{"id":9027,"date":"2020-05-20T18:05:05","date_gmt":"2020-05-20T12:35:05","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=9027"},"modified":"2020-12-18T15:21:11","modified_gmt":"2020-12-18T09:51:11","slug":"tds-provisions-restrictions-disallowance-of-section-40a-ia-and-40a-3","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/tds-provisions-restrictions-disallowance-of-section-40a-ia-and-40a-3\/","title":{"rendered":"TDS Provisions &#038; Restrictions: Disallowance of Section 40(a) (ia) and 40a (3)"},"content":{"rendered":"\n<p class=\"has-drop-cap\">TDS means&nbsp;<strong>Tax Deducted at Source \u2013 \u201c<\/strong>Collection\nof tax at the source from where an individual&#8217;s income has originated.&#8221;\nThe government practices TDS as an instrument to collect tax to minimize tax\nevasion by taxing (partially or wholly) the income at the time created. TDS is\npertinent to the numerous incomes such as salaries, interest received,\ncommission\/donations received, etc.<\/p>\n\n\n\n<p>However, TDS is not applicable to all incomes and for all people. In this article, you will observe the extracts of&nbsp;<strong>Section 40(a) (ia) and Section 40a (3)<\/strong>&nbsp;of the Income Tax Act, 1961. It will explain the <strong>disallowance for non-deduction<\/strong> or non-payment of TDS under Section 40(a) (ia) and 40a (3). <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/tds-provisions-restrictions-disallowance-of-section-40a-ia-and-40a-3\/#What_is_Section_40a_ia_of_Income_Tax_Act_1961\" >What is Section 40(a) (ia) of Income Tax Act, 1961?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/tds-provisions-restrictions-disallowance-of-section-40a-ia-and-40a-3\/#What_do_you_mean_by_Disallowance_for_Non-Deduction_or_Non-Payment_of_TDS\" >What do you mean by Disallowance\nfor Non-Deduction or Non-Payment of TDS?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/tds-provisions-restrictions-disallowance-of-section-40a-ia-and-40a-3\/#Sample_Calculations_for_Tax_Deduction_under_Section_194J_at_rate_of_10_Estimation_of_Disallowance\" >Sample Calculations for Tax Deduction under Section 194J\nat rate of 10%: Estimation of Disallowance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/tds-provisions-restrictions-disallowance-of-section-40a-ia-and-40a-3\/#What_are_the_relevant_Case_laws_Amendments_Circulars_under_the_TDS_Provisions_%E2%80%93_Chronological_Event\" >What are the relevant Case laws, Amendments&amp; Circulars\nunder the TDS Provisions? &#8211; Chronological Event<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/tds-provisions-restrictions-disallowance-of-section-40a-ia-and-40a-3\/#CBDT_Circular_on_TDS_Obligation-When_Payment_Made_To_Entities_Exempt_Us_10_2017\" >CBDT Circular on TDS Obligation-When Payment Made To Entities Exempt U\/s 10 2017<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/tds-provisions-restrictions-disallowance-of-section-40a-ia-and-40a-3\/#Latest_%E2%80%93_Amendment_for_Trusts_and_NGO_from_FY_2020-21_onward\" >Latest: &#8211; Amendment for Trusts and NGO from FY 2020-21 onward<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/tds-provisions-restrictions-disallowance-of-section-40a-ia-and-40a-3\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Section_40a_ia_of_Income_Tax_Act_1961\"><\/span>What is Section 40(a) (ia) of Income Tax Act, 1961?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>According to Section 40(a) (ia) of <strong>Income Tax Act, 1961<\/strong><sup><a href=\"https:\/\/www.incometaxindia.gov.in\/pages\/acts\/income-tax-act.aspx\/\"><strong>[1]<\/strong><\/a><\/sup>, <strong>30% of sum payable<\/strong> of a person on which tax is deductible at source under&nbsp;<strong>&#8216;Chapter XVII-B.&#8217;<\/strong>&nbsp;If this tax has not been deducted or paid after deduction on or before the due date specified in sub-section (1) of section 139, it may have severe limitations.<\/li><li><strong>1st Position of law-<\/strong>&nbsp;In any such sum, taxes have to be deducted in any succeeding year. Or else it may be deducted during the previous year but have to be compensated after the due date specified in <strong>sub-section (1) of section 139<\/strong>. In such payments, 30% of sum shall be allowed as a deduction in calculating the income of the preceding year.<\/li><li><strong>2nd Position of Law-<\/strong>&nbsp;It says that if an assessee <strong>fails<\/strong> to decrease by the <strong>whole or any part of the tax<\/strong> in agreement with the provisions stated above, without being default under sub-section (1) of <strong>section 201<\/strong>; it shall be <strong>considered deducted<\/strong> and paid on the date of furnishing of return of income.<\/li><\/ul>\n\n\n\n<p><strong>For easy explanation, kindly draw your attention to the Info-Chart given below for this sub-clause:-<\/strong><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/05\/image-89.png\" alt=\"sub-clause chart\" class=\"wp-image-9028\" width=\"533\" height=\"410\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/05\/image-89.png 674w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/05\/image-89-300x231.png 300w\" sizes=\"(max-width: 533px) 100vw, 533px\" \/><\/figure><\/div>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/05\/image-90.png\" alt=\"Info-Chart of sub-clause\" class=\"wp-image-9029\" width=\"533\" height=\"398\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/05\/image-90.png 669w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/05\/image-90-300x224.png 300w\" sizes=\"(max-width: 533px) 100vw, 533px\" \/><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_do_you_mean_by_Disallowance_for_Non-Deduction_or_Non-Payment_of_TDS\"><\/span>What do you mean by Disallowance\nfor Non-Deduction or Non-Payment of TDS?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Following&nbsp;<strong>section 40(a) (ia)<\/strong>&nbsp;of\nIncome Tax Act, any payments made to residents, the deductor has the permit to\nclaim a deduction for payments <strong>as per\nexpenditure occurred<\/strong> in the previous year of payment. It can happen if the\ntax gets deducted during the last year, and the equal amount gets paid on or\nbefore the due date itemized for filing of return of <strong>income U\/s 139(1)<\/strong> of Income Tax Act.<\/li><li>In consideration\nwith &#8216;<strong>non-deduction<\/strong>&#8216;\nor &#8216;<strong>non-payment&#8217;<\/strong>&nbsp;of\ntax deducted at source from certain expenses made to the residents, herewith,\nthe entire amount of expenditure is &#8216;<strong>overrule\/disallowed<\/strong>&#8216;\nunder section 40(a)(ia) for determinations of calculating income under the head\n&#8220;<strong>Profits and gains of\nbusiness or profession<\/strong>.&#8221;&nbsp;<\/li><li>It has been\npropounded to reduce the undue hardship. In such ordinances, the&nbsp;<strong>disallowance shall be &#8216;restricted to 30%&#8217;\nof the amount of expenditure on which &#8216;TDS not deducted.&#8217;<\/strong><\/li><li><strong>Previous\nPosition&nbsp;<\/strong>(100%\ndisallowed): &#8211; The &#8216;non-deduction&#8217; or &#8216;non-payment&#8217; of TDS on payments made to\nresidents&nbsp;<strong>results in\ndisallowance<\/strong>&nbsp;only concerning assured\/specific categories\nof payments. Such payments can include<strong>&nbsp;interest, commission, brokerage, rent, royalty,\nfee for technical services, or professional services,&nbsp;<\/strong>as\nstated above.<\/li><li><strong>Present Position:<\/strong>&nbsp;According to the present view, section 40(a) (ia) has\nincreased the scope of disallowance to &#8216;<strong>all\nthe Category&#8217;<\/strong>&nbsp;of payment made to a resident. It schedules\nthis parameter upon the tax, which is required to be deducted at source&nbsp;<strong>under &#8216;Chapter XVII-B&#8217;<\/strong>&nbsp;of\nthe Income Tax Act.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Sample_Calculations_for_Tax_Deduction_under_Section_194J_at_rate_of_10_Estimation_of_Disallowance\"><\/span>Sample Calculations for Tax Deduction under Section 194J\nat rate of 10%: Estimation of Disallowance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li><strong>10% of \u20b9 1, 00,000 is \u20b9 10,000 &#8211;\nWith no deduction<\/strong><\/li><\/ul>\n\n\n\n<p><strong>With this,&nbsp;<\/strong>no tax has been deducted and paid on \u20b9 1, 00,000 and estimation\nof disallowance will be <strong>\u20b9 30,000<\/strong>\/-\n(30% of \u20b9 1, 00,000)<\/p>\n\n\n\n<ul><li><strong>10% of \u20b9 1,\n00,000 is \u20b9 10,000 &#8211; Deducted and paid \u20b9 1,000<\/strong><\/li><\/ul>\n\n\n\n<p><strong>With this,\ntax&nbsp;<\/strong>deducted and paid is \u20b9\n1,000\/- on \u20b9 10,000\/-; therefore, tax is deducted and paid on \u20b9 90,000\/-.\nEstimation of Disallowance is \u20b9&nbsp;<strong>27,000<\/strong>\/-\n(30% of \u20b9 90,000\/-)<\/p>\n\n\n\n<ul><li><strong>Assumption: &#8211;&nbsp;<\/strong>The final assumption is that there is a Proportional basis, in case of non-deduction and short deduction. The amount disallowed under section 40(a)(ia) will be 30% of the amount in which \u2018TDS not deducted\u2019 or \u2018short deducted.&#8217;<\/li><\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/business-income-taxation-of-charitable-institution-u-s-11-4-and-11-4a\/\">Business Income &amp; Taxation of Charitable Institution U\/s 11(4) and 11(4A): In-depth with Case-Laws<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_relevant_Case_laws_Amendments_Circulars_under_the_TDS_Provisions_%E2%80%93_Chronological_Event\"><\/span>What are the relevant Case laws, Amendments&amp; Circulars\nunder the TDS Provisions? &#8211; Chronological Event<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>Circular No\n8\/2009 [F.NO. 385\/08\/2009 IT (B)], DATED 24- 11-2009<\/strong><\/p>\n\n\n\n<ul><li>The services\noffered by hospitals to various patients are mainly included as \u2018<strong>medical services<\/strong>.&#8217; Accordingly, the\nprovisions of section 194J are duly applicable to such payments. <\/li><li>Persons who are <strong>making payment on behalf<\/strong> of patients to\nhospitals for the expense of <strong>medical\/insurance<\/strong>\nunder various projects are accountable to deduct tax at source under section\n194J.<\/li><\/ul>\n\n\n\n<p><strong>Case Law: &#8211; Delhi\nH.C VipulMedcorp TPA (P) Ltd.v. Central Board of Direct Taxes 2011<\/strong><\/p>\n\n\n\n<ul><li>It held that\nSection 194J applies to the payments made by the petitioners to hospitals that\nare providing &#8220;<strong>professional\/Medical<\/strong>\nfacilities. Moreover, in light of various&nbsp;<strong>Central Board of Direct Taxes<\/strong>&nbsp;circulars and\njurisdictional verdicts, <strong>TDA will be\nvalid<\/strong> on all payments made to the Hospital for Medical amenities. The NPOS\nshould make <strong>compulsory compliances<\/strong>\nto side-step any disallowances of expenses and TDS penalty requirements.&nbsp;\n&nbsp;<\/li><\/ul>\n\n\n\n<p><strong>Case Law: &#8211;\nMahatma Gandhi SevaMandir<\/strong>&nbsp;<strong>V.<\/strong>&nbsp;<strong>Deputy Director of Income-tax (E) 1(2),\nITAT Mumbai 2012:&nbsp;<\/strong>Disallowances under section 40(a) not\napplicable to charitable trust\/institution under section 11<\/p>\n\n\n\n<ul><li>It held that\nSection 40 is applicable only when deductions under <strong>&#8216;Sections 30 to 38&#8217;<\/strong> made calculating the income imputable under\nSection 28, under the head &#8220;<strong>profits\nand gains of business or profession<\/strong>.&#8221;&nbsp;<\/li><li>The concession\ngiven under <strong>Section 40<\/strong> has carved\nout. It is applicable only for &#8216;<strong>Section\n28&#8242;<\/strong>&nbsp;and not for calculating the exemption of income of a\ncharitable trust under Section 11 of the Income Tax Act. It means that\nprovisions of section 40(a) are not applicable in the events of <strong>charitable trust or institution<\/strong> where\nincome and expenditure gets figured in terms of section 11.<\/li><\/ul>\n\n\n\n<p><strong>Case Law: &#8211; Bombay Stock Exchange Ltd vs. Dy. DIT (Exp) (2014)<\/strong><\/p>\n\n\n\n<ul><li>In this case, the\n<strong>Bombay High Court<\/strong> has decided that\nprovisions of section 40(a) (ia) do not apply to Charitable trusts as well as\nNon-Profit Organisations.&nbsp;<\/li><li>On the other\nhand, there is <strong>no general exemption<\/strong>\nthat Trust, Society, or Non-Profit Organizations are exempt from deducting and <strong>compensating TDS<\/strong>.&nbsp;<\/li><li>It is generally\nsubject to the <strong>Financial Transactions <\/strong>and\nrestrictions of <strong>TDS<\/strong> stated every\nyear in the <strong>Financial Act<\/strong>. As a\nresult, if NGOs make payments to specific persons above detailed\/prescribed\nlimits, they need to deduct and pay TDS within an itemized timeline.<\/li><\/ul>\n\n\n\n<p><strong>Case Law: &#8211; Nokia India Pvt. Ltd. Vs. DCIT ( Delhi ITAT) <\/strong>\u2013 <strong>ITA No. 5791\/Del\/2015<\/strong>&#8211; No Disallowance for non-deduction of TDS under section 194H\/194J in the absence of <strong>\u2018Principal-agent relationship\u2019 and \u2018technical services.<\/strong>\u2019<\/p>\n\n\n\n<ul><li>The disallowance\nunder Section 40(a) (ia) for non-deduction of <strong>TDS u\/s 194H as well as 194J<\/strong> on account delivered by the assessee\nto its distributors was not acceptable; as a &#8216;principal-agent relationship was\nabsent.&#8217;&nbsp; <\/li><li>As a consequence,\n<strong>benefit<\/strong> extended to distributors\ncould not be preserved as commission under Section 194H. Moreover, A.O. had not\ngiven any reasoning or conclusion to the extent that there was payment for\n\u2018technical service\u2019 responsible for withholding under Section 194J.<strong>&nbsp;<\/strong><\/li><\/ul>\n\n\n\n<p><strong>Case Law-<\/strong>&nbsp;<strong>JCIT Vs. Karnataka Vikas Grameen Bank (ITAT Bangalore) \u2013 ITA No. 1391 &amp; 1392\/Bang\/2016:&nbsp;<\/strong>No interest allowance under section 40(a<strong>) (<\/strong>ia) conditional for deductee to furnish Form 15G or 15H<\/p>\n\n\n\n<ul><li>It has held that\nany disallowance of interest paid to persons who furnished \u2018<strong>Form 15G and Form 15H\u2019<\/strong>&nbsp;should\nnot be prepared u\/s 40a(ia) for non-deduction of TDS. <\/li><li>It is because of\nthe requirement of filing of Form 15G and 15H with the approved authority i.e.\nCIT, which was only procedural, and that could not effect in a disallowance\nunder section 40a(ia).<strong>&nbsp;<\/strong><strong><\/strong><\/li><\/ul>\n\n\n\n<p><strong>Case Law: &#8211;<\/strong>&nbsp;<strong>DCIT Vs. Murugarajendra Oil Industry (P) Ltd. (ITAT Bangalore) \u2013 ITA No. 2094\/Bang\/2017:&nbsp;<\/strong>No disallowance U\/s. 40(a) (ia) if assessee complies with section 194C (6)<\/p>\n\n\n\n<ul><li>In this case, the\nassessee claimed on the basis of obtaining either the <strong>declaration anticipated<\/strong> under second proviso of section 194C (3) or\nthe <strong>PAN details<\/strong> under the present\nsection 194C(6). As a result, the assessee required <strong>not paying<\/strong> tax deduction at source on the payments made to the\ncontractor and sub-contractor.&nbsp;<\/li><li>It was\nirrespective of the fact whether or not such data was furnished to the\nauthorities as approved under the third proviso to the amended <strong>section 194C(3)<\/strong> or the current section <strong>194C(7).<\/strong> Therefore, it can be said that\nif Assesseefulfils as per the provisions of section 194C (6). Disallowance\nunder section 40(a)(ia) does not stand up just because there is an <strong>infringement of provisions<\/strong> of section\n194C(7).<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"CBDT_Circular_on_TDS_Obligation-When_Payment_Made_To_Entities_Exempt_Us_10_2017\"><\/span><strong>CBDT Circular on TDS Obligation-When Payment Made To Entities Exempt U\/s 10 2017<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>This circular\nstate about the<strong>&nbsp;\u2018<\/strong><strong>requirement of Tax Deduction\u2019<\/strong> at source\nin case of entities or<strong> Non-Profit <\/strong>organizations\nwhose income gets exempted from section 10 of the Income Tax Act, 1961<\/li><\/ul>\n\n\n\n<p><strong>Case Law: &#8211; A.K. Industries Vs. ACIT (ITAT Kolkata) \u2013 ITA No. 665\/Kol\/2018: &#8211;&nbsp;<\/strong>Disallowance under section 40(a)(ia) not applicable to \u2018<strong>Short-Deduction\u2019<\/strong> of TDS<\/p>\n\n\n\n<ul><li>This case\nproceeds to disallow the sum under section 40(a) (ia) in respect of which TDS\ngets deducted. During the appellate proceedings, it holds that <strong>TDS got deducted at a lower rate<\/strong>;\nhence, it means that provisions of section 40(a) (ia) are not appropriate in\nrespect of the appellant.&nbsp;<\/li><li>It was\nsufficiently clear from the examination of the lower appellate discussion that\nthis is not an instance of &#8216;<strong>non-deduction\nof TDS<\/strong>\u2019 per se. The assessee had certainly deducted <strong>TDS u\/s.194C<\/strong>, although at a lesser rate followed by three other\nhead<strong>(s) of 194-H, 194-I, and 194-J<\/strong>\nconcerning <strong>zero deduction<\/strong>.&nbsp;<\/li><li>At the least, the\nAssessing Officer had disallowed, and calls the sum into question under the\nfirst head only. As a result, the end of the <strong>impugned disallowance<\/strong>&nbsp;<strong>u\/s\n40(a) (ia)&nbsp;<\/strong>does not apply to the <strong>\u2018short deduction<\/strong>\u2019 of TDS.<\/li><\/ul>\n\n\n\n<p><strong>Case Law: &#8211;<\/strong>&nbsp;<strong>Sri. SingonahalliChikkarevannaGangadharaiahVs. ACIT (ITAT Bangalore) \u2013 ITA No. 785\/Bang\/2018:-&nbsp;<\/strong>No Section 194C TDS on \u2018reimbursement\u2019 of vehicle expenses.<\/p>\n\n\n\n<ul><li>In the presented\ncase, a vehicle was provided by the assessee to the concerned parties, and the\nassessee was to accept the vehicle expenses essentially incurred by the cab\nowners who will be \u2018<strong>reimbursed<\/strong>\u2019 by\nthe concerned parties.&nbsp;<\/li><li>It was held that\nreimbursement of <strong>actual expenses<\/strong>\nincurred by assessee could <strong>not<\/strong> be\nconsidered as payment subject to <strong>TDS <\/strong>under\n<strong>section 194C<\/strong> of the Act.&nbsp;<\/li><\/ul>\n\n\n\n<p><strong>Case Law:-Pediatric Infectious Diseases Academy Vs. ITO (ITAT Kolkata) 2018:&nbsp;<\/strong>Section 40(a)(ia) <strong>not applicable<\/strong> to charitable or religious trust <strong>before 01.04.2019<\/strong><\/p>\n\n\n\n<ul><li>In the present\ncase, it was not justified in holding that the fact of the assessee being the\ncharitable organization is of no significance for the applicable consideration\nof section 40(a)(ia). As per the wording of learned counsel for the assessee,\nthis opinion has been contrary to the decision of the Hon\u2019ble Bombay High Court\n(Explained Above) in the case of \u2018<strong>Bombay\nStock Exchange vs. DDIT 365 ITR 181\u2019<\/strong>.&nbsp;<\/li><li>Additionally, the\n<strong>Finance Act, 2018<\/strong>, has inserted the <strong>explanation 3 to Section 11<\/strong>. It is to\nmake inter-alia the provisions of Section 40(a)(ia) applicable in case of\ncharitable or religious trust or institution with <strong>effect from 1st April, 2019<\/strong>.<\/li><li>It further shows\nthat section 40(a) (ia) up till now was not applicable in calculating the\nincome of entities registration u\/s 12A of the Act. For that reason, it holds\nthat the disallowance made by the A.O. under section 40(a)(ia) was correct, and\nconfirmed by the Ld. CIT(A)<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Latest_%E2%80%93_Amendment_for_Trusts_and_NGO_from_FY_2020-21_onward\"><\/span>Latest: &#8211; Amendment for Trusts and NGO from FY 2020-21 onward<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>It has propounded that the <strong>donors will get deduction<\/strong> only based <strong>on <\/strong><a href=\"https:\/\/corpbiz.io\/tds-return-filing\"><strong>TDS return filed<\/strong><\/a><strong> by trusts<\/strong>, NGOs. It allows meaning that it will be almost like the same as <strong>26AS TDS credit (annual tax credit statement)<\/strong>. There is a responsibility on Trust or Institution to file the Annual Statement of Donation with effect from 1st June 2020.<\/li><\/ul>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/05\/image-91.png\" alt=\"Amendment for Trusts and NGO \" class=\"wp-image-9030\" width=\"516\" height=\"396\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/05\/image-91.png 657w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/05\/image-91-300x231.png 300w\" sizes=\"(max-width: 516px) 100vw, 516px\" \/><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>When the revenue beats the <a href=\"https:\/\/corpbiz.io\/ngo-registration\"><strong>NGO&#8217;s<\/strong><\/a> expenses, it gets considered that such an organization earns profit. It can&#8217;t be implied from the nature of a charitable organization that carries out social, economic or developmental programs to reach those people; even the government cannot reach. The government should encourage the unfolding of subsequently TDS schemes recognition to an independent intervention by opening it up to more meaningful public investigation. <\/p>\n\n\n\n<p>Hereafter, this blog was being entirely for informational purposes after deliberating minute due care. Besides, it does not convey any expert advice or formal preferences. Kindly consult our <a href=\"https:\/\/corpbiz.io\/\"><strong>Corpbiz<\/strong><\/a> team if you need expert advice. We will help you to ensure complete TDS Compliances as per your income tax exemptions, ensuring the successful and timely accomplishment of your work.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/paid-donations-tax-treatment-for-charitable-purpose\/\">Paid Donations: Guide on Tax Treatment for Charitable Purpose\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>TDS means&nbsp;Tax Deducted at Source \u2013 \u201cCollection of tax at the source from where an individual&#8217;s income has originated.&#8221; The government practices TDS as an instrument to collect tax to minimize tax evasion by taxing (partially or wholly) the income at the time created. TDS is pertinent to the numerous incomes such as salaries, interest [&hellip;]<\/p>\n","protected":false},"author":20,"featured_media":9036,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[152,324],"tags":[583],"acf":{"service_id":"51"},"authorName":"Archita Bhattacharjee","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/WhatsApp-Image-2020-03-18-at-11.26.19-AM-1.jpeg","authorDescription":"Archita Bhattacharjee is working as Legal Analyst (Team Lead, Research &amp; Development) at Corpbiz and has proving experience about 2 years as Corporate Legal Researcher in law firms as well as Rajya Sabha and authors in diverse publications. She has refined her skills by representing India in Paris, France and the University of Leiden over implications of International Humanitarian and Criminal Law being certified member of many Legal Centers.","postViews":17757,"readingTime":8,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/9027"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/20"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=9027"}],"version-history":[{"count":13,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/9027\/revisions"}],"predecessor-version":[{"id":22332,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/9027\/revisions\/22332"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/9036"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=9027"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=9027"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=9027"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}