Business   

TDS for payments to mutual associations

Where the Association is registered as a company under Section 25 of the Companies Act or as a society, such a company or Association of Persons may not be exempt as a charitable institution, since its purpose is confined to service for its members and not the general public. It may, however, be exempt on principle of mutuality.

Any payment of interest is liable for tax deduction under Section 194A. Deduction cannot be avoided by the Association by filing Form 15G, which is available only for individuals and HUFs. In such cases, the recourse for such association is to get a certificate of non-deduction from the assessing officer under Section 197A, which is available in the case of a person “not being a company or a firm”. An Association of Person, therefore, qualifies for such certificate.

The view of the assessing officer that the assessee is not exempt as a charitable institution is correct. Since, however, the assessing officer has accepted the argument, that the assessee is not liable for tax on mutuality principle, he could have well issued a non-deduction certificate.

The question, whether any member of the association has taxable income or not is relevant only for application of maximum marginal rate in the case of an Association, which is liable to tax, where the members have taxable income. In the case of associations exempt on mutuality principle, it is immaterial.

The decision not to issue certificate of nil deduction is unfortunately a decision for which no appeal is provided. An administrative remedy may well be possible on a complaint with the next superior officer or the Commissioner of Income-tax. A writ being expensive, may not be viable.

The only other alternative left for the association is to claim refund after the end of the accounting year by filing voluntary return of nil income along with refund application and await refund.

Past deductions can only be subject matter of refund applications along with the returns. Refund applications will be within time only for current assessment year and the immediately preceding year.

For earlier years, it is possible for the Commissioner to condone the delay and admit the application.

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

Galloping inflation, a cause for concern
Cloud of uncertainty hangs over the IT-BPO sector
Alarm bells ring for Indian foundries
TDS for payments to mutual associations
No ceiling on contributions to Sec. 35AC or 80GG
New telecom brand

Copyright © 2008, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu