Applicability of TDS for legal review by Banks

[Parag Shah]

Dear Members,

I request opinion of the members on the following issue:

There are several applicants who have applied for loan.

1. The Bank has appointed a legal firm / Advocate to advise on the validity of documents pre- & post sanction.
2. The Advocate raises the invoice on the Bank- A/c Applicant.
3. The fees payable to advocate is debited tot the account of the Applicant & thereinafter the fees have been to the advocate /firm.
4. The Bank states it is reimbursement / paid on behalf of the applicant & accordingly the TDS is not applicable, neither it routed through the profit / loss account.
5. Kindly advise on the above at my email id [email protected]

Thanks & Regards//

Parag Shah

+91 9869788636

[CAGOPALJI AGRAWAL]

since bank is liable to pay to the lawyer hence it would liable to deduct tax at source. It has no relevance that the payment is not debited in P/L. 

AI Summary

Tax Deduction at Source: banks must deduct TDS on legal fees paid to advocates even if charged to applicants. The bank, as the payer of legal fees to an advocate, is liable to deduct Tax Deduction at Source on those payments; this liability exists irrespective of the bank treating the payment as a reimbursement charged to the applicant or not routing the expense through its profit and loss account.