| 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? |
| ANSWER: | 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. As regards getting the aforesaid work done through outside agencies, for which agreements have been entered into, it is nothing but a contract to get ‘work’ done. The ‘work’ envisaged in section 194C(1) has a wide import and covers any work which the organization specified in the said provision can get done through a contractor under a contract as per Associated Cement Co. Ltd. vs. CIT [201 ITR 435 (SC)]. However, as per clause (iv) of explanation to said section doesn’t cover the “work” as envisaged above . [See Birla Cement Works v. CBDT 248 ITR 216 (SC)], hence, no TDS is required to be made. For purchase of materials for its own use by Municipal Council, no tax is required to be deducted [See BDA Ltd. vs. ITO 281 ITR 99 (Bom)]. |
| EXPERT: | CA. H. N. Motiwalla |
| SECTION(S): | 192, 194(C) |
| GENRE: | Taxation (Domestic) |
| CATCH WORDS: | Municipal Corporation, salaries, tax deducted at source |
Opinion Of Eminent Legal Luminaries On Controversial Issues
Whether TDS Is Required On Any Contract Of Work?
Posted in Income-tax
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