Circular No. 1/2014 dated 13.01.2014 has been issued by
the Central Board of Direct Taxes, clarifying that TDS shall be deducted under
Chapter XVII B on the amount(s) excluding Service Tax, where the same has
been charged separately.
Circular No. 1/2014, [F.NO.275/59/2012-IT(B)], dated
13-01-2014
Section 194-I of the Income-Tax
Act, 1961 - Deduction of Tax at Source - Rent –
Clarification
Regarding TDS under Chapter XVII-B on Service Tax Component comprised of payments
made to Residents
The Board had
issued a Circular No.4/2008 dated 28-04-2008 wherein it was clarified that tax
is to be deducted at source under section 194-I of the Income-tax Act, 1961
(hereafter referred to as 'the Act'), on the amount of rent paid/payable
without including the service tax component. Representations/letters has been
received seeking clarification whether such principle can be extended to other
provisions of the Act also.
2. Attention of
CBDT has also been drawn to the judgement of the Hon'ble Rajasthan High Court dated
1-7-2013, in the case of CIT (TDS) Jaipur v. Rajasthan Urban
Infrastructure (Income-tax Appeal No.235, 222, 238 and 239/2011), holding
that if as per the terms of the agreement between the payer and the payee, the
amount of service tax is to be paid separately and was not included in the fees
for professional services or technical services, no TDS is required to be made
on the service tax component u/s 194J of the Act.
3. The matter has
been examined afresh. In exercise of the powers conferred under section 119 of the
Act, the Board has decided that wherever in terms of the agreement/contract
between the payer and the payee, the service tax component comprised in the
amount payable to a resident is indicated separately, tax shall be deducted at
source under Chapter XVII-B of the Act on the amount paid/payable without including
such service tax component.
4. This circular
may be brought to the notice of all officer for compliance
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