194-C- Interest Liability

[Asked by Guest]

Dear All,

Please guide me on the following issue:

A company has received a bill of Rs. 18000 for vehicle running expense during April. The Company did not deduct TDS as limit of 30,000 as well as 70000 was not applicable at that time.

Now on January end the contractor has raised a bill of Rs. 48000 and the company expects that the transaction with the contractor would exceed 70000 and hence it deducted TDS on the current as well as the previous amount.

Please guide me with reference to case laws (if any) whether interest on delay deduction of TDS applicable on earlier sum, i.e. 1% per month.

Regards

CA.Suman Sharma

[Rajendran Natesan]

Hi,

 As per this IT Law, the

Yearly Limit u/s  194C be paid/credited to Contactor or Sub-contractor exceeds Rs.75,000 during the financial

:Also where the aggregate of the amounts paid/credited or likely to

year, TDS has to be made u/s 194C.

As per this amenment there is no TDS need to deducted from their service...

hanks

 N. Rajednran

9841302690

  

[Manish Phulwani]

Hi,

As per  Sec 194C, tax is to be deducted when :

a)Single payment or credit  -The amount exceeds Rs.30000
b)Aggregate of all payments/credits in a financial year  exceeds Rs . 75000  on any contract amouting to "Work".

Since in your case,initially bill was raised for Rs.18000,it was not required to deduct the tax at tht time,but later another bill of Rs. 48000,now this bill amount exceeds Rs. 30000 as mentioned above,tax is to be made on the whole now.

Further,you are required to deduct tax even though the aggregate of the likely payments in a year are not expected to exceed Rs.7500 since the payment/credit for a single bill has exceeded Rs. 30000 as mentioned at point (a) above.

I hope this resolves your query.

Regards,

Manoj Phulwani

[Vivek Harsh]

In your case Interest shall be charged  from the date when such TDS was liablle to be deucted ( i.e at the time of credit of expenditure in books or payment whichever is earlier) till TDS is actually deducted @1% per month (SEC 201(1A))

COMMISSIONER OF INCOME TAX (TDS) Versus M/S AMERICAN EXPRESS BANK LTD 2011 - TMI - 208119 - DELHI HIGH COURT

I think its difficult to escape from the applicability of Sec 201(A).

[Manish Phulwani]

@ Vivek Harsh,

I think the company was not liable to deduct tax initially when bill of Rs. 18000 was raised,bt later as the bill of Rs. 48000 was raised,the company deducted on the whole.So,no default by company since company was not liable to deduct initially,hence,Interest on delayed deduction as contemplated u/s 201(1A)  is not attracted. 

[Vivek Harsh]

@ Manish

It has been clearly mentioned in the query that the l transaction with contractor would excced 70,000, therefore tds is to be deducted on the total amount. on faliure to do so Interest is chargeable under 201(A)

Proviso to  194C

where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds ¹⁸[seventy-five thousand rupees], the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section.

AI Summary

TDS on contract payments: delayed withholding can attract interest from the date TDS became liable until deduction is made.
The issue concerns whether interest for delayed TDS deduction applies when an earlier contractor bill did not at that time require withholding but a subsequent bill causes statutory thresholds to be exceeded. The withholding rule triggers on either a single payment exceeding the single-payment threshold or aggregate payments (including those likely to be paid) exceeding the aggregate threshold. Interest on delayed deduction runs from the date TDS was liable to be deducted - typically the earlier of credit in books or payment - until actual deduction, and applicability turns on whether the payer reasonably anticipated aggregate liability.