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TDS on Technical fee

Vikash Kharvar (Dy. Manager -F&A) (469 Points)

18 March 2011

Dear CCI Members,

Please suggest what should reply me to our Vendor on the following case :

Our Co. take one year Mail excess service from Rediff Mail.com for33,972/- on this amount i have deduct TDS @ 10% p.a. under Section 194J (Professional & Technical Services).

But Vendor is calling that his service will be fall in 194C (being he is given annual contract in nature) and TDS should be deduct @ 2% p.a.

Am i Right, Pl. sugesst ?

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12 Replies

Angad kr kannaujiya (Studant) (169 Points)
Replied 18 March 2011

can u express "Mail excess service " then it is esey to give solution

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ankit singhal (student) (123 Points)
Replied 18 March 2011

Dear Vikash

Actually your vendor is right TDS should be deducted under 194C on a contract basis because u have a contract with them and in this type of mostly cases TDS is deducted under 194C

Vikash Kharvar (Dy. Manager -F&A) (469 Points)
Replied 18 March 2011

Dear Mr. Ankit Singhal,

But the Vendor have charge Service Tax on their service.

Vikash Kharvar (Dy. Manager -F&A) (469 Points)
Replied 18 March 2011

Dear Mr. Anand Kr. Kannaujiya,

Term "Mail Excess Service" shall mean Rediffmail Enterprise Pro, a common web based email management solution provided by Rediff.com under which Client can avail various eMailboxes for its Users to interact and communicate through email in a quick and efficient manner.

Pankaj Arora (Learner) (3134 Points)
Replied 18 March 2011

THIS SERVICE COVERS SERVICE TAX THAT’S WHY PARTY CHARGE YOU SERVICE TAX HENCE IT DOES NOT MATTER THAT U/S 194C SERVICE TAX DOES NOT COME… YOU HAVE TO DEDUCT TDS ON GROSS AMOUNT….

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(Guest)

Dear Vikash,

The service rendered by the vendor is under contractual basis. It is not a professional service. A profession or vocation is that where the qualified person only can do the job. On other person can fulfill his job as a substitute. The service about the mail box is not a professional service. Any employee of Rediff can provide you that service, provided you contract with them.

Therefore, Your vendor's contention is right. The situation falls under section 194C and not u/s 194J.

Secondly, regarding service tax,

Service tax charged has nothing to do with the TDS provisions. The TDS is to be made on the gross amount only. The only exception is Sec.194I where TDS is deducted on rents. Here, TDS is to be deducted on the net amount i.e. after deducting service tax. In all other cases except 194I, TDS is made on gross amounts.

Regards,

Bhagirath KS

<<corrections, suggestions welcome>>

(Guest)

@ subramanya

how can u dedudct TDS on service tax amount .

service tax is nothing but collection of government revenue by service provider .

it has nothing to do with Income tax act which is deducted by way of TDS on the Income generated by the person from us.

can any one show me the source of this information???

comments r welcomed..

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 19 March 2011

Originally posted by : S. VIJAY NARENDRA
	@ subramanya how can u dedudct TDS on service tax amount . service tax is nothing but collection of government revenue by service provider . it has nothing to do with Income tax act which is deducted by way of TDS on the Income generated by the person from us. can any one show me the source of this information??? comments r welcomed..

TDS is related to payment basis , not on the mode of bill and taxation . gross amount PAID or credited on account is liable for TDS, it does not matter that payment is inclusive of direct or indirect or state taxes, TDS is to be decuted on all inclusive amount.

Muralidharan (Chartrered Accountants) (115 Points)
Replied 19 March 2011

In Chennai, the IT Department is taking a stand that any IT company is a Professional body like Satyam or any other IT Providers even if they provide with a lease line for connectivity, Dept is insisting that the Assessee is required to deduct tax u/s 194 J since the service provider is a Professional company. This is just for your information. May be on the same line as the IT Dept in Chennai taking a stand Mr Vikash Kharvar has followed

(Guest)

Originally posted by : U S Sharma
	Originally posted by : S. VIJAY NARENDRA @ subramanya how can u dedudct TDS on service tax amount . service tax is nothing but collection of government revenue by service provider . it has nothing to do with Income tax act which is deducted by way of TDS on the Income generated by the person from us. can any one show me the source of this information??? comments r welcomed.. TDS is related to payment basis , not on the mode of bill and taxation . gross amount PAID or credited on account is liable for TDS, it does not matter that payment is inclusive of direct or indirect or state taxes, TDS is to be decuted on all inclusive amount.

The answer for ur question is...

https://www.simpletaxindia.org/2008/05/tds-on-rent-194-i-not-including-service.html

A long awaited clarification regarding tds on payment of service tax on rent u/s 194-I has been Issued by the CBDT.Details about the issue is given hereunder

Brief about section 194-I

Rent is to be deducted by all person on payment of rent except huf and individual who's sales is less than limit specified in section 44AB(tax audit)(40 lacs for business 10lac for professionals)
Rent means any payment by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of
(a) land; or
(b) building (including factory building); or
(c) land appurtenant to a building (including factory building); or
(d) machinery; or
(e) plant; or
(f) equipment; or
(g) furniture; or
(h) fittings,
section is applicable even in case of payee is owner or not.
Rate of tds is(upto payment made on 30.09.2009)
For use of any machinery or plant or equipment:10%
For other assets :in case of
Payee is Individual or Huf:15%
other case:20%
Rate of tds is( payment made on or after 01/10/2009 as per Budget 2009)
For use of any machinery or plant or equipment:2%
For other assets :10%
No need to add surcharge and Cess for resident deductee
The rate of TDS wil be 20 per cent in al cases, if PAN is not quoted by the deductee w.e.f. 1.04.2010
Tax is deductible only if amount of rent paid is more than 12oooo

what was the issue
whether the service tax paid on rent of immovable property to landlord is to included while deducting tax at source.
what is clarified

and now clarification by CBDT has been issued that service tax should not be included while deducting tax at source on rent paid to landlord.

what are implications of clarification

Clarification has been issued in such a manner like that this issue were never a issue at all.what is wording please look

"Service tax paid by the tenant doesn't partake the nature of income of the landlord."

By this the CBDT has indirectly fixed a relation between Income and TDS whether it has been fixed intentionally or unintentionally,but this clue/wording can be used for other tds provisions by the assessee in his defense while not deducting tds on reimbursement of taxes so we can draw a conclusion that if person is getting mere reimbursement of taxes than tds should not be deducted.
For calculating the amount of 120000 now service tax amount should be excluded ,suppose if a person pay rent of rs 108000 to payee and 12.5% service tax on rent i.e 13500.in this case though total amount paid is 121500 but tds is not deductible after clarification as rent amount is only 108000 and less than 120000 prescribed in the section 194-I
Can we apply this clarification on section 194-J also

Update:05.07.2008:A clarification regarding applicability of circular 4/2008 has been issued by the dept to bombay chamber of commerce and clarified that section 194 j is not covered under circular 4/2008 .hence tds should be deducted on service tax under section 194J(professional fees)