20 October 2011
Suppose X limited is an agreement with a contractor in May 2011 for a job contract say contract value is Rs 60000/- . Contractor raised 3 monthly R.A bills of Rs 20000/- each. Whether X Limited should deduct tds under section 194C on the logic that it is a single contract? There is no renewal or other contract with the contractor.
20 October 2011
194C is not applicable in this case. Since 1) The amount of single sum credited or paid to the contractor doesn't exceed 30,000; 2) The aggregate of such sums credited or paid during the FY doesn't exceed 75,000.
20 October 2011
I am in agreement with you but does it not an escape route for non deduction of tds which any person can do by splitting the no of bill as well as payment?
"If the single contract is there for Rs. 60000/-, then TDS would apply under section 194C."
When you are giving a view you must have a support observation of the related provision or case law, or circular. From where you are getting the strength?
Section 194C does not talks about the single contract or multiple contracts section read as follows
1."No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed thirty thousand rupees"
2."Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds seventy-five thousand rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section"
First condition referring the single payment or single bill Rs.30000 this is purely related to bill not related to contract value.
2nd condition referring when the payment overall in a year when exceeds Rs.75000 then TDS will apply. here also not talking about the single or multiple contract.
So in my opinion the given case TDS will not apply because in single payment amount is not crossed the limit and over all bills in year also with in limit. so tds will not attract.
finally tds threshold limit is apply for amount paid or credited to the particular assessee not based on the each contract value of the assessee
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