08 December 2007
Yes. The tax is required to be deducted at source on the gross amount of bill which is inclusive of service tax as per the clarification issued by the Department.
CBDT in circular no. 715 has clarified that Section 194 C and 194 J refer to "any sum paid" and obviously reimbursement cannot be deducted out of bill amount for the purpose of TDS. Therefore, considering the above circular and the amount to be debited in books as expenditure, the tax has to be deducted on the entire amount of bill inclusive of service tax (Source: http://www.lexsite.com/services/network/caa/ar30-a.shtml)
Also visit http://www.taxworry.com/2007/03/tds-on-gross-amount-including-service.html
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