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No tds on service tax circular dtd. 13-01-2014 (Income Tax)

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Author : Anonymous

( Author )
19 January 2014

The circular dtd. 13/01/2014 No TDS on Service Tax. Can anybody elaborate it. How it is applicable to section 194I and 194J. How this circular is beneficial to us.


@VaibhavJ

( Expert )
19 January 2014

Hi

Its applicable on 194 J.

Under 194 I TDS on ST is not applicable.

Thanks


C A S.S.Agarwal, M.Com.,LL.B,

( Expert )
19 January 2014

CBDT had issued a Circular No. 4/2008 dated 28.04.2008, wherein it was clarified that tax is to be deducted at source under Section 194-I of the Income-tax Act, 1961 on the amount of rent paid/payable without including the service tax component.

Representations/letters have been received seeking clarification whether such principle can be extended to other provisions of the Act also.

Board had actually clarified in Letter F.No. 275/73/2007-IT(B), dated 30-6-2008 as follows:

Deduction of Tax at source on Service Tax - The payments made under section 194-I differ significantly from payment made under section 194J in the way that in the case of 194-I TDS has to be deducted on any income paid as rent. However, in the case of section 194J TDS has to be deducted on any sum paid as professional and technical fees. The Board had decided to exclude TDS on service tax component on rental payment because it was construed that service tax payment cannot be regarded as income of the landlord. Since section 194J covers any sum paid, therefore the Board has decided not to extend the scope of Circular No. 4/2008, dated April 28, 2008 to such payment under section 194J.

Anyway Board seems to have forgotten this letter. They are reminded of a recent judgement of the Rajasthan High Court dated 01.07.2013, in the case of CIT(TDS) Jaipur vs Rajasthan Urban Infrastructure - 2013-TIOL-663-HC-RAJ-IT, holding that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service tax component u/s 194J of the Act.

On re-examination of the matter, in exercise of the powers conferred under section 119 of the Act, the Board has decided that wherever in terms of the agreement/ contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.

CBDT Circular No. 1/2014 in F. No.275/59/2012-IT(B), Dated: January 13, 2014.

Pursuant to an important judgement of the Hon’ble Rajasthan High Court, in the case of Commissioner of Income Tax (TDS), Jaipur Vs. M/s. Rajasthan Urban Infrastructure [2013 (8) TMI 12 – RAJASTHAN HIGH COURT] holding that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service tax component u/s 194J of the Income Tax Act, 1961 (“the Act”).
Earlier, vide Circular No. 4/2008 dated 28-04-2008 it was clarified that tax is to be deducted at source under Section 194-I of the Act, on the amount of rent paid/payable without including the service tax component. Representations/letters has been filed to CBDT seeking clarification whether such principle can be extended to other provisions of the Act also.
CBDT has examined the matter afresh and clarified vide Circular No. 1/2014 dated 13-1-2014 (Produced Below) -“TDS under Chapter XVII-B of the Income-tax Act, 1961 on service tax component comprised of payments made to residents” that wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/ payable without including such service tax component.


Author : Anonymous

( Author )
19 January 2014

Hi,
So the above Act is applicable to Only Section 194J and 194I only. In case of 194I the TDS has to be deducted only on amount of Rent payable without including service tax component. For eg. Rent PM is Rs.100000/- and service tax thereon is Rs.12360/- so the TDS @10% to be deducted on Rs.1 Lac and not the amt. of rs.112360/-. And in case of Professional Fees or Techincal Fees Rs.50000/- and service tax @12.36% is 6180/- so the TDS has to be deducted on rs.50000/- and not on rs.51680/- (50000+6180)vide circular dtd. 13/01/2014 by CBDT. Am i right in above context pls. explain


Ganeshbabu K

( Expert )
20 January 2014

As per circular 1 /2013 dated 13.1.2014
.

It is applicable to all tds secctiona chapter XVII-B of incometax act which comprises payment made to residents
.



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