Provision - Espense - TDS Challan A.Y.

[Siva Rama]

Dear sir,

Please give your opinion on this.

FY 2012-13 AY 2013-14

A company. An year end provision (Mar 31.2013) was kept for Professional fees as per mercantile system of accounting to get true and fair view of PL. ₹ 100/-.

Entry

Professional fee (Expense GL) Dr 100

Outstanding Liability (Liability Balance sheet GL) Cr 100

Expense was duly disallowed for AY 2013-14 under section 40a(i)(a).

FY 2013-14 AY 2014-15

Professional of company produced bill only on Dec 2013 for same ₹ 100/-

Entry passed

Outstanding liability (Liability GL) Dr100

Vendor Cr 90

TDS Cr 10

This TDS was paid to Government in next month before due date of 7^th jan 2014.

Since TDS ought to be deducted on 31.03.2013, Interest for the period from 31.03.2013 to 07.01.2014 paid over and above ₹ 10 TDS.

This TDS challan for ₹ 10 is made in AY 2014-15.

Since provision is disallowed in AY 2013-14, and since TDS is paid duly in FY 2013-14, this expense of ₹ 100 is claimed in AY 2014-15.

Assessment by assessing officer for AY 2014-15

Assessing officer is not allowing ₹ 100 in AY 2014-15, because TDS challan is in AY 2014-15 and not AY 2013-14(i.e. Assessment year of provision booking). Assessing officer is asking to file correction statement of TDS.

How can assessing officer tell like this?

Provision was duly disallowed in AY 2013-14

Double deduction is not claimed.

Bill is given by the professional only in Dec 13.

TDS is paid in Jan 14 and return is duly filed.

Income is booked by Professional in FY 2013-14 (AY 2014-15).

TDS is now correctly matching in the 26AS of that professional.

If correction statement is filed, mismatch will occur in the 26AS of professional.

Question

Is there any provision in the Income tax Act, that TDS challan should have been paid in AY 2013-14 and not AY 2014-15 and then only deduction can be claimed?

Section 40(a) is saying that wherein respect of any such sum, where any tax has been deducted in any subsequent year, such sum shall be allowed as deduction in computing the income of the previous year in which such tax has been paid.

Regards,

Siva

AI Summary

TDS payment timing on provision: deduction disputed where TDS challan bears a later assessment year affecting allowance.
The company provisioned professional fees at year end which was disallowed under Section 40a(i)(a); when the vendor later billed, TDS was deducted and remitted in the following financial year and the vendor recognised income then. The assessing officer denies deduction because the TDS challan bears the later assessment year; a single challan covered amounts from two years so correction statements would create 26AS mismatches. The issue is whether a deduction can be claimed in the year when TDS was actually paid after the provision was disallowed.