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Wht obligation where fts invoice includes cost of material

Kushal (Student) (225 Points)

17 February 2015

In case of an invoice received from a resident vendor for technical services received, the invoice also mentions cost of materials separately. Request you to let me know whether tax is to be withheld under section 194J from the whole amount of invoice or after reducing the cost of materials from the invoice? Pls also let me know the case laws/ provisions from where you derive the answer.

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Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 17 February 2015

There are various Judgements in this regard. Various cases interprete the sec.194J provisions in different ways. Some courts held that TDS is to be deducted on entire bill since section.194J stipulating a condition that TDS is to made on Gross amount charged which include reimbursement of expenses also. Refer Circular no.715 dated 8-8-1995, whrere clarification to question no.30 clearly stated that Reimbursement charges will also attract T.D.S. But as it is a Circular where it binds Revenue authorities only (but not assessee), Assessee can deduct TDS excluding Reimbursement expenses challenging Circular. But on safer side, no one prefer to have allegations with Revenue authorities. To avoid TDS on it, better thing is request Service provider to issue seperate bills for Reimbursement of expenses and his service charge where there is no problem where you can deduct TDS on his service fee only.