Tds on service tax component

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 February 2014 As per circular no. 01/2014 dated 13-01-2014

In exercise of the powers conferred under section 119 of the Act, the Board has decided that wherever in terms of the aggrement between payer and payee, the service tax componient comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the act on the amount paid / Payable without including such service tax component.

Now, if there is no such written agreement between payer and payee but in the bill the service tax is shown separately, then TDS will be deducted service TAx component or not???

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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17 February 2014 If Service Tax amount mentioned separately TDS will not be deducted on service tax amount.

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AVTAR SINGH

AVTAR SINGH (Expert)
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17 February 2014 The circular does not say that the agreement has to be written.

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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17 February 2014 irrespective of agreement if service tax is sep shown in invoice then no tds.

AVTAR SINGH

AVTAR SINGH (Expert)
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17 February 2014 Mr. Tushar Sampat, could you please provide any notification/circular saying 'irrespective of agreement' no TDS would be deducted on service tax. Just to update my knowledge. Because, I am of the view that as per the Notification 1/2014 the Agreement is not necessarily required to be in written form but there must be an agreement (may be oral), to pay a particular amount for a particular service.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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17 February 2014 By negative analogy it can be interpreted that way as nothing have been mentioned abt the agreement in the bare circular...so u can argue that way.

hope ur doubt is cleared.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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17 February 2014 You can read the circular again ...check in that have they even mentioned anything aboutthe agreement also?

AVTAR SINGH

AVTAR SINGH (Expert)
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18 February 2014 You also read the circular, it does mention 'wherever in terms of the agreement.......' so we cant say irrespective of agreement. We can say as per the verbal agreement but the moment we say without agreement, the benefit can be denied by the Department. We have to be very cautious while submitting reply to any query raised by the Income Tax Authorities. Once you say there is no Agreement, you will put the client in unnecessary litigation.

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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18 February 2014 so how can u prove verbal agreement????????

AVTAR SINGH

AVTAR SINGH (Expert)
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18 February 2014 Simply by saying that verbally we agreed to it and that's why the amount was paid. A written statement made to the Authorities to this effect would suffice.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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18 February 2014 but in law verbal agreement is not considered as enough evidence as per evidence act...

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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18 February 2014 Agreement is necessary. A verbal agreement is enforceable by law when it is consented by both the party.

The CBDT has issued Circular No. 1/2014 dated 13.01.2014 pointing out that the Rajasthan High Court has taken the view in CIT(TDS) vs. Rajashthan Urban Infrastructure that if as per the terms of the agreement between the payer and the payee, the amount of service-tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service-tax component u/s 194J of the Act. Pursuant thereto, the CBDT has decided in exercise of powers u/s 119 that wherever the terms of the agreement/ contract between the payer and the payee, the service tax component comprised in the amount is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.

So agreement/contract (be it verbal or written is an essential element).

Complete notification may be seen from below link--

http://law.incometaxindia.gov.in/DIT/Circulars.aspx

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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19 February 2014 Thanks sanjay bhai for the clarification.