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TDS on Installation of machinery

Prachi (Student) (30 Points)

03 January 2010

Hi Friends,

I have 1 query regarding TDS. If I purchased machinery say costing Rs 5Lakhs which includes installation cost of Rs 15000/- (Which is separately mentioned in the bill).Is it necessary to deduct TDS ?On what amount it should be deducted (on entire amt or only on installation cost ie considering it as labour charges)?

will the answer be different if installation cost is more than Rs 20000/-

please give reference of circular or cases.....

Please reply me as early as possible...Its urgent

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17 Replies

CA Anand Oberoi (Chartered Accountant) (296 Points)
Replied 03 January 2010

yes, TDS should be deducted if installation cost exceeds Rs. 20000 and if it is separately mentioned on the bill.

1 Like

Prachi (Student) (30 Points)
Replied 03 January 2010

Is it necessary to deduct TDS on entire amt?

CA Anand Oberoi (Chartered Accountant) (296 Points)
Replied 03 January 2010

NOOOO....!!! Machinery is an assest. We dont deduct TDS when we purchase an asset. There is no section or provision in I.T. ACT which asks for deduction of TDS on purchase price of assets.

so... deduct TDS only on labour amount (i.e. installation charges only, if they ae shown separately on bills.)

1 Like

CA CS Amit Borade (Chief Accountant) (2828 Points)
Replied 03 January 2010

As per IT act Section 194 c TDS should be deducted on any payment made in persuance of any contract

>>> for carring out work

>>> for supply of labour

So in the given case TDS should be deducted on payment made towards Labour charges only ...

Thanks

1 Like

Bimal Thacker (Proprietor) (762 Points)
Replied 04 January 2010

If this is for the current year then better to deduct TDS on Labour charges for not going in litegation.

If it is for prior year and you have not deducted TDS then also don't worry as the main contract is for supply of goods i.e. machinery and not for labour work. As per IT act Section 194 c TDS should be deducted on any payment made in persuance of any contract

>>> for carring out work

>>> for supply of labour

You will find the various judgement in your favour if the tax has not deducted

Thanks

NARENDER PAWAR (CA final Student) (337 Points)
Replied 04 January 2010

this is a capital expenditure there is no need of dedution of tds

Gaurang Desai (CA FINAL & CS Inter Student) (123 Points)
Replied 04 January 2010

Originally posted by : Prachi

rule of TDS is to be applied per party here only one bill of party is came, & it is capital expenditure,hence not required to deduct TDS

yash bhartiya (final student) (245 Points)
Replied 04 January 2010

if tds is not deducted the maximum that happens is that expense will be disallowed..

thus if in this case tds deduction is not mandatory as this expense will be capitalised and the question of disallowance of expenses does not arise even if raised as a seperate bill(As-10)

thus deduction of tds depends upon the wish of the payee

Aditi Arya (Ok) (51 Points)
Replied 04 January 2010

Agree with Anand sir

CA Pramod Jain (manager finance) (1577 Points)
Replied 04 January 2010

i think for safer side if the amt exceeds 20000/- tds should be deducted u/s194c

yash bhartiya (final student) (245 Points)
Replied 05 January 2010

acha i ask a question to all those ppl who says that tds should be deducted

what will be the consequences if i don deduct tds

CA Anand Oberoi (Chartered Accountant) (296 Points)
Replied 05 January 2010

hiii yash.

with due respect i agree at your point that this expense will be capitalized anyway (as per AS-10). BUT, if such expenses are shown separately on bill and you claim capitalisation without deducting TDS, then such capitalisation will not be considered proper as you cannot disobey the ACT. a CA has to report this improper treatment in form 3CD (Tax Audit).

Further, if this company got selected for scrutiny order by ITO, then demand for bills of Fixed Assets will be made along with other documents (it is a part of general format of scrutny order u/s 143(2). at that time, ITO will surely raise this matter and then you will not be able to make him understand. he will disallow capitalisation and will disallow excess depreciation too.

so, its always better to deduct TDS if such expenses are more than 20000 and shown separately.

agree or not???

1 Like

mallela.ravikiran (learner) (136 Points)
Replied 06 January 2010

Hi Seniors,

according As-10, what ever the expenes incurred towards asset put to use we need to capitalise respective asset. So installation expenses also capital expenses. No need to deduct TDS.

Please advice..