Quote from: probal_shome on November 20, 2009, 03:21:25 PMPlease note :Quote from: subbufca on November 20, 2009, 01:36:44 PM
A Principal engages an agent for a region. The agent fails to deduct TDS u/s 194C, which he has incurred on behalf of his principal . Principal settles his account with agent without noticing the same, but deducts TDS from Agent's fee . Principal says that he could claim expenditure though agent failed to deduct TDS on same.As for Agent, he says that he is not concerned with disallowance as he is not claiming the expense in the Profit & Loss a/c. Whose expenditure is legitimately attracted for disallowance -Principal or agent ? or is this a loophole ? What recourse is available to the principal , if he is disallowed the claim ?Please share your views
Facts aere not clear:
(i) Was the agent required to pay sub-contractors on behalf of the principal?
(ii) Are such payments being claimed by the principal as a deduction?
(iii) What is the TDS deduction that the principal did when he paid the agent? Is it only on the agent's commission?
If the agent was required to pay sub-contractors on behalf of the principal then the failure by the agent to deduct tax at source will disable the principal's right to claim deduction of the payments.
i)Yes, the agent is to pay sub-contractor for such works that are covered under the agency agreement. To be more clear, the agent gets the work done on behalf of principal and meets the expe3nditure at first instance and later accounts for it with the principal and gets settled with him
ii) Yes, as the expenses are those incurred by him through the agent.
iii)the principal deducted TDS only from the agency charges and not from the reimbursements he made to the agent. He says the TDS liability should be taken care by the agent, who made the direct payment for the work.
Pls share your views . Also state case law; if any on this point.
With best regards
K S Iyer