1. Presentation by Jayant Gokhale B. Com, L.lb, FCA Chartered Accountant
IMC Seminar on TDS-Recent Developments
Domestic Transactions covered by
Ss. 194 C, 194H, 1941, 194J, 194IA,
Presentation by Jayant Gokhale B. Com, L.lb, FCA Chartered Accountant

2. Deduction of Tax at Source COVERAGE
S. 194 C
Payments to Contractors & Sub- Contractors
S.194J
Fees for Professional or Technical Services Including Royalty, & Non- compete fees covered by s.28(va)
S.194-I
Rent
S.194-H
Commission or Brokerage
S. 194 IA
Payment on Transfer of Certain Immovable Property…

3. Features Common to s. 194 C , 194 H, 194 I, 194 J
Deduction at time of payment or credit whichever is earlier (including credit to account of Payee, suspense a/c or by any other name)
No tax deductible by Individuals/ HUFs unless such person was liable to tax audit in the immediately preceding financial year
Disallowance u/s 40(a)(ia) applies in all cases in the event of default
Threshold limit applies in all the four cases
Certificate for Lower Deduction u/s 197 possible
Deduction not required to be made in case of payments made exclusively for personal purposes C & 194 J
this exclusion does not apply in the case of commission brokerage and rent

4. S. 194 C - Applicability Applies to payments to a resident
By a person making payments in pursuance of a contract for
carrying out any work
including supply of labour for carrying out any work
Distinction between Contractors & Sub-contractors removed w.e.f
No separate rate for advertising contracts
No TDS from payment to contractor during course of business of plying, hiring or leasing goods carriages if PAN furnished
Only goods carriages, not passenger vehicles (buses, taxis, etc)
Irrespective of number of vehicles
No form prescribed as yet for details of payments
Rate of Deduction - 1% if payee is individual/HUF, 2% if other

5. S. 194 C - Inclusions & Exclusions
work’ shall include
advertising;
broadcasting and telecasting including production of programmes for such broadcasting or telecasting;
carriage of goods and passengers by any mode of transport other than by railways;
Catering.
Manufacturing or supplying a product per requirement/specification of customer IFF using material purchased from such customer.
No TDS from payment to contractor during course of business of plying, hiring or leasing goods carriages if PAN furnished
Only goods carriages, not passenger vehicles (buses, taxis, etc)
Irrespective of number of vehicles
The details of PAN and the fact of non-deduction have now to be mentioned in the return

6. Who is to Deduct – Specified person
(a) the Central Government or any State Government; or
(b) any local authority; or
(c) any corporation established by or under a Central, State or Provincial Act; or
(d) any company;
(e) any co-operative society; or
(f) any authority, constituted in India for the purpose of housing accommodation planning, development or improvement of cities, towns and villages, or both; or
(g) any society registered under the Societies Registration Act, 1860
(h) any trust; or
(i) any University or
Any government of a foreign state / foreign enterprise / or any Association of body established outside India
any firm,
Individual or HUF, AoP /BoI – not covered by above and not subject to tax audit in the immediately preceding financial year.

7. S. 194 C - Rate & Charge Each TDS section mutually exclusive
Threshold limit - individual transaction - Rs. 30,000. However if aggregate amount paid or credited are likely to be paid or credited during the year exceeds Rs. 75,000; then even if the transaction is individually less than 30,000 - TDS deductible.
No Surcharge/Education Cess on payments to residents
Covers a a contract, whether oral or written
Each TDS section mutually exclusive
Each section under Chapter XVII deals with particular kind of payment to exclusion of all other sections in this Chapter - payment of any sum liable for deduction of tax only under one section – CBDT Cir. No.720 dated

8. Case law on 194 c
Deduction – from gross payment, not only on the Income comprised therein
Supreme Court in ACC’s case 201 ITR 435
Also - Contract for work - Contractor carrying out loading/ unloading of wagons
"Any work" means any work and not a "works contract“
‘Work’ envisaged in the sub-section, therefore, has a wide import and covers ‘any work’ which one or the other of the organisations specified in the sub-section can get carried out through a contractor under a contract and further it includes obtaining by any of such organisations supply of labour under a contract with a contractor for carrying out its work which would have fallen outside the ‘work’, but for its specific inclusion in the sub-section.”
Deduction to be on Gross Billing - CBDT Cir No.715 dated
Whether deductible on reimbursement?
Do not come into play in the case of reimbursement of expenses. Emersons Process Management India Pvt Ltd. v Addl. CIT -ITAT Mumbai - ITA No. 8118/Mum/2010

9. Case law on 194 c
The trade name affixed on the goods is of the assessee;
The formulation is given by the assessee;
The entire product manufactured is sold to the assessee;
There is a prohibition on the sale of the same product to third parties;
Manufacturer obligated to surrender licenses after term of the contract.
Per Department’s counsel, restrictions which have been imposed on the manufacturer in the present case are:
To utilise the formula provided by the assessee:
To affix the trademark of the assessee; and
To deal exclusively with the assessee.
These according to counsel must result in an inference that the contract is not a contract of sale.
The submission that the contract is not a contract of sale because specifications are provided to the manufacturer by the purchaser cannot be accepted. CIT v. Glenmark Pharmaceuticals Ltd 324 ITR 199 (Bom)

10. Issues now resolved - S. 194 c
Distinction between contract of work & contract of sale
Wadilal Dairy International Ltd.. vs.. Asst.. CIT (2001) 70 TTJ (Pune) 77 &
Andhra Pradesh State Road Transport Corporation vs.. DCIT (2002) 74 TTJ (Hyd.) 531
Deduction on composite amount of contract Essar Oil Ltd. v ITO (2001) 77 ITD 92)
Transportation Contracts vs. Vehicle Hire Contracts – 194C applies – not 194I
Payment to Bus Operators providing pick and drop facility to students –Lotus Valley Education Society v. ACIT (Del ITAT)
Tata AIG General Insurance Co Ltd v. ITO 43 SOT 215 (Mum) – arrangement for providing cars of particular category for transportation of employees and guests from one place to another – no specific cars earmarked and identified - hire of buses for transport of employees from station to office - s.194C, not s.194I
CIT vs. Poompuhar Shipping Corporation Ltd. 282 ITR 3 (Mad). – Ships hired for transport is not contract of transport - were re foreign operations – covered by "royalty" as defined under Section 9(1)(vi)(b) of the Income Tax Act.

11. Fees for Professional Services Fees for Technical Services.
Fees for Professional or Technical Services Including Royalty & Non-Compete fees – 194 J
Fees for Professional Services
Fees for Technical Services.
Payment to a director of a company by whatever name called, (remuneration / fees / commission) not covered by S. 192.
Royalty,
Non –compete fee covered by s.28(va) i.e. for restraint from certain activity or sharing of know-how etc. 
Threshold - Rs.30,000 per annum – except for payment to Director

12. Professional Services as per Explanation to Sec 194 J
Professional services – i.e. rendered in the course of carrying on legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, advertising or
Notified professions – film artists (actor, lyricist, story writer, screenplay writer, dialogue writer, dress designer), company secretary, information technology & professions notified in relation to sports activities w.e.f – sports persons, umpires & referees, coaches & trainers, team physicians & physiotherapists, event managers, commentators, anchors, sports columnists

13. Fees for Technical services – 194 J
Explanation 2 to section 9(1)(vii) –
‘any consideration (including any lumpsum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”.’

14. Meaning of “Royalty” - for S. 194 J
Explanation 2 to section 9(1)(vi) – ‘consideration (including lumpsum consideration but excluding consideration chargeable as capital gains of the recipient) for
the transfer of all or any rights (including granting of licence) in respect of patent, invention, model, design, secret formula or process or trade mark or similar property;
The imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property;
The use of any patent, invention, model, design, secret formula or process or trade mark or similar property;
The imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill;
The use or right to use any industrial, commercial or scientific equipment…………….

15. Case Law J
Reimbursement of salary of personnel deputed with assessee by IHC, Personnel like accounts executive, engineer, chef, etc. employed by IHC who deputed them with assessee—Salary paid by IHC and assessee reimbursing the same to IHC—Same not fee for technical services UNITED HOTELS LTD. vs. INCOME TAX OFFICER - (2005) 93 TTJ (Del) 822 : (2005) 2 SOT 267 (Del)
We do not think it appropriate to interpret the Explanation (a) in a manner that the person, to whom payment is made, should himself/herself be a professional Doctor. The aforesaid interpretation will be highly restrictive, and would ignore the reality that services in medicine are not confined and rendered by individuals but in most cases rendered in hospitals which may be corporate or juristic entities. Dedicated Health Care Services TPA (India) Pvt. Ltd. (Bom HC) Karnataka High Court in Medi Assist India TPA P. Ltd. vs. DCIT (TDS) & Ors., [2010] 324 ITR 356 (Kar.), have taken similar view. Held that Section 194J applies to the payments made by the petitioners to juristic or corporate entities that are “provide” “professional services”. – Vipul Medcorp – TS 579- HC DEL
Purchase of film rights – whether "Royalty“ ? - person who transferred such rights was assignor – rights given 99 years. AO concluded - it is not a sale but grant of satellite right in the movie produced by assignor and the payments are "Royalty“- However HC held the agreement in the case on hand, is beyond the period of 60 years, for which the copy right would be valid, the document could only be treated as one of sale. – 194 J will not apply. - Also refer Balaji Communications – held 194 J applies – period was 25 years.

16. S.194-H – Commission or Brokerage
Commission or Brokerage includes payment received/receivable directly or indirectly by a person acting <as agent> on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities
EXCLUDES
Insurance Commission covered u/s 194D
Brokerage/commission on transactions relating to securities as defined in S. 2(h) of SCRA
Exempts commission/brokerage payable by BSNL/MTNL to PCO franchisees
Threshold - Rs.5,000 per annum

17. Case law - S.194-H – Commission or Brokerage
Discount allowed to licensed stamp vendors—Does not fall within the expression "commission" or "brokerage" under s. 194H - Ahmedabad Stamp Vendors Assoc.Vs. Union Of India (2002) 257 ITR 202 : (2002) 124 TAXMAN 628 – now confirmed by SC on 06/09/2012
See also Mother Dairy India Ltd.
Net receipt by the franchisees is commission in nature and not discount – ACIT v Bharati Cellular (2007) 105 ITD 129 (Kol)

18. S.194-I – Rent
Rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together),
for the use of any machinery or plant or equipment; (2%)
for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) - (10%)
for the use of furniture or fittings - (10%)
Threshold - Rs. 1,80,000 per annum –
Qua payee –CBDT Cir.No.715 dated
whether or not owned by the payee;

19. Case Law on S.194-I – Rent
Even fixed charges paid for hire of vehicles not “Rent” for Sec 194-I [Ahmedabad Urban Development Authority Vs. ACIT (ITAT Ahd.)]
A composite agreement for hire of vehicles to be used for loading and unloading and transport of the products. The vehicles were to be driven and operated by the persons who were to be paid by the owner. Agreement provides for hire charges & does not require the owner of the vehicle to do any work at all. It is the assessee who makes use of the vehicles and the equipment. He pays hire charges on the basis of the number of hours of use. and thus appellant not justified in contending that Section 194C applies. - Legislative intent is clear, in that, it intends liability to TDS in respect of "any machinery or plant or equipment". The machinery need not be the machinery annexed to immovable property. Hence I applies. M/S.THREE STAR GRANITES PVT LTD – Kerala HC
Services of transport of gas through pipeline owned, maintained & operated by GSPL. Appellant does not have right, exclusive or otherwise on the pipelines. Also confirmed that same pipeline is used or transport of gas for many other customers. Sly, in regard to availing helicopter services I does not apply C applies. ITO vs. Gujarat State Petroleum Corporation Ltd
See contra – IFFCO – Oct 2013

20. Case Law on S.194-I – Rent
Landing of aircraft or parking aircraft amounts to user of the land of the airport. Hence, the landing fee and parking fee will amount to 'rent' within the meaning of aforesaid provision, even if it could not have such a meaning in common parlance. - United Airlines v. Commissioner of Income-tax
Fixed monthly charges for warehousing are liable for tax deduction u/S. 194-I. (Refer Q. 3 of Cir. no. 718 dated )
The charges paid to a business centre are of a composite nature viz. hourly or daily charges for use of premises and charges for other services. In case the payments for services are not in the nature of rent, then the provisions of tax deduction will not apply to the payments of service charges to the business centre. It is therefore necessary that the element of consideration should be clearly identifiable in so far as it relates to service charges. Where the consideration is lumpsum and where the bifurcation is not provided by the contract with the business centre, then tax will be deductible on the entire sum. Refer Q. 23 of Circular no. 715 dated 8/8/95.

21. If taxes, ground rent, etc borne by tenant – no TDS on such component
TDS u/s 194 I Deductible at time of payment or credit, whichever is earlier
CBDT Cir.No.715 dated Advance Rent - Whether the rent paid should be enhanced for notional income in respect of deposit given to the landlord?
Ans. The tax is to be deducted from actual payment and there is no need of computing notional income in respect of a deposit given to the landlord. If the deposit is adjustable against future rent, the deposit is in the nature advance rent is subject to TDS.
See Also - Adjustable Deposit – CIT v. Reebok India Co. 291 ITR 455 (Del), CBDT Cir.No.718 dated
If taxes, ground rent, etc borne by tenant – no TDS on such component
CBDT Cir. No.718 dated
Cold Storage– not rent, where no right to use any demarcated space/place or machinery– Cir. No.1 of

22. Payment on Transfer of Certain Immovable Property… S. 194 IA
Transferee - responsible for paying to a resident transferor (excluding 194 LA) any consideration for transfer of any immovable property (other than agricultural land),
Earlier of credit or payment of such sum
Deduct 1 %
Threshold - Rs.50,00,000

23. Agricultural Land – meaning ? What about deemed consideration ?
Some Issues ia
Threshold - qua payee ?
Agricultural Land – meaning ?
Has to be in India & meet other conditions
What about deemed consideration ?
Importance of PAN

24. CBDT Circular No. 1/2014 in F. No.275/59/2012-IT(B), Dt: Jan 13, 2014
“ …..wherever in terms of the agreement/ contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.”

25. Jayant Gokhale B. Com, L.lb, FCA Chartered Accountant
Thank You
Jayant Gokhale B. Com, L.lb, FCA Chartered Accountant