Ad-Free CAclubindia and Daily Updates on your mobile. Subscribe Now!

TDS on payment for transport on behalf of third party

26 December 2009

X ( Clearing House Agent ) paid Rs. 50000/- ( Single Payment) on behalf of his client to transporter for carrying containers for export from Ahmedabad to Mumbai. The Lorry receipt is in the name of client. The Trasporter has raised statement of expenses in the name of X A/c Client's. Whether X is required to deduct TDS in the financial year 2006-07 on Rs. 50000/-. The Client has already deducted TDS on payment to X @ 2%..

Reply
Follow
Share

7 Replies

Amir (Learner) (4016 Points)
Replied 28 December 2009

X is required to deduct TDS since The Burden to deduct TDS is on the person making the payment and fact that the invoice is in the name of Client will not escape him from his liability to deduct TDS..

I tell you the simple thing is to deduct TDS to be on safer side.

Upgrade to CAclubindia Pro. Subscribe Now!

PRAVEEN KUMAR (MBA (Finance) B.Com.(P)) (3443 Points)
Replied 28 December 2009

I am not agree with you Mr. Amir on this. if we are paying on behalf of our client, we don't need to deduct TDS.

it is the liability of the service getter i.e. to whom the bill has raised, we need to just debit the client only, and to deduct TDS on services which client is providing to us.

:-)

Praveen

@ CA. $ahar$h @ (Student) (338 Points)
Replied 29 December 2009

Dear Mahendra,

Clearing house always book the client by the amount they have to pay.Clearing house is just a mere agent who pays on our behalf. The client will book the ultimate expenditure of transporter and bill will be raised in the name of the client. So clearing house is not required to deduct tds, rather it will raise a bill on the client of the amount net of tds and client will have to deposit the same. Further the client will also be deducting tds of the clearing house as well.

From 1 Oct,09 there is no tds on freight if the transporter mentions its pan no. hope u r aware of this amendment

@ CA. $ahar$h @ (Student) (338 Points)
Replied 29 December 2009

Dear Mahendra,

From 1 Oct,09 there is no tds on freight if the transporter mentions its pan no. hope u r aware of this amendment

Amir (Learner) (4016 Points)
Replied 29 December 2009

Dear Mahendra

My view to deduct TDS is hereby supported with a Board Circular:-

Payments to clearing and forwarding agents - Payments made to clearing and forwarding agents for carriage of goods are subjected to deduction of tax at source under section 194C, since unlike the travel agents, they are independent contractors. They would also be liable to deduct tax at source while making payments to a carrier of goods—Circular : No. 715, dated 8-8-1995.

Upgrade to CAclubindia Pro. Subscribe Now!

Bimal Thacker (Proprietor) (762 Points)
Replied 29 December 2009

Dear Mahendra

I agree with Mr. Amir. Mr. X (Clearing & forwarding agents) should deduct TDS on the payment of freight to Transporter and also the client should deducted TDS on payment to Mr. X (clearing & forwarding agent). This has been clerified by Board circuler no. 715 dt. 8.8.1995

shailendra (C.A. FINAL) (189 Points)
Replied 29 December 2009

Dear Mahendra,

Here is the simple solution

X's liability to deduct TDS is not disputed. X is under an obligation to deduct TDS.

However client is not under an obligation to deduct TDS on payment to X because it's simply the reimbursement of expenses.

However, if X gives a single bill to his client for the reimbursement of expenses made by him and his service charges, then client will be liable to deduct TDS on the whole bill amount. But if X gives a seperate bill for the reimbursement of expenses made by him and his agency charges then client is liable to deduct TDS only on the bill of agency charges.

It's the actual law.