Company “A” is the owner of the brand. Company “B” manufactures the product and sells it. Though Company “A” makes the payment for supplies, invoices are raised in the name of Company “B”.
Company “B” transfers the sales proceeds to Company “A” as and when received from the market.
Thus technically speaking Company “B” buys the raw material, manufactures the product and sells in the market.
The differential amount between Sales and Purchases i.e., If the sale price is say Rs.10 and purchases amount to Rs. 5, the balance Rs.5 is transferred to Company “A”.
Now Company “B” wants to deduct TDS at 10% (194J – Royalty) on the differential amount of sales and purchases.
Company “A” disputes this saying that sales contracts are not liable to TDS. Even presuming that they attract TDS, it should be only 2% under 194C and not 10% under 194J.
A clarification is needed on this.
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