X Ltd. credits a sum of ₹ 45,000 as commission to Y Ltd., an Indian company on 25.06.2020 without deducting tax at source. Y Ltd. paid its entire tax liability on its income by way of advance payment of tax during P.Y. 2020- 21 and filed its return of income for A.Y. 2021-22 on 15.07.2020. X Ltd. also has a certificate in Form No. 26A from a chartered accountant. Compute the amount of deduction that shall be allowed to X Ltd. in respect of the commission credited to Y Ltd. assuming that X Ltd. follows mercantile system of accounting:
A. ₹ 45,000
B. Nil
C. ₹ 13,500
D. ₹ 31,500
Answer:A
X Ltd. credits a sum of ₹ 45,000 as commission to Y Ltd., an Indian company on 25.06.2020 without deducting tax at source. Y Ltd. paid its entire tax liability on its income by way of advance payment of tax during P.Y. 2020- 21 and filed its return of income for A.Y. 2021-22 on 15.07.2020. X Ltd. also has a certificate in Form No. 26A from a chartered accountant. Compute the amount of deduction that shall be allowed to X Ltd. in respect of the commission credited to Y Ltd. assuming that X Ltd. follows mercantile system of accounting:
A. ₹ 45,000 B. Nil C. ₹ 13,500 D. ₹ 31,500