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TDS on Supply of Goods under Income Tax Act

RAHUL SINGH (Student CA Final ) (69 Points)

21 December 2018

Dear All,
This is to ask whether TDS is to deducted by a Municipal Corporation on receipt of goods from a supplier under a Tender for supply of goods.
If yes, then under which section..

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2 Replies

M M SALUNKHE (M COM G D C & A) (23 Points)
Replied 21 December 2018

Yes Under Section 194C provides such Deductions

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Z (Tax Consultation (US and India)) (2965 Points)
Replied 21 December 2018

TL: DR> No.

A transaction of sale is not a works contract, unless such sale arise by manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer.

Citations

Eshan Minerals Pvt. Ltd.V/s. The Deputy Commissioner of Income Tax, ITA No. 1242/PUN/2014

CIRCULAR NO. 13/2006, DATED 13-12-2006 contained the reference to Circular No. 681, dated 8-3-1994 the Board clarifies in para 7(vi) that the provisions of section194C would not apply to contracts for sale of goods and further clarifies that where the property in the article or thing so fabricated passes from the fabricator-contractor to the assessee only after such article or thing is delivered to the assessee, such contract would be a contract for sale and so outside the purview of section 194C.

Is municipal corporation out of the purview of S.194C?

[No,]

As per S. 194C, Tax is to be deducted if a contract for carrying out any work exists between the contractor and a specified person

"specified person" shall mean,—

(a) the Central Government or any State Government; or

(b) any local authority; or

(d) any company; or

(e) any co-operative society; or

(f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or

(g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or

(h) any trust; or

(i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or

(j) any Government of a foreign State or a foreign enterprise or any association or body established outside India; or

(k) any firm; or

(l) any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, if such person,—

(A) does not fall under any of the preceding sub-clauses; and

(B) is liable to audit of accounts under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor;

As per S.2(31) of the General Clauses Act, 1897, "local authority" shall mean a municipal committee, district board, body of port commissioners or other authority legally entitled to, or entrusted by the government with the control or management of a municipal or local fund;

[So 194C may be applicable to you in some cases. You are not out of its purview by reason of being a Municipal corporation.]

Further, As per S.194C(iv), "work" shall include—

(a) advertising;

(b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting;

(d) catering;

(e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer.