Allowability of Expense - where tds paid by holding company

[Kirti Tulsyan]

Dear Professionals

H is a holding company & S is a subsidiary company . H Pays for all the expense bills on behalf of S & also pays the TDS.

H transfer the entry to S & S books the expense.

Whether the expense will be disallowed in the books of S, since TDS was not paid by S ?

(if any relevant case law is there please provide)

Can anyone provide guidance on this ... thanks in advance .

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Best Regards

Piyush Choraria

REPLY 1

Sir,

the way expense is paid by holding company on behalf of subsidiary, in the same way the TDS is also paid by the holding company on behalf of its subsidiary. The challan should be filled in the name of the subsidiary, the subsidiary also has to file TDS return for the amount deposited, it is just the fund of the holding company which is utilised.

when expense is booked by the subsidiary at that time TDS should also shown as a deduction and when the holding company deposits the tds on behalf of the subsidiary, based on the challan the subsidiary should debit TDS payable and credit the account of the holding company.

in such case the expense will be considered as an allowable expenditure in the hands of the subsidiary company.

Hope I have been able to resolve the matter to some extent.

Regards

Abhisek Konar

REPLY 2

Hi,

Although what Abhishek has said seemed to be correct & should be followed to avoid any controversy neverthless , I guess, many holding Cos do deduct/deposit TDS from exp which are later allocated to their subsidiaries  who then do not deduct TDS and still exp are allowable. I would also request the readers to provide supporting case law and/or any other material to justify non deduction of TDS in the hands of Subsidiary cos.

Ramesh Bansal

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Best Regards, 
Kirti Tulsyan
B.Com.,ACA,CS


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