Treatment-of-sponsorship-in-a-sole-prop-firm-

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This query is : Resolved

Mayank (Querist)

18 May 2013 Hello respected sirs,
I am from Kanpur, UP
We run a garments business under sole prop. format and being a brand for youth, we keep on organizing events for publicity. This time we are organizing an event on a PANindia level which involves getting sponsorship of Rs.30,00,000.
I would like to ask that firstly, being registered as a trader, can we accept sponsorships??
Secondly, How much TDS would be deducted if on an average we rake 7.5 lacs from each sponsor...
Thirdly, The expense made in the whole event would consume approx 90-95% of the sponsorship amount, would the remaining 5% would be only taken to my personal income while assessing it for income tax??
It would be really great if you could oblige me by the correct guidance..

Thanks'
mayank
8090724107

CA. RAVIKUMAR

CA. RAVIKUMAR (Expert)

19 May 2013 Hi
1) As per my view you can accept the Sponsorship subject to Service tax registration and Service tax payment.( refer revere charge mechanism under Service tax)

2)It cover under 194C as per the Circular No. 715, dated 8-8-1995. (question no 18. in the circular)

3)Yes, only difference is taxable under income tax, subject to expenditure qualifies for deduction i.e complience of income tax act like., TDS, Non cash payment etc..

note that you have to consider that sponsorship fee collected as Business receipt and claim the expenditure as a deduction and balance is taxable income.

CA. RAVIKUMAR

CA. RAVIKUMAR (Expert)

19 May 2013
note that you have to consider that sponsorship fee collected as Business receipt and claim the expenditure as a deduction and balance is taxable income.

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