Please refer the below circular & advise whether we should deduct TDS on Hotel taken for Accomodation for Employees on a regular basis or not????
ircular : No. 5/2002, dated 30-7-2002. > > 1. Circular No. 715 dated 8-8-1995 has been issued by the Central > Board of Direct Taxes to clarify various provisions relating to tax > deduction at source under various provisions of the Income-tax Act. > Question No. 20 of the aforesaid Circular related to applicability of > the provisions of section 194-I of the Income-tax Act in respect of > payments made to a hotel for rooms. The relevant question and answer is reproduced below : > > . . . Q. No. 20 : Whether payments made to a hotel for rooms hired > during the year would be of the nature of rent? > > Ans. : Payments made by persons other than individuals and HUF for > hotel accommodation taken on regular basis will be in the nature of > rent subject to TDS under section 194-I. [Emphasis supplied] > > In this context, doubts have been raised as to what constitutes hotel > accommodation taken on regular basis for the purpose. > > 2-Furthermore, for purposes of section 194-I, the meaning of rent has > also been considered. Rent means any payment, by whatever name called, > under any lease . . . or any other agreement or arrangement for the > use of any land. . . . [Emphasis supplied]. The meaning of rent in > section 194-I is wide in its ambit and scope. For this reason, payment > made to hotels for hotel accommodation, whether in the nature of lease > or licence agreements are covered, so long as such accommodation has > been taken on regular basis. Where earmarked rooms are let out for a > specified rate and specified period, they would be construed to be > accommodation made available on regular basis. Similar would be the > case, where a room or set of rooms are not earmarked, but the hotel > has a legal obligation to provide such types of rooms during the currency of the agreement. > > 3. However, often, there are instances, where corporate employers, > tour operators and travel agents enter into agreements with hotels > with a view to merely fix the room tariffs of hotel rooms for their > executives/guests/customers. Such agreements, usually entered into for > lower tariff rates, are in the nature of rate-contract agreements. A > rate-contract, therefore, may be said to be a contract for providing > specified types of hotel rooms at pre-determined rates during an > agreed period. Where an agreement is merely in the nature of a rate > contract, it cannot be said to be accommodation taken on regular > basis, as there is no obligation on the part of the hotel to provide a > room or specified set of rooms. The occupancy in such cases would be > occasional or casual. In other words, a rate-contract is different for > this reason from other agreements, where rooms are taken on regular > basis. Consequently, the provisions of section 194-I while applying to > hotel accommodation taken on regular basis would not apply to rate contract agreements. >
Party is refusing on the ground that Hotel has not > earmarked any particular Room for our company, neither there is any > obligation on the part of Hotel to provide a room. > > This clearly means that TDS liability of company does not arise. >
26 August 2009
generally travel agents & companies went into contract to have room in a year at a particular rate , below rack rate. If the contract of this nature, then tds is deductible becz in that case it is not necessary that a particulatr room is booked or not.
CAclubindia
