Institute of Chartered Accountant India- WIRC- Baroda
Controversies in TDS
C.A. Mahesh Sarda
10th June, 2017
Summary
•
TDS Process Flow
•
Framework – Key sections covered under Chapter XVII-B
•
Brief background – Sections 192, 194C, 194H, 194-I, 194-IA, 194J, 195
•
Section 197 and 197A
•
Case Studies
2
TDS Process Flow
Accrual of expense / payment of invoice
(whichever is earlier)
No
Whether PAN of payee is available?
Deduct tax @ 20% or higher rate, as may be applicable
Yes
Determine the nature of payment (e.g. rent,
royalty, commission, fees for professional
Service etc.)
Whether nil certificate / lower deduction
certificate provided by payee?
No
Yes Is certificate covers the payment Yes Deduct tax at the
rate specified
under consideration and is
in certificate
valid for that period?
No
Determine and deduct the tax at the
appropriate rates
Deposit of tax with the government
treasury in challan no. ITNS 281
E.g. payment to contractor (194C) - 2%;
payment of office rent (194I) - 10%
payment for use of equipment or
professional fees (194J) - 10%;
• For the period April to February - on or before
7th of succeeding month in which tax is deducted
• For the month of March - on or before 30th April
File quarterly withholding tax return
on or before the due dates
Issue TDS certificate in Form No.16A
• Except payments under section 194-IA (due date
extended by CBDT Circular dated 29 April 2016)
• AO may permit quarterly deposit of TDS for payments
under section 192, 194A, 194D, 194H
Framework – Key sections covered under Chapter XVII-B
Section
192
192A
Relevant Provision
Salary
Payment of accumulated balance due to an employee
193
Interest on securities
194
Dividends
194A
Interest other than Interest on securities
194C
Payments to contractors
194H
Commission or brokerage
194-I
Rent
194IA
Payment on transfer of certain immovable property other than
agricultural land
194J
Fees for professional or technical services
195
Other Sums – Payments to non-residents
4
Section 192
TDS on Salary
5
Section 192 – TDS on Salary
• Only section which allows estimation – taxes required to be withheld on
estimated income ~ Section 192(1)
• TDS to be deducted only at the time of payment of salary. No question of tax
deduction if employee’s account is credited with salary due to him but not paid
• Taxability determined by essence of contract (i.e. existence of employeremployee relationship) and not nomenclature
• TDS to be deducted as per ‘average rate of tax’ computed as per the ‘rates in
force’ i.e. slab rates applicable to individuals ~ Section 192(1B)
• Income from other heads declared by employee to be considered ~ Section
192(2B)
- No loss to be considered
- Only loss from house property could be reduced at the time of estimation of
income
• Employer to furnish to the employee Form No. 16 giving details of salary and
TDS deducted
6
Section 192 – TDS on Salary
• Employer to obtain evidence or proof or particulars of prescribed claims
(including claim for set off of loss) in such form and manner as may be
prescribed ~ Section 192(2D)
• CBDT circular on salary no. 20/2015 dated 2 December 2015. Annual CBDT
circular on salary to be followed in allowing exemptions / deductions. Circular for
current FY yet to be issued (reference may be made to last year’s circular till
that time)
• Rule 26C introduced w.e.f 1 June 2016 for furnishing evidence of claims by
employee for tax deduction ~ Notification No. 30/2016 dated 29 April 2016
• Form 12BB prescribed for furnishing details
Nature of claims
Evidence or particulars
House Rent Allowance
Name, address and PAN of the landlord(s) where aggregate
rent paid during the previous year exceeds ` 100,000
Leave Travel concession or
assistance
Evidence of expenditure
Deduction of interest under income
from house property
Name, address and PAN of the lender
Deduction under Chapter VI-A
Evidence of investment of expenditure
7
Section 192 – TDS on salary
Average rate of income- tax – Key points
• Average rate computed on the basis of “rates in force” for the financial year of
payment
• TDS to be deducted on monthly basis in equal instalments ~ Circular
No.8/2013 dated 10 October 2013
• Employer to adjust the withholding for payment like bonus, ex-gratia, increment
in salary, etc. during the middle of the year ~ Section 192(3)
• Whether TDS is required to be deducted uniformly throughout the year?
Yes. However, adjustment can be made for short deduction or excess
deduction as per section 192(3)
Vinsons v. ITO (89 ITD 267) (Mum ITAT) – Assessee reasonably estimated the
annual income and deducted tax on it. Hence, interest under section 201(1A)
was held to be wrongly charged
8
Section 192 – General Issues
• Whether TDS to be deducted on salary paid to non-resident?
• Whether a foreign employer is required to deduct taxes?
CIT v. Eli Lilly & Co. (India) (P) Ltd. (312 ITR 225) (SC)
- Foreign company paying income which is chargeable to tax in India should
comply WHT requirements
- Salary paid outside India to expat employees seconded to India subject to
WHT provisions and it is obligation of either the foreign company or its Indian
counterparts to comply with the Indian WHT provisions if salary chargeable to
tax in India
• Whether foreign tax credit can be considered while computing TDS under
section 192?
Debatable issue
Section 192 of the Act is silent as to whether FTC may be considered by the
employer at the time of TDS.
9
Section 192 – General Issues
• Per diem Allowance:
Not subject to TDS under section 192 Kolkatta tribunal in case of ITO Vs
Spartrshi Ghos (48 SOT 522)
• Whether Hypo Tax allowed as deduction:
Hypo tax is a notional tax based on income in the home country. The expat who
is deputed to host country is assured of same level of take on pay. Therefore,
his remuneration in the host country is worked out in such a manner that his net
pay after deduction of tax of host country is equal to net take on pay in the
home country. As the employee has worked in host country is not liable to pay
any tax in Home country. The deduction of hypo tax from his gross salary is
notional. In fact his entitlement is for salary equal to net take on pay.
The issue which arise for consideration is whether deduction of hypo tax is to be
given effect to in computing his net income under the head salary or not.
10
Section 192 – General Issues
If total tax on salary comes to Rs 1500 in USA while that in India at Rs 1000, then
as per Tax equalization Policy, Rs 500 is to be substracted as hypothetical tax
in order to determine total emoluments of the assesse. CIT v. Dr Percy Batlivala
2009 taxmann.com 1028 Delhi HC.
Favourable to asseessee~ ACIT-Circle-48(1) V. Robert Arthur Keltz 2013 35
taxmann.com 424 (Delhi-Trib)
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11
Section 194A
Interest other than
interest on securities
12
Interest other than interest on securities
Applicability
Payer
Interest other Any person
than interest
on securities
like interest on
fixed deposits,
interest on
Loans and
advances
other than
banks
Payee
Rate of TDS
Exemptions
A resident
person
10%
•Tax not
deductible if
payment/credi
t does not
exceed Rs.
10,000 in case
of bank
interest, Co
operative
bank interest,
interest on
SCSS
•Rs. 5000 in
any other
case
13
Section 194A - General Issues
•Whether discounting charges are in the nature of interest on which tax
is deductible
Cheque discounting charges are different from interest payments and the
provisions of section 194A are not attracted. – ITO v. A.S. Babu Sah [2003]
86 ITD283 Mad.
•Deposits in banks in the name of the Registrar to the supreme
court/High Court during pending litigation?
Interest on FDR made in the name of Registrar general of the court or the
depositor of the fund in the directions of the court, will not be subjected to TDS
till the matter is decided by the Court. However, Once the Court decides the
ownership of the money lying in the fixed deposits, the provisions of section
194A will apply to the recipient of the income. Circular No 23/2015 based on
Delhi High court Judgement dated 11.11.2014 in the case of UCO Bank
14
Section 194A - General Issues
•Whether interest on overdue purchase bills is interest?
Payments which have direct link and immediate nexus with the trading
liability connected with the delayed purchase payments, will not fall within
the category of interest as defined in section 2(28A). Therefore, interest on
delayed payment of purchase bills is not subject to TDS under section
194A- Sri Venkatesh Paper Agencies(Hye.) (P.) Ltd. V. CIT[2012]
15
Section 194C
Payment to contractors
16
Section 194C – Payment to contractors
Applicability
Payer
Payee
Rate of TDS
Exemptions
Any sum
payable for
carrying out
any work
(including
supply of
labour) in
pursuance of a
contract
between
contractor and
specified
person
Any
person
[except
Individual
or HUF or
AOP or
BOI not
liable for
tax audit]
Resident
Individual or HUF
1%
Any other
resident
2%
• Payment of transport
charges made to
contractor satisfying 3
conditions:
- Recipient engaged in
the business of
transport (plying, hiring
or leasing or leasing
goods carriages);
- Recipient owns 10 or
less goods carriage at
any time during FY;
- Recipient furnishes a
declaration alongwith
PAN
• Payments exclusively
for personal purposes of
individuals and HUF
17
Section 194C – Payment to contractors
• No TDS if:
 Amount paid / payable or credited / likely to be credited to contractor / subcontractor does not exceed ` 30,000 in a single instance;
 Total amount paid / payable or credited / likely to be credited to contractor /
sub-contractor during the FY does not exceed ` 1,00,000 – w.e.f 1 June
2016 – earlier ` 75,000)
•
Once any single payment exceeds the applicable monetary limit, tax must be
deducted on the whole amount and not on the amount in excess of such
monetary limit
•
Similarly, where aggregate payments to the same payee during the FY at any
stage exceeds the applicable monetary limit, tax must be deducted on the
amount of aggregate payment and not on the amount in excess of such
monetary limit
•
Even oral contract is sufficient for invoking TDS provisions – ITO v. Gopal
Rajput (156 ITD 827) (Mum ITAT)
18
Section 194C – Payment to contractors
Payments to contractors / sub-contractors inter alia includes following
contracts:
•
Advertising contracts;
•
Broadcasting and telecasting including production of programmes for such
broadcasting or telecasting;
•
Carriage of goods or passengers by any mode of transport (except railways);
•
Catering;
•
Manufacturing or supplying a product as per customer specification by using
material purchased from the customer, does not include manufacturing or
supplying a product as per customer specification by using material purchased
from a person, other than such customer
•
Works contracts (construction / renovation of buildings, repairs of vehicle, etc.);
•
Supply of labour;
19
Section 194C – General issues
Meaning of ‘any work’:
As per Explanation (iv) to section 194C, “Work” Shall include(a) Advertising;
(b) Broadcasting and telecasting including production of programmes for such
broadcasting or telecasting;
(c) Carriage of goods or passengers by any mode of transport other than railways;
(d) Catering;
(e) Manufacturing or supplying a product according to the requirement or
specification of a customer by using material purchased from such customer,
But does not include manufacturing or supplying a product according to the
requirement or specification of a customer by using material purchased from a
person, other than such customer.
20
Section 194C – General issues
• Works contract v. Contract for supply of goods
BDA Ltd v. ITO (TDS) (281 ITR 99) (Bom HC) ~ Printing done as per
specifications is a contract for sale and not contract for work, therefore no TDS
under section 194C
CIT v. Hindustan Lever Limited (306 ITR 25) (Guj HC) ~ When contract is for
supply of materials, it cannot be termed as a contract for labour and provisions
of section 194C do not apply
CIT v. Reebok India Co (306 ITR 124) (Del HC) ~ sale of goods does not
attract section 194C
•
Reimbursements
Circular No. 715 dated 8 August 1995 (FAQ 30) ~ Section 194C refers to ‘any
sum paid’. Reimbursements cannot be deducted out of the bill amount for TDS
•
Procurement of Orders
Circular No. 715 dated August 8, 1995 ~ Rendering services for procurement
of orders is not covered by section 194C (but by section 194J)
21
Section 194C – General issues (contd.)
•
Payments for sponsorship events
Circular No. 715 dated 8 August 1995 (FAQ 18) ~ Sponsorship is in essence,
advertising, therefore gets covered by TDS under section 194C
•
Maintenance contract including supply of spares
Circular No. 715 dated 8 August 1995 (FAQ 29) ~ Routine, normal
maintenance contracts which includes supply of spares will be covered under
section 194C
•
Payment to foreign shipping companies
Circular No. 723 dated 19 September 1995
As section 172 overrides other provisions of the Act, provisions of section 194C
not applicable to non-resident shipping business. Even where payments are
made to shipping agents of non-resident ship owners or charterers for carriage
of passengers etc., shipped at a port in India, the agents act on behalf of the
non-resident, provisions of section 194C will not apply
22
Section 194C – General issues (contd.)
•
Payment to production house for production of programmes as per the
specifications of the TV channel
Circular No. 4/2016 dated 29 February 2016 ~ Specifically covered in
definition of work and clarified by CBT Circular No. 715
• Divisible and indivisible works contract for supply and installation
TDS on composite contracts which are divisible consisting payments for supply
of materials / payments for execution of works contract having common
purchase order to be deducted only in respect of consideration attributable to
the works contract. Payments towards supply of material etc. to be excluded
• Cooling charges paid to cold storage owners
Circular No. 1/2008 dated 10 January 2008 ~ The main function of the cold
storage is to preserve perishable goods by means of mechanical process, and
storage of such goods is only incidental in nature. The customer is also not
given any right to use any demarcated space/place or the machinery of the cold
store and thus does not become tenant. Therefore, the provisions of section
194I is not applicable. Since the arrangement is basically of contractual in
nature, the provision of section 194C will be applicable.
23
Section 194C – General issues (contd.)
•
Advertising agency making payment to their models, artists etc.
Circular No. 714 dated 3 August 1995 ~ When an advertising agency makes
payment to their models, artists, photographers, etc. TDS to be deducted under
section 194J and not 194C
•
Hoarding
Circular No. 715 dated 8 August 1995 ~ Contract for putting up a hoarding is
in the nature of advertising contract and provisions of 194C will apply. However,
if a person takes a particular space on rent and thereafter sublets the same
fully or in part for putting up a hoarding, he would be liable to deduct TDS under
section 194-I and not 194C
•
Publicity of a brand or logo
Payment made towards publicity of a brand or logo brings commercial benefit,
assumes character of ‘advertisement’ liable for TDS under section 194C ~
DCIT v. Sahara India Commercial Corpn. Ltd (67 SOT 318) (Luck. ITAT)
24
Section 194C – General issues (contd.)
•
Landing and parking charges paid at airports
Payment of landing and parking charges by an airlines to Airport Authority to be
treated as payment to contractors under section 194C and not as rent under
section 194-I ~ CIT v. Singapore Airlines Ltd (358 ITR 237) (Mad HC)
affirmed by SC in Japan Airlines Co. Ltd v. CIT (377 ITR 372) (SC)
25
Section 194H
Commission or brokerage
26
Section 194H – Commission or Brokerage
Applicability
Payer
Payee
Commission
or Brokerage
(other than
194D which
deals with
insurance
commission)
Any person Resident
[except
Individual
or HUF not
liable for
tax audit]
Rate of TDS
5%
Exemptions
•
Aggregate payment during
the year does not exceed `
15,000
•
Payments of brokerage on
purchase / sale of
securities
•
BSNL / MTNL not required
to deduct TDS from
commission to their public
call franchisees (i.e.
owners of PCOs)
Commission or brokerage includes any payment received or receivable, directly
or indirectly, by a person acting 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
27
Section 194H – General issues
•
Relationship of “agency” between parties ~ a pre-requisite for taxability of
income as commission
•
Transactions on P2P basis are not covered
•
Incentives paid, whether commission
CIT v. Intervet India (P) Ltd (364 ITR 238) (Bom HC) – Incentive to
distributors / stockists on meeting sales target on P2P basis could not be
treated as commission under section 194H
National Panasonic India (P) Ltd. v. DCIT (3 SOT 16) (Delhi ITAT) – Trade
discounts, regional sales promotion, key dealer incentive, fast track bonus etc.
are trade incentives, cannot be treated as commission to attract section 194H
•
Discount given to stamp vendors
Discount given to stamp vendors for purchasing stamps in bulk quantity
qualifies as cash discount, does not fall within commission or brokerage and
hence no TDS to be deducted under section 194H – CIT v. Ahmedabad
Stamp Vendors Association v. UOI (348 ITR 378) (SC)
28
Section 194H – General issues
•
Discount to SIM card dealers
Discount offered by assessee to its distributors was in the nature of
commission liable for TDS under section 194H
CIT v. Idea Cellular (325 ITR 148) (Del HC);
Vodafone Essar Cellular Ltd v. ACIT (332 ITR 255) (Ker HC);p
Bharti Cellular Ltd v. ACIT (354 ITR 507) (Cal HC);p
Hutchison Telecom East Ltd v. CIT (232 Taxman 665) (Cal HC)p
Contrary view after considering above decisions
Sale of SIM cards / recharge coupons at discounted rate to distributors ~ not
commission and therefore not liable to TDS under section 194H – Bharti Airtel
Ltd v. DCIT (372 ITR 33) (Kar HC)
Vodafone Essar Gujarat Ltd v. ACIT (60 taxmann.com 214) (Ahd ITAT) –
After considering all the above HC decisions, ITAT held that view favourable to
the assessee to be followed
29
Section 194H - General issues (contd)
• Travel agent commission
Airlines issued tickets to its travel agents at a concessional price. Transaction
between airlines and travel agents was that of P2P and difference in price was
discount, hence transaction does not fall within the ambit of section 194H - CIT
v. Singapore Airlines Ltd (319 ITR 29) (Del HC)
Amount which agents earned over and above fixed minimum commercial price
would neither amount to commission nor brokerage at the hands of the agent Qatar Airways (332 ITR 253) (Bom HC)
• Payments by TV channels and publishing houses to advertising
companies for procuring or canvassing for advertisements?
Circular No.5/2016 dated 29 February 2016 - Relationship between media
company and advertising company is on P2P basis, therefore section 194H
does not apply
30
Section 194H - General issues (contd)
•
Bank Guarantee:
When Bank issues bank guarantee on behalf of a customer, there is no principal
agent relationship between bank and customer and, consequently section 194H
is no applicable.- Efftronics Systems (P.) Ltd v. ACIT (2016)
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31
Section 194-I
Rent
32
Section 194-I - Rent
Applicability
Payer
Payee
Use of any
machinery or
plant or
equipment
Any
person
[except
Individual
or HUF
not liable
for tax
audit]
Resident
Use of any
land or
building or
land
appurtenant
to a building
or furniture
or fittings
Rate of TDS
2%
Exemptions
Aggregate payments to
payee during a
financial year does not
exceed ` 180,000
10%
Besides on land or land and building, tax will be deductible for leasing or hiring
of machinery, plant, equipment, furniture and fittings whether given separately
or not and whether or not any or all of the above are owned by the payee
33
Section 194I – Rent
• Use is the most important factor in deciding whether payments are made for
hire of equipment / land / building / furniture and fittings
• Payment made for provision of any service cannot be termed as rent
chargeable to TDS under section 194-I for example business center services,
cab services, cold storage services (without any demarcation of area)
TDS on service-tax component
• Service-tax paid by tenant does not partake the nature of income. Landlord acts
as a collecting agency on Government’s behalf for collection of service-tax.
Service-tax amount to be excluded while calculating TDS under section 194-I ~
Circular No 4/2008 dated 28 April 2008
• Wherever in the agreement terms / contract between the payer and payee,
service-tax component in the amount payable to resident is indicated
separately, TDS to be deducted on the amount paid / payable excluding such
service-tax component ~ Circular No 1/2014 dated 13 January 2014
Swachh Bharat Cess and Krishi Kalyan Cess ~ similar to service tax and no
TDS applicable on such payments
34
Section 194I – Rent – General Issues
TDS on payments for hotel accommodation
• Payments made for hotel accommodation taken on regular basis will be in the
nature of rent subject to TDS
• Earmarked rooms let out for a specified rate and specified period, would be
construed to be accommodation made available on regular basis
• Similar would be the case where room or set of rooms are not earmarked, but
hotel has a legal obligation to provide such type of rooms
Rate contract agreements
• Contract for providing specified types of hotel rooms at pre-determined rates
during an agreed period
• Corporate employers, tour operators and travel agents enter into agreements
with hotels for fixing room tariffs for their executives / customers
• Cannot be said to be accommodation taken on regular basis as no obligation
by hotel to provide room(s). Not subject to TDS- Circular No 05/2002,dated
July 30,2002
35
Section 194I – Rent – General Issues
• Adjustable deposits, refundable / non-refundable deposits
Circular No. 718 dated 22 August 1995 (FAQ 2)
Any deposit given by the tenant which is adjustable against future rent is in the
nature of advance rent and subject to TDS
TDS to be deducted as non-refundable deposit represents consideration for the
use of land or building etc. partaking the nature of rent. No TDS if deposit is
refundable
• TDS on advance rent
Circular No.5/2001 dated 2 March 2001 ~ Where advance rent is spread over
more than one FY and TDS is deducted thereon, credit shall be allowed in the
same proportion in which such income is offered for taxation
36
Section 194I – Rent – General Issues
Sharing of office and utilizing other services
• Payment made for use and occupation of premises with furniture and fixture
falling within the parameters of rent, hence 194-I applicable – Wipro GE
Medical System Ltd v. ITO (TDS) (3 SOT 627) (Bang ITAT)
• Cars hired from time to time by assessee for its business without any
control over vehicles
No specific cars identified and earmarked for assessee, only arrangement for
providing cars of a particular category to facilitate transportation of employees
and guests from one place to another, provisions of 194C were applicable and
not 194-I – TATA AIG General Insurance Co. Ltd v. ITO (TDS) (43 SOT 215)
(Mum ITAT)
• Limit of ` 180,000 per annum, whether would apply separately for each coowner of property?
Circular No. 715 dated 8 August 1995 (FAQ 21)
Limit of ` 180,000 will apply to each payee / co-owner separately if there are
number of payees, each having definite and ascertainable share in the property
37
Section 194-IA
Payment of transfer of certain
immovable property other than
agricultural land
38
Section 194-IA
Applicability
Payer
Payee
Purchase of
immovable
property
Any person
(other than
those referred
to in 194LA)
Resident
Rate
1%
Exemptions
• Rural agricultural
land
• Where the sale
consideration for
the property is less
than ` 50 lacs
• Section effective from 1 June 2013
• Section 194-IA not applicable if seller is non-resident
• Residential status of the transferee is immaterial
• Not necessary that property is situated in India
• TDS to be deducted irrespective of whether immovable property is held as
capital asset or stock-in trade by the buyer and seller
• If sellers jointly own a property, section 194-IA is attracted even if each coowner’s consideration is less than ` 50 lacs
• No TAN required
39
Section 194-IA - Mechanics
• Buyer to deduct TDS @ 1% and then pay to the government’s treasury on
account of the seller
• TDS to be deposited to the government’s treasury within 30 days (w.e.f 1 June
2016, earlier 7 days) from the end of the month in which deduction is made and
to be accompanied by challan-cum-statement in Form 26QB
• Mandatory to make online payment of TDS. Link provided by NSDL website to
electronically deposit such payments
• Alternate mechanism if buyer does not have net-banking facility Ø Fill information online and then opt for e-tax payment on subsequent date
option;
Ø Once form completed, acknowledgement will be generated;
Ø Visit the bank for payment furnishing the acknowledgment number;
Ø Bank will use TIN website to retrieve payment information based on
acknowledgment number and then proceed to make payment electronically;
• TDS certificate to be issued by buyer to seller in Form 16B within 15 days from
the due date of depositing tax. Form 16B can be downloaded from TRACES
website
40
Section 194-IA – Points to be noted
• TDS shall be deducted even if the transaction takes place before 1 June 2013
and payment is made after 1 June 2013
• If credit to transferor’s account has been given before 1 June 2013 then
provisions of section 194-IA will not apply, even if payment has been made after
1 June 2013 (Payment or credit whichever is earlier)
• Under construction properties ~ TDS to be deducted on installments paid on or
after 1 June 2013, if aggregate purchase consideration more than ` 50 lacs. No
TDS to be deducted in respect of installments paid before 1 June 2013
• Threshold limit of ` 50 lacs is with reference to each property. If property
transaction involves more than one buyer and share of each buyer in the
property is less than ` 50 lacs but value of the property in aggregate more than `
50 lacs, provisions of section 194-IA will be applicable. TDS will be deducted
and deposited by each buyer in respect of their respective share in the property
• Transaction involving more than one seller, TDS will be deducted in respect of
amount paid to each seller and their respective PAN will be quoted while making
payment through Form 26QB
41
Section 194J
Fees for Professional or
Technical services
42
Section 194J – Fees for Professional / Technical Services
Applicability
•
•
•
•
•
Fees for
Professional /
Technical services
Remuneration or
fees or
commission to
Director, other
than salary
Royalty
Non compete fee
Non sharing of
intellectual
property (knowhow, patents
copyrights, trade
marks etc.)
Payer
Payee
Any person Resident
[except
Individual or
HUF not
liable for tax
audit]
Rate
10%
(2% in case
of a payee
engaged in
the
business of
call centre
Exemption
•
Payment of
professional services
exclusively for
personal purposes of
Individuals and HUF
•
Aggregate payment
during a FY does not
exceed ` 30,000
43
Section 194J – Fees for Professional / Technical Services
• “Professional Services” defined to include legal, medical, engineering, architect,
accountancy or technical consultancy, interior decorator, advertising or any
other profession notified under section 44AA or under this section by CBDT*
• *Notification No 88/2008 dated 21 August 2008
• Sports persons, umpires and referees, coaches and trainers, team physicians
and physiotherapists, event managers, commentators, anchors and sports
columnists
• Meaning of “Royalty and Technical Services” ~ same as per Explanation 2 to
section 9(i)(vi) and section 9(i)(vii) respectively
• Sitting Fees paid to director ~ TDS @ 10% without any threshold limit
Fees paid through regular banking channels to any CA, lawyer, advocate or
solicitor who is resident in India by non-residents who do not have any agent or
business connection or PE in India may not be subject to TDS ~ Circular No.
726 dated 18 October 1995
44
Section 194J – Fees for Professional / Technical Services
Payment to hospitals by TPAs on behalf of insurance companies for settling
medical / insurance claims with hospitals
Circular No 8/2009 dated 24 November 2009
• Services rendered by hospitals to various patients are primarily medical
services, hence provisions of section 194J applicable
• TPAs making payment on behalf of insurance companies to hospitals for
settlement of medical / insurance claims under various schemes including
cashless schemes are liable to deduct tax on all payments to hospitals
Payment to consultant doctors by hospitals - TDS under section 194J and not
192
 CIT (TDS) v. Grant Medical Foundation (375 ITR 49) (Bom HC);
 CIT (TDS) v. Apollo Hospitals International Ltd (359 ITR 78) (Guj HC)
45
Section 194J – Fees for Professional / Technical Services
• Transaction charges paid to stock exchange
CIT v. Kotak Securities Ltd (383 ITR 1) (SC)
Service made available by BSE Online Trading (BOLT) System for which
transaction charges are paid by members of BSE are common services that
every member of Stock Exchange is required to avail of to carry out trading in
securities in Stock Exchange
Such services do not amount to 'technical services' provided by Stock
Exchange, and therefore, no TDS would be deductible under section 194J
Decision of Bombay High Court in CIT v. Kotak Securities Ltd (245 CTR 3)
(Bom HC) overruled
•
Reimbursements
Circular No. 715 dated 8 August 1995 (FAQ 30) ~ Section 194J refers to ‘any
sum paid’. Reimbursements cannot be deducted out of the bill amount for TDS
46
Section 194J – Fees for Professional / Technical Services
• Human Interface
Services provided by machines / robots not technical services as human
interface is absent ~ CIT v. Bharti Cellular Ltd (319 ITR 139) (Del HC)p
Where facility was provided through machines or sophisticated equipment only
which did not involve human element, would not amount to rendering of
technical service ~ ITO (TDS) v. Hindustan Zinc Ltd (62 SOT 11) (Jodh ITAT)
47
Section 194J – Fees for Professional /
Technical Services
• Payment to Non resident for employee secondment as FTS, rejects salary
reimbursement plea~
Where in terms of “secondment agreement” entered into by the assesse with
overseas companies, employees of those companies used their technical
knowledge and skills while assisting assesse in conducting its business of quality
control and management, the amount reimbursed by the assesse to overseas
companies towards salaries of seconded employees amounts to fee for technical
services” ~ Centrica India Offshore (P) Ltd v. CIT[2014], Flughafen Zurich AG
[TS-96-ITAT-2017(Bang)]
Contrary ruling –CIT v Mahanagar Gas Ltd [2016] 69 taxmann.com 321(Mum.)
Member Firms and DTTL: Insert appropriate copyright (Go Header & Footer to edit this text)
48
Section 195
Payment to Non-Residents
49
Section 195 – Payment to Non-Residents
Basic principle
Source
Based
Income taxable in the state of
source or where situs is situated
Residence
Based
Income taxable in the state of
residence of the tax payer
Scope of taxation in India – Combination of residence and source rule
GVK Industries Ltd v. ITO (371 ITR 453) (SC)p
50
Section 195 – Payment to Non-Residents
Features:
•
Payer: Any person
•
Payee: Non-resident, not being a company or a foreign company
•
Payments: Interest or any other sum (other than salaries) chargeable under
the Income-tax Act
•
Time of deduction: Payment or credit, whichever is earlier
•
Threshold: No minimum threshold exemption
•
Subject Matter: TDS
•
Rate of TDS: Rates in force
Obligation to comply with WHT provision arises irrespective of whether
• payer is a resident or non-resident;
• non-resident has a residence, place of business, business connection
or any other presence in India
51
Section 195 – Payment to Non-Residents
195(1)
•
•
•
•
payment by any person responsible / to a non resident
interest or any other sum chargeable to tax
payment or credit whichever is earlier / at rates in force
other than salary and dividend referred in section 115-O
• application to AO by payer if it considers whole of sum is not income
chargeable in the hands of the recipient
195(2)
• application to the AO by payee viz. Foreign Banking Company or nonresident having branch in India for lower or Nil withholding – 195(3) & (4)
195(3),
(4),(5)
195(6)
• powers to CBDT to make rules – 195(5)
• Payer to furnish information in prescribed form viz. Form 15CA/15CB in
respect of any sum whether chargeable or not under the Act
52
Comparative Analysis – Sections 195(2), 195(3) and 197
Particulars
195(2)
195(3)
197
Application by
Payer
Payee
Payee
Purpose
To determine
portion of income
liable for WHT
To receive specific
payment without
deduction of tax.
Certificate valid till
expiry of period
mentioned therein
To obtain NIL /
lower WHT
certificate for all
receipts. Valid till
expiry of period
mentioned therein
Applicability
Specified Payments Specified Receipts
All receipts
Whether
appealable
under section
248?
Yes – where tax
deposited by payer
No
No
Yes
Yes
Revision under Yes
section 264
53
Section 195 – Payment to Non-Residents
Steps for determination of TDS
Section
Documents viz. Agreements
/ invoices
• Check whether payment covered within section
195
• Other sections for eg. 192, 194LC, 194LD etc.
• Examine the agreements
determine nature of payment
and
invoices
to
Taxability under the Act
• Based on documents, determine nature of
payments and applicable provisions under the Act
• Certificate under section 195(2) / 195(3) / 197
Taxability under the tax
treaty
• Determine whether the payee eligible for treaty
benefits and whether relevant documents
obtained to grant treaty relief
TDS rate
• Determine applicable TDS rate under Act or treaty
(whichever is more beneficial), also whether
grossing-up applies
54
Section 195 – Payment to Non-Residents
Under the Act
Section 5(2) ~ Scope of Total Income in case of Non-Resident
• Income received or deemed to be received in India; or
• Income accrues or arises or deemed to accrue or arise to him in India
Section 9 ~ Income deemed to accrue or arise in India
Income said to be deemed to accrue or arise in India if accruing or arising directly
or indirectly, through
• any business connection in India; or
• from any property in India; or
• from any asset or source of income in India; or
• transfer of a capital asset situated in India
• also includes any share or interest in a company or entity registered or
incorporated outside India which derives its value substantially from assets in
India
Under the Treaty
Section 90(2)
• Provisions of Act or treaty, whichever is beneficial
• Sums not chargeable to tax in India on account of treaty benefit shall continue
to remain outside the ambit of section 195
55
Section 195 – Payment to Non-Residents
Sum chargeable to tax
GE India Technology Centre Pvt. Ltd v. CIT (327 ITR 456) (SC)
Where payment made by resident to non-resident, was not chargeable to tax in
India, no tax is deductible at source even though assessee has not made an
application before AO
CBDT Instruction No 2/2014 dated 26 February 2014
Where assessee fails to deduct tax under section 195, AO required to determine
income component involved in the sum on which WHT liability is to be computed
and payer would be considered as being in default for non-withholding of taxes
only in relation to such income component
Illustrative payments to non-residents not chargeable under the Act
• Payments on capital account, for eg. gifts, loans, repayment of loans, etc.
• Sums which are on revenue account and which are not chargeable to tax at all
under the Act in the hands of the recipient
• Sums which fall within the scope of section 5, but which are expressly
exempt under the Act. for eg. dividend income
56
Section 195 – Key Aspects
Amended provisions under the Act cannot be unilaterally read into the treaty
•
•
•
•
•
•
CIT v. Siemens Aktiengesellschaft (310 ITR 320) (Bom HC);p
DIT v. Nokia Networks OY (358 ITR 259) (Del HC);
Sanofi Pasteur Holding SA v. Dept of Revenue (354 ITR 316) (AP HC);
DIT v. Infrasoft Ltd. (220 Taxman 273) (Del HC);
B4U International Holdings Ltd. v. DCIT (52 SOT 545) (Mum ITAT)
Verizon Communications Singapore Pte Ltd v. ITO (361 ITR 575) (Mad HC) Amended definition of royalty under the Act would apply to India–Singapore tax
treaty
Payment in kind
Assessee liable to deduct tax under section 195 on payment made to non-resident
even though payment is not made in cash but in kind ~ Kanchanganga Sea Foods
Ltd. v. CIT (325 ITR 540) (SC)
Net Payment received
Assessee liable to deduct tax under section 195 even under an arrangement where he
receives only net payment from other party after deducting commission / management
fees etc. ~ Raymond Ltd. v. DCIT (86 ITD 791) (Mum ITAT)
Exchange Rate
Rule 26 ~ SBI TT Buying rate as on the date of deduction of tax
57
Section 195 – Key Aspects
Rates in force
• Section 195 refers to deduction of tax at “rates in force”
• Defined in section 2(37A)
• TDS to be deducted at rates in force ~ Circular No 728 dated 30 October 1995
• Rates specified in Finance Act of the relevant year (refer Part II of the First
Schedule to the Finance Act) OR rates specified in the tax treaty entered with
respective country, whichever is more beneficial
• During the period when Finance Bill is pending approval, rates in force for the
preceding year or rate proposed for the current year, whichever is more
favourable will be applicable ~ Section 294
• Applicability of surcharge (SC) and education cess (EC)?
Rates prescribed by tax treaty generally inclusive of SC and EC
• Parke Davis & Co LLC v. ACIT (62 SOT282) (Mum ITAT)
• Sunil Motiani v. ITO (59 SOT 37) (Mum ITAT)
58
Section 195 – Key Aspects
Non furnishing of PAN
Section
2(37A)
Rates of Income-tax specified in Finance Act or
rates specified in the tax treaty entered with
respective country
Section 90
Provisions of Act or treaty,
whichever is more beneficial
Section
206AA
If no PAN, TDS to be deducted at higher of the
following:
• Rates specified in Act;
• Rates in force;
• 20%
Based on above, 206AA would
prevail over section 90
59
Section 195 – Key Aspects
Non furnishing of PAN
• DDIT v. Serum Institute of India Ltd (68 SOT 254) (Pune ITAT)
Where TDS is deducted on the strength of beneficial provisions of the tax treaty,
provisions of section 206AA of the Act cannot be invoked to insist on tax
deduction @ 20%, having regard to overriding nature of section 90(2)
• DCIT v. Infosys BPO Ltd (154 ITD 816) (Bang ITAT)
No scope of tax deduction @ 20% as per section 206AA where treaty benefit is
available to the assessee
Based on above decisions, one may
contend that section 90 shall override
section 206AA
Effective 1 June 2016, TDS not to be deducted at
higher rate in case of NR not holding PAN,
subject to prescribed condition
60
Section 195 – Key Aspects
Grossing up – Section 195A
• If payee bears tax liability i.e. payment is “net of tax”, then for computing TDS,
income should be grossed up
Particulars
Amount
(in `)
Amount payable to NR (sum chargeable to tax in India)
100
Tax rate
10%
Grossed-up amount (100)*(100/(100-10))
111.11
Tax payable (111.11*10%)
11.11
Net remittance amount
100
• Applicability of section 195A in cases of presumptive taxation (section
44B, section 44BB, 44BBB)
Not applicable ~ CIT v. ONGC (276 ITR 585) (Utt HC)
61
Section 195 – Key Aspects
Grossing up – Section 195A
• Whether grossing-up required if payment made net of tax to foreign
company which does not have a PAN in India?
Income could be grossed up using applicable rate e.g. 10% and tax could be
withheld @ 20%
Ex. Total amount paid net of tax ` 100, income increased to ` 111.11 (grossed up
by 10%), TDS to be deducted @ 20% on to ` 111.11 = ` 22.22
Bosch Ltd v. ITO (141 ITD 38) (Bang ITAT)
62
Section 195(6) and Rule 37BB
Furnishing of information / CA certificate
• Information regarding remittance made to NR’s needs to be furnished in
prescribed form and manner as per Rule 37BB  Form 15CA ~ Information to be furnished by remitter
 Form 15CB ~ Certificate to be obtained from a CA by remitter
• Forms 15CA / 15CB revised vide CBDT Notification dated 16 December 2015
• Amended notification lays down that information regarding all foreign
remittances are required to be furnished, whether or not such sum was
chargeable to tax under the Act
• Specific Exemptions –
 remittance made by individuals under Liberalised Remittance Scheme of RBI
and does nor require RBI’s prior approval;
 Remittance in the nature as provided in the ‘specified list’. Currently, 33
transactions are provided
63
Section 195(6) and Rule 37BB
• Form 15CA consists of 4 parts:
Payment chargeable
Part A
Payment(s) made during FY does not exceed ` 500,000. No form
15CB required for such payments
Part B
Certificate for lower WHT has been obtained in respect of
payments made during FY
Part C
CA certificate obtained in Form 15CB in respect of payments
made during FY
Payment not-chargeable
Part D
Payment(s) made during FY which is not chargeable under the
provisions of the Act
64
Step wise procedure for foreign remittance
Obtain certificate of Accountant (Form 15CB
Electronically upload the remittance details in Form 15CA
Take print out of filled form (15CA) with system generated
acknowledgment number
Print out of the undertaking form (15CA) is signed
Submit the signed paper undertaking to AD alongwith Form
15CB in duplicate. AD remits the amount
65
Form 15CB
• Certificate issued by a CA wherein it specifies the documents verified by him
• Following documents are required while issuing Form 15CB  Agreement entered between the parties (payer and payee)
 Invoice / Documentary evidence
 Challan evidencing payment of WHT (if tax payable)
 TRC in case of claiming treaty benefit
 Form 10F (where specific details as required by Government of India is not
mentioned in TRC, in case of claiming treaty benefits)
 No PE declaration
66
Form 10F and TRC
Name of the
beneficiary
Address of the
beneficiary
PAN (if allotted)
Nationality
TIN of the
beneficiary
Period of
residential status
Prescribed format of TRC was done away by FA 2013, it did provide that additional
information and documentation shall be furnished separately
Rule 21AB consequently amended ~ Information to be furnished in Form 10F and
sufficient documentation to substantiate shall be maintained
Form 10F only an adhoc requirement to enable NR’s to disclose certain
information which is not mentioned in TRC. If TRC is inclusive of all the requisite
information, no need to furnish Form 10F
67
Obligation of the Payer
• Onerous requirement to determine taxability of the payment
• Evaluate application of the provisions of the Act for taxability after
characterization
• Evaluate applicability of the tax treaty
• Get confirmation whether payee has a PE in India
• Be aware of latest judicial precedents
• Observe deadlines for WHT and depositing the same
68
Consequences of TDS non-compliance
Non-deduction or not depositing within prescribed time
Section
Consequences
40(a)
Disallowance of expenses in computing taxable income of
payer. Allowance in the year of deduction
201(1)
Recovery of tax not deducted / deposited or short deducted /
deposited
201(1A)
221
Interest @ 1% / 1.5% per month or for part of the month
Penalty – not exceeding the amount of tax not paid
271C
Penalty – not exceeding the amount of tax not withheld
276B
Prosecution
69
General provisions
Time limit for depositing TDS – Rule 30(2) and 30(2A)
• Income / amount credited or paid during April to February ~ TDS to be deposited on
or before 7 days from the end of the month in which deduction is made
• Income / amount credited or paid in March ~ TDS to be deposited on or before 30
April
• Any sum deducted under section 194-IA ~ TDS to be deposited within 30 days
(w.e.f 1 June 2016, earlier 7 days) from the end of the month in which deduction is
made
• AO may permit quarterly deposit of TDS for payments made under sections 192,
194A, 194D, 194H
Issue of TDS certificate – Section 200(3) read with Rule 31
• Deductor to issue TDS certificate to deductee in Form 16 (annually) in case of salary
by 31 May of next FY and Form 16A (quarterly) in other cases within 15 days from
the due date of furnishing TDS statement under Rule 31A
• TDS deducted under section 194-IA - Deductor to issue TDS certificate to deductee
in Form 16B within 15 days from the due date of furnishing challan-cum-statement in
Form 26QB
70
General provisions
Filing of quarterly statement of TDS - Section 200(3) read with Rule 31A
TDS deducted under section 192
Form 24Q
TDS deducted under sections 193 to 196D
Form 27Q*
All other deductees
Form 26Q
* in respect of deductee who is a non-resident not being a company or a foreign
company or resident but not ordinarily resident – Section
Due dates for furnishing statement (w.e.f 1 June 2016)
Date of ending of quarter of FY
Due Date
30 June
31 July of the FY
30 September
31 October of the FY
31 December
31 January of the FY
31 March
31 May of the FY immediately
following the FY in which
deduction made
71
General provisions
Manner of furnishing TDS statements - Rule 31A(3)
Mandatory to furnish TDS statements electronically under DSC or electronically
alongwith verification of the statement in Form 27A if:
 deductor is government;
 deductor is a company;
 deductor liable for tax audit under section 44AB;
 number of deductee’s records in a statement for any quarter of the FY are 20 or
more
72
Section 197
Certificate for deduction at
lower rate
73
Section 197
Section 197 – Certificate for deduction at lower rate
• If AO satisfied that total income of the recipient justifies deduction at lower
rates or no deduction, at the time of payment, at the rates in force under the
relevant sections, he shall issue a certificate on an application made by
assessee
• Payer to deduct TDS at the rates specified in the certificate until such certificate
is cancelled
• Application by a person for a certificate under section 197(1) shall be made in
Form 13 ~ Rule 28
• Certificate under section 197 has no retrospective effect – Circular No 774
dated 17 March 1999
Certificate issued on 9 September 1997 cannot apply to amounts paid between
1 April 1997 and 9 September 1997 - Essar Oil Ltd v. ITO (262 CTR 63) Guj
HC)
74
Section 197
Section 197A – No deduction to be made in certain cases
• No deduction on certain incomes if the deductee files a declaration in the
prescribed form (Form 15G) that tax on his estimated total income would be NIL
• Resident individual who is of the age of 60 years or more to file declaration in
Form 15H that tax on his estimated total income would be NIL to receive certain
income without deduction of tax at source (197A(1C))
• Format and procedure for self-declaration of Form 15G / 15H - Rule 29C
 Payee to submit self-declaration either in paper form or electronically;
 Deductor will not deduct tax and will allot Unique Identification Number (UIN)
to all self-declarations;
 Particulars of such self-declarations to be furnished by deductor alongwith
UIN in quarterly TDS statements;
 Requirement of submitting physical copy of Form 15G / 15H by deductor to
tax authorities dispensed with
 Deductor to retain Form 15G / 15H for 7 years
75
Case Studies
76
Case Study 1 – Reimbursement of Expenses
‘A Ltd’ incurred certain expenses amounting to Rs. 150,000 on behalf of ‘B Ltd’. A Ltd
raised a debit note on B Ltd for reimbursement of expenses. In light of the above,
advice B Ltd in following scenarios with respect to TDS?
1. A Ltd is in Mumbai and the reimbursement is towards repairs charges
2. A Ltd is in Hong Kong and the reimbursement is towards repair charges
3. A Ltd, Mumbai, has raised a lumpsum invoice towards IT support charges
amounting to Rs. 350,000 which includes reimbursement of Rs. 150,000 towards
software license fee:
a. Where breakup of Rs. 350,000 is provided?
b. Where breakup of Rs. 350,000 is not provided?
4. Would your answer differ if A Ltd is in USA?
5. What documentation do you advice your client in above cases?
77
Case Study 1 – Reimbursement of Expenses
• Gross amount of bill including reimbursements - TDS to be made on the total bill
amount including reimbursements - Circular 715 – Q. 30
• Consultant raising separate bills for reimbursements in addition to service bill – No
TDS on reimbursements - ITO v. Dr.Willmar Schwabe India (P) Ltd. (95 TTJ 53)
(Del ITAT)
• Income element to be present – Section 4(2) and Section 190, Vijay Ship
Breaking Corporation v. CIT (314 ITR 309) (SC), GE India Technology Centre
P. Ltd v. CIT (327 ITR 456) (SC) p
• Reimbursement does not partake the nature of income in the hands of the payee
Mahindra and Mahindra Ltd v. DCIT [313 ITR (AT) 263] (Mum ITAT)(SB),
Expeditors International (India) P. Ltd v. ACIT [2 ITR (Trib) 153 (Del ITAT) p
• Reimbursement of travel expenses – Debatable issue since courts have taken
both the views Saipem S.A. v. DDIT (54 SOT 111) (Mum ITAT), Ashok Leyland
Ltd. v. DCIT (119 TTJ 716) (Chennai ITAT), P
• Robust documentation – Back to back invoices, separate invoice for services and
reimbursements, specifically for non-resident payments.
78
Case Study 2 – Telecom Towers
X Ltd had the technology for constructing telecom towers
During the year 2016, X Ltd approached various land owners to obtain their terrace
space on lease and thereby acquired 3,000 terrace space on lease. X Ltd further
constructed telecom towers on each of these terraces. X Ltd also purchased land to
accommodate further 7,000 towers
During the year 2016, X Ltd entered into a contract with Bharti Airtel Limited for
leasing out the towers for consideration of Rs. 3,000 per month per tower along with
land. The contract specifically provided for leasing out of both land as well as towers
to Bharti Airtel
Advice Airtel on withholding tax on payment to X Ltd.
79
Case Study 2 – Telecom Towers
• Rent defined to include lease, sub-lease, tenancy, furniture, plant and machinery,
etc.
• Purpose test to be satisfied – Operative intention of the parties - Rajbir Kaur vs.
S. Chokesiri & Co AIR 1988 SC 1845 p
• Inseparability of transaction - Sultan Brothers (P.) Ltd. (51 ITR 353) (SC)
• Passive infrastructure services to telecom operators – TDS under section 194-I @
2% - Indus Towers Ltd. v. CIT (364 ITR 114) (Del HC)
80
Case Study 3 – Non Resident Payments
S Ltd, India is engaged in the design of mobile hardware. H Ltd, Hong Kong, which
fully holds S Ltd, sends Mr. John for 15 days to S Ltd for training the employees on a
new technology in relation to mobile hardware.
H Ltd raises an invoice of $.200,000 on S Ltd for the training services
Advice A Ltd.
a. What aspects would you analyse from the aspect of withholding tax?
b. What documents would A Ltd have to obtain from S Ltd?
c. What would be the advice?
81
Case Study 3 – Non Resident Payments
• Payment of “any sum” – Covers payment of FTS
• Payments “chargeable to tax” in India - Payment to H Ltd is taxable in India as
FTS [Section 9(1)(vii)]
• India China Treaty not to apply – Instruction No. 1947 dated. April 23, 1998
• Conversion to INR - Rule 26 (SBI TTBR as on the date on which tax is required to
be deducted)
• TDS @ 10.506% (10% + 2% + 3%)
• Compliances:
− Obtaining “No PE” declaration from H Ltd?
− Tax Residency Certificate?
− Form 15CA & CB
− E-TDS returns
− Form 16A
82
Case Study 4 – Year end Provisions
P Ltd entered into a contract with Q Ltd for use of trademark on which royalty was
payable @ 1% of total sales to Q Ltd.
For the year ended 31 March 2016, P Ltd accrued for royalty payable in its books.
However no tax was deducted at source on 31 March 2016. It may be noted that Q
Ltd has neither raised debit note nor has raised any invoice for royalty receivable as
on 31 March 2016
Advice P Ltd from withholding tax perspective under the following circumstances:
1. The provision is credited to ‘Royalty Payable’ Account on 31 March 2016 and
a. Remains in the said account as on date of filing the ROI
b. Is subsequently reversed on 1 April 2016
c. Is subsequently transferred to Q Ltd Account on 31 May 2016
2. The provision is credited to ‘Q Ltd’ on 31 March 2016 and no reversal has been
made nor the same has been paid as on the date of filing the return of income
3. What if Q Ltd has raised a debit note on 30 April 30 2016?
83
Case Study 4 – Year end Provisions
• Conflicting positions adopted by different courts - Depends on facts of each case
• Facts to be ascertained:
− Whether Payee’s are identifiable?
− Whether the entries are reversed subsequently?
• DIT v. Ericsson Communications Ltd (378 ITR 395) (Del HC) – Mere passing of
book entries which are reversed, would not give rise to an obligation to deduct
TDS by the assessee, as clearly, there is no debt that can be said to be
acknowledged by the assessee (Favorable)p
• Pfizer Ltd v. ITO (TDS) (55 SOT 277) (Mum ITAT) – Payee’s are not identifiable
and TDS not applicable. However since payer has himself disallowed the
expense, no further disallowance is warranted (Favorable)
• IBM India (P) Ltd v. ITO (TDS) (154 ITD 497) (Bang ITAT) – Liability to deduct
tax exists when amount is credited to suspense account. Argument of unidentified
payee is not tenable since company is required to maintain accounts on
mercantile basis (Against)p
84
Questions????
85
Thank You !!
86