hi friendsas per ceircular no 4/2000dated 28.04.08,service tax should be deduct before deducting tds on rent, if rent includes service tax.
pls. confirm me, it is applicable for professional & contractor or not
plssssssssssssss reply me
3 Replies
malkit
(article)
(23 Points)
Replied 30 May 2008
Shyam Lal Naik
(Service)
(6156 Points)
Replied 30 May 2008
The circular does not speak of general applicability of the principle.
AMIT DOSHI
(CHARTERED ACCOUNTANT)
(74 Points)
Replied 30 May 2008
this circular has been issued wrt rent provisions u/s 194I.. but the same principle could always be followed for TDS on Professional fees u/s 194J bcoz
service provider only acts as a collection agent for the Government. The money thus collected is instantly diverted by over-riding title. Therefore, the service-tax component of the moneys received by the service provider is not the income of the service provider.
Most of the taxable services come within the purview of Sections 194C, 194D, 194H, or 194J of the IT Act and the payer has to deduct tax at source while paying the service provider. Such payment will include service tax. It is clear from Section 190 of the IT Act that tax is deductible out of `income'. By now, the concept of income is so clear that receipts such as service tax can hardly be termed as income of the recipient. Where a receipt is not in the nature of income, the question of deduction of tax (by the payer) does not arise. Therefore, it appears that while paying towards taxable services, the payer has to deduct income tax at source only in respect of the net amount after excluding service tax. Section 194J also refers to ``professional fees payable''. Obviously, professional fees will not include service tax.
Though Section 194C requires deduction of tax ``out of sum payable'', it has to be read with Section 190. If the sum comprises a receipt which is patently not income and does not belong to the recipient, such as service tax, such sums should be excluded for the purpose of TDS. Even the ratio laid down by the Supreme Court in the case of Chowringhee Sales Bureau [(1973)87ITR542] that sales tax is a part of the turnover, will not support a view that service tax is part of professional fees as that decision was given in a different context. Service tax law is unambiguous about the status of the moneys collected as it is in the hands of the service provider. So, let there be no TDS on service tax.
Most of the taxable services come within the purview of Sections 194C, 194D, 194H, or 194J of the IT Act and the payer has to deduct tax at source while paying the service provider. Such payment will include service tax. It is clear from Section 190 of the IT Act that tax is deductible out of `income'. By now, the concept of income is so clear that receipts such as service tax can hardly be termed as income of the recipient. Where a receipt is not in the nature of income, the question of deduction of tax (by the payer) does not arise. Therefore, it appears that while paying towards taxable services, the payer has to deduct income tax at source only in respect of the net amount after excluding service tax. Section 194J also refers to ``professional fees payable''. Obviously, professional fees will not include service tax.
Though Section 194C requires deduction of tax ``out of sum payable'', it has to be read with Section 190. If the sum comprises a receipt which is patently not income and does not belong to the recipient, such as service tax, such sums should be excluded for the purpose of TDS. Even the ratio laid down by the Supreme Court in the case of Chowringhee Sales Bureau [(1973)87ITR542] that sales tax is a part of the turnover, will not support a view that service tax is part of professional fees as that decision was given in a different context. Service tax law is unambiguous about the status of the moneys collected as it is in the hands of the service provider. So, let there be no TDS on service tax.
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