Re: Non deduction of withholding tax under section 195 and the disallowance under section 40a(ia)
An assessee has incurrent substatial loss in the business operations while framing the assessment loss has been reduced inrespect of amount of server storage charges remitted to USA entity alleging failure to deduct withholding tax for the remittance US firm. The appel has been filed before CIT and te same is pending since 01.10.2019. There was no order for penalty for non deduction of withholding tax as on date hence no appeal has been preferred. The issue is whether in case the assessee opts for settlement under Viwad se viswas scheme whether withholding tax for server storage has to be remitted to the departmnet. Will the same be insisted for giving effect to the scheme
As per FAQ No. 53 of Circular No. 9 of dated April 22, 2020; in a case where the dispute in relation to an assessment year relates to reduction of reduction of loss, the appellant shall have an option either to:
(i) include the of tax related to loss in the amount of disputed tax and carry forward the loss amount
(ii) to carry forward the loss.
Rule 9 of VSV Rules, 2020 prescribes the manner of computing disputed tax in cases where loss is reduced. Once the tax is paid on disallowances and the issue is settled the department will not insist for remitting the tax to be deducted at source .
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