21 April 2008
YOUR POINT 1 IS NOT CLEAR.KIDLY CLARIFY.HOWEVER REGARDLESS OF THAT AS IT APPEARS TO BE 2 BILLS OF A COMPOSITE CONTRACT , TDS WILL HAVE TO BE MADE U/S 194C @ 2.266%.
21 April 2008
You should deduct TDS only on first bill which is charges for providing man power to you. In second bill which is purely salary to guards and do not attract TDS.
Both the payment is for supply of man power or for a service contract for security. It is a contractual payment. Substance should supercede mere form. 194C is clearly attracted in this case.
25 April 2008
Yeah, definitely, but it depends on the contract script, If the agreement/contract specifically provide that the agency will charge a specific %s or amount on the payments to Security guards then only the amount payable to that agency is tax deductible.
25 April 2008
Sections 194C and 194J refer to any sum paid. Obviously, reimbursements cannot be deducted out of the bill amount for the purpose of tax deduction at source.
Before issue of such circular ,Supreme Court in Associated Cement Co.Ltd vs CIT[1993] 201ITR435 held that person responsible for deducting tax is not required to estimate the income comprised in the payment . Relevant portion of judgment is
"Indeed, it is neither possible nor permissible for the payer to determine what part of the amount paid by him to the contractor constitutes the income of the latter. It is not also possible to think that Parliament could have intended to cast such impossible burden upon the payer nor could it be attributed with the intention of enacting such an impractical and unworkable provision. Hence, on the express language employed in the sub-section, it is impossible to hold that the amount of two per cent. required to be deducted by the payer out of the sum credited to the account of or paid to the contractor has to be confined to his income component out of that sum. " There fore without going into the question whether the service tax or education cess should be included for TDS purpose or not, payer should deduct the tax at gross amount of PAYMENT.
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