tds on labor charges for Fixed assets

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This query is : Resolved

Prakash (Querist)

02 May 2009 We install a transformer (treating as assets) to our factory. We paid some labour charges bill for install a transformer. So, TDS applicable on this labour charges bill when labour charges expenses book in assets a/c.

Simililarly, we purchased a machine and party has given bill including labour charges amount. We book bill(including labour charges) in assets a/c. So, here same TDS applicable on this labour charges bill when labour charges expenses book in assets a/c.

We purchased a Truck from A Co. Rs.560000 (Including separate bill of Labour Charges Rs. 60000/-). But total amount Rs. 560000/- finance by IndusInd Bank.So, how will we deduct TDS on Labour charges amount because total amount paid by IndusInd bank if we deduct TDS then A co's debit balance will show in our books for . But We can't force A Co. to pay TDS amount. So, what we will do in this matter.

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)

02 May 2009 If he gives a consoldiated bill as Machinery supplied 100000 then tds is not applicable.

If he gives a bill giving the break up like machinery - 75000 labour charges for erecting et., - 25000 then tds is applicable on that 25000.

K V Subba Rao

K V Subba Rao (Expert)

02 May 2009 TDS has to be affected wherever required irrespective of whether expenditure of capital or revenue nature

In case of expenditure of revenue nature, failure to affect TDS attracts not only usual penal and interest provisions but also disallowance

In case of expenditure of capital nature, there is no question of disallowance of expenditure but usual interest provisions are invoked fo failure to affect TDS

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)

02 May 2009 There is no need to deduct tax on capital expenditure.

taxindiaconnect

taxindiaconnect (Expert)

02 May 2009 TDS is required to be deducted from the payments of particular nature like contractor, commission, interest, rent royalty professional services. It is the nature payment not the nature of expenditure which triggers the applicability of TDS. It is neither the treatment of such expenditure in books which affect the TDS applicability. Thus TDS is required from the expenditure whether the expenditure is capitalised or charged off to revenue in books. So your first query is answered accordingly. In the second query the TDS is required to be deducted from the amount of labour charges if the bill is a separate one. In case the bill is only for machinery and no separate installation / labor charges are charged, as rightly advised earlier, no TDS is required to be deducted.

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)

03 May 2009 Even if the section says that "any sum paid" tax need not be deducted on capital expenditure since nothing as will be disallowed if tax is not deducted.

Prakash

Prakash (Querist)

05 May 2009 If TDS deduct on capital expenditure.
We purchased a Truck from A Co. Rs.560000 (Including separate bill of Labour Charges Rs. 60000/-). But total amount Rs. 560000/- finance by IndusInd Bank.So, how will we deduct TDS on Labour charges amount because total amount paid by IndusInd bank if we deduct TDS then A co's debit balance will show in our books for . But We can't force A Co. to pay TDS amount. So, what we will do in this matter.

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)

06 May 2009 In this case tax is not to be deducted since your are neither paying nor crediting Mr.A in your books of account.

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