TDS on Demolition - Tricky Question

TDS 1418 views 2 replies

K Rajendra Prasad

133 Points Joined March 2007

This question is little bit tricky. Pz try.

Mr A is a Contractor who is specialized in demolition of large buildings. M/s ABC , Firm , is the owner of a multi storied building. Both accounts are liable for Tax Audit u/s 44AB of the Income Tax Act. Mr A and M/s ABC has entered into a contract and gist of the contract is as follows.

1. A will demolish the building with its manpower , machinery.

2. M/s ABC is the owner of the scarp.

3. A will sell the entire scarp on behalf of ABC. Invoice will be raised by ABC. Proceeds will be credited into ABC Account.

4. After that entire sale proceeds will be transferred to A account.

5. A will pay Rs.1000/- per Steel of MT and Rs.500/- per Wood of MT.

6. This payment is entered in A books as an expenditure.

7. What is the TDS liability by A and ABC. Here A is providing his Service , ABC is supplying old Building.

Regards

CA K Rajendra Prasad

Replies (2)

Member

Management

325 Points Joined February 2010

What is the contract amount ? That amount will attract TDS u/s 194C. As for sale of scrap, may be TCS will be attracted and ABC will have to collect that amount from the buyer and remit to Government.

If there is no amount involved, then what for is the contract taken by A? He doesn't seem to be getting any benefit out of this deal.

Max Payne

employed

2574 Points Joined May 2008

Dear Rajendra,

As Member said, 194C will be on the charges of A towards demolition of the building....

The sale transactions involving steel and wood are outside the purview of TDS..... So A need not deduct the TDS on the payment to ABC

Regarding TCS on scrap sales, yes, TCS will be applicable as per section 206C(1)....

But by getting an declaration from A, that he is going to use this scrap for manufacture or production, not trading, TCS can be avoided. The declaration should be in form no 27C (Refer Rule 37C)