Search Results For: 194(C)


QUERY: Mr. Champaklal is a practising Advocate. His gross fees for the year ended 31st March, 2009 were Rs. 27,00,000/-. During the year ended 31st March, 2010 the following issues have arisen on which Mr. Champaklal seeks advice from you

(a) For academic interest, Mr. Champaklal wants to understand the meaning of ‘interest’ on which tax is required to be deducted at source u/s. 194A

(b) Mr. Champaklal has taken a loan of Rs. 2,00,000/- taken by him from his wife for investing in a new car which forms part of his block of fixed assets. The loan carries interest @ 10% p.a. The loan was taken on 1st February, 2008. No interest was paid in the F.Y. 2008-09. As per the term of the loan agreed upon between Mr. Champaklal and his wife, the loan is to be treated at par with a Cumulative Time Deposit and interest is to be actually paid over only on expiry of 3 years. Mr. Champaklal wants to know whether he should account for the interest in his books (he follows cash method of accounting) and if yes, whether tax is required to be deducted at source. Also, if he now accounts for interest for the period 1st February, 2008 to 31st March, 2009 then whether there is any likelihood of it being disallowed on the ground that it is a prior period expenses?

(c) Mr. Champaklal purchased three computers, a printer and office furniture from Departmental Store. For this purpose, he utilized a special card issued by the Store to him (as he was a regular customer in the store). The card entitled him to make payment in the same manner as a Credit Card. However Mr. Champaklal has chosen to take credit rather than pay the card dues. He has therefore not paid the dues. The Store has charged interest on the delay in payment. Now, Mr. Champaklal has decided to opt for Direct Debit facility offered by his bank for paying off the Departmental Store card payments. He wants to know how the TDS obligation on the interest paid to the Departmental Store is to be satisfied if the payment is made by direct debit to his bank account.


ANSWER: Click here to read the full answer of the expert
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S. 2(28A) defines – Interest.

“Interest” means interest payable in any manner in respect of any moneys borrowed or debt incurred (including deposit, claim or other similar right or obligation) and includes any service fee or

QUERY: Assessee engaged in imports and/or exports engage services of Clearing and Forwarding (C & F) agents. Payments to such C & F agents typically comprises of following:

(a) Reimbursement of freight paid to shipping companies or airlines.

(b) Reimbursement of freight on local transportation.

(c) Reimbursement of import or export clearing expenses like payments to Port Trust, Airport Authorities of India, miscellaneous charges, etc.

(d) Reimbursement of bonded warehousing charges.

(e) Reimbursement of Customs duties and Octroi.

(f) Reimbursement for Crane and Machinery charges to Port Trust. etc.

(g) Agency service charges.

(h) Service tax.

Whether any tax is liable to be deducted u/s. 194C of the Income-tax Act, 1961 on any of the above payments to C & F agents?
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In ITO vs. Dr. Willamer Schwable India (P) Ltd. [3 SOT 71 (Del.)], the Tribunal has held that reimbursement of actual expenses where no profit element is involved, is not liable for the TDS. Similarly, it has been held by the Delhi High Court in Handicrafts & Handloom Export Corpn. of India vs. ITO [140 ITR 532]; that the amounts received by an assessee

QUERY: Mr. X pays freight charges of Rs. 3,00,000 in a year to ABC Pvt. Ltd, whose business is only to arrange truck owned by different persons. The said companies does not own any truck but acts only as a commission agent. The buyer of goods pays freight charges to the said company and obtain its PAN.

Now, whether payer is liable to deduct tax u/s. 194C of the Act while mak-ing payment to the said company, not knowing who is the owner of the truck and whether such person owns more than 10 trucks? If not wheth-er any declaration from the Transport Agent needs to be obtained in terms of amended Sec. 194C w.e.f. June 01, 2015.
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From the query, it is clear that a payer, is seeking help from the company, for arrangement of trucks from others. The company does not own any truck therefore it is only entitle for commission. Hence, the payer is paying to the company not for carrying out any work.

QUERY: The Municipal Council is discharging their various functions as provided under the relevant Act and Rules framed thereunder. One of the functions of the Municipal Council is to keep the town neat, clean and maintain sanitation either by employing their own employees or labourers or by allotting the said work to external agencies / outsiders by following due procedure of the law, for which agreements have been entered into.

Moreover the Municipal Council effect purchases of required materials and goods etc. from various vendors for the purpose of their own use.

The query is as to under what provisions of Law, payments made by the Municipal Council to the above persons are covered for the purpose of making TDS along with their Rates of TDS?
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From the query, it is clear that work of cleaning town and maintaining sanitation by Municipal Council through its employees would be covered by section 192 of the Act and, tax would be deducted if the salary / wages paid are above the basic exemption limit at rate applicable.

QUERY: Mr. X a practicing Advocate who is subject to Tax Audit u/s. 44AB for the year ending March 31, 2008 having the following transactions during the financial year 2009-10

1. Constructed a house for self occupation & he is making payment to contractor Rs. 10,00,000/-.

2. Making payment to Architect for designing his house Rs. 1,00,000/-.

3. Borrowed funds from friends Rs. 10,00,000/- on which he wants to pay the interest.

Examine the applicability of TDS.
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1. Section 194(C) provides that no individual or HUF shall be liable to TDS on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purpose of such individual or any member of HUF.