10 July 2009
please tell me whether tds u/s 194C is applicable on :- printing & designing work in case of 4 pages newsletter in pharma co. vat @ 4% is there in invoice. we have not provided any material to the job worker. this very urgent . I request any advice from ACA OR FCA.
10 July 2009
This is case if sale of Material and not contract for any work or labour. So, need for tax deduction. Mr.Ratan's answer needs reconsideration.
11 July 2009
U/s.194C, a person is required to deduct tax at source, at the time of making payment to a resident for carrying out any work, including supply of labour for carrying out any work. The tax is required to be deducted at the rate and the time specified by S. 194C and the tax so deducted is required to be deposited within the time provided by Rule 30 of the Income-tax Rules. The expression ‘carrying out any work’ has been a subject matter of judicial controversy, for long. The Section does not define the said expression nor does it provide any guidelines for enabling a payer to determine whether a payment made by him was for carrying out any work or was for the purchase of material. Ordinarily, a payment is made either for getting work done in respect of material supplied by the payer or is made for purchase of material. In the first case, the tax is required to be deducted at source, and in the latter case, no tax is required to be deducted. This simplicity achieves a complexity where a person makes payment for purchase of material as well as for working on such material. Further, difficulties arise in cases of a supplier-manufacturer of general merchandise, where he produces the same product as per the specifications of the payer and also carries out some labour work in the process of such manufacturing. In cases of composite payments for composite contracts to the same person, for supply of material as also for supply of labour, it is difficult for a person to determine his liability to deduct tax u/s.194C. A dilemma is faced by such a person regarding the true nature of such payments. Whether the payment was made for supply of any article or for the supply of labour, or both, is a question a payer has to address. For example, a person purchasing packing material like corrugated boxes or bags or wrappers on which the supplier undertakes to carry out printing as per the specifications of the payers or purchasing the customer-specific bus-body from a manufacturer, who supplies the material as well. The Supreme Court in the case of Associated Cement Co. Ltd., 201 ITR 435, considered this contentious issue in detail and laid down the guidelines for deciding whether the payment was made for carrying out any work or was made for purchase of any material. Subsequent to the decision of the Supreme Court, the Section was amended by inserting Explanation III to define the term ‘work’. However, the issue of the liability to deduct tax at source in cases of composite contracts continues to be debatable.
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