• Land, Building (incl. Factory building) land appurtenant thereto with Furniture & Fittings,
• Plant & Machinery, Equipment All or Any assets may not be owned by Payee.
CA. Manish Shah
Contd…
Exemption/limit• If payment does not exceed ` 1,80,000/- p.a. • No TDS on Municipal Taxes, Ground Rent
Rate of deduction: Plant, Machinery, Equipment : 2% Land, Building, Furniture : 10%
CA. Manish Shah
Contd…
Limit is per owner in case of joint owners with definite shares.
Applicable, if Hotel accommodation is taken on regular basis. (Ref. Circular No. 715)
On Interest bearing Deposits – Sec.194 A is applicable. (Ref. Circular No. 715)
Film exhibition – Not Rent (Ref. Circular No. 736) Cold Storage Charges- S. 194C is applicable. Not
Sec. 194I (Ref. Circular No. 1/2008) Rent doesn't include Service Tax -‘Rent Income’ (Ref. Circular No. 4/2008)
Contd…
Payment to Electricity Board-Transmission of electricity & not for use of wires etc. S. 194I not applicable
• Chhatisgarh State Electricity Board 143 TTJ 151
CA. Manish Shah
CA. Manish Shah
Fees for Professional or Technical Services [ Sec. 194J ]
Fees for Professional Services: Legal/ Medical/ Engineering/ Architectural/Accountancy/ Technical/ Interior Decoration/Advertising (i.e.. Models, Artists, Photographers etc.) & any notified profession
Fees for Technical Services - Sec.9(1)(vii)–Expl-2 Remuneration, Fees, Commission to Directors
(other than S.192 Wef 01/07/2012) Royalty - Sec.9(1)(vi)–Expl-2 Non Compete Fees
CA. Manish Shah
Contd…
Exemption Limit : ` 30,000/- (except payment to Director)
Rate of Deduction – 10%
No T.D.S on payment of professional fees for personal purposes by Individual & H.U.F.
TDS to be deducted under one section only i.e.. 194C /194J.
CA. Manish Shah
Contd…
Payments made to :• Hospital for medical service, • Share Registrar, • Commission of Advertisement Agency• Event Manager, Anchors • Sportspersons, Umpires, Coaches, Trainers,
Commentators, Columnists, Physiotherapists, etc.
CA. Manish Shah
Contd…
Reimbursement of Actual Expenses & Service Tax to be included- as 'Any Sum Paid’: (Ref. Circular No.715 & Letter No. F275/73/2007)
No TDS on acquisition of software, where software is acquired in subsequent transfer without modification & tax has been deducted U/194 J or U/s 195 for any previous transfer & certificate is obtained from transferor with PAN (Ref. Notification 21/02012 dated 13/06/2012)
Contd…
Transaction Charges of Stock Exchange- Fees for technical services. S. 194J
applicable. • Kotak Securities Ltd. 340 ITR 333
In this case, the court observed that since no claim was made by department in earlier year, no liability arises.
CA. Manish Shah
Contd…
Lease line charges- not fees for technical services. S. 194J not applicable.
• Omniscint Securities 15 ITR (Trib.) 82• Angel Broking 3 ITR (Trib.) 294
Payment by TPA to hospitals. S.194J applicable.• Dedicated Healthcare Services 324 ITR 345
(Circular No. 8/2009)
• Vipul Medcorp 202 Taxman 463
CA. Manish Shah
CA. Manish Shah
Compensation for Compulsory Acquisition Property [Sec.194LA]
Payment made as Compensation, enhanced compensation, consideration, enhanced consideration on account of compulsory acquisition of any immovable property.
Immovable property does not include Agricultural Land [as per Section 2 (14)].
Contd…
Exemption Limit : ` 1,00,000/-
(Wef 01/07/2012 - ` 2,00,000/-)
Rate of Deduction : 10%
No need to prove that land is used for agriculture-
• Special Land Acquisition Officer 46 SOT 458
CA. Manish Shah
CA. Manish Shah
Interest by Infra. Debt Fund [Sec.194LB]
Interest to Non Resident & Foreign Co. by Infrastructure Debt Fund as per Section 10(47)
Rate of Deduction : 5%
No threshold Limit
CA. Manish Shah
Interest from Indian Cos. [Sec.194LC]
Interest payable to Non Resident & Foreign Co. by Indian Co. for money borrowed 01/07/2012 - 01/07/2015 in foreign currency under loan agreement or Long Term Infra. Bonds
Rate of Deduction : 5%
No threshold Limit
CA. Manish Shah
Payment to Non-Residents [Sec.195]
Applicable to Interest and any other payment other than Salary to Non Resident & Foreign Co.
Rate of Deduction : As per D.T.A.A or As per Sch.1, Part II of Finance Act, 2007Whichever is beneficial to the assessee However in case of No PAN @ 20%
Contd…
For Lower or Nil TDS - Payee to apply in F.13/15C/15D to A.O. for Certificate in F.15E
Payer may also apply to A.O. to determine income in payment for lower TDS
CA. Manish Shah
CA. Manish Shah
Income from Units [196B]
Applicable to Long Term Capital Gain of Offshore Fund.
Units referred to Section 115AB
Rate of Deduction – 10%
CA. Manish Shah
Income from FC Bonds [196C]
Applicable to Foreign Currency Bonds & GDR of Indian Companies.
Bonds & GDR referred to Section 115AC
Rate of Deduction – 10%
CA. Manish Shah
Income of FII [196 D]
Applicable to Income of FII from Securities not being Dividend, LT & ST Gain.
Securities referred in Section 115AD
Rate of Deduction– 20%
TDS @ 20 % if the deductee does not provide PAN to deductor.
No Surcharge No Cess to be deducted /collected in case of all assessee other than NR & Non Domestic Cos. on all income other than salary.
Non Domestic Company surcharge @ 2.5% if income or the
aggregate of such income paid or likely to be paid exceeds ` 1 Crore.
Education Cess @ 2% + SHE Cess @ 1% is deductible at source
in case of Non-Residents and Foreign Cos.
TDS Provisions u/s. 194A, 194C, 194H, 194I & 194J are applicable to Individuals & HUF’s only if they were liable to tax audit in the immediately preceding A.Y
General Points:
CA. Manish Shah
CA. Manish Shah
TDS & TCS Returns
Payment to Resident:
Salary Form 24 Q 15th July, 15th Oct., 15th Jan., 15th May
Other Payments
Form 26 Q 15th July, 15th Oct., 15th Jan., 15th May
TCS Form 27EQ 15th July, 15th Oct., 15th Jan., 15th May
CA. Manish Shah
Contd…
Payment to Non Resident:
All Sections Form 27 Q 15th July, 15th Oct., 15th Jan., 15th May
CA. Manish Shah
TDS, TCS Certificates
Time limit for TDS / TCS Certificates:
Form 16 31st May
Form 16A 30th July, 30th Oct., 30th Jan., 31st May
Form 27D 30th July, 30th Oct., 30th Jan., 31st May
CA. Manish Shah
Time Limit for Payment
Deduction of TDS :• Salaries : At the time of Payment• Other Payment : Paid or credited, whichever is earlier Payment Of TDS :• Salaries : Within 1 week from the last day of the month.• Other Payments (except 194B/194BB/194EE/194F):
a. If amount is credited to a/c of the payee in March – By 30th April b. In any other case – within 7 days of end of month in which
deduction is made.
CA. Manish Shah
Procedure for Nil/Lower TDS
Interest & Withdrawal from NSS : Individuals other than a Co. or Firm to file F.15H (Senior Citizens) / F.15G-Others
Application U/s. 197/206 C in F.13 to TDS ITO & obtain Certificate. Now these certificates are issued online through ITD System.
CA. Manish Shah
Other Amendments
From 01/09/2011, Bank can correct PAN, Year, Section, Type of Payment if requested within 7 days of payment.
New rule for refund of excess TDS.
Wef 01/04/2012 now amount of expenditure on which no TDS has been deducted is to be given.
CA. Manish Shah
Contd…
Wef 01/04/2012, all deductors to issue Form 16A through TIN System with manual or digital sign.
In Form 15G, 15H and all lower TDS application, quoting PAN is must.
Form 15H - Age limit for filing it has been reduced to 60 years.
CA. Manish Shah
Contd…
TCS @ 1% on : Wef 01/07/2012• Minerals being Coal, Lignite & Iron ore• Cash Sale of : Bullions (other than coin or article less than 10 gms) >` 2 Lacs Jewellery > ` 5
Lacs
Intimation [200A]
Intimation of demand /refund shall be send to Assessee
TDS return shall be processed & after making adjustments of arithmetical error & incorrect apparent claim,
Interest, if any, shall be computed & demand if any or refund due shall be determined after adjusting TDS due & interest payable U/s 201.
Intimation shall be sent within 1 year from end of F.Y in which TDS return has been filed.
CA. Manish Shah
Contd…
Deductor needs to verify the defectsPay demand or file revised return if
needed.Intimate AO of filing revised return or
File an appealThis intimation is now subject to
rectification / appeal also Wef 01/07/2012 & it will be deemed to be notice U/s 156.
CA. Manish Shah
Reasons for Defects
Short Deduction:1. Wrong rate of TDS2. Rounding off to lower rupee3. PAN not matching4. Not mentioning lower rate & wrong payment5. Wrong deductee code6. Wrong Section7. Wrong gender of employee8. Wrong exemption information
CA. Manish Shah
Contd…
TDS not paid:1. Actually not paid
2. Wrong challan information
3. Splitting & merging of challan
4. Wrong minor code of challan
CA. Manish Shah
Interest on late payment:1. No interest paid on delay
2. Less interest paid
3. Wrong CIN for interest
4. Cheque realized after due date
5. Challan due date is holiday
Contd…
CA. Manish Shah
Failure to Deduct or Pay [Sec. 201]
If any person does not deduct or doesn’t pay or after so deducting fails to pay whole or part of the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of such tax (subject to amendment made Wef 01/07/2012).
Such person shall also be liable to pay interest U/s 201(1A) & Penalty U/s 221.
CA. Manish Shah
Interest U/s 201(1A) shall be paid before filing TDS returns.
No penalty shall be charged U/s 221 unless the Assessing Officer is satisfied that such person has without good and sufficient reasons failed to deduct and pay the tax.
Where tax has not been paid after deduction, the tax + interest shall be charged on all the assets of the assessee.
CA. Manish Shah
Contd…
CA. Manish Shah
Interest [Sec. 201(1A)]
Where the assessee after deducting TDS fails to pay the tax as required by or under this Act
Liable to simple interest @ 18% p.a [i.e. 1.5% p.m.] from the date on which the tax was deducted till the date on which the payment is actually made.
Where the assessee fails to deduct TDS and make the payment as required by or under this Act
Liable to simple interest @ 12% p.a [i.e. 1% p.m.] from the date on which the tax was deductible till the date on which the TDS deducted.
No Order U/s 201 can be made for failure to deduct: • After 2 Years from end of the F.Y in which TDS
return is filed.• After 4 Years from end of the F.Y in which
payment is made or credit is given. This time limit is increased to 6 Years Wef 01/07/2012
Wef 01/07/2012, no interest U/s 220(2) shall be charged if interest is charged U/s 201(1A) on tax payable in the intimation U/s 200A(1) of the Act on the same amount for same period- Section 220(2B)
CA. Manish Shah
Contd…
Amendment to Section 201
Wef 01/07/2012, failure to deduct tax whole or part, the assessee shall not be deemed to be in default provided:
1. Payee has furnished his ROI U/s 139(1) [includes Sec. 139(4) also]
2. Payee has considered such amount in the computing the income in ROI
CA. Manish Shah
3. Has paid tax due on returned income
4. Furnishes certificate to that effect by a CA in the prescribed form.
However, in all such cases, interest @ 1% would be payable from the date on which TDS was deductible till the date on which ROI is furnished by the payee.
Contd…
CA. Manish Shah
Issues:• Year of income • Non filing of return due loss or below
taxable income.• No tax payable on return income• Still penalty chargeable U/s 221 • Insertion of word “further” why?
Contd…
CA. Manish Shah
Contd…
When can assessee be treated as “assessee in default”?
• There must be a reasoned/speaking order passed U/s 201(1)
• Letter/intimation is not an order.• Sec. 246(1)(ha) indicates that the statute contemplates a
written order so that person can file appeal. • Refer :
AM Agencies 239 ITR 136Mettur Chemicals 150 ITR 341
CA. Manish Shah
Penalty U/s 221
When an assessee is in default or deemed to be in default in making payment.
Liable to Maximum penalty @100% of Tax + Arrear of tax + Interest U/s 220 (2) payable
No Penalty if A.O. is satisfied No amendment in this Section in spite of
amendment in Sec. 201 and Sec. 220.
CA. Manish Shah
Levy of Fess [234E ]
Section 234 E Applicable to Returns due after 01/07/2012Non filing & Late filing of TDS, TCS
Returns ` 200/- per day – maximum to the extent
of TDS/TCSTo be paid with returns. Penalty U/s 272A of ` 100/- per day
removed.
CA. Manish Shah
Penalty [271H]
Non Filing or Late of TDS & TCS Returns Incorrect Information in ReturnsApplicable to Returns due after 01/07/2012No penalty if Tax, Interest, Late Fees paid &
returns filed before 1 year from due date. Penalty : Minimum- `10,000/- Maximum- `1,00,000/-
CA. Manish Shah
CA. Manish Shah
PENALTIES - PROSECUTION
Sec.271C/271CA : Tax Failed to be deducted/collected/pay = Amount failed to be deducted/collected/paid.
Sec.272B, BB: Failure to quote/apply for PAN/ – ` 10,000/-
Sec.272A(2) : Failure to Furnish F.15H/15G/16/16A/27D/24Q/26Q/27Q/27EQ – ` 100/- per day or Amount of TDS/TCS whichever is lower (except cases of Sec. 234E Wef 01/07/2012)
Sec. 276B - TDS / 276BB – TCSProsecution from 3 Months to 7 Years and Fine
Penalty Decisions
If no malafide intention- not leviable.• Cadbury India 55 DTR 318
In this case Hon’ble Supreme Court decision in case on Anwar Ali 76 ITR 696 as well as decision of Delhi High Court in case of Woodvard Govemor 253 ITR 745 were followed.
CA. Manish Shah
Section 40(a)(ia)
Introduced wef 01/04/2005 Applicable to computation of “Profits and
Gains of business or profession”. Expenditure covered: • Interest• Commission or Brokerage,• Rent• Royalty• Fees for Professional & Technical Services • Contract incl. Sub Contract payment for Any
WorkCA. Manish Shah
Contd…
Such expenditure will not be allowable if the tax is deductible under Chapter XVII-B and such tax has not been deducted or after deduction not paid before due date as per Sec. 139(1) of the Act.
If tax is deduced in subsequent year or deducted in earlier year but after Sec. 139(1) limit, expenditure will allowed in that year.
CA. Manish Shah
Contd…
The provision of not disallowing the expenditure if TDS is paid before due date U/s 139(1) has been introduced wef 01/04/2010 by Finance Act 2010.
CA. Manish Shah
Issues:
Whether the amendment made in Sec. 40(a)(ia) by Finance Act, 2010 is retrospective or not?
• Virgin Creations (Calcutta High Court- ITA No. 302/2011 dated 23-11-2011)
This decision is followed by ITAT Ahmedabad in case of Alpha Projects Society Pvt. Ltd. ITA No. 2869/Ahd/2011
• Hon’ble Supreme Courts decisions in case Allied Motors (224 ITR 677), Alom Extrusion (319 ITR 306) RB Jodha Mal (82 ITR570) Followed.
• Decision of the Mumbai Special Bench in Bharti Shipyard Ltd. 132 ITD 53 (SB) Overruled by Virgin Creations
CA. Manish Shah
Contd…
• Kanubhai Ramjibhai Makwana 44 SOT 264• Piyush C Mehta 20 Taxmann.com 473• Bansal Parivahan 43 SOT 611• Sanjaykumar Pradhan 14 ITR 150 (Trib) • Kulwantsingh 10 Taxmann.com 25• Raja Mahendri Shipping 51 SOT 242
CA. Manish Shah
If the payee has paid tax -• DICGC Ltd. 14 ITR (Trib.) 194 (Against)• Skycell Communications 251 ITR 53 • Kotak Securities Ltd. 340 ITR 333 – Non Taxing
Provision.• Reliance Hindustan Coca cola Beverage 293 ITR 226
SC Circular No. 275/201/95-IT(b) dated 29/01/1997
Short Deduction of TDS -• S.K. Tekriwal 48 SOT 515 • Chandabhoy Jassobhoy 49 SOT 448• Beekaylon Synthetics ITA No. 6506/Mum./2008
Contd…
CA. Manish Shah
TDS default –• Bapusaheb Nanasaheb Dhumal 132 TTJ 694• M. G. Vishwanath Reddy 51 SOT 420• H S Mahindra Traders 132 TTJ 701
Joint Ventures – No Sub Contract – Only money routed through –
• Rishikesh Buildcon 206Taxman 567
Contd…
CA. Manish Shah
Section 40(a)(ia) has been introduced wef 01/04/2005 that Finance Act was brought in force in October, any payment before the same would not be disallowed.
• Golden Stables Lifestyle Center ITA No.5145/Mum/2009
• Shri Jivrajbhai Devjibhai Patel ITA No. 2479/Ahd/2008
Assessee has paid excess tax – hence did not deduct TDS U/s 194C – Not Permissible.
• SCC Pati Joint Venture 46 SOT 263
Contd…
CA. Manish Shah
If interest paid is as part of purchase price, then no TDS U/s 194A – Section 40(a)(ia) doesn’t apply
• Parag Mansukhlal Shah 46 SOT 302 Ahd.
Retrospective Amendment – impossibility for assessee to deduct tax –
• Sterling Abrasive Ltd. 40 TTJ 68 Ahd.
Contd…
CA. Manish Shah
Late submission of Form 15G – submitted during course of assessment –
• Shyamsundar Kailashchand 141 ITD 126
Cost Sharing with group concerns• Emerson Process Management 47 SOT 157
Interest paid as part of Debt – No TDS• Akber Abdul Ali- 43B BCAJ 25 (March-12)
Contd…
CA. Manish Shah
Commission to Non Resident agents for services outside India -
• Devi’s Laboratory Ltd. 140 TTJ 746 • Eon Technology Pvt. Ltd. 246 CTR 40
Cash payment of labour expense – Sec. 194 C & Sec. 40(a)(ia) - Applicable
• Nalawade C. Maruti 48 SOT 566
Section 40a(ia) – Not ultra vires • Rakesh Kumar & Co. 325 ITR 35
Contd…
CA. Manish Shah
Controversy between - Sec. 194C & 194J• Nalawade C. Maruti 48 SOT 566 • Sanjaykumar 143 TTJ 415
Reimbursement of expenses of C & F Agents like sea freight, CCI charges, steam freight charges, container charges, etc.-
• Minpro Industries 143 TTJ 331 • Karnavati Co-op Bank Ltd 134 ITD 486
Charged separately• Choice Sanitary Ware 9 Taxmann.com 120 (Raj)
Contd…
CA. Manish Shah
Brokerage paid on derivatives – Sec. 194H not applicable –
• Noble Enclave & Towers Pvt. Ltd. 50 SOT 5
Commission to Directors –• Jhangir Biri 126 TTJ 567
Freight Charges-Truck hired for own use - Sec. 194C not applicable -
• Kranti Road Transport Pvt. Ltd. 50 SOT 15
Contd…
CA. Manish Shah
S. 40(a)(ia) would apply only to expenditure that remain payable at the end of relevant F.Y and cannot be invoked to disallow amounts which have already been paid without TDS
• Merilyne Shipping & Transports 136 ITD 23 (Vishakhapatnam Sp. Bench)
• K. Srinivas Naidu 131 TTJ 17• Teja Construction 129 TTJ 57 • Ashika Stock Broking 139 TTJ 192
Contd…
CA. Manish Shah
Contd…
Failure to deduct tax on reimbursement of expenses- Sec. 40(a)(ia) is invoked only when some expense is claimed as deduction & reimbursement of expense is profit neutral, it is not rooted through P & L A/c, it is not an expense and does not attract S. 40(a)(ia) -
• Sharma Kajaria & Co. 145 TTJ 1
Failure to Disallow U/s 40a(ia) – Section 263• Raja & Co. 335 ITR 381
CA. Manish Shah
In case of Joint Venture formed mainly to get a contract - work is being done by each party separately - no relation of contract & sub- Contract. Hence, no TDS
• ITO v. UAN Raju Constructions 48 SOT 178
Charitable Trust – Income computed U/s 11
• Mahatma Gandhi Seva Mandir 21 Taxmann.com 321
Contd…
CA. Manish Shah
Contd…
Contract for supply of goods and along with the supply of goods, there are services like supply of gas by GAIL. Payment is made for gas as well as transportation. Not liable for TDS –
• Krishak Bharati Co-op Ltd. 10 ITR 527 (Trib.)
Brokerage Paid on sale of Property – No Business – No TDS
• Mrs. Sushila Mallick 142 TTJ 372
CA. Manish Shah
Payments made on account of capital Expenditure. Sec. 40(a)(ia) applicable. No distinction between capital and revenue expenditure -
• Spaco Carburettors (I) Ltd. 3 SOT 798
In case of assessment U/s 145 (3) • Teja Construction 129 TTJ 57
Expenses other than Section 30 to 38• Teja Construction 129 TTJ 57
Contd…
CA. Manish Shah
Amendment to Section 40a(ia)
2nd Provision inserted Wef 01/04/2013 It provides that if the assessee is “not deemed
to be assessee” in default as per 1st Proviso to Section 201(1) for non deduction of TDS, it shall be deemed that the assessee has deducted & paid tax on the date of filing return & no disallowance shall be made.
Retrospective Effect?
CA. Manish Shah
CA. Manish Shah
Questions?
Shah & Bhandari Chartered Accountants
CA. Manish Shah
Thank You