Tds on rent for chemical storage
This query is : Resolved
14 November 2013
Dear Sir/Mam,
Request you to please answer this query..
- There is a company in trading business of a chemical, which takes tanks for storage of its chemical on rent.
Now the question is whether TDS at the time of payment is to be deducted u/s 194I or 194C as there is a contract between the two parties.
Request you to please answer this query..
- There is a company in trading business of a chemical, which takes tanks for storage of its chemical on rent.
Now the question is whether TDS at the time of payment is to be deducted u/s 194I or 194C as there is a contract between the two parties.
14 November 2013
Business requires good contacts.
.
A Contact when converts into a contract, it
results into a business relationship.
.
So you can say that a business runs on the basis of contacts and contracts.
.
All the contracts have got different names.
.
When a specific name is given to a contract it becomes a specific contract. It may be covered by a specific provision of the law, which supersedes the general provision.
.
So in my view 194I is applicable.
.
.
A Contact when converts into a contract, it
results into a business relationship.
.
So you can say that a business runs on the basis of contacts and contracts.
.
All the contracts have got different names.
.
When a specific name is given to a contract it becomes a specific contract. It may be covered by a specific provision of the law, which supersedes the general provision.
.
So in my view 194I is applicable.
.
Message likes :
1 times
14 November 2013
Sir but when we take a space on rent, the utilisation of the space is in our control, but here we are just utilising a part of the total arena available and there is a lessor and lessee relationship. so in that situation also it will be 194I ??
14 November 2013
The payments to the lessor, if otherwise are not named in the agreement differently, are generally known as lease rentals.
.
The company exercises effective control over the space.
.
Further, using of a part or whole, does not make in the nature of the payment.
.
So, I would still advise to treat the said transaction U/s 194I. This safer position costs nothing extra to the company.
.
The company exercises effective control over the space.
.
Further, using of a part or whole, does not make in the nature of the payment.
.
So, I would still advise to treat the said transaction U/s 194I. This safer position costs nothing extra to the company.
18 November 2013
agree with Paras Sir
18 November 2013
Thanks a lot sir
20 December 2013
one more thing whether the storage tanks fall under the definition of Plant & Machinery ????
and in that case what will be effective rate of TDS 2% or 10%????
and in that case what will be effective rate of TDS 2% or 10%????
27 July 2025
Great question! Here’s a detailed breakdown about **TDS on rent for chemical storage tanks**:
---
### 1. **Which Section applies: 194I or 194C?**
* **Section 194I (TDS on Rent)** applies when you pay rent for **land, building, plant, machinery, or equipment**.
* **Section 194C (TDS on Contractor payments)** applies when you pay for **work done or services provided** under a contract.
---
### 2. **Are chemical storage tanks "plant or machinery"?**
* Storage tanks generally **qualify as “plant and machinery”** because they are equipment used for business operations.
* Courts and tax authorities generally classify rented tanks used for storage as plant/machinery if they are used in business operations (not just space rental).
---
### 3. **So, what is the right section?**
* If you are paying rent for **storage tanks (plant and machinery)**, **TDS should be deducted under Section 194I**.
* Even if tanks are partly used or located in a larger area, the rent paid for these tanks is treated as rent for machinery.
---
### 4. **What is the applicable TDS rate?**
* Under **Section 194I**, there are two rates for TDS on rent:
* **2%** if rent is paid for **plant and machinery**.
* **10%** if rent is paid for **land, building, or furniture**.
Since tanks are plant/machinery, the **TDS rate would be 2%**.
---
### **Summary:**
| Situation | Section | TDS Rate |
| --------------------------------------------- | ------- | ---------------------------------- |
| Rent paid for storage tanks (plant/machinery) | 194I | 2% |
| Rent paid for building/space | 194I | 10% |
| Payment for services or contract work | 194C | Applicable if actual contract work |
---
### Additional note:
If your contract clearly mentions “rent” for tanks (equipment), Section 194I at 2% is the correct provision. If it looks like you’re paying for “services” (e.g., operation or handling of tanks with operators), then 194C may apply on that part.
---
If you want, I can help draft a clarification note for your company or provide legal references!
---
### 1. **Which Section applies: 194I or 194C?**
* **Section 194I (TDS on Rent)** applies when you pay rent for **land, building, plant, machinery, or equipment**.
* **Section 194C (TDS on Contractor payments)** applies when you pay for **work done or services provided** under a contract.
---
### 2. **Are chemical storage tanks "plant or machinery"?**
* Storage tanks generally **qualify as “plant and machinery”** because they are equipment used for business operations.
* Courts and tax authorities generally classify rented tanks used for storage as plant/machinery if they are used in business operations (not just space rental).
---
### 3. **So, what is the right section?**
* If you are paying rent for **storage tanks (plant and machinery)**, **TDS should be deducted under Section 194I**.
* Even if tanks are partly used or located in a larger area, the rent paid for these tanks is treated as rent for machinery.
---
### 4. **What is the applicable TDS rate?**
* Under **Section 194I**, there are two rates for TDS on rent:
* **2%** if rent is paid for **plant and machinery**.
* **10%** if rent is paid for **land, building, or furniture**.
Since tanks are plant/machinery, the **TDS rate would be 2%**.
---
### **Summary:**
| Situation | Section | TDS Rate |
| --------------------------------------------- | ------- | ---------------------------------- |
| Rent paid for storage tanks (plant/machinery) | 194I | 2% |
| Rent paid for building/space | 194I | 10% |
| Payment for services or contract work | 194C | Applicable if actual contract work |
---
### Additional note:
If your contract clearly mentions “rent” for tanks (equipment), Section 194I at 2% is the correct provision. If it looks like you’re paying for “services” (e.g., operation or handling of tanks with operators), then 194C may apply on that part.
---
If you want, I can help draft a clarification note for your company or provide legal references!
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