Clarification

This query is : Resolved

CA Nitin Wadhwani (Querist)
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26 August 2008 author : vishal
Posted On : 8/26/2008 2:24:47 PM
As per CBDT Circular No tds has to be deducted on service tax on rent paid. because service tax is not a income of the person who is receiving rent.

If this is the case then how the tds can be recovered on service tax charged on contract, Professional fees, commission etc., In these case also the person is acting as agent of government.

The person is collecting service tax from the clients and paying to the government just like rent. Service tax is not a income of the person.

I think this decision should be challege in court and there should rule that tds should not be charged on service tax of all categories.

Expert : CA Hemant T Dewani
Posted On : 8/26/2008 3:07:30 PM
amendment is made for rent only & not other services

Whatever May Be The Expenditure If Deduct TDS On Amount Excluding Service Tax There is No Harm.
It is Absolutely Correct And Generally It is Done This Way.

Ranjit Ahluwalia

Ranjit Ahluwalia (Expert)
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26 August 2008 By the Finance Act 2007, Central Government has extended the levy of service tax on renting of property with effect from 1.06.2007. Under section 194-I of the Income-tax Act TDS have to be deducted by any person, who is responsible for paying to a resident any income by way of rent. So the question was whether TDS have to be deducted on rent, inclusive of service tax or exclusive of service tax. By Circular No. 4/2008, dated 28-4-2008, CBDT clarified that Service tax paid by the tenant doesn’t partake the nature of income of the landlord, thus TDS has not to be deducted on Service tax. Though this clarification was in respect of section 194I, but it was the considered opinion of professionals and tax consultants that this view is also applicable in respect of other TDS provisions. But the CBDT has recently clarified to the query of Bombay Chamber of Commerce & Industry that TDS is also applicable on service tax portion in respect of professional / technical fees payable u/s 194J.

Therfore everybody needs to take decision on their own factoring the litigation which may get attracted.

CA Nitin Wadhwani

CA Nitin Wadhwani (Querist)
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26 August 2008 The CBDT has recently clarified to the query of Bombay Chamber of Commerce & Industry that TDS is also applicable on service tax portion in respect of professional / technical fees payable u/s 194J.

Can You Plz Provide The Documantary Of Such Evidence?

Hiral Raja

Hiral Raja (Expert)
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20 November 2008 No TDS has to be deducted in case of service tax on rent. However the same is applicable on the service tax charged on professional/technical and other services.

The reason for the same as is given by IT officials in a letter under RTI is as follows:

- Section 194I specifically refers to the word"Income by way of rent" whereas

- Section 194J mentions "paying any sum by way of fees for professional, technical services,, royalty,etc. Similar wordings are there in section 194C and other sections also (except section 194I)

Hence the benefit of non deduction of TDS on service tax component is available only in respect of Section 194I and not others.

Hope the same clarifies.

In case you need any further details/clarifications, pls. let me know the same.

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