Search Results For: 194A


QUERY: Mr. Champaklal is a practising Advocate. His gross fees for the year ended 31st March, 2009 were Rs. 27,00,000/-. During the year ended 31st March, 2010 the following issues have arisen on which Mr. Champaklal seeks advice from you

(a) For academic interest, Mr. Champaklal wants to understand the meaning of ‘interest’ on which tax is required to be deducted at source u/s. 194A

(b) Mr. Champaklal has taken a loan of Rs. 2,00,000/- taken by him from his wife for investing in a new car which forms part of his block of fixed assets. The loan carries interest @ 10% p.a. The loan was taken on 1st February, 2008. No interest was paid in the F.Y. 2008-09. As per the term of the loan agreed upon between Mr. Champaklal and his wife, the loan is to be treated at par with a Cumulative Time Deposit and interest is to be actually paid over only on expiry of 3 years. Mr. Champaklal wants to know whether he should account for the interest in his books (he follows cash method of accounting) and if yes, whether tax is required to be deducted at source. Also, if he now accounts for interest for the period 1st February, 2008 to 31st March, 2009 then whether there is any likelihood of it being disallowed on the ground that it is a prior period expenses?

(c) Mr. Champaklal purchased three computers, a printer and office furniture from Departmental Store. For this purpose, he utilized a special card issued by the Store to him (as he was a regular customer in the store). The card entitled him to make payment in the same manner as a Credit Card. However Mr. Champaklal has chosen to take credit rather than pay the card dues. He has therefore not paid the dues. The Store has charged interest on the delay in payment. Now, Mr. Champaklal has decided to opt for Direct Debit facility offered by his bank for paying off the Departmental Store card payments. He wants to know how the TDS obligation on the interest paid to the Departmental Store is to be satisfied if the payment is made by direct debit to his bank account.


ANSWER: Click here to read the full answer of the expert
EXPERT:
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S. 2(28A) defines – Interest.

“Interest” means interest payable in any manner in respect of any moneys borrowed or debt incurred (including deposit, claim or other similar right or obligation) and includes any service fee or

QUERY: Mr. Champaklal seeks further advice from you on behalf of his clients.

(a) One of Mr. Champaklal’s clients is a financier and he has asked him whether section 194A would apply to Bill Discounting Charges paid by him to another financier. Mr. Champaklal seeks your advise in the matter

(b) The same financier client of Mr. Champaklal also wants to know whether the difference between price and face value of Commercial Paper is to be treated as interest or as discount. Mr. Champaklal seeks your advice in this matter also.

(c) Taking a cue from an exporter whose writ petition (in respect of 80HHC matter) had been handled by him. Mr. Champaklal has started the practice of levying interest in his Memo of Fees itself in respect of some of his regular clients who are regularly irregular in payment of his fees. His clients have enquired as to whether they would be liable to deduct tax at source u/s. 194A in respect of the interest charged by him.

ANSWER: Click here to read the full answer of the expert
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CBDT Cir.No. 65{F. No. 275/79/TTJ] dt. 2/9/71.

“Where the supplier of goods makes over the usance bill/hundi to his bank which discounts the same and credits the net amount to the supplier’s A/c. straightway without waiting for realization of the bill on due date,

QUERY: The Finance Act, 2015 has amended clause (v) of sub section (3) of Sec. 194A w.e.f. June 01, 2015. Accordingly TDS is now required to be deduc-tion by a Co-op Bank from interest payment to its members subject to other provisions.

Now, can payment be made by other Co-operative Bank to other Co-operative Society without TDS?
ANSWER: Click here to read the full answer of the expert
EXPERT:
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Section 194A(1) of the Income tax Act, 1961 provides

“Any person, not being an Individual or a Hindu Undivided Family, who is re-sponsible for paying to a resident any income by way of interest other than in-come by way of interest on securities shall at any time of credit of such income

QUERY: Whether TDS u/s. 194A is deductible on payment of credit card? Several entities have been receiving notices regarding non-deduction of TDS u/s. 194A on charges paid to banks towards use of credit card facilities used by them as merchant establishments. Whether these charges would be covered by the term ‘interest’ and would get covered under the said section?
ANSWER: Click here to read the full answer of the expert
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S. 2(28)(a) defines ‘interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee

QUERY: Mr. X a practicing Advocate who is subject to Tax Audit u/s. 44AB for the year ending March 31, 2008 having the following transactions during the financial year 2009-10

1. Constructed a house for self occupation & he is making payment to contractor Rs. 10,00,000/-.

2. Making payment to Architect for designing his house Rs. 1,00,000/-.

3. Borrowed funds from friends Rs. 10,00,000/- on which he wants to pay the interest.

Examine the applicability of TDS.
ANSWER: Click here to read the full answer of the expert
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1. Section 194(C) provides that no individual or HUF shall be liable to TDS on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purpose of such individual or any member of HUF.