06 April 2012
If employee of holding company act on behalf of Subsidiaries and holding company raised a debit note to Subsidiaries of manpower charges. In that case, Are subsidiaries liable for Tds deduction on debit note?????? If it is liable then in which section 194c or 194j
28 July 2025
Sure! Here's the detailed explanation:
### Context: - The **holding company** is charging the subsidiaries for **manpower services** (i.e., manpower charges) via a debit note. - The question is: Should the subsidiaries deduct TDS on this debit note, and if yes, under which section — 194C or 194J?
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### Why TDS is deductible under **Section 194J** (Fees for Professional/Technical Services) and not under 194C (Contractor payments)?
**Section 194C** applies to payments made for **work contracts or contracts for carrying out any work**, which typically involve physical execution or delivery of goods or services like construction, transportation, repair work, manufacturing, etc.
- Examples: Payments to transporters, builders, contractors for repair work.
**Section 194J** applies to payments made as **fees for professional services, technical services, royalty, or non-compete fees**.
- Examples: Payments for consultancy, technical advice, legal services, professional services.
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### Why manpower charges fall under **194J**?
- When a holding company provides manpower to its subsidiaries (employees acting on their behalf), it is generally considered a **service for professional/technical support or manpower supply**. - The service involves **deployment of skilled manpower or professional services** rather than a physical work contract. - Therefore, the payment is treated as **fees for professional services** (Section 194J) rather than contract work (Section 194C).
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### Summary:
| Payment Type | Relevant TDS Section | Reason | |---------------------------------|---------------------|---------------------------------------------------| | Work contracts (transport, repair, construction) | 194C | Payment for physical work or contracts | | Professional/manpower services | 194J | Payment for professional/technical services, including manpower deployment |
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### So in your case:
- Subsidiaries **should deduct TDS under Section 194J** on the manpower charges debited by the holding company.
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If you want, I can help you with exact TDS rates applicable, thresholds, or how to report this in the TDS return. Would you like that?
CAclubindia
