TDS QUERY ?

[CABIJENDERKUMAR BANSAL]

X is a sole proprietor. F.y 09-10= Turnover 45 lakh F.y 08-09= Turnover 39 Lakh F.y 07-08= Turnover 50 lakh He has paid a royalty of Rs 35,000/- to a company on march 25, 2009 without deducted TDS. Disallowance U/s 40(a)(ia) is applicable in the case or not?

[Anuj Gupta]

Yes the dis allowance should be applicable as the proprietor was liable for TDS deduction on 25-3-2009 since the turnover was more than 40 lakhs in 2007-08.

[CABIJENDERKUMAR BANSAL]

Dear Sir, As per some professionals , Section 44AA is apply i.e tax audit when last year turnover is more than 40 lac. in this case FY 2007-08 turnover is more than 40 lac, hence tax audit will apply to fy 2008-09 but in FY 2008-09 turnover is less than 40 lac, hence tax audit will not apply to fy 2009-10 i.e if tax audit is not apply then no need to deduct tds by individual. please clarify about this.

[DEV KUMAR KOTHARI]

TO for PYE 310308 50 lakh TAR is required. TO for PYE 310309 39 Lakh TAR is not required. TO for PYE 310310 is not relevant. See. Second proviso to S. 194J, according to which turnover in immediately preceding PY (IPY) is to be considered. to consider issue as on 25.03.09 (PYE 31.03.09) immediately preceding PY is PYE 31.03.08 for which TAR was required as TO was 50 lakh that is more than Rs.40 lakh -prescribed for that year. Therefore, for Royalty paid during PYE 31.03.09 he is liable to deduct tax. Hence S. S.40(a) (ia) is attracted. Information for PYE 31.03.10 appears to be irrelevant and may cause confusion. Please correct me if I am wrong or I could not understand the issue fully and correctly. Readers are requested to give information in analytical manner and to avoid irrelevant information which cause wastage of time of other persons who read the query and try to answer. Confusing information also causes wrong result due to wrong analysis. I suggest that query / answer can be typed in a word document and then can be copied in this column. I suggest TMI also to workout some other manner of placing query and answer by way of word document or as attachment for ease in writing and submitting. Provision of insertion of table can also be made.

[SUDHIR SINGHI]

Yes

[Mukesh Ambani]

Disallow, bcz Turnover in the FY 2007-08 is more than Rs 40 Lacs so he shall be liabe to deduct TDS in FY 2008-09

[Rama Krishana]

Look, if you are required to deduct TDS and failed to deduct or deposit the same, the provisions of section 40(1)(ia) are applicable. If you are not required to deduct TDS the provision of section 40(1)(ia) are not applicable at all. Now, in case of proprietorship concern the second proviso to section 194J is applicable which read as, "Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum by way of fees for professional services or technical services is credited or paid, shall be liable to deduct income-tax under this section". By applying the second proviso, you have made the payment for royalty of Rs. 35000/- was made in F.Y 2008-09 whereas your turnover for the immediate preceding year was exceeding 40 lakhs therefore you are liable to deduct TDS u/s 194J during the finance year 2008-09, failure to TDS would attract the provisions of section 40(a)(ia).

AI Summary

TDS liability on royalty requires deduction when preceding-year turnover exceeds threshold; failure triggers disallowance under tax law. Royalty paid by a sole proprietor without TDS is subject to statutory disallowance if, for the financial year in which the payment was made, the immediately preceding year's turnover exceeded the monetary threshold that creates an obligation for an individual or HUF to deduct tax at source; identification of the relevant previous year and its turnover therefore determines whether the disallowance provision applies.