From: CA. V.M.V.SUBBA RAO <vmvsrao@...>
Subject: Relief in deduction u/s 40(a)(ia)
To: aashabhasker@...
Date: Wednesday, 30 April, 2008, 6:01 PM

RELIEF IN SECTION 40(a)(ia)

 

FURTHR AMENDMENT MADE IN FINANCE BILL,2008 IN LOK SABHA ON 29^TH APRIL,2008

 

Sec 40 (a) (ia) IT Act  amended retrospectively to allow deduction of  expenditure in case TDS of March month not paid in time but paid before due date of return.

 

 

 

 

Finance Bill,2008 (as passed in Loksabha)

Section 40(a)(ia)

TDS default

4. Interest, commission, brokerage, rent, royalty, fees for technical/professional services payable to a resident or amounts payable (for carrying out any work contract) to a resident contractor/sub-contractor are subject to tax deduction under different sections of Chapter XVII-B. If tax is deductible but not deducted or if tax is deducted but not deposited (or deposited late) with the Government, then these expenses are not allowed as deduction according to the provisions of section 40(a)(ia). These provisions were incorporated by the Finance (No. 2) Act, 2004 with effect from the assessment year 2005-06.

The scheme of disallowance under section 40(a)(ia) has been modified with retrospective effect from the assessment year 2005-06 on the following lines—

Tax is deductible but not deducted                              

          u  No deduction  in the current previous year    

          u  If tax is deducted in any subsequent year, the expenditure will be deducted in the year in which TDS will be deposited by the assessee with the Government.

Tax is deductible (and is so deducted) during the last month (i.e., in the month of March) of the previous year but it is not deposited on or before the due date of submission of return of income under section 139(1)                                                                             

          u  No deduction in the current previous year

          u  If tax is deposited with the Government after the due date of submission of return of income, the expenditure will be deductible in that year in which tax will be deposited.

Tax is deductible (and is so deducted) during any month but  other than the last month (i.e., any time before March 1) of the previous year but it is not deposited on or before March 31 of the previous year

          u  No deduction in the current previous year

uIf tax is deposited with the Government after the end of the current previous year, the expenditure will be deductible in that year in which tax is deposited

 

 

 

Text of Amendment made to Section 40(a)(ia)

 

In section 40 of the Income-tax Act, in clause (a),—

 

(a) in sub-clause (ia), with effect from the 1st day of April, 2005.—

(i) for the words, brackets and figures "has" not been paid during

the previous year, or in the subsequent year before the expiry

of the time prescribed under sub-section (1) of section 200",

 the following words, brackets and figures shall be substituted and

shall be deemed to have been substituted, namely:—

"has not been paid,—

(A) in a case where the tax was deductible and was so

deducted during the last month of the previous year, on or

before the due date specified in sub-section (1) of section

139; or

(B) in any other case, on or before the last day of the previous

year";

(ii) for the proviso, the following proviso shall be substituted and

shall be deemed to have been substituted, namely:—

"Provided that where in respect of any such sum, tax has been

deducted in any subsequent year, or has been deducted—

(A) during the last month of the previous year but paid after

the said due date; or

(B) during any other month of the previous year but paid after

the end of the said previous year,

such sum shall be allowed as a deduction in computing the

income of the previous year in which such tax has been paid.";

(b) sub-clause (ib) shall be omitted with effect from the 1st day of April

2009

 

 

--
CA. V.M.V.SUBBA RAO
Chartered Accountant
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