DEDUCTION OF TDS

[S.C. WADHWA]

34	A Pvt. Ltd. Co. is in course of taking loan from a
	finance company named B. As per sanction letter
	B will charge 2% of loan amount as processing fees.
	When I required the mangement to deduct tds
	on payment of such processing fees, it claimed
	that they were making full payment to B without
	deduction of tds since B will make repayment of
	same.
	Whether it is permitted in law to make payment
	to B without deduction of tds on saying that B will
	make repayment of same to A.
	Please clarify on which ground it is permissible.
	If B will make repayment of same, then why it
	is mentioned in sanction letter that it will charge
	loan processing fee @ 2%.
	If you are of opinion that tds should not be deducted,
	please clarify in which head payment should be
	booked in books of A at time of making payment.

[DR.MARIAPPAN GOVINDARAJAN]

Whether you have got clarified in the above issue? If not please inform.

AI Summary

TDS on loan processing fee: whether payer may avoid deduction when lender will reimburse and the accounting treatment. Query whether TDS must be deducted on a loan processing fee paid to a finance company when management refuses to deduct on the ground that the finance company will reimburse the fee, and asking the accounting head to use if TDS is not deducted; the provided reply contains no substantive legal guidance, only a follow up question.