13 February 2012
As per the provison of Section 194c(5) of the income tax act, "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 provided that......" It his regards, it is not clearified whether the said limit of Rs.30,000 is for a value of single contract or transaction value of a single contract. To illustrate this, a Company has maintenance contract with XY Ltd. for Rs.60,000 p.a for which a monthly bill of Rs.5000 is raised by the company. As per company, Since single transaction value does not exceeds Rs.30,000, TDS is not Deductable. However, as per my interpretation, a) Word used for Rs.30,000 is "such sum" and not amount of Such sum.Thus, on reading with section 195c(1), sum refers to the contract value. b) The word used are "amount credited/paid or likely to be credited or paid". the word likely also support the value of contract c) The above provision end without specifying " during the financial year". Thus it is irrelevant whether the amount is credited/paid or to be credited/paid during the financial year or succedings financial years From above, I conclude that limit is to be considered on the basis of value of contract and not on the basis of value of transaction. Hence, TDS is not deducatble in above mentioned case. Please advice whether my opinion is correct or not. Please specify any case law/notification/circular, if any in this regards
15 February 2012
The answer to your query is within the explanation provided, please read the same once again, reproduced below: (5) 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 48a[thirty] thousand rupees : 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 48b[seventy-five] thousand rupees, the person responsible for paying such sums referred to in subsection(1) shall be liable to deduct income-tax under this section.
Therefore, it is very clear that the threshold limit of rs.30000 is per transaction and for aggregate of such transactions during a financila year is Rs.75000.
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