nsportation of goods. we are taking the vehicles on rent basis from the market through a broker. we are making the payment to the broker. should we deduct tds u/s 194 c on payment made to the broker??

TDS should be deducted u/s 194H as you are paying the amount to the broker, if the amount of brokerage is not show seperatly then deduct TDS on whole amount

Agreed with Mr. Abhishek. You would have to deduct tds u/s 194H @ 10% on commission paid to broker, if shown sepatately. However, if brokerage is not shown separately then you would have to deduct tds on total rent paid u/s 194 I @ 10%,it it exceeds the exemption limit.

Richa... Are you sure that if brokerage is not shown separately then TDS will be deducted under section 194I and not 194C......

WELL , if brokerage is not show seprately whole amount will be treated as rent and TDS will be deducted @ 2% u/s 194I  and if brokerage is show you are only liable to deduct TDS @ 10% u/s 194H .194C has no applicability here..

 

@ ashish... Yes Sir, if brokerage is not shown separately then that means the entire payment is towards rent hence tds will be deducted u/s 194 I and 194C has no applicability.

And please may I correct myself as the tds to be deducted would be 2% u/s 194 I on rent of vehicle and not 10% as stated earlier by me. However, if brokerage is shown separately then u/s 194H @ 10%.

Dear ruchi....one thing to churn out is..that whether we are having a rent agreement with the supplier...or a contract with a person that he will provide the required vehicle to transporter as and when he requires.........In simple words, it is very common in transportation form of business... It is being in the nature of sub contract.....Therefore it will be covered under 194C.... One thing if we think in legal perspective then we find that rent is taken for some specific number of item..... Here we are not having specific number of item for which we can enter a rent deed.... Here it's just as per need of transporter.......

Dear Ashish

In my opinion, Existence of rent agreement or a specific number of items are not enough conditions to determine the nature of agreement. Agreed that there is a contract between the parties. Your contention that it is as per need of transporter is also admissible. Hence, such rate contracts may/ may not be covered in the definition of rent. My point is that  If you are hiring complete motor vehicles 'on regular basis' then it will be called 'rent' covered u/s 194 I , however, if there is existence of merely a rate contract where hiring is only occassional or casual then it will be covered u/s 194 C.

You may be right ruchi..........I will be very happy if you provide any supporting facts or case law or any citation or anything to support your opinion....... That why it is to be covered under 194I and why it is not under 194C

Hi Ashish , I agree with my fellow counterparts and would like to state 194C has no relevance , as per plain reading of 194c it is clear that a work should be carried on by one person to another , even if as per your contention if i agree that the broker works for you by way of providing you with vehicles , then the work as per your contract with the broker is limited to his services of making available the vehicles for you . Nothing more. His powers as a broker is limited to acting as an agent between you and owner of vehicles , he can in no way on principal to principal basis give you vehicles on rent because he has no authority to do so in the eyes of law . Thus his work is limited to only his brokering services and doesnot include rent amount , so even if you wanted to argue that he is doing his work then you have to compare between 194C or 194 H . As far as the applicablity of 194I, the terms of contract and absence of rent agreement are irrelevant it is substance over form as you are hiring vehicles the same amounts to rent and nothing else, this can be substantiated by plain reading of the sections and interpretation of the same .

@ ashish... I dont have any case law in my eyes right now to support my opinion but the facts of the case and interpretation of various sections form the basis of my opinion. Substance Over form principle, ad stated above, is also relevant.

Ohk.... Thanks ruchi and karthik .. .