30 May 2008
The Same will Fall Under Contract and T.D.S would be Deducted at the Rate Specified in Sec 194C. Neither u are paying proffessional fees nor Technical Fees. In the above case u are entering into contract for leased line which is for certain period and once this period is completed u may have option to enter or exit from the contract.
30 May 2008
under 194J, it will clrearly not fall, there is also a Madras high court decision stating that it is not covered u/s sec. 194J.
Skycell Communications Ltd. v. Dy. CIT 251 ITR 53 (Mad)
but the characterstics given by Chirag also prevails in 194I, and even there is a equipment also. so, on that ground sec. 194I looks ahead in race.
but i have seen at some places that telephone and internet charges are out of tds purview. so, sky looks cloudy.
i paste a query from Business Line tax colum (u can find it on net):
Jan 21, 2008 Is tax required to be deducted at source on payment to a service provider for a leased line for data access?
Rajendra Jain, email
In Skycell Communications Ltd vs DCIT (2001 119 Taxman 496), the Madras High Court ruled that use of equipment and machinery does not tantamount to receipt of technical services. This then rules out deduction of tax under Section 194J. But it appears that one cannot ignore the mandate of Section 194-I, which calls upon a user to deduct tax at source on payment of rent for use of equipments and machinery.
It appears that the CBDT has not come out with any specific circular on this issue. Therefore, everyone including individuals and HUFs coming under the purview of tax audit in terms of Section 44AB may have to deduct tax at source on payments such as the one described by you.
CAclubindia
