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PRESENTATION ON TAX DEDUCTION AT SOURCE

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PRESENTATION ON TAX DEDUCTION AT SOURCE Powered By Docstoc
					TAX DEDUCTED AT SOURCE

   CA. SUDHIR BAHETI

     12 JUNE 2010
                       1
       INDEX



 Introduction
 Payments covered
under the scheme of TDS.
 Provisions for filing
Returns to the Income Tax
Department.
 Effects of Tax Evasion
                    Introduction

To avoid cases of tax evasion, the Income-Tax Act has made
provisions to collect tax at source on accrual of income. Cases
included in the scheme are, generally, those where income can
be computed at the time of accrual of income. Under this
scheme, persons responsible for making payment of income
covered by the scheme are responsible to deduct tax at source
and deposit the same to the Government’s treasury within the
stipulated time. The recipient of income—though he gets only
the net amount (after deduction of tax at source)—is liable to
tax on the gross amount and the amount deducted at source is
adjusted against his final tax liability. The details of the scheme
of tax deduction and collection at source are briefly discussed in
this presentation. To conclude one can say that the scheme of
TDS is only payment of tax on adhoc basis by the payer of
income on behalf of recipient.
Setps for TDS
                   TAN


• Every deductor is required to obtain a
  unique identification number called TAN
  (Tax Deduction Account Number) which is
  a ten digit alpha numeric number. This
  number has to be quoted by the deductor in
  every correspondence related to TDS
     Tax Deduction & Collection Account Number


Every person deducting tax or collecting tax should
 obtain a tax deduction & collection number
Such person should quote such number in every
 challan for payment u/s 200 or 206C(3), in every
 certificate furnished u/s 203 or u/s 206C(5)
In all the TDS returns delivered
In all other documents pertaining to such transaction
 as may be prescribed in the interest of revenue.
Payment covered under the scheme of TDS.

      Salary (Sec.192)
      Interest on Securities (Sec.193)
      Dividends (Sec.194)
      Interest other than Interest on Securities (Sec.194A)
      Winnings from Lotteries or crossword puzzles (Sec.194B)
      Winnings from Horse Races (Sec.194BB)
      Payments to Contractors and Sub-contractors (Sec.194C)
      Insurance Commission (Sec.194D)
      Payment to Non-resident sportsmen or sports association
     (Sec.194E)

      Payment in respect of NSC (Sec. 194EE)




                                                          Contd…
Payment covered under the scheme of TDS.


     Payments in respect of Repurchase of units of Mutual
    Funds or UTI (Sec.194F)
     Commission on Sale of Lottery Tickets (Sec.194G)
     Commission or Brokerage (Sec.194H)
     Rent (Sec.194I)
     Fees for Professional or Technical Services (Sec.194J)
     Payment of Compensation on acquisition of certain
    immovable property (Sec.194LA)
     Other Sums (Sec.195)
     Long term capital gain (Sec.196B)
     Income or Long term capital gain from Foreign Currency
    bonds/Global Depository Receipts (Sec.196C)
     Income of Foreign Institutional Investors from Securities
    (Sec.196D)
                                                               Contd…
                               Salary (Sec.192)


Who is the payer                                Employer

Who is the recipient                            Employee

Payment Covered                                 Taxable Salary of the employee

At what time TDS to be deducted                 At the time of payment

Maximum amount which can be paid                The amount of exemption limit
without tax deduction                           (i.e.,Rs.160000/190000/240000 for A.Y.
                                                2011-12)
Rate at which tax to be deducted.               As per Calculation

When the provisions are not applicable          --

Is it possible to get the payment without tax   The employee can make application in
deduction or with lower tax deduction           Form No.13 to the Assessing Officer to get
                                                the certificate of lower tax deduction or no
                                                tax deduction.
               Interest on Securities (Sec. 193)


Who is the payer                                Payer of interest on securities

Who is the recipient                            A resident person holding securities

Payment covered                                 Interest on securities

At what time TDS to be deducted.                At the time of payment or at the time of
                                                credit, whichever is earlier
Maximum amount which can be paid                Rs. 2500
without tax deduction
Rate at which TDS to be deducted                10%


When the provisions are not applicable          Interest on Central/State Government
                                                securities
Is it possible to get the payment without tax   The recipient can make application to the
deduction or with lower tax deduction           Assessing Officer in Form No. 13 or
                                                declaration to the payer in Form 15G or
                                                15H as applicable
                           Dividends (Sec. 194)

Who is the payer                                Domestic company

Who is the recipient                            Resident shareholder

Payment Covered                                 Deemed dividend under section 2(22)(e)

At what time TDS to be deducted                 At the time of payment

Maximum amount which can be paid                Rs.2500
without tax deduction
Rate at which TDS to be deducted                20%


When the provisions are not applicable          Dividend covered by section 115-O

Is it possible to get the payment without tax   The recipient can make application to the
deduction or with lower tax deduction           Assessing Officer in Form No. 13 or
                                                declaration to the payer in Form 15G or
                                                15H as applicable
    INTEREST OTHER THAN INTEREST ON
          SECURITIES (Sec 194A)

Who is the payer                                Any person paying interest other than interest
                                                on securities
Who is the recipient                            A Resident person
Payment covered                                 Interest other than interest on securities
At what time TDS to be deducted.                At the time of payment or at the time of credit,
                                                whichever is earlier
Maximum amount which can be paid without        If payer is banking company, co-operative
tax deduction                                   engaged in banking business or Rs 10000/- if
                                                Payer is any other person Rs 5000/-
Rate at which TDS to be deducted                10% if the recipient is resident non-corporate
                                                assessee and 20% if the recipient is resident
                                                corporate assessee
When the provisions are not applicable          If the payee are Insurance companies or
                                                financial institutions including co-operative
                                                societies etc.
Is it possible to get the payment without tax   Declaration to the payer in Form 15G or 15H
deduction or with lower tax deduction           as applicable
         Winnings from Lotteries or Crossword Puzzles
                         (Sec. 194B)


Who is the payer                                Any person paying winnings from
                                                lotteries/crossword puzzles/card games/other
                                                games
Who is the recipient                            Any Person

Payment covered                                 Winnings from lotteries/crossword
                                                puzzles/card games/other games
At what time TDS to be deducted.                At the time of Payment

Maximum amount which can be paid without        If the amount payment is Rs. 10000/- or less
tax deduction                                   than Rs. 10000/-
Rate at which TDS to be deducted                30%


When the provisions are not applicable          --

Is it possible to get the payment without tax   Not Possible
deduction or with lower tax deduction
     Winnings From Horse Races (Sec. 194BB)

Who is the payer                                Any person paying winnings from horse
                                                races
Who is the recipient                            Any person

Payment covered                                 Winnings from Horse Races

At what time TDS to be deducted.                At the time of payment

Maximum amount which can be paid                If the amount of payment is Rs. 5000/- or
without tax deduction                           less than Rs. 5000/-
Rate at which TDS to be deducted                30%


When the provisions are not applicable          --

Is it possible to get the payment without tax   Not Possible
deduction or with lower tax deduction
         Payments to Contractors And Sub-contractors
                          (Sec.194C)


Who is the payer                Specified person


Who is the recipient            A resident person
Rate of TDS                     2%


Payment Covered                 Consideration for any Work Contract
At what time TDS has to be      At the time of payment or at the time of credit
deducted
Maximum amount which can        The tax is required to be deducted if a single payment exceeds
be paid without tax deduction   Rs. 30000/- or if the aggregate payments exceed Rs. 75000/-
                                per annum


Is it possible to get the       The recipient can make application to the Assessing Officer in
payment without tax             Form No. 13
deduction or with lower tax
deduction
               Insurance Commission (Sec.194D)

Who is the payer                                Any person paying insurance commission.

Who is the recipient                            A resident person
Payment covered                                 Insurance Commission
At what time TDS to be deducted.                At the time of payment or at the time of credit
                                                whichever is earlier
Maximum amount which can be paid without        If the amount of payment is Rs. 20000/- or
tax deduction                                   less than Rs. 20000/-
Rate at which TDS to be deducted                10% if the recipient is resident non-corporate
                                                assessee and
                                                20% if the recipient is resident corporate
                                                assessee
When the provisions are not applicable          --
Is it possible to get the payment without tax   The recipient can make an application in
deduction or with lower tax deduction           Form No. 13 to the Assessing Officer to get
                                                the certificate of lower tax deduction or no tax
                                                deduction.
          Payment to Non-resident sportsmen or
               sports association (Sec.194E)

Who is the payer                                Any person making payment to non-resident
                                                sportsman/sports association
Who is the recipient                            Non-resident sportsman/sports association

Payment covered                                 Payment to non-resident sportsman/sports
                                                association
At what time TDS to be deducted.                At the time of payment or at the time of credit
                                                whichever is earlier
Maximum amount which can be paid without        Nil
tax deduction
Rate at which TDS to be deducted                10%+ Education cess etc and Surcharge as
                                                applicable
When the provisions are not applicable          --
Is it possible to get the payment without tax   No Provision
deduction or with lower tax deduction
       Payments in respect of NSC (Sec.194EE)

Who is the payer                           Post Office

Who is the recipient                       Any Person

Payment covered                            Payment (Principal+Interest) out of National
                                           Saving Scheme, 1987.

At what time TDS to be deducted.           At the time of payment

Maximum amount which can be paid without If the amount of payment is Rs.2500 or less
tax deduction                            than Rs.2500

Rate at which TDS to be deducted           20%



When the provisions are not applicable     The payment is made to legal heirs of the
                                           deceased depositor
     Payments on account of repurchase of units of Mutual Funds
                                  or UTI        (Sec. 194F)

Who is the payer                                 Mutual Fund or UTI
Who is the recipient                             Unit holder under section 80CCB
Payment covered                                  Payment on account of repurchase of units
                                                 referred to in section 80CCB
At what time TDS to be deducted.                 At the time of payment
Maximum amount which can be paid without         --
tax deduction
Rate at which TDS to be deducted                 20%


When the provisions are not applicable           --
Is it possible to get the payment without tax    No Provision
deduction or with lower tax deduction
         Commission on Sale of Lottery Tickets
                                        (Sec.194G)

Who is the payer                                Any person paying commission of sale of
                                                lottery tickets
Who is the recipient                            Any person

Payment covered                                 Commission on sale of lottery tickets

At what time TDS to be deducted.                At the time of payment or at the time of credit,
                                                whichever is earlier
Maximum amount which can be paid without        If the amount of payment is Rs. 1000 or less
tax deduction                                   than Rs. 1000
Rate at which TDS to be deducted                10%


When the provisions are not applicable          --

Is it possible to get the payment without tax   The recipient can make an application in
deduction or with lower tax deduction           Form No. 13 to the Assessing Officer to get a
                                                certificate of lower tax deduction or no tax
                                                deduction
                   Commission or Brokerage (Sec.194H)


Who is the payer                                Any person paying commission or
                                                brokerage
Who is the recipient                            Any resident person

Payment covered                                 Commission or brokerage (not being
                                                insurance commission)
At what time TDS to be deducted.                At the time of payment or at the time of
                                                credit, whichever is earlier
Maximum amount which can be paid                If the amount of payment is Rs. 5000 or
without tax deduction                           less than Rs. 5000
Rate at which TDS to be deducted                10% (up to may 31, 2007 : 5%)


When the provisions are not applicable          --

Is it possible to get the payment without tax   The recipient can make an application in
deduction or with lower tax deduction           Form No.13 to the Assessing Officer to get
                                                a certificate of lower tax deduction or no tax
                                                deduction
                                   Rent (Sec.194-I)


Who is the payer                            Any person paying rent (not being an individual
                                            or HUF whose books of account are not
                                            required to be audited under section 44AB in the
                                            immediately preceding financial year)
Who is the recipient                        A Resident Person
Payment covered                             Rent
At what time TDS to be deducted.            At the time of payment or at the time of credit,
                                            whichever is earlier
Maximum amount which can be paid            Rs. 180000/-
without tax deduction
Rate at which TDS to be deducted            For Plant and Machinary Rent 2% and for
                                            For Use of and Land or Building including
                                            Furniture etc.
                                            Individual Huf 10%
                                            For any other 20%
Is it possible to get the payment without   The recipient can make application in Form No.
tax deduction or with lower tax             13
deduction
        Fees for Professional or Technical Services
                        (Sec.194J)

Who is the payer                            Any person paying professional charges (not
                                            being an individual or HUF whose books of
                                            account are not required to be audited under
                                            section 44AB in the immediately preceding
                                            financial year)
Who is the recipient                        Any Person
Payment covered                             Professional services, technical services,
                                            Royalty,
At what time TDS to be deducted.            At the time of payment or at the time of credit,
                                            whichever is earlier
Maximum amount which can be paid            If the amount of payment during the financial
without tax deduction                       year is Rs. 30000 or less than Rs. 30000

Rate at which TDS to be deducted            10%


Is it possible to get the payment without   The recipient can make application in Form No.
tax deduction or with lower tax deduction   13
                             Provisions for Filing Returns



Different Payments   In case the person deducting tax is a   In case the person   Time-limit for submission
                     company or a Government                 deducting tax is     of return by the person
                     department or a person whose books      any other person     deducting tax
                     are required to be audited u/s. 44AB
                     in the immediately preceding year or
                     in whose case number of deductees
                     in any of the quarterly statements in
                     the immediately year is 20 or more

Salary               Form No. 24Q in Electronic format       Form No. 24Q         Within 15 days from the
                     and Form No. 27A                                             end of each quarter (31st
                                                                                  May in case of last
                                                                                  quarter)
Payment (other       Form No. 26Q in Electronic format       Form No. 26Q         Within 15 days from the
than salary) to a    and Form No. 27A                                             end of each quarter (31st
resident                                                                          May in case of last
                                                                                  quarter)
Payment (other       Form No. 27Q in Electronic format       Form No. 27Q         Within 15 days from the
than salary) to a    and Form No. 27A (quarterly)            (quarterly)          end of each quarter (31st
non-resident                                                                      May in case of last
                                                                                  quarter)
               Issue TDS Certificates Sec. 203




Sr.   Form no      Periodicity Cut off Date
No.
1     16 For       Annual      31st May of following financial
      Salary                   year

2     16A Other Quarterly      Within 15 days from due date
      than                     of furnishing the TDS
      salary                   statement under rule 31A
               Dates for Payment of TDS


 Deductor      For MARCH           For April to February

Government On or before 7th    On the same day for other than
           of next month for   salary & on or before 7th of
           salary              next month for salary
Other than On or before 30th   On or before 7th of next month
Government April

Special     30th April         Quarterly payment on or before
Cases                          7th of the month succeeding
                               quarter
 Furnishing of quarterly returns for payment of interest
    to residents without Deducting Tax (Sec. 206A)


• Banking company, Cooperative societies, &
  Public Companies shall furnish quarterly
  return to department in respect of payments of
  Interest (other than Interest on Securities) in
  any computer readable media.
                       Collection of Tax
Who is the payer                                Seller


Who is the recipient                            Buyer

Payment covered                                 As per Details in next slide

At what time TDS to be Collected.               At the time of receipt or at the time of
                                                debiting the account, whichever is earlier
Maximum amount which can be paid                Nil
without tax collection
Rate at which TDS to be deducted                As per Details in next slide


Is it possible to get the payment without tax   The recipient can make an application in
deduction or with lower tax deduction           Form No. 13 to the Assessing Officer to get
                                                a certificate of lower tax deduction or no tax
                                                deduction
Rates for Collection of TAX
              Effects of Evasion of TDS (Sec 201)


Sr.      Reasons                         Effects
No.
1.    Non deduction        The expenditure for which TDS to be
         of TDS        deducted gets DISALLOWED & penal interest
                       @1% for every month or part of month from
                        the date on which such tax was deductible to
                                   the date of deduction
2.    Non payment of   The expenditure for which TDS deducted but
           TDS                  not paid gets disallowed

3.    Less deduction    The amount less deducted is required to be
         of TDS.         paid by the deduct or along with penalty
4.    Late Payment of The deductor should have to pay penal interest
            TDS         @1.5% for every month or part of month
                          from date of deduction to the date of
                                        payment.
Penal Provisions
      Practical Issues



Based on TDS Proceedings
                    Contents
Uniform deduction of tax
Exempt allowances
Payments by way of adjustment
Contract for Sale – Printing Charges
Contractor & Sub contractor payments
Reimbursement to C & F Agents
Reimbursement under Agency
Element of Agency
Rent on Plant & Machinery
Regular Contract vis-à-vis Rate Contracts   33
                    Contents
Internet Connectivity charges – Technical Services?
Reimbursement of Expenses
Tax paid by Payee – non/short deduction
Time Limit under section 201




                                                      34
                    Case Study 1
                      FACTS


• An assessee employer is liable to deducted tax at source
  under section 192.

• Deduction of tax of the employees was not uniform
  during the year; very negligible in the initial months and
  high amount in the last months.

• AO passed order levying interest under section 201(1A)
  on the grounds that tax was not properly deducted.

                                                        35
                      Case Study 1

                         ISSUES
• Whether the Assessing Officer has rightly levied
  interest on non-uniformity of TDS deducted?


CASE LAWS

 Vinsons v. ITO, 89 ITD 267 (Mum)
 Grasim Industries Ltd. v. ITO, 92 TTJ 944 (Jodh)
 Secy. Board Of Secondary Education, Rajasthan v. ITO, 93
  TTJ 256 (Jaipur)
                                                        36
                  Case Study 2

                    FACTS
• The assessee company (employer) deducted tax
  under section 192 treating leave travel expense
  as exempt on the basis of declarations filed by
  the employee.
• The assessee did not obtain any documentary
  evidence to treat LTA as exempt.
• AO passed order under section 201(1) treating
  ‘assessee in default’ having regard to non-
  verification of travel payments proof.         37
                      Case Study 2

                         ISSUES
• Is the AO’s order justified in treating the assessee as
  ‘assessee in default’ and levy interest u/s 201(1A)?

CASE LAWS

 DCIT v. HCL Infosystems Ltd. 282 ITR 263
 Savani Financials Ltd. v. ITO, 1 SOT 111
 Lintas India Ltd. v. Ass. CIT, 5 SOT 310
 DCIT v. Excel Industries Ltd., 5 SOT 235
                                                            38
                   Case Study 3
                      FACTS

• G Ltd is a construction company engaged in the
  business of construction etc.
• At the initiation of the job work, the client provides G
  Ltd. some interest bearing ‘mobilization and plant
  advance’, which is to be repaid by the end of the
  contract along with interest.
• G Ltd. submits the running account bills on monthly
  basis depending on the completion of contract.
• Against this the client recovers the principal + interest
  amount and thus G Ltd. does not actually pay any
  interest.
• Since no direct payment of interest made, NO TDS 39
                 Case Study 3

                     ISSUES
• Is the contention of assessee correct?
• Whether tax is required to be deducted at source
  under section 194A- ‘Interest other than interest
  on securities’?
• What are the other implications of such non-
  deduction?


CASE LAWS

 Raymond Limited V. DCIT 86 ITD 791.                 40
                     Case Study 4
                       FACTS
• Assessee engaged in business of imports and/or exports,
  engages services of Clearing & Forwarding agents.
• Payments to such C&F agents comprise of the following:
      Reimbursement of freight paid to shipping companies or airlines.
      Reimbursement of freight on local transportation.
      Reimbursement of import or export clearing expenses like
       payments to Port Trust, Airport Authorities of India,
       miscellaneous charges, etc.
      Reimbursement of bonded warehousing charges.
      Reimbursement of Customs duties and Octroi.
      Reimbursement for Crane and Machinery charges to Port Trust
       etc.
      Agency service charges.                                    41
                    Case Study 4

                       ISSUES
• Whether any tax is liable to be deducted on any of the
  above payments to C&F agents?
• If the agent has already deducted TDS on freight payment
  to the Indian Shipping Co., then whether the
  importer/exporter also needs to deduct tax on the
  payments made to the agents and if so then on what
  amount?
• When C&F agent deduct tax and pays it to the exchequer,
  the payment would be on his own TDS account or his
  clients’ account number?
                                                      42
                Case Study 4

             CASE LAW

 CIT v. Industrial Engineering Projects Pvt.
 Ltd., 202 ITR 1014 (Del.)
 CIT v. Dunlop Rubber Co. Ltd, 142 ITR 493
 (Cal.)
 Raymond Ltd. 86 ITD 791 (Mum.)
 Associated Cement Co. Ltd.(SC) 201 ITR 435

                                           43
                 Case Study 5

                     FACTS
• The assessee is a pharmaceutical company, engaged in
  manufacturing and selling business.
• It procures packing material like plastics wrappers,
  containers, cardboard boxes etc from the vendors
  (manufacturers) as per assessee’s desired specifications
  viz. brand name, name & address, designs, trademarks etc.
• Similarly, payments are also made to printing and
  stationary vendors who supply printed letterheads,
  business cards, sales and other printed literature where the
  printing is done as per the assessee’s specifications.
• Vendor’s charge excise duty and sales tax on such items.
                                                        44
                Case Study 5

                   ISSUES
• Whether TDS is required to be deducted under
  section 194C for payments made as printing
  charges?




CASE LAWS
 BDA Ltd. v. ITO (TDS), 281 ITR 99 (Mum.)
                                                 45
                 Case Study 6
                    FACTS

• G Ltd. is engaged in the business of engineering
  and construction.

• G Ltd enters into execution of construction
  contracts.

• G Ltd has made certain payments for carrying out
  certain ancillary work undertaken for the purpose
  of executing the above contracts.
                                                 46
                     Case Study 6

                        ISSUES
• Whether the payments made by G Ltd should be treated as
  payments for main contract or as sub-contract for
  deduction of tax at source u/s 194 C?


CASE LAWS

 Datta Digamber Sahakari Kamgar Sanstha Ltd. V. ACIT
 83 ITD 148 (Pune)
 ITO V. Rama Nand & Co. And Others 163 ITR 702 47
                    Case Study 7

                        FACTS
• Assessee, a Govt. establishment procured milk from
  various Sanghs etc and sold it in the market through milk
  centres run by the appointed agents.
• Agents sold the goods at the price fixed by the assessee.
• Assessee used to reimburse these agents @ Re.0.90 per
  litre towards transport cost, container cost and chilling
  charges.
• Assessee had given the nomenclature as Commission for
  such payments.
• AO held to deduct tax u/s 194H as payments for
  commission.                                             48
                   Case Study 7

                      ISSUES
• Is the said transaction based on ‘principal-agent’
  relationship?
• Whether any TDS is required to be deducted u/s 194H?



CASE LAWS

 Government Milk Scheme v. ACIT [2006] 98 ITD 306

                                                   49
                      Case Study 8
                         FACTS


• B Ltd is engaged in the business of providing cellular
  mobile telephone services through its distributors.
• It sold SIM and other pre-paid cards at a fixed rate [below
  market price] to such distributors for ultimate sale to
  customers.
• As agreed, all rights, title, ownership and property rights
  in such cards would all time vest with B Ltd.
• Assessee claimed such price difference as discount
  allowed and not as commission defined in Expl. u/s 194H
• AO treated it as default and levied interest under section
  201(1) and 201(1A).                                      50
                     Case Study 8

                          ISSUES
• Is the AO’s claim justified in treating it as
  commission?
• Whether provisions of section 194H gets
  attracted??


CASE LAWS

 ACIT v. Bharti Cellular Ltd. 105 ITD 129 (Cal.)
 Hindustan Coca-Cola Beverages (P.) Ltd. v. ITO
 [2005] 97 ITD 105 (Jp.)
                                                    51
                   Case Study 9
                      FACTS
• X Ltd. is in the business of running a call centre.
• Contract is entered with transport contractor for
  transporting the employees of X
• X Ltd. uses the bus or van and such other means of
  transport for this purpose.
• The payments made by X Ltd to transport contractor are
  fixed hire charges .
• TDS is deducted by X u/s 194 C.
• AO is of the view that payments are in nature of ‘rent’
  under section 194I, as defined by Tax Law Amendment,
  2006.
                                                       52
                 Case Study 9

                     ISSUES
• Is the stand taken by the AO is correct?




CASE LAW & REFERENCE

 Circular No. 558 dated 28.3.1990
                                             53
                  Case Study 10
                     FACTS

• PQR Ltd., the assessee, is engaged in the business of
  providing airline services.
• Co. frequently requires hotel rooms for accommodation of
  its pilots and crew members.
• Co. books rooms and makes payments for hire of rooms.
• PQR Ltd. has entered into ‘rate-contracts’ with some and
  with others the nature of contract is such that hotels are
  under an obligation to provide accommodation to PQR Ltd.
• TDS is deducted under section 194C.

                                                       54
                   Case Study 10

                       ISSUES
• Is PQR Ltd. required to deduct tax under section 194-
  I or whether the co. is justified in deducting under
  section 194C?


CASE LAWS

 Krishna Oberoi and another v. UOI [2002] 257 ITR
  105 (AP)
 Circular No. 5/2002 dtd. 30-7-2002, 194I does not 55
        Case Study 11
                           FACTS

• G Ltd. is a manufacturer.
• Company has made payments to an Indian entity towards
  the Internet connectivity, Vo-Data card charges and Domain
  registration charges.
• No TDS is deducted on such payments made.
• Company has a view that the payments made are not in
  terms with ‘payment for technical services’ as covered
  under section 194J.
• However, CCIT treats the payments made as ‘fees received
  for providing technical services’ and deduct tax at source.
                                                       56
                     Case Study 11

                        ISSUES
• Is G Ltd correct in its stand that the payments made to
  providers of internet connectivity, facility of Vo-Data
  card or domain registration charges are out of the
  purview of ‘fees for technical services’?
• Whether TDS should be deducted on such payments?

CASE LAW


 Skycell Communications Ltd (251 ITR 53) [Mad.]
                                                      57
                      Case Study 12

                          FACTS
• The invoice raised on the assessee was inclusive of
  professional charges and service tax thereon and
  reimbursement of actual expenses.
• No TDS deducted on the reimbursement of expenses.
• Under ‘any sum paid’ as referred to in Sec.194J,
  reimbursement of actual expenses cannot be deducted out of
  the bill amount for the purpose of tax deduction. [Circular:
  No. 715 dtd. 8-8-1995]
• AO relied on CBDT circular and levied interest u/s
  201(1A).
                                                        58
                   Case Study 12

                       ISSUES
• Whether TDS will be deductible on gross value of bill or
  on net?
• Will the answer be different if separate bills are raised for
  both?



CASE LAW

 ITO v. Dr. Willmar Schwabe India (P) Ltd. , 3 SOT 71.
                                                        59
                    Case Study 13

                        FACTS
• A Ltd., the assessee, entered into a lease agreement with
  B Ltd. for taking premises on lease with a separate
  agreement on hire of furniture.
• A Ltd. fails to deduct tax at source under section 194-I
  on the lease payments made to the payee.
• However B Ltd. while filing his return of income
  declared the said receipt of income and paid taxes
  thereon.
• Assessing officer issued notice under section 201(1) &
  201(1A) levying interest for non deduction of TDS.
                                                        60
                        Case Study 13

                            ISSUES
•   Whether the AO can issue such a notice on A Ltd.?
•   If yes, is he liable to pay tax?
•   If not, is he liable to pay interest?
•   If yes, what is the period for which interest is payable?


CASE LAWS

 CIT v. Adidas India Marketing Pvt. Ltd. , 288 ITR 379
 CIT v. Rishikesh Apartments Co-op Housing Soc. Ltd.
                                                    61
 253 ITR 310,316 (Guj.)
                  Case Study 14
                     FACTS

• A Ltd. delayed in depositing the tax deducted at
  source into Government’s account for the
  assessment years 1988-89 to 1996-97.
• For the above stated Ass. yrs. the Assessing Officer
  passed orders dated 25.5.2000 levying interest under
  section 201(1A) on the grounds of such delay.
• The assessment and other proceedings for all those
  years has been completed much earlier.
• Appeal was filed by A Ltd. saying no such interest
  could be levied after lapse of such a long time.
                                                 62
                     Case Study 14
                       ISSUES
• Whether in absence of the prescribed time limit for
  initiation and completion of proceedings under the Act,
  initiation of proceedings should be within reasonable time?
• What can be the reasonable time period of levy of interest
  under section 201(1A) for delay in deposit of TDS?
• Whether AO can levy/order interest u/s 201(1A)?

CASE LAWS
 Raymond Woollen Mills Ltd. 57 ITD 536 (Mum.)
 Century Textiles & Industries Ltd. 13 SOT 507 (Mum.)
                                                        63
Questions?

             64
Thank You!




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