TDS

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CA-ASPIRANT (Querist)
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28 January 2011 Dear Sir,

Fact: "A" company has entered into a contract with "B" company AND "B" has leased a photo copier machine to "A" and charges fees on the basis of number of prints out on monthly basis.

Question: Whether TDS shall be deducted u/s 194C or 194 I.

My view: The above fact shows that is not a work contract, there is no involvement of man power at all. The service is absolutely completed with the man power of company "A".

Hence Section 194C is not applicable.

I seek your valuable opinion at the earliest. Pl give your answer with reference of laws.

Thanks & Regards

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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29 January 2011 Agree. Sec 194C will apply. It is not rent which is evident from the fact that the rent amount is not fixed. Fees are charged on the basis of number of prints out on monthly basis. Hence it is out of the purview of Sec 194I. TDS deductible u/s 194C.

CA-ASPIRANT

CA-ASPIRANT (Querist)
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29 January 2011 It is not necessary that rent should be fixed.

and in my above mentioned question, we discussed about the work contract, in my query there was no work contract.

Experts are requested to explain the issue with reference of law.

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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30 January 2011 "" Fact: "A" company has entered into a contract with "B" company AND "B" has leased a photo copier machine to "A" and charges fees ""
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Facts shows that the activity is to carry out any "work" in pursuance of a contract.
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The manner in which the work is carried out is not material.
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194C applies on all types of Contracts, whether works or other (contract).
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Rent does not depend upon any factor like production, or in your case No. of copies.
Rent is generally a fixed amount and is never equal to Zero. In this case it can be valid for Zero amount.
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Hence I agree with expert CMA. Sanjay Gupta.
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Ranjan Dayal

Ranjan Dayal (Expert)
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30 January 2011 The gist of the circular No. 681, dated 8-3-1994. As per this, "The provisions of section 194C shall apply to all types of contracts for carrying out any work including transport contracts, service contracts" .
Since in the given case, it is a service contract hence TDS will be deducted under sec.194C.

CA-ASPIRANT

CA-ASPIRANT (Querist)
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31 January 2011
AS PER CERCULAR NO. 681 DT . 8.03.1994

The Supreme Court has held that “...there is nothing in the sub-section which could make us hold that the contract to carry out a work or the contract to supply labour to carry out a work should be confined to ‘works contract’....” . Their Lordships have further held that “‘Any work’ means any work and not a ‘works contract’, which has a special connotation in the tax law.... The Supreme Court has held that “...there is nothing in the sub-section which could make us hold that the contract to carry out a work or the contract to supply labour to carry out a work should be confined to ‘works contract’....” . Their Lordships have further held that “‘Any work’ means any work and not a ‘works contract’, which has a special connotation in the tax law.... ‘Work’ envisaged in the sub-section, therefore, has a wide import and covers ‘any work’ which one or the other of the organisations specified in the sub-section can get carried out through a contractor under a contract and further it includes obtaining by any of such organisations supply of labour under a contract with a contractor for carrying out its work which would have fallen outside the ‘work’ but for its specific inclusion in the sub-section.”

I think the photocopier taken by the company is not a work,

Pl explain the concept.

Thanks

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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31 January 2011 "Photocopier taken by the company is not a work"
I think, you will allow me to modify this sentence from the perspective of the contractor, as he has to do work for the company. By putting a photo copier, no work has been performed by the contractor? No ... It can't be said. For performing this work (which is "any work") contractor is getting money.

Now we consider from the company's angle.

Taking copies from the photocopier can be said a "work". and amount, being paid to the contractor is in reference to this work.

If he takes away the machinery, what the company can do?
Can it get photocopies? ....No.
Can the contractor demand money from the company for no work done in this situation?...No.

To get photocopy is a work. To Put machine for getting photocopies is also work.

So.. Now it's your choice?
(Because we all have other work also. And the first work is to advise the company to purchase its own photo copier.)

CA-ASPIRANT

CA-ASPIRANT (Querist)
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01 February 2011 To Put machine for getting photocopies is also work.

SIR,

AS FAR AS I UNDERSTAND FROM YOUR VALUABLE OPINION, TO PUT MACHINE FOR GETTING PRINTOUTS IS A WORK AND TDS SHALL BE DEDUCTIBLE U/S 194C.

THEN, WHEN A COMPANY TAKE GENERATOR ON RENT FOR GENERATING ELECTRICITY, WHY TDS IS DEDUCTED U/S 194 I IF PUTTTING OF MACHINE IS A WORK.

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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01 February 2011 Intention plays a great role in deciding whether a particular transaction is of a rent or a contract.

"Basically, wherever importance on physical possession is given more impetus than the productive part, it may be termed as "rent"

but where production is given more impetus than the possession of asset, we may term it as a contract."
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In your query, I observed that, the terms of contract are dependent upon the productive part only, and there is no term which indicates otherwise, hence it has been told as a contract.

If you go through the terms and conditions on which generator has been taken on lease, and apply the above test , you may find the difference.

-Generator is taken on rent
-But Contract for Supply of electricity can also be .entered into.
So it depends a lot upon the terms of contract.