TDS u/s 194-I or 194-C?

This query is : Resolved

CA Parag Jani (Querist)
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18 October 2010 One of my clients has entered into an agreement with taxi contractor for providing taxis for their outstation works. Now the terms of the agreement provides for a fixed monthly lumpsum amount (for say 2000 kms p.m.) to be paid irrespective of the number of kilometers travelled. Over & above the 2000 kms, it charges on per km basis.

Now is it subjected to TDS u/s 194-I as Rent (as fixed lumpsum amount is there) or u/s 194-C (as taxi contractor)?

Also clarify - "TDS need not be deducted u/s 194-C in case the transport contractor furnishes his PAN to the deductor." Is it so that these proviso applies only in case of Goods Transporters & not passenger transporters as in my case?

Regards

PARAG

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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18 October 2010 TDS to be deducted u/s 194C.

As per the amended section 194C, through Finance Act (2) of 2009, No deduction shall be made from any payments made to a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his PAN to the deductor.

This new subsection 6 of 194-C makes such transport contractor to compulsorily provide PAN to the Deductor, failing to which TDS will be made by Deductor as per 194C.

Applicability
This provision is applicable on payments made on or after October 01, 2009. Such scenario should be determined by checking whether the Deductee has provided his PAN to the Deductor, during the payment.

So this rule will not apply in your case.

taxindiaconnect

taxindiaconnect (Expert)
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18 October 2010 Two correction are required in the understanding of Sanjay on the issue -

One - The taxi hiring is not business of plying, hiring or leasing of goods carriage, it is passengers carriage. The meaning of goods carriage is provided in explanation to section 44AE of IT Act. so the amended provisions of section 194C are at all not applicable to this situation.

Two - The applicability of sub section 6 of section 194C is not limited to the period mentioned by him. This provision is applicable even today

Hope this clarifies the issue better.

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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18 October 2010 Firstly I have mentioned that TDS is deductible u/s 194C. I just gave condition and below i have mentioned that this rule will not be applicable in this case.

Secondly i accept the mistake of date this rule is applicable from 01.10.2009. upto 31st is wrongly posted.