Income Tax - TDS - 'Other Sum Chargeable' - CBDT Explains
AS per Section 40(a)(i) of the Income Tax Act, while computing the income under the head "Profits or gains of business or profession", deduction of any interest, royalty, fees for technical services or other sum chargeable, will not be allowed if there has been a failure in deduction or in payment of tax deducted in respect of such amounts.
Doubts have been expressed as to whether the term other sum chargeable refers the whole sum being remitted or only the portion representing the sum chargeable to income tax under relevant Provisions of the Act.
CBDT had earlier in Instruction No. 2/2014 clarified that in cases where tax is not deducted at source under Section 195 of the Act, the Assessing Officer shall determine the appropriate portion of the sum chargeable to tax, as mentioned in sub-section (1) of section 195, to ascertain the taxliability on which the deductor shall be deemed to be an assessee in default under section 201 of the Act. It has been further clarified that such appropriate portion of the said sum will depend on facts and circumstances of each case taking into account the nature of remittances, income component therein or any other fact relevant to determine such appropriate proportion.
CBDT now clarifies that for the purpose of making disallowance of 'other sum chargeable' under section 40 (a) (i) of the Act, the appropriate portion of the sum which is chargeable to tax under the Act shall form the basis of such disallowance and, shall be the same as determined by the Assessing Officer having jurisdiction for the purpose of sub-section (1) of section 195 of the Act as per Instruction No. 2/2014 dated 26.02.2014 of CBDT.
CBDT Circular No. 03/2015., Dated: February 12, 2015