Practical issues on tds & cpc

Issues and Issues and DevelopmentDevelopments on TDS….s on TDS….

Amendments made by Finance Amendments made by Finance Act,2012Act,2012

For Sec.194 J-Explanation to Section 9(1)(vi)- “Royalty”

• 2With retrospective effect from 01.04.1976.• Explanation 4 introduced to include transfer of

all or any right for use or right to use a computer software.

• Explanation 5 introduced to clarify that royalty included consideration in respect of any right, property or information whether or not the possession or control is with the payer or is used directly by the payer or the location is in India.

• Explanation 6 introduced to clarify that process includes transmission by satellite, cable, optic fiber or by any other similar technology.

06/01/201306/01/2013 Sanghvi Sanghvi & SanghviSanghvi Sanghvi & Sanghvi 22


Section 201 Section 201 : Consequences of failure : Consequences of failure to deduct or pay And to deduct or pay And Section 40(a)Section 40(a)(ia)(ia)

• W.e.f. 01.07.2012 deductor will not be held as an W.e.f. 01.07.2012 deductor will not be held as an assessee in default if:assessee in default if:

i) the payee is a resident,i) the payee is a resident,

ii) payee has furnished his return of Income,ii) payee has furnished his return of Income,

iii)payee has included such sum in computing Income iii)payee has included such sum in computing Income in in his return,his return,

iv)payee has paid the tax due on the Income,iv)payee has paid the tax due on the Income,

v) certificate is obtained by the CA in the prescribed v) certificate is obtained by the CA in the prescribed formform



Section 201(1A): Section 201(1A): Interest payable by the Interest payable by the payer for not deducting taxpayer for not deducting tax

Interest is payable by the deductor (covered Interest is payable by the deductor (covered under first proviso) from the date on which under first proviso) from the date on which such tax was deductible to the date of such tax was deductible to the date of furnishing of return of income by the payee.furnishing of return of income by the payee.



Amendments made by Finance Amendments made by Finance Act,2012 Act,2012

Section 201(3)Time limit for passing an order for holding a

person to be an assessee in default.

No order shall be made after the expiry of:-

a. Two years from the end of the financial year in which the TDS statement is filed.

b. Six years from the end of the financial year in which payment is made or credit is given.


Section 234E Section 234E : Levy of fee in case of delay in filing : Levy of fee in case of delay in filing TDS or TCS statementTDS or TCS statement

• Rs.200 per day but not exceeding amount of TDSRs.200 per day but not exceeding amount of TDS• Before submitting TDS/TCS StatementBefore submitting TDS/TCS Statement• w.e.f. 01.07.2012w.e.f. 01.07.2012 Section 271H Section 271H : Penalty : Penalty for filing incorrect for filing incorrect

particularsparticulars or failure to file TDS or TCS Statement or failure to file TDS or TCS Statement in prescribed timein prescribed time

• Rs. 10,000 to Rs. 1 LacRs. 10,000 to Rs. 1 Lac• No penalty if the deductor proves that tax, fee and No penalty if the deductor proves that tax, fee and

interest is paidinterest is paid• No penalty if delay is not more than one year No penalty if delay is not more than one year


Circular No.01/2012 dt. Circular No.01/2012 dt. 09/04/201209/04/2012

All deductors shall issue TDS All deductors shall issue TDS certificates in Form No 16A to be certificates in Form No 16A to be downloaded from the TIN website in downloaded from the TIN website in respect of all sums deducted on or respect of all sums deducted on or after 01.04.2012.after 01.04.2012.


Section 40(a)(i)/(ia)Section 40(a)(i)/(ia)Amounts not deductible under the headAmounts not deductible under the head

Profits and gains of business or Profession”Profits and gains of business or Profession”

(ia)” any interest, commission or (ia)” any interest, commission or brokerage, brokerage, rent, rent, royalty, fees for royalty, fees for professional professional services services payablepayable to a to a residents, or amounts residents, or amounts payablepayable to a to a contractor…………. on which contractor…………. on which tax is tax is deductibledeductible at source under Chapter at source under Chapter XVII-B and XVII-B and suchsuch tax has not been tax has not been deducted deducted or after deduction, has not or after deduction, has not been paid on or been paid on or before the due date before the due date specified in section specified in section 139(1).”139(1).”


Contd’Contd’

Whether can be applied from Assessment Whether can be applied from Assessment Year 2005-06 ?Year 2005-06 ?

Bharti Shipyard Ltd. vs Dy. CIT 132 ITD 53Bharti Shipyard Ltd. vs Dy. CIT 132 ITD 53

(SB)(Mum)(SB)(Mum)

CIT vs Virgin Creations (Cal.) (H.C.)CIT vs Virgin Creations (Cal.) (H.C.)

itatonline.orgitatonline.org

Sanjay Kumar Pradhan vs ACIT 14 ITR Sanjay Kumar Pradhan vs ACIT 14 ITR 150150

(Cuttack)(Trib.)(Cuttack)(Trib.)


Contd’Contd’ Section 40(a)(i)/(ia) Section 40(a)(i)/(ia)

Expenditure paid during the Financial Year on Expenditure paid during the Financial Year on

which tax is not deducted, whether which tax is not deducted, whether disallowance disallowance

of expenditure is called for?of expenditure is called for?

Merilyn Shipping & Transports P Ltd. Merilyn Shipping & Transports P Ltd.

ITANo.477/Viz/2008 (Sp. Bench) Dt:22.03.2012ITANo.477/Viz/2008 (Sp. Bench) Dt:22.03.2012

Stay granted by High court of Andhra PradeshStay granted by High court of Andhra Pradesh

Sarala Associates 35 SOT 148 (Mum)Sarala Associates 35 SOT 148 (Mum)

Tubes Investment Ltd. 325 ITR 610 (Mad)Tubes Investment Ltd. 325 ITR 610 (Mad)


Contd’Contd’

• Short deductionShort deduction

Whether the amount to be:Whether the amount to be:

a)a) Fully disallowedFully disallowed

b)b) Proportionately disallowedProportionately disallowed

c)c) No disallowanceNo disallowance Ref: S.K. Tekriwal (Kol.) 48 SOT 515Ref: S.K. Tekriwal (Kol.) 48 SOT 515

– Chandabhoy & Jassobhoy (Mum) Chandabhoy & Jassobhoy (Mum) ITATITAT


Contd’

Genuine and bonafide belief that no tax is to be deducted

ref: Kotak Securities Ltd. (Bom) ITNo.3111 of 2009

Provision for expense made, but payee not known.Provision for expense made, but payee not known.ref: IDBI (Mum) 107 ITD 45ref: IDBI (Mum) 107 ITD 45

Expenses not debited to profit & loss accountExpenses not debited to profit & loss accountref: Umang Diaries (Delhi) 36 SOT 383ref: Umang Diaries (Delhi) 36 SOT 383

Pranik shipping & Services (Mum) 135 ITD Pranik shipping & Services (Mum) 135 ITD 233233


Credit of T.D.S. Credit of T.D.S. Rule for allowing credit for TDS for the purpose of section

199. Rule 37BA inserted w. e. f. 01/04/2009 vide

notification No.28 dt. 16.03.2009. Conditions:

On the basis of information of tax deducted furnished by the deductor.

Information in Return of Income. Credit will be allowed for the Assessment Year for will be allowed for the Assessment Year for

which such income is assessable.which such income is assessable.

Where Tax is deducted and paid to Central Where Tax is deducted and paid to Central Government Government and the and the income is assessable income is assessable over a number of over a number of years, credit for years, credit for TDS TDS shall be shall be allowed across allowed across those years those years in the same in the same proportion in which the proportion in which the income is assessable to tax income is assessable to tax


Contd’Contd’

Ref. Ref. Sec. 198 Sec. 198 :All sums deducted in :All sums deducted in accordance with the provisions of this accordance with the provisions of this chapter shall, for the purpose of chapter shall, for the purpose of computing the income be deemed to be computing the income be deemed to be income received.[Except Salary]income received.[Except Salary]

Ref. Ref. Sec. 205 Sec. 205 : Where tax is deductible : Where tax is deductible at source under the provisions of this at source under the provisions of this chapter, the assessee shall not be called chapter, the assessee shall not be called upon to pay the tax to the extent……….. upon to pay the tax to the extent………..


IssuesIssues

Credit to be allowed in which year?Credit to be allowed in which year?

What if income is not assessable What if income is not assessable (e.g. reduces pre-operative exps.) ?(e.g. reduces pre-operative exps.) ?

Whether sec. 198 applies even if Whether sec. 198 applies even if income not recd?income not recd?


Issues on Reimbursement of Expenses

Tax and duty

Security, Maintenance Charges, etc.

Other Expenses


Section 194J Fees for professional or technical

services Payment of transaction charges, VSAT

charges, etc. paid by Stock broker to Bombay Stock Exchange and National Stock Exchange .

kotak Securities Ltd. 62 DTR 339 (Bom) Bharti Cellular Ltd. 44 DTR 190(SC). Skycell Communiciation Ltd. 251 ITR 53 (Mad) Glaxo Smithkline 12 SOT 221 (Del)


Section 194HCommission or brokerage

Credit Card PaymentsCredit Card Payments

Mechanism of payment. Mechanism of payment.

To approve the merchant establishment (ME)for To approve the merchant establishment (ME)for processing the credit card payments.processing the credit card payments.

Acquiring bank (AB) pays ME the amount after Acquiring bank (AB) pays ME the amount after deduction.deduction.

No indemnity to AB in case of defaultNo indemnity to AB in case of default

No payment made or amount credited by ME No payment made or amount credited by ME

Ref: Vah Magna Retail (P). Ltd.Ref: Vah Magna Retail (P). Ltd.

ITA No.905/Hyd/2011 Dt.10/04/2012ITA No.905/Hyd/2011 Dt.10/04/2012


Section 194HCommission or brokerage

Bank Guarantee Commission Kotak Securities Limited ITA No.6657/Mum/11

dt: 03/02/2012Distribution / Sale of SIM card and recharge coupons (prepaid).

Principal to principal or Principal to agent. Vodafone Essar Cellular Ltd. 35 DTR 393 (Cochin)

Idea Cellular Ltd. 29 DTR 237 (2009) (Hyd)Idea Cellular Ltd. 230 CTR 43 (2010) (Del)

Bharti Cellular Ltd. 294 ITR 283 (2007) (Kol)

Explanation is not wide enough to cover any payment received in course of buying and selling of goods.

Ahemdabad Stamp Vendor 79 DTR 81 (SC) 257 ITR 202 (Guj.)

Kerala Stamp Vendor 150 Taxman 30 (Ker.)


Section 194H: Commission or brokerage

Sale of goods at fixed margins and the activity is under the direct supervision and control of the manufacturer.Hindustan Coco Cola Beverages Pvt. Ltd. 98 TTJ I (Jp)

Contract of sales Vs. Contract of agency.Title and property passes on to the buyer / distributor on thedelivery of goods.Fosters India Pvt. Ltd. 117 TTJ 346 (2008) (Pune)

Target discounts and incentives to distributors and dealers.National Panasonic India Pvt. Ltd. 94 TTJ 899 (2005) (Del


Section 194I: Rent Scope after amendment by Taxation laws

(Amendment) Act, 2006 w. e. f. 13.7.2006.

Whether following payments are covered:

• Cold Storage• Car/Bus/Aircraft• Ship• C & F agent, Goods Stored in Warehouse• Payment to Hotel• Business Service Centre


Section 194C Payment to Contractors

Meaning of the words “any work”Meaning of the words “any work” Not restricted to works contract, therefore has wide import and Not restricted to works contract, therefore has wide import and

covers ‘any work’.covers ‘any work’.Associated Cements Co. Ltd. vs. CIT 201 ITR Associated Cements Co. Ltd. vs. CIT 201 ITR 435(SC) 435(SC)

““Any work” does not mean professional services are also Any work” does not mean professional services are also included. CITC vs. CBDT 209 ITR 660 (Bom)included. CITC vs. CBDT 209 ITR 660 (Bom)

““Any work” has wider imports after the Supreme Courts Any work” has wider imports after the Supreme Courts decision, however, it is not unqualifyingly wide to cover “each decision, however, it is not unqualifyingly wide to cover “each and every work”. East India Hotels Ltd. vs. CBDT and every work”. East India Hotels Ltd. vs. CBDT

223 CTR 133 (Bom)223 CTR 133 (Bom) ““Work” is different from “service”. In work, the activity is Work” is different from “service”. In work, the activity is

predominantly physical, it is tangible. In service, activity is predominantly physical, it is tangible. In service, activity is predominantly intellectual or at least mental.predominantly intellectual or at least mental.

S.R.F. Finance Ltd. vs. CBDT 211 ITR 861 (Del)S.R.F. Finance Ltd. vs. CBDT 211 ITR 861 (Del)



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Practical issues on tds & cpc

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