NON DEDUCTION OF TDS FOR PAYMENT MADE BY SUBSIDIARY COMPANY TO HOLDING COMPANY

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An 100% Subsidiary compamy has paid the holding company as service charges during the financial year 2007-08. At the time of making payment TDS has not been deducted. The holding company accounted the service charges received from the subsidiary company and paid Tax as applicable. Now the A.O is proposed to disallow the expenditure u/S 40(a)(ia) in the subsidiary company as the subsidiary has not deducted the TDS at the time of making payment. Whether the CBDT Circular No.275/201/95-IT(B) dt.29.01.1997 will be applicable.

AI Summary

Subsidiary Faces Disallowance for Not Deducting TDS on Service Charges Despite Tax Paid by Holding Company A subsidiary company paid service charges to its holding company during the financial year 2007-08 without deducting TDS. Although the holding company accounted for the payment and paid the applicable tax, the Assessing Officer (A.O) intends to disallow the expenditure under Section 40(a)(ia) due to the subsidiary's failure to deduct TDS. The query raised concerns whether CBDT Circular No. 275/201/95-IT(B) dated 29.01.1997 applies. The response clarified that the circular might be relevant for proceedings under Section 201 but not for disallowance under Section 40(a)(ia).