Dear Experts/Professional Colleagues,
As per the CBDT Circular No. 4/2008 dated 28.04.2008, it is clarified that TDS must be deducted on rent u/s 194-I, exclusive of service tax. The logic given by the department is that, the service tax component does not form part of the service provider's income. For the purpose of service tax, he is merely acting as a collection agency of the Government.
But my view is that (as have also been pointed out by many experts in this forum earlier), in all the other cases too, the TDS must be deducted exclusive of service tax. In those cases also, the service tax component does not form part of the service provider's income.They are merely acting as a collection agency. Even if we go by the words of Law, except for Section 194C and 194J, TDS must not be deducted on the service tax component as the words "by way of income" is mentioned in the relevant sections. So, the circular issued by CBDT seems to be self-contradictory because it clarifies the matter only with regards to Section 194-I whereas the words "by way of INCOME" is mentioned in many other sub-sections to Section 194 (For example - 194H, 194A etc..).
I dont know whether we have already forwarded our view to the Government or not for consideration, but we as a professionals should go about making such efforts for proposing these amendments to ICAI, which will escalate it to the Government for consideration.
I invite the views of all the experts present in the forum.
CAclubindia
