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sec.40a(ia) disallowance

Started by sai prasad, January 19, 2012, 05:09:58 PM

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sai prasad

A film distributor pays film processing charges to film labs. No TDS was made. The film labs have given confirmations that they filed returns of the respective year and paid tax. The issue for consideration
1.Whether abatement of TDS liability u/s. 191 will holds good for sec.40a(ia) because TDS relevant provisions are  Chapter XVIIB
2.  Sec.40a is a nonobstante provision  covering sec.30 to 30 . Whether proc.charges fall under the above sections or sec.28. If it is later sec. , sec.40a(ia) is not applicable

please give your valuable views with supporting case laws

ashutosh majumdar

(i) The whole purpose of s. 40(a)(i) is to discourage payers from defaulting on their TDS obligations. But if the tax has been recovered from the payee, then the purpose is fulfilled. Applying the purposive interpretation, the requirement in s. 40(a)(i) will have to be deemed to be fulfilled. But it will require a real strong and clear-headed judge to take this view. If he/she does, then hats' off to him/her!

(ii) Isn't processing charges "expenditure" u/s 37(1)? What is the doubt?

sai prasad

thanks for your view. Film processing charges are not like any other and routine exp. It goes with the film cost . In the instant case raw film is also purhcased . I feel it must be treated as purchase exp. or direct cost that fall u/s.28.