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INCOME TAX - ARTICLES

TDS on element of service tax in payments liable to TDS under I. T. law.

 

The CBDT's Circular No. 4/2008 dated 28.4.2008 clarifies, in relation to TDS on payment of rent that a tenant is not required to deduct TDS on the amount of service tax paid/payable on the rent. This clarification donot give exemption from applicability of TDS on Service Tax element involved in all kinds of payments covered under various provisions relating to TDS.

The CBDT has, however, vide its letter addressed to the Bombay Chamber of Commerce & Industry, dated 30.6.2008, declined to extend the exemption to payment of fees for professional or technical services attracting TDS as per the provisions of section 194-J. The CBDT has distinguished these payments from payment of rent, on the reasoning that while section 194-I uses the phrase ‘any income paid as rent’, section 194-J covers ‘any sum paid as professional or technical fees’.

So TDS liability on the amount of service tax involved in payment of insurance commission (u/s 194-D), commission on sale of lottery tickets (u/s 194-G) and other commission or brokerage (u/s 194-H), can be escaped based on the analogy of Circular No. 4/2008, since these sections also use the same terminology as section relating to rent.

However, in terms of the CBDT’s clarification dated 30.6.2008, payees shall continue to deduct TDS on the amount of service tax involved in payments to contractors /sub-contractors for execution of works contracts under section 194-C, since the use of word ‘sum’ in section 194-C is analogous to that in section 194-J.

 

 

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