Tax deducted at sorce

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This query is : Resolved

Manju (Querist)

01 April 2008 Is TDS to be deducted from Payments of a Company to Travel Agents (if in excess of Rs.50,000/annum). What all kind of payments do come under 194C . Is all service providers included under the scope of this sectiom?

Late CA Sampat Jain

Late CA Sampat Jain (Expert)

01 April 2008 Payments to airlines/travel agents - The provisions of section 194C do not apply to the payments made to the airlines or the travel agents for purchase of tickets for air travel of individuals. The provisions shall however apply when payments are made for chartering an aircraft for carriage of passengers or goods. This clarification will apply mutatis mutandis to the tickets for travel of individual by any other mode of transport also—Circular : No. 713, dated 2-8-1995.

The payments made to a travel agent or an airline for purchase of a ticket for travel would not be subjected to tax deduction at source as the privity of the contract is between the individual passenger and the airline/travel agent, notwithstanding the fact that the payment is made by an entity mentioned in section 194C(1). The provisions of section 194C shall however apply when a plane or a bus or any other mode of transport is chartered by one of the entities mentioned in section 194C—Circular : No. 715, dated 8-8-1995.

CA. GOPAL SONIKA

CA. GOPAL SONIKA (Expert)

02 April 2008 Following are few instances

1 The deduction of income tax will be made from sums paid for carrying out any work or for supplying labour for carrying out any work. In other words, the new provision will apply only in relation to “works contracts” and “labour contracts” and will not cover contracts for sale of goods.
2 Contracts for rendering professional service by lawyers, physicians, surgeons, engineers, accountants, consultants, etc, cannot be regarded as contracts “for carrying out any work” and, accordingly, no deduction of income tax will be made from payments relating to such contracts.
3 A transport contract cannot ordinarily be regarded as “contract for carrying out any work” and, as such, no deduction in respect of income tax is required to be made from payments made under such a contract. In the case of composite contract involving transport as well as loading and unloading, the entire contract will be regarded as “works contract” and income tax will have to be deducted. Where however, the element of labour provided for loading and unloading is negligible, no income tax will be deducted.
4 Service contracts not involving the carrying out of any work are outside the scope of the provision.
5 With a view to prevent postponement of liability to deduct tax at source, tax will now be deducted at source either on accrual or at the time of credit to the account of the payee or at the time of payment whichever event occurs first. Further, any sum credited to the “suspense account” or any other account, by whatever named called, is to be deemed to be a credit for the purpose of tax deduction at source under section 194C.
6 The carriage of documents, letters, etc is in the nature of carriage of goods and, therefore, provisions of section 194C would be attracted in respect of payments made to couriers.

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