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Q. > Please Help: capital work in progress
my client entered into a contract, wherein the tenderer agreed that he shall spend an amount towards rennovation , which the tenderer will reimburse in 36 months. the company has booked the entire amount which is to be spent in the next 12-36 months as a revenue expenditure in year 2011 & deposited tds on it. Pls suggest the nature of the transaction in my receipient clients books
answered Sep 21, 2011 by Ashish Karundia , New Delhi
Dear Geet,
I would request you to explain the transaction as the actual transaction is still not clear.
However, taking the fact that the contractee(tenderer)has deducted and deposited tds on the entire amount and that he has shown the amount to be expensed (12-36 months wala)in his books as revenue expenditure, it may be noted that is will not affect the accounting of transactions in your clients (contractor)book. The client can book the income in respect of the same only once he has rendered the service[Refer AS-1 disclosure of Accounting Policies].
In case of any other issue, please revert at the earliest. Further, I would request you to give the facts in a crystal clear way so the answers can be given to the point...
answered Sep 22, 2011 by Ashish Karundia , New Delhi
Dear Geet,
It may be noted that your client can claim the TDS in the year in which the income is shown i.e. in this case for 1.25 cr he can claim TDS in years in which the same is shown as income.
You can refer circular 5/2001 dated 2.3.2001 can be referred. Further, you can refer the case of Pardeep Kumar Dhir vs Assistant Commissioner of Income-tax, C.C.-IV, Ludhiana [In the ITAT Chandigarh Bench 'B'(Third Member)].
Hope the same answers your issue.
Experts Panelist
Comments
geet paul makkar
22-Sep-2011 , 12:56:04 pmHi Ashish, Thanks for the Revert. the details are that my client had an old theater, for which he enetered into an agreement with an company that he shall apend 1.50 cr for the refurbishment & the same shall be reimbursed to him in 36 months. Due to paucity of funds my client spent around Rs.25.00 lacs on refurbishment during 2010-11 & an almost equal amount was refunded back to him as five installments upto 31-03-2011. Now on seeing the 26AS, i noticed that the company has claimed the entire amount of 1.50 cr as contractual payment & deposited 3.00 lacs as TDS on it. I hope now the facts are in better light as i cannot claim neither the full amount as revenue nor the full amount as TDS & also i will not be allowed the TDS in coming years.
geet paul makkar
22-Sep-2011 , 06:32:00 pmthe problem regarding claiming of TDS is that the construction & repayment period is spread over more than 2 years, where as the tax deductor has claimed the entire amount yet to be spent as revenue expenditure & deducted the tds, in my clients case, the profit/loss shall only arise once the entire project gets completed