Dear Naveen,
Services are not covered under the scope of "work" in section 194C. Renting out the room is a service, not a work, and hence is not covered for tax deduction. Hence, it would not be required to make TDS on this expense. But just to be on safe side, sometimes 194C is applied. Thats done just to protect yourself from any unreasonable demand from AO; IT IS NOT REQUIRED LEGALLY. The case law provided by lalit Sir is below:
https://www.blonnet.com/2009/05/16/stories/2009051650060900.htm
Correctly establishing that the TDS need not be made on room rent u/s 194C as it is not work.
If renting out the room is done habitually (as per guidelines in circular), then 194-I would be attracted. You may note that to attract TDS provisions, it is not necessary to have a written agreement, rather, we should see the situation actually prevailing, and gauge if there is an implied contract.
Now what if the hotel bill is for food and room stay?
Again, the expenditure for food is outside the scope of section 194C, because that is a contract of sale, not a contract for work. So there need not be TDS on food expenses. However, catering is a contract covered u/s 194C.
CBDT has clarified "Whether a contract for catering would include serving food in a restaurant/sale of eatables?" Answer : TDS is not required to be made when payment is made for serving food in a restaurant in the normal course of running of the restaurant/cafe. - Circular : No. 714, dated 3-8-1995.
According to me, room service is also a part of "serving food in a restaurant in the normal course of running of the restaurant/cafe", because the room service is also a part of the restaurant activities.
Hope your query is resolved. :) Would appreciate divergent/concurring views.
CAclubindia
