Pradeep kumar T V (Ops Executive) (87 Points)
11 October 2019Dear Sir/madam,
I would like to know if a research company hire agriculture land to grow paddy for R&D purpose and the rent would be 5,00,000/- PA. Do we need to deducted TDS?
Please confirm under which section do we need to deduct TDS? Sec 194I or 194C?
With advance thanks
Pradeep Kumar T V
Kapadia Pravin
(17259 Points)
Replied 17 October 2019
Suresh Thiyagarajan
(Student)
(3986 Points)
Replied 17 October 2019
1. As per sec 2(1A), rent received from a land that is used for an agricultural activity will be covered under agricultural income and subsequently exempted from payment of tax.
2. There is no doubt cultivation of paddy is an agricultural activity. Now the question is whether R&D expenditure incurred on the growing of paddy will be covered under agricultural activity.
3. In my view, it is very much an agricultural activity and if so, it will be exempted from payment of tax and TDS need not be deducted on the same.
Please correct me if the above solution has an alternative view.
Ashok Kumar
(CA qualified)
(389 Points)
Replied 17 October 2019
TDS provisions flow from Section 4 in respect income chargeable u/s 4. Constitution does not constitute power to CG to levy tax on Agricultural Income (AI) and hence Section 4 does not apply to AI and hence not includible in total income.
However, there may be an issue of integration of agricultural and non-agricultural income. And since there is a hidden tax levy on agricultural income and TDS is only a mode of recovery of tax, it is advisable to deduct tax
Kapadia Pravin
(17259 Points)
Replied 22 October 2019
Rent receipt by Agri land owner from a person for using land for Agri purposes will be considered as Agri income and it will qualify for exemption under 10(1).
But the onus of TDS non Deduction will be on Research company and that's why research Company will prefer to deduct TDS and request the land owner to claim in his ITR.
One more way is to apply for a nil rate certificate from department by Land owner and furnish it to Research Company.
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