Non deposit of TDS

[PARVEEN ARORA]

If TDS deducted and not deposited. Will it possible for deductor to pay back TDS amount to landlord and landlord claim his rental income as usual and also show proof to deductor about the treatment of rental income.  

In that case can the deductor claim rent as his expense on the basis of proof provided by landlord?

Secondly if deductor file his income tax return before the land lord and treated rent as his expense (without depositing TDS to government but pay back amount deducted as TDS to landlord) and landlord assure him orally or in writing that he will treat rent as his income as usual, what will be the treatment of this rent expense?

[Surender Gupta]

As per my view, the amount of expenses towards rent shall continue to be eligible as deduction without invoking the provisions of Section 40(a)(ia) or Section 201 of the Income Tax Act, 

However, the peculiarity in the facts of your case is that you have deducted the tax but failed to deposit. Though in my view, since you are refunding the amount to the landlord, the position would remain same as above, but, AO may have something to say for his satisfaction if these facts are on record.

AI Summary

Can a Deductor Claim Rent Expense if TDS on Rental Income is Refunded to Landlord? A query was raised regarding the non-deposit of Tax Deducted at Source (TDS) on rental income. The deductor considered refunding the TDS amount to the landlord, allowing the landlord to claim rental income as usual and provide proof of this treatment. The question was whether the deductor could still claim the rent as an expense. A tax advisor responded that the rent expense could remain deductible despite the non-deposit, provided the TDS amount is refunded. However, the Assessing Officer might scrutinize the situation if these facts are documented.