applicability of tds

Yes the TDS should be deducted by the person / company  who is paying brokerage. It can be taken as preliminary expenses if approved by the BOD.

Yes TDS is applicable on that expenses

For Section 194H

“commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities;

          (iii)  the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956)⁶ ;

     The definition of securities given in section 2 of the Securities Contracts (Regulation) Act, 1956 is

(h) "securities" include- (i) shares, scrips, stocks, bonds, debentures, deben- ture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; (ii) Government securities; (iia) such other instruments as may be declared by the central Government to be securities; and"] (iii) rights or interests in securities;

Hence in my opinion TDS needn't to be deducted at time of public issue.  However its better to deduct to be on safer side.

THE Finance Act, 2001 has reintroduced Section 194 H for deduction of tax at source on commission and brokerage payments. Any payments made after June 1, 2001, by an assessee other than individual or HUF, should comply with tax deduction @ 10 per cent if the sum exceeds Rs 2,500.

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benjonson

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