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TDS on rent for space used for advertisement

Dilip (Working) (408 Points)

01 December 2009

We had hired a space for a day or two in one of big mall for advertisement purpose. they had sent a invoice towards rent for signages. so now my question is whether i have to deduct tds u/s 194I or 194C because my usage is for temporary period, can it be covered under contract...?

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20 Replies

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 01 December 2009

Dear Dilip,

In my opinion the TDS should be deducted u/s 194C.

194I does not apply because there is no landlord-tenant relationship between you and the vendor.

The vendor has also raised an invoice saying "Rent for signages".It falls under advertisement because it helps in increasing your sales.

We also had the same problem with a client who booked stall for exhibiting his products.We deducted TDS u/s 194C.

Dilip (Working) (408 Points)
Replied 01 December 2009

Dear Fatema,

In my opinion, it is an pure case of rent and contract as there is also not an contract between them and us. Further they are issuing invoice as mentioning rent for signages. what is your further view on it.

Harshal (Article Assistant ) (182 Points)
Replied 01 December 2009

Yup fatema dilip is right...the invoice clearly states that they are charging rent and so here TDS should be deducted u/s 194I....

Moreover dilip if u can ask d mall authorities to change the invoice than u can prob deduct TDS u/s 194C, else not possible...

Dilip (Working) (408 Points)
Replied 01 December 2009

Dear Harshal, Jus changing the words in invoice is not only an matter to decide the applicability of TDS, it is also matter with actual facts, otherwise any one will write an contract instead of professional service or rent or whatever.

Harshal (Article Assistant ) (182 Points)
Replied 01 December 2009

Yeah Dilip i knw bt d situation u hv drafted compels dat it is contract...bt d invoice states dat it is rent and so i was of d opinion dat changin of invoice would help...

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 01 December 2009

Harshal,

even i said the same thing above.The situation is a contract and does not cum under the definition of rent under explanation (i) of sec 194-I.

Harshal (Article Assistant ) (182 Points)
Replied 01 December 2009

Yeah fatema bt u cnt also ignore invoice as it states rent on it....it may create problem in future...so i was of opinion of chngin d invoice...

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 01 December 2009

Dilip's question was regarding TDS.so i just gave my opinion.Changing the contents of the invoice depends on him.

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 01 December 2009

we have also have the same problem but if we deduct on rent a huge amount of tax is deducted and they are left with no margin change the invoice and deduct it under contract

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 01 December 2009

Sivaram,

this should not be the logic behind deducting tds u/s 194C.It is treated as expenditure towards advertisement because it is enhancing your sale.Hence the tds is deducted u/s 194C.

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 01 December 2009

Harshal /Fatema

There is one Advertisement agency which bills for display at Airport for median charges .Though the medians are at Aiport which belongs to Munciplaity the party only bills as display charges .We do have agreement between them and they dont use the word rent anywhere .Going by CBDT Circular 715 i think so advise me as to under what section TDS to be deducted under 194c or 194 I

Dilip (Working) (408 Points)
Replied 01 December 2009

Dear Fatema,

you are right, i am now accepting your point, for rent there should be an lease or rent agreement and it should be for some period. in my case it is for temporary period and also it is for advertising purpose though they are writing rent on it. thanks dear...

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 01 December 2009

I think it should be under section 194C.

Gurusamy Raja (CA Student) (19 Points)
Replied 01 December 2009

while explaning the work contract u/s 194C, 'work' has been defined to include - advertising, broadcasting & Telecasting, carriage of goods & passengers by any mode other than railway, catering

u/s 194I Defnition of Rent means - payment by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of - land, building, machinery, plan, equipment, furniture, fittings.

Please note 194I covers payments made for above purposes only and it does not contain any specific words of advertisement, hoarding rent, etc and the defnition of Sec 194C, specifically covers the advertisement payments, hence the TDS on advertisement must be done u/s 194C only

Please also refer Circular 715 dt 08/08/1995, 717 dt 14/08/1995 for further clarifications

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