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while coming to the above conclusion, I think a point was missed. By the amendment brought in sec. 40(a)(ia) in F.Y. 2010, the deductor is getting time to deduct and deposit all the TDS  upto the date of filing return of income. One should not forget that "all the TDS" means the entire TDS deducted during the previous year and "the date of filing of return of income" will always be in  the subsequent financial year which means that TDS deducted during this year can be deposited during the next financial year, of course, before filing the return of income. If it is proved that due taxes have been paid by the deductee before filing return of income where is the question of deductor being punished under the amended provisions sec. 40(a)(ia). I think the intent of legislation can be explained in this way also. Is it not so.

Return of income will always  be filed in subsequent year. It is true not only in the case of deductee but also in the case of deductor. Ergo, while filing return of income by the deductor he can ascertain that the particular receipt from him was included by the deductee and due taxes were paid by him and finally ensure that he also filed return of income. Then there is no question of any disallowance u/s 40(a)(ia) in his hands. In my opinion, this is the intent of legislature while making the amendment. Moreover, scrutiny assessment of the deductor will be taken up only after 1 year or so. If it is proved that all the conditions specified are fulfilled then it is sufficient compliance to get out of the rigours of the provisions of sec. 40(a)(ia).

as per amendment brought in Finance Act 2012, if the assessee is not deemed to be in default then the expenditure need not be disallowed u/s 40a(ia). I am surprised to note that as to how you have seen one amendment in sec. 201(1) and missed the consequential amendment in sec. 40a(ia).

this decision is also on interest u/s 220(2) but not on interest u/s 201(1A). The issue in question is about the allowability of interest u/s 201(1A). Therefore, the issue is still open for discussion.

All the above arguments have been considered by Hyderabad ITAT in the case of My Home Power Limited and finally it has been held by the ITAT that  the proceeds  received by selling CERs i.e. carbon credits are capital receipts and accordingly not taxable. The same is reported in 27 taxman.com 27. Till a High Court reverses this decision, the same can be utilised by everybody to strengthen the argument that carbon credits are not revenue receipts to attract tax liability.  However,  the alternative argument that the deduction u/s 80IA should be extended to carbon credits also is not answered by ITAT as it was felt that this argument is academic in nature. Therefore, we have to wait till a decision comes on the issue of allowability of 80IA deduction on CERs.

on 02-11-2012,  Hyd ITAT has held in the case of My Home Power Ltd  that  the proceeds  received by selling CERs i.e. carbon credits are capital receipts and accordingly not taxable. The same is reported in 27 taxman.com 27. Till a High Court reverses this decision, the same can be utilised by everybody to strengthen the argument that carbon credits are not revenue receipts to attract tax liability.

on 02-11-2012, Hyd ITAT has held in the case of My Home Power Ltd that  the proceeds  received by selling CERs i.e. carbon credits are capital receipts and accordingly not taxable. The same is reported in 27 taxman.com 27

unless your client had regular business transactions like supplying some material or purchasing material for the said company and the money taken was towards supply of material, there is no way he can escape from deemed dividend provided the company is a private limited company in which public are not substantially interested and the company had sufficient reserves (accumulated profits) before issuing the loan. One interesting feature is that, the reserves or accumulated profits means the surplus arisen by providing the depreciation as per incometax ACt but not the depreciation as per companies Act as per the citation reported in 121 TTJ 713. Please verify whether your client's case falls under any of these categories.

sorry, just type 40(ia) in the search button of this forum and you will get the answer.

if you just type 40a(ia) in the search button of this forum, you will find the link for the same.

I do accept your argument that the case cited by you is not appealed against before higher appellate fora doesnot mean the law declared is correct. As we see the logic, TDS is always allowable and interest on TDS is also always allowable in my opinion. As correctly pointed out by you, interest on direct taxes are not allowable as cited by CA Manoj Gupta Sir and as pronounced by Hon,ble Supreme Court. However, in the case on hand, TDS cannot be construed as direct tax in the hands of deductor but it is the liability of the deductee discharged by deductor because of the vicarious liability casted upon him by the statute. If it is considered that TDS is also a direct tax, then regular TDS deducted is not at all allowable as pointed out by me in earlier answers.

With regard to your queries, you have to revise the returns otherwise department may think that you have not paid the interest and there is every possibility that they may raise once again the intersest on that because of which you have to go all the way to office and convince them by showing already paid challans. If you want face all thism then the answer is left to you.

Interestingly, I have seen an argument written by somebody in this forum with regard to 40a(ia) disallowance and TDS demand. I found that the same is logical and reasonable. Once the deductee had filed return of income duly reflecting the receipts from the deductor, then not only the demand u/s 201(1) but also the demand u/s 201(1A) cannot be enforced in the hands of deductor. To overcome that an amendment has been brought into statute 201(1A) by way of a proviso in the Finance Act, 2012. When the section says that interest is to be charged till the date of payment of the relevant tax either by the deductor or by the deductee, the newly inserted proviso says interest is payable till the date of finling return of income by the deductee. It appears that the law makers didnot make note of this while proposing the amendment. Think from this angle also.

First of all, Kindly enlighten the basis on which you have come to the conclusion that interest on TDS will be disallowed in your case. Any expenditure incurred for the purpose of business is allowable as per sec. 37(1). Accordingly, personal incometax is also allowable under the said section. But the intention of legislature is not to allow incometax under the provisions of 37(1). Ergo, one more section i.e. 40(a) has been introduced in the statute so that personal incometax paid by an assessee is not to be allowed even if it is found allowable. Further, in the normal course, when TDS is deducted which section makes the assessee entitle for claiming the same as expenditure. For example, if a professional payment is made to a person who had done services worth Rs. 1,00,000/- then only 90,000/- is paid to that person and the remaining balance of Rs. 10,000/- shall be payable to the government in the form of TDS. Then which section says the TDS of Rs. 10,000/- is also allowable in the hands of deductor. Therefore, a logical conclusion is that TDS , either paid in normal course or paid subsequently when the defect is found, is allowable in the hands of deductor. Since there was no section prescribed for  disallowance of  the interest on TDS, the same is also allowable as per the provisions of section 37(1) in the hands of deductor. Now coming to interest on TDS I could not find any section in IT Act, which says that the same is not allowable. Further, interest paid by you cannot be passed on to deductees so that they are entitled to claim it. I dont accept this argument. However, as stated above, interest paid by you is allowable in the hands of deductor. This is my opinion as on today. I am ready to correct myself if a reasonable interpretation which is against the above argument is presented.

As per sec. 112, there is no question of claiming any deduction under chapter VIA from the income computed under this head. If your income is positive  then only u can claim deduction under chapter VIA. If ur income is in negative, Where is the question of claiming any deduction. Chpater VIA deductions are meant for reducing tax liability, if any. I(f there is no tax liability at all, there is no question of claiming any deduction.

The question framed is not clear. If HUF gives a gift to its members the others donot have any right to object for that. If your query is as to what are the incometax implications when a gift is received by a member of HUF from the said HUF, then the answer is that there are no tax implications as per the ITAT decision reported in 46 SOT 97.

Even to get deduction u/s 54 also, there was no need to use the same proceeds for investment. Even the borrowed funds can be used as per the decisions reported in 45 DTR 208, 41 SOT 504 and 18 taxman.com 265. Ergo, you can proceed to claim all the deductions.