TDS amendment in Section 194C

This query is : Resolved

Yogesh Modi (Querist)
Follow

26 November 2009 As per the amendment effective from 1st oct, 2009:

In respect of section 194C, where any sum is paid or credited for carrying out any work ( i.e manufacturing or supplying a product according to the specification of a customer by using material purchased from such customer then in such a case if on the invoice value of material and labour are separately identified then TDS will be deducted only on the labour charges and not on materials . However if the invoice does not specify the value of material and labour separately then TDS is to be deducted on the whole amount. This provision is effective from 01.10.2009

But what about TDS on work where the material is not provided by the customer (i.e., by ICICI Bank) like for printing of cards, posters, envelopes etc. Do we need to deduct TDS on the same.

Because as per Definition of Work under Section - 194C (Explanation (iv)(e)) it does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer.

Sunil

Sunil (Expert)
Follow

26 November 2009 Section 194C has been SUBSTITUTED and not simply amended. Earlier, before the substitution whenever any article was manufactured specifically for the buyer and was customised for the buyer in such a way that only the buyer could use the article, as per board clarification, TDS was applicable in such cases.

After substitution it is now reading as TDS is applicable if the manufacturer supplies goods as per specification of buyer by using inputs from the buyer. There is still silence regarding customisation. Customisation and specification are different from each other in the sense that if you manufacture customised product it is manufacturing to specification but if it is manufactured to specification it does not automatically mean that product is customised.

For you it is to decide whether the circular is still applicable after substitution. I would contend that as the substitution has been done way after the circular, the substituted section 194C should hold more weight. However, it is better you deduct TDS and wait for clarifications.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

26 November 2009 Income tax need not be deducted on the issue raised in 2 nd para by virtue of the explanation cited by u.

Upgrade to CAclubindia Pro. Subscribe Now!

Sunil

Sunil (Expert)
Follow

26 November 2009 There is going to be a slight problem for you. You cannot say that nothing is provided by the ICICI Bank. If ICICI Bank is giving you the artwork of their 'i' Logo on which they undoubtedly have full ownership, then you have an input from them to carry out your manufacturing activity. The ownership of the logo is undisputed. If you just simply print cards using ICICI name and address then there is no problem and as Mr. Warrier says no TDS. However, if the printer is doing the work for ICICI Bank or say a manufacturer of chairs does a job for ICICI Bank with the 'i' logo embossed, even if the die is purchased from someone else, the 'i' belongs to ICICI or any of their entities has the right to use it and claim it as theirs without any disputes and accordingly if ICICI is the buyer, it will have to deduct TDS on wherever their 'i' is used whether it is purchased or not by contractor.

Therefore it is better you list out all the facts of the job/transaction and then arrive at the conclusion. The material is not purchased from ICICI. Mere provision of the same is sufficient to make it a jobwork. Therefore it is better to make a separate bill for stationery (purchased from others and resold with VAT) and service charges for the printing and do the TDS on the printing charges only.