Hi,
I would like to request your help regarding TDS when there is a service receiver and 2 service providers in an advisory role to their client. I would like to explain this with an example to simplify my query.
Example: There are 2 entities A and B providing an advisory role to company C. A has an agreement to receive fees from C directly. A and B have back to back agreements wherein A would distribute say 50% of the fees received from C to B. Now let us say the total fee received is Rs 10 lacs. C would deduct 10% i.e. Rs 1 lac as TDS when it pays to A. A has received Rs 9 lacs and TDS certificate of Rs 1 lac. A would then give B fees of Rs 5 lacs (based on back to back agreement) and deduct Rs 50,000 as TDS. So total TDS deduction in fees of Rs 10 lacs is Rs 1.5 lacs. Now in spirit A and B's entitlement to the fee is Rs 5 lacs each and total TDS outflow should have been Rs 1 lac but it is Rs 1.5 lacs as per the above arrangement. I would like to request views from fellow CAs on following:
1. Is the above understanding correct for actual TDS deduction?
2. Is there a way where A can show its gross income as Rs 10 lacs and Net Income as Rs 5 lacs (after declaring that Rs 5 lacs belongs to B quoting its PAN, etc.) and hence is there a way to claim TDS of Rs 50,000 each for A and B?
3. Do the equations change if A and B are individuals instead of companies?
Please let me know your views. Thanks.
Regards
Nikhil D
CAclubindia
