1. TDS is nothing related with inflows & outflows, it is chrged on "Income".
2. HR consulting company providing such workers come under the category of recruitment agency and not under the category of manpower supply agency.
3. Examples of manpower supply agencies are Securiy Services, Roadways Buses & Trucks Operators (e.g. UPSRTC), a replication of sending employees on dedputation...
4. In manpower supply agency the relation of employer and employee exists between agency and the employee and
there is a contract between the agency and the company fr supply of such person.
5. However, in case of recruitment agencies (the only best example is HR consulting company) the relation of employer and employee exists between the company and the employee.
The Hr consulting company, the agency, has just performed a professional service for you by just searching th Best person suiting ur employment criterias....
such services whether named as contract or otherwise are just treated as rendering of Professional Services.
6. The HR consulting company, having requisite skills and competence to select the best candidate for your employment and vacancy criteria is just rendering its services as professional
7. The HR consulting company is never engaged in hiring employees except as required for rendering thier own professional services.....they just select a best candidate suiting the company's criteria.....it is soleley the decision of the company whether to engage or not to engage.
However, in each such cases the company has to pay a certain "Fees" to the onsulting comapny.
8. In case of manpower supply agency(e.g. security agencies)the payment of salary chain work as under:
Company ---> pays money----> agency : referred as payment towards contract. : "Revenue" for manpower agency
Agency ----> pays salary----> employee : referred as salary payment made by the agency to employee : expenses for the agency.
The sum paid by the company to agency & by the agency to the company "differs"....
The agency is bound to pay salry to employees irrespectively whther the company has paid them the amt of revenue or not
9. In Ur example payment of salary to employee by the consulting company is just the "Reimbursement" of payment actually made by the company. they are just paying Mr x on ur behalf....
The chain works as under:
Payment by company to agency:
1. Payment for Fees Rs. 10,000 + ST @ 10.3% : revenue for the consulting comapny (Rs. 10,000 is gross revenue to be shown)
Salary payment Rs. 1 lakh + ST @ 10.3% : Indirect Income to be shown net of expenses in the nature of reimbursements to epmloyee. (rs. 1lakh gross indirect income- reimbursed to employee, may or may not be different)
Payment by Agency to Mr. X
1. Salary payment Rs. 1lakh , if received from the comapny - to be deducted from indirect income and shown as net.... : Nature : reimbursement.
If in any month company doesnt make a payment of Rs. 1,00,000 + ST @ 10.3% to the agency, the agency is not bound to pat Rs. 1 lakh to Mr. X...
10. Two different Acts may have different meaning for the same word...so there is nothing "common" in two different Acts....
Conclusion- U R REQUIRED TO DEDUCT TDS @ 10%......
Circular : No. 715, dated 8-8-1995.
Question No. 12.