Académique Documents
Professionnel Documents
Culture Documents
Seminar By NIRC
By
1 Pradeep Dinodia
LL.B., FCA
B. 4(1) Income Tax shall be charged in respect of the total income of the
previous year.
4(2) In respect of Income chargeable u/s 4(1), income tax shall be deducted
at source.
D. Credit shall be given to him for the Assessment Year for which such income
is assessable
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E. Section 191 - Where no provision for TDS or where TDS has not been
deducted. Obligation to pay directly by the assessee.
Section 205 - Where TDS applicable and deducted then assessee can not
be called upon to pay tax himself.
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TDS – Provision in Brief
Section 192 - Salary
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Section 193 – Interest on Securities
(a) Any person responsible for paying an interest on securities to a resident is
required to deduct tax at source at the rates in force on amount of interest
payable.
(b) The Tax is required to be deducted at the time of credit of such income to the
payees account or at the time of payment of interest on securities whichever
is earlier.
Section 194 – Dividends
(a) The Principal Officer of the Indian Company or a company, which has made
prescribed arrangements for declaration and payment of dividend in India is
responsible for deducting tax at source from dividend payable to a
shareholder, who is resident in India.
(b) No tax is to be deducted at source u/s 194 from Dividend payable to any
individual shareholder if the dividend is paid by the company by an account
payee cheque and the aggregate amount of dividend distributed/paid or
likely to be distributed/paid during the financial year does not exceed
Rs.2,500/- 5
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(c) Dividend paid by domestic companies u/s 115O are exempt from tax in the
hands of the recipients’ w.e.f. April 1, 2003.
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(e) No tax is required to be deducted in case of interest paid/credited to any
banking company/financial corporation, LIC, UTI, etc.
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(b) However, an individual or a HUF whose total sales or gross receipts or
turnover from business exceeds Rs.40 lakhs or whose gross receipts from
profession exceeds Rs. 10 lakhs during the financial year immediately
preceding the financial year which such sum is credited or paid to the account
of sub-contractor shall be liable to deduct tax at source.
(c) Tax is required to be deducted either the time of credit of the sum paid to the
account of the payee or at the time of payment in cash or by cheque or by any
other mode, whichever is earlier.
(d) With effect from 1st October, 2004, Section 194C has been amended to
provide that tax will be required to be deducted at source where the amount
credited or paid to the contractor or a sub-contractor exceeds Rs.20,000 in a
single payment or Rs.50,000 in the aggregate during the financial year.
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Section 194D – Insurance Commission
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Section 194EE – Payment in respect of deposits under National
Savings Scheme
(a) Any person responsible for paying to any person any amount referred to in
Section 80CCA(2) is required to deduct Income Tax.
(b) No deduction is required to be made where the amount of such payment or
the aggregate amount of such payments during the financial year is less
than Rs.2,500/-.
Any person responsible for paying to any person any amount referred to in
Section 80CCB(2) is required to deduct tax at source at the time of payment
without any exemption.
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Section 194G – Commission etc. on the sale of Lottery Tickets
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Section 194 I – Rent
(a) Any person other than an individual or Hindu Undivided Family responsible
for paying rent to resident any income by way of rent is required to deduct
tax.
(b) ‘Rent’ means any payment by whatever nature called, under any lease, sub-
lease, tenancy or any other agreement or arrangement for the use of
(either separately or together) any:
(i) land, or
(ii) building (including factory building), or
(iii) land appurtenant to a building (including a factory building), or
(iv) machinery, or
(v) plant, or
(vi) equipment, or
(vii) furniture, or
(viii) fittings 12
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Any hire charges paid for hiring Motor Cars would also get covered under the
ambit of TDS u/s 194-I. The amendment has simply expanded the coverage of
section 194-I to include machinery or plant or equipment within its ambit.
c) From 1st June, 2002 an individual or a Hindu Undivided Family whose total
sales or gross receipts or turnover from business exceeds Rs.40 lacs or
whose gross receipts from profession exceeds Rs.10 lacs during the
financial year immediately preceding the financial year in which such sum is
credited or paid shall be liable to deduct tax at source.
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Section 194 J – Fees for Professional or Technical Services
a) Any person other than individual or HUF responsible for paying to a resident
fee for professional services or fee for technical services is required to deduct
tax on the income comprised therein.
(b) “Professional services” means services rendered by a person in the course of
carrying on legal, medical, engineering or architectural profession or the
profession of accountancy or technical consultancy or interior decoration or
advertising or such other profession as is notified by the Board for the
purpose of section 44AA or of this section.
(c) “Fees for technical services” shall have the same meaning as in Explanation
2 to clause (vii) of sub-section (1) of section 9 – For the purpose of this
clause “Fees for technical services” means: any consideration
(including any lumpsum consideration) for the rendering of any
managerial, technical or consultancy services (including the
provisions of services of technical or other personnel), but does not
include consideration for any construction, assembly, mining or like
product undertaken by the recipient or consideration which would
be income of the recipient chargeable14under the head ‘salaries’.
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d) The tax is required to be deducted at the time of credit of such income to
the account of the payee or at the time of payment in cash or by issue of
cheques or drafts or by any other mode whichever is earlier.
No tax is required to be deducted in case amount of such sum or aggregate
of amount of such sums credited or paid during the financial year does not
exceed Rs.20,000/-.
(e) With effect from 1st June, 2003 no individual or HUF shall be liable to deduct
tax on fees for professional services in case such sum is credited or paid
exclusively for personal purposes of such individual or any member of HUF.
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Section 197 – Obtaining a Certificate of Lower Rate from
the Assessing Officer
a) For tax-deductible u/s 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-
I, 194J, 194K, 194LA or 195.
(b) The recipient can apply in Form No.13 to the Assessing Officer to get a
certificate authorizing the payer to deduct tax at lower or deduct no tax as
may be appropriate.
c) The certificate of lower rate shall be issued on plain paper directly to the
person responsible for paying income, under an advice to the applicant.
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Consequences of Default
Amounts not deductable u/s 40(a)(ia) in computing the income under Profit and
Gains of business or profession.
i) When TDS is deductable and has not been deducted.
ii) After deduction, has not been paid during the previous year or time
prescribed under section 200 (1) read with Rule 30.
- For Non Government Payer
Within one week from last day of the month in which deduction is made
or
credited on the date of making up of accounts upto within 2 months of the
expiry of the said months, except
- Salary (192) winning from Lottery (194), winning from Horse Racing
(194BB), payment of NSS (194EE) Repurchase of Mutual Fund (194F)
Within one week from the last day of the month in which the deduction was
made.
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However, these will be allowed in the year of payment.
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Consequences of Default
Liability u/s 201
(1) Penalty – assessee in default u/s 221 equal to the amount of tax
in arrears.
(1A) Interest @ 1% per month
Both the above are consequences of
- Not deducting
or
- Deducted and not paying to the Central Government.
(2) After deducting not paying also leads to a charge being credited on the
assets of the payer.
Section 271C
Penalty for failure to deduct tax at source as required or under the provisions of
Chapter XVII-B. Penalty Equal to Tax. 18
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Section 276B
Fails to pay to the credit of Central Government, tax deducted at source
by him as required by or under the provisions of Chapter XVII-B.
Imprisonment Period 3 months to 7 years and with fine.
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CASE STUDY I
In Madumilan Syntex Ltd. vs. Union of India (2007) 160 Taxman 71(SC)
“The contention of the appellant that though tax deducted at source had been deposited late but since TDS had already been
deposited to the account of the Central Government, there was no default and no prosecution can be ordered, could not be
accepted.
Once a statute requires to pay tax and stipulates period within which such payment is to be made, the payment must be made
within that period. If the payment is not made within that period, there is default and an appropriate action can be taken under
the Act. Interpretation canvassed by the appellant would make the provision relating to prosecution nugatory.”
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CASE STUDY II
a) Reimbursement of expenses actually incurred
b) Service tax levied on the services rendered – whether liable for TDS
Ref: CBDT Circular No. 715 dated 08.08.1995 : Question No. 30.
CBDT Circular No. 718 dated 22.08.1995 : Question No. 4.
CIT Vs. Laxmi Machine Works (2007) 290 ITR 667 (SC)
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CASE STUDY III
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CASE STUDY IV
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CASE STUDY V
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CASE STUDY VI
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CASE STUDY VII
Labells sold after the printing logo, trademark as per directions of the customer, is a
sale and not a works contract which contrary to Circular No. 715 dated 08/08/95
Question No. 15
DBA Ltd. vs. ITO (2006) 281 ITR (Bom.) 99
CIT vs. Dabur India Ltd. (2006) 283 ITR (Del) 197
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CASE STUDY VIII
Landing fee and parking fee at the airport for aircraft is rent within
the definition of section 194I liable for TDS.
United Airlines vs. CIT (2006) 287 ITR (Del) 281
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CASE STUDY IX
Specific provision will override the general provision – contractors’ payment specifically covered u/s.194C, will not be covered under general
provisions of section 194J.
CIT vs. Prasar Bharti (2007) 208 CTR 317 (Del)
Glaxo Smithkline Healthcare Services Ltd. vs. ITO (2007) 12 SOT 221 (Del)
Each section regarding TDS under Chapter XVII deals with the particular kind of payment to the exclusion of all other sections in this Chapter.
Thus, payment of any sum shall be liable for deduction of tax only under one section
Ref: CBDT Circular No. 720 dated 30th August 1995.
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