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Short Payment and Short deduction TDS defaults-Problems and solutions

Short Payment and Short deduction TDS defaults-Problems and solutions
  By C.A Pratik Anand, ACA

These days TDS has become a nightmare both for the assessee as well as the tax professional with notices being issued by the CPC (TDS) immediately on filing of the Quarterly TDS Statements.

This is an attempt to give a comprehensive list of problems and their solutions relating to short payment and short deduction defaults issued in the intimation U/s 200A:

A) Short Deduction Defaults
Short Deduction defaults arise due to many reasons, some of which are as follows:

1.      Due to PAN Errors:
One of the prime reasons for short deduction defaults is quoting the wrong PAN:
Quoting of the correct PAN is very essential in the TDS Return. Quoting the wrong PAN give rise to TDS demand of 20% less the amount of TDS already deducted.       It also results in no TDS Credit being given to the deductee whose TDS has been deducted.
It also results in defaults in furnishing TDS Certificates as these days the TDS Certificates are being issued from the TRACES website, therefore if the PAN is incorrect, it results in more than one default on the part of the deductor and unnecessary trouble for the deductee who does not get the credit of his taxes paid.
Another problem with quoting of the wrong PAN is that CPC (TDS) while processing the correction statement does not correct the errors in PAN where the mistake in quoting of PAN is more than two alphabets and two numeric characters even in cases of genuine typographical errors. There are two courses of action for correcting the PAN Errors of more than 2 alphabets and 2 numeric characters:
·         To file the correction statement by making the entry with the wrong PAN at an amount equal to zero as the deductee entry cannot be deleted and then add a new deductee row for the amount paid and TDS deducted with the correct PAN.
·         To appeal against the intimation U/s 200A with the CIT (TDS)
Requirements from the client:
·         Copy of PAN card of the deductee.
·         Deduct TDS@20% in absence of PAN of the deductee.
Points to remember:-
·         Correction statement for rectifying any error in the PAN can be done by utilising the online correction facility at , this correction facility can be used by entering the correct details of the profile of the deductor with the TRACES website.
·         Online Correction can be used with or without digital signature of the authorized person.

2.      Due to wrong quotation of Lower Deduction Certificate U/s 197 of the Income Tax Act’1961:

Another reason for the short deduction default is wrong quotation of the particulars of the certificate of lower deduction of tax.
Following should be correctly quoted while filing the TDS Return.

·         Certificate Number
·         Period for which the certificate is valid
·         Amount upto which lower deduction is applicable
·         Rate specified in the certificate at which tax is to be deducted
Certificate Number: Certificate Number is a ten digit alpha numeric number mentioned alongside the TAN and the name of the deductee.
Please remember that the Reference No. mentioned at the top of the certificate is not the certificate number to be quoted while filing the TDS Return which is a common mistake done by the assessees while filing the returns.
Period: Every lower deduction certificate is valid for the specified period mentioned in the certificate. Care should be taken to deduct TDS at the lower rate only for the transactions entered between the period mentioned in the Certificate.
Transactions entered before and after the specified period have to suffer tax deduction at the normal rates as prescribed under the Act.
Amount: Every lower deduction certificate is valid for the amount mentioned in the certificate.
This means that when the total amount of the transactions exceed the limit specified in the certificate, tax at the normal rates as prescribed in the Act is to be dedctee on the amount exceeding the limit.
Rate: TDS should be deducted at the rate prescribed in the certificate.

3.      Due to mistake in deduction of Tax at Source:
Sometimes the assessee due to ignorance or otherwise deducts TDS for such an amount which turns out to be lower than the rates prescribed in the Act.
Care should be taken while filing the return that on every payment the amount of tax deducted is not short of the amount which should have been deducted if tax were to be deducted at the prescribed.
If such a case is found then the balance tax should immediately be deposited vide a new challan.

4.      Due to wrong quotation of 15G and 15H Certificates:
Many people don’t know that non deduction of tax due to receipt of Forms 15G and 15H are also to be reported in the TDS Return, this is especially relevant in the case of banks filing their tds returns.
Incorrect reporting of forms 15G/H particulars can result I short deduction defaults.
Short Payment Defaults
Short payment defaults arise due to the following reasons:
1.      Due to Challan errors:
Short payment errors also arise due to wrong quoting of the particulars of the challan through which tax has been paid.
The necessary challan particulars to be correctly mentioned in the TDS Return are:
·         Challan Number
·         BSR Code of the bank in which tax is deposited.
·         Tender date of deposit of the challan
In addition to this, the details of the payment bank and the mode by which tax is paid are also to be mentioned in the return.
Let us look at these particulars one by one.
1)      Challan Number: The challan number is a five digit number which is provided in every challan by the receiving banker at the time of clearing the challan.
Whenever the challan number is not clear in the challan, the same should be reconfirmed from the bank.
The challan number can also be confirmed from the following the following link:
After logging onto the following link there are two options:
·         Challan based view
·         TAN Based view

a)      In the Challan based view the particulars of each challan can be verified by entering the following details:
BSR Code
Challan tender date
Challan Serial Number i.e challan number
Challan Amount
Note that these can be checked only if you have a rough idea of the above particulars and same are to be confirmed.

b)      TAN Based view: In the TAN Based view the particulars of the challan for a particular period can be checked just by entering the TAN of the deductor and the period for which the challans are to be checked.

Note: The period to be entered here cannot exceed 24 months.

After you enter the desired period and the TAN, the list of all the challans paid during the selected time period will be visible. You will have to enter the amount of challan in order to match the particulars of the challan.

2)      Challan tender date: Challan tender date is the date in which the challan is                                         presented with the bank for payment. This date is entered in the stamp of the bank inscribed on the challan at the time of clearing. This can also be checked from the abovementioned link.
3)      BSR Code: BSR Code is a seven digit code for every branch of the bank i.e every branch has a separate BSR Code. You could check the BSR Code from the internet or by even calling the concerned branch of the bank.
4)      Challan amount: The Challan amount entered should be including interest and other amounts like penalty or fee u/s 234E paid in the challan and should not merely include the amount of tax paid.
Nowadays a challan file is downloaded at the time of generating the TDS Return. This file is an indicator of whether the particulars of the challan have been correctly entered in the Return.
In case of inaccurate particulars being entered in the return, it shows/generates a warning file that the ‘Challan details are not present in the challan file downloaded.’
Another point to remember is that very often the TDS Return is to be filed or is filed on the day or a day after which the challan is deposited in the bank for clearing.
In this case since the challan is not cleared from the bank therefore it will not be present in the challan file downloaded at the time of generation which leads to a warning file as mentioned above.
In this case if there is still time left for the filing of the return, the concerned person should not file the return till the challan is cleared from the bank and is showing in the challan file downloaded. This is so because when we file the return, then the same is processed at CPC (TDS) and if at the time of processing the return the particulars of the challan are present in the challan file then CPC will raise demand for short payment of Tax which is actually not the case.
Point to remember:-
·         Correction statement for rectifying any error in the Challan can be done by utilising the online correction facility at , this correction facility can be used by entering the correct details of the profile of the deductor with the TRACES website.
·         Online Correction can be used with or without digital signature of the authorized person.
Sometimes, there is a case where the deductor mistakenly pays an amount in excess of the amount required to be paid as TDS and such amount is required to be set-off from the subsequent payments of tax.
In this case special care is to be taken while allocating the payments of TDS with the unconsumed amounts of the challan.

Other important points related to challans:
·         From the financial year 2013-14 onwards, the section code under which the challan is paid and that entered in the return does not matter. As long as the amount of tax is paid, wrong entry of the section code will not result in the short payment default.
·         The Financial year entered in the challan is also not relevant. There will not be any short payment default due to this.
·         Mistake in quoting the TAN of the deductor in the challan can only be rectified by the jurisdictional A.O of the assesse and cannot be rectified by the CPC (TDS).

Very soon the CPC TDS is going to bring a notification where it will be mandatory to close all the short payment defaults before the necessary consolidated file can be downloaded for revision of other defaults.
Following are key information to be noted in this regard:
§  CPC (TDS) mandates to close the above default by tagging unconsumed challans, if available in CPC (TDS) system, through online correction (without digital signature).
§  In case there is no available challan for consumption, the deductor is required to first deposit the due tax in the bank and then the same challan will be available for tagging in CPC (TDS) system after around 3-4 days of deposit.
§  CPC (TDS) mandates to close the above default by Matching or Payment of challans.
§  The user will not be able to download Conso file for the relevant TDS statement until the above default is closed.
§  The Online Correction facility of TRACES needs to be used for closure of the Short Payment default.
§  User will subsequently be able to download the Conso file for relevant period only after the default is closed.

Hope you find the above information relevant and useful in your daily practice  

The author is a CA in practice at Delhi and can be contacted at:
Mobile: +91-9953199493

CBDT To AOs: Respect Taxpayer’s Time And Don’t Make Them Wait

The CBDT has issued an Office Memorandum dated 22.08.2014 in which it has pointed out that some AO’s issue notices to taxpayers/ witnesses/ representatives etc. indicating a standard time of appointment. Thus, many persons called for hearing etc on a day by an officer are given the same time for appearance and the persons are made to wait for their turn. It is pointed out that such actions, apart from causing avoidable inconvenience to the taxpayers/ witnesses/ representatives etc cause great embarrassment to the Government. All officers have been advised to strictly maintain the appointment schedule in spirit with the Citizen’s Charter, 2014 of the Department which specifically provides that the Department shall endeavour “to adhere to the schedule of appointments with taxpayers”. All Supervisory officers, i.e. the CCsIT, CsIT and the Addl. CsIT have been requested to ensure that officers reporting to them strictly comply with this instruction and avoid fixing multiple appointments at the same time. Instances of disregard to these instructions may be viewed seriously, it is added.

Approval of Financial statements of a Company for the FY 2013-14 - Have You filed form MGT-14

Approval of Financial statements of a Company for the FY 2013-14 - Have You filed form MGT-14
  By C.A Pratik Anand, ACA

We are all in the process of finalising the accounts of Companies for the Financial Year 2013-14 or have already finalised such financial statements. But, do we know that the resolution with respect to approval of financial statements by the Board for the FY 2013-14 is to be filed with the Registrar of Companies.

As per the provisions of Companies Act’2013, the financial statements of a company alongwith the Directors’ report are to be approved by the Board of Directors of the company at a meeting of the Board of Directors.

Let us take a look at the resolutions to be filed with the Registrar:

As per clause (g) of Section 117 (3) of the Companies Act’2013 the following resolutions are to be filed with the Registrar:

·         resolutions passed in pursuance of sub-section (3) of section 179

Now let us look at the provisions of sub-section (3) of section 179:

Section 179(3):
The Board of Directors of a company shall exercise the following powers on behalf of the company by means of resolutions passed at meetings of the Board, namely:—
(a) to make calls on shareholders in respect of money unpaid on their shares;
(b) to authorise buy-back of securities under section 68;
(c) to issue securities, including debentures, whether in or outside India;
(d) to borrow monies;
(e) to invest the funds of the company;
(f) to grant loans or give guarantee or provide security in respect of loans;
(g) to approve financial statement and the Board’s report;
(h) to diversify the business of the company;
(i) to approve amalgamation, merger or reconstruction;
(j) to take over a company or acquire a controlling or substantial stake in another
(k) any other matter which may be prescribed:

From the simultaneous reading of the above Sections 117 and Section 179 (3) of the Companies Act’2013, it is clear that unlike the previous years, the resolution with respect to approval of financial statements and the Board’s report for the FY 2013-14 onwards has to be separately filed with the Registrar of Companies.
Form MGT-14 has been prescribed for filing resolutions listed under section 117 of the Companies Act’2013.

Q. What is the last date for filing the form MGT-14?

Ans: As per the provisions of Section 117 of the Companies Act’2013, every resolution listed under sub-section (3), has to be filed with the Registrar within thirty days of passing of such resolution.
Therefore, in order to avoid late fee under the provisions of the Companies Act’2013, the resolution approving the financial statements and the Board’s Report has to be filed within 30 days of such approval.

Now let us examine the latest date upto which the financial statements can be approved and Form MGT-14 could be filed.   

As per the provisions of Section 96 of the Companies Act’2013, every company other than a one-person company shall hold in each year a general meeting as its Annual General Meeting within a period of six months, from the closing of the financial year.

Since, the accounting year of most of the companies is the financial year i.e period beginning from 1st day of April of the preceding year and ending with the 31st day of March of the subsequent year. 1st April’2013 to 31st March’2014 in our case, therefore
The Annual General Meeting can be held latest by 30th September’2014.

Section 101:

As per the provisions of Section 101 of the Companies Act’2013,

(1) A general meeting of a company may be called by giving not less than clear
Twenty one days’ notice either in writing or through electronic mode in such manner as may be prescribed:
Therefore, the notice of the meeting should reach the members latest by the 8th of September’2014.
Since, the facility of internet is not available in everywhere in India, therefore we consider notice in writing to be sent by registered post. In that case we consider three clear days as the time lag between the posting of notices and the receipt of the notices by the members. Therefore the notices need to be posted by the 4th of September’2014 for the AGM of FY 2013-14.
Since the notices are to be posted by the 4th of September’2014, therefore the Board meeting approving the financial statements alongwith the Board’s Report and setting the Agenda for the AGM for FY 2013-14 should have taken place latest by the 3rd of September’2014.
So, If 3rd of September’2014 is taken as the date of Board meeting for approval of the financial statements then MGT-14 has to be filed latest by 2nd of October’2014 in order to avoid late fee under section 403 of the Companies Act’2013.


·         In this situation, we have considered clear twenty days notice for the AGM.
The AGM can be called at a shorter notice if consent is given in writing or by electronic mode by not less than ninety-five per cent of the members entitled to vote at such meeting. The situation may alter in that case.

·         The notice of the meeting can also be called by electronic mode i.e E-mail, the notice in that case will be received on the day of mailing itself and the same can be done by the 7th or 8th of September’2014 and the meeting could be held on the seventh of September’2014 and MGT-14 can be filed latest by 6th October’2014.

The views expressed in this article are personal.

Hope you find the above information relevant and useful in your daily practice  

The author is a CA in practice at Delhi and can be contacted at:
Mobile: +91-9953199493

Clarification Accounting Standards (AS) 10- Capitalization of Cost - regarding General Circular No. 35/2014

General Circular No. 35/2014


5th Floor, 'A' Wing Shastri Bhawan, Dr. R.P. Road, New Delhi Dated: 27th August 2014


All Regional Directors,
All Registrars of Companies, All Stakeholders.

Subject: Clarification Accounting Standards (AS) 10- Capitalization of Cost - regarding.


Government has received a number of representations seeking clarifications on

capitalization of costs in cases of Competitive Bid power projects. The clarifications sought were with regard to capitalization of borrmying costs incurred during extended delay in commercial production for  reasons beyond the  developer's· control, and  whether capitalization of power plant should be unit-wise or project-wise. The matter has been examined in consultation with the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI).

2.       Accounting Standards AS-10 and AS-16 prescribe the principles of capitalization of various costs based on the underlying concept that only such expenditure should be capitalized as form a part of the cost of fixed assets which increase the worth of the assets. Cost incurred during the extended delay in commencement of commercial production after the plant is otherwise ready does not increase the worth of fixed assets. Such costs cannot, therefore, be capitalized.

 3.       Accounting Standard AS 16, inter alia provides guidance with regard to part capitalization where some units of a project are complete. In case one of the units of the project is ready for commercial production and is capable of being used while construction continues for the other units, costs should be capitalized in relation to that part once the part is ready for commercial production.

4.       It is further clarified that AS 10 and AS 16 are applicable irrespective of whether the power projects are 'Cost Plus projects' or 'Competitive Bid projects'.
This issues with approval of the competent authority.

Yours faithfully

(S.K Verma) Assistant Director (Policy) Ph:23073067

Copy to:-

ovemance Section and web contents Officer to place this circular on the Ministry website.

2.  Guard File.



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