I would like to draw your kind attention of some facts as below :-
Scenario 1 :-
Mr. A purchased some materials from Mr. B for Rs. 8,000/- vide Invoice No. 1 dated 05.06.2009. Again on 08.06.2009 he purchased some materials from Mr. B for Rs. 6,000/- vide Invoice No. 3. On 01.07.2012 Mr. A hire Mr. B for some assembling Work and Mr. B raise a service invoice for the same for Rs. 16,000/- for the same.
On 25.08.2012 Mr. A issued a cheque to Mr. B for Rs. 30,000/- for all the above bills.
Scenario 2 :-
Mr. X hired Mr. Y for doing assembling charges on 04.06.2009. Mr. Y Completed the work and raised a bill to Mr. X for Rs. 10,000/-. On 12.07.2009 Mr. X again hired Mr. Y for assembling and Mr. Y raised a bill for Rs. 12,000/- for the same. On 10.08.2009 Mr. X again hired Mr. Y for assembling and Mr. Y raised a bill for Rs. 8,000/- for the same. On 01.01.2010 Mr X issued a cheque for Rs. 30,000/- to Mr. Y.
Now My Question is
Is TDS applicable in both the cases ?
There is a provision of single payment but the above payments are made for 3 bills in both the cases.
Kindly give your opinion / Guidance on urgent basis as this problem is related to IT Scrutiny.
10 October 2012
For both the cases No TDS applicable because of first read the section 194C once so i here reproducing that section.
TDS ON CONTRACTS - SEC 194C:
1) Any person responsible for paying any sum to a resident contractor for carrying out any work,in connection with a contract,including sub-contract shall deduct tax at source under this section. It may be noted that the contract under this section includes a contract for supply of labour for carrying out work.
2) The tax deduction at source under this section shall be made either on payment or credit whichever is earlier.
THRESHOLD LIMIT FOR DEDUCTION:
i) the amount of any single sum credited or paid to the contractor exceeds Rs.30000 or ii) the aggregate amount of such sums credited or paid to the contractor during the financial year exceeds Rs.75000.
Note: i not produced complete section i.e i produced the points which are reliable for your case only.
Now analysis of section with your cases.
A) according to the point no 1, 194C applicable for the work not for the purchases/sales so in the scenario 1 of you purchases of Rs.14000(8000+6000) doesn't comes under contract payment.
B) according to the point no 2, TDS would be deducted at the time of payment or credit which is earlier based on the point no (i) or (ii) i.e if such payment or credit by single entry is Rs.30000 or more or if such payment or credit exceeding the contract amount to such person of Rs.75000 during the year. So Scenario 1 of you doesn't comes under any of these provisions. Because of you made the credit first before the payment so TDS liability would be calculate on the date of credit such on such date no TDS deduction liability will arises.
C)At the same way scenario 2 of you; you first made the credit so at the time of credit there is no liability to deduct TDS as well as aggregate amount of credit doesn't arises the deduction of TDS liability according the above provision. So no liability of TDS deduction.
So please explain this clearly to the AO if any objection by them. All the Best.
CAclubindia
