194C- Various circulars Issued

03 Apr 2017

TDS ON CONTRACTS U/S 194C - CBDT CLARIFICATIONS

Here are the list of clarifications issued by CBDT with respect to deduction of tax u/s 194C


CIRCULARS ISSUED WITH RESPECT TO ADVERTISING CONTRACTS:

Circular No.715 dated August 8,1995

When a client makes payment to an Advertising agency, TDS is applicable.


If an Advertising agency gives a Consolidated bill (including charges for  art work and other related jobs as well as payment to media), tax to be deducted.


Payments made for Production of programmes for the purpose of Broadcasting/telecasting, TDS applicable.


Payments in the nature of advertising made directly to Doordarshan may not be subjected to TDS, as DD being a Govt agency, not liable to income tax.


The agreement of Sponsorship of debates, seminars & other functions in schools/colleges/associations is in the nature of advertising and 194C would apply.


TDS is applicable on the payments towards cost of Advertisements in the souvenirs brought out by various organizations.


The Contract for putting up a Hoarding is in the nature of advertisement .Hence 194C would be applicable. However if a person has taken  a particular space on rent and thereafter sublets the same fully or part for putting up a Hoarding, the person would  be liable u/s 194I.


Circular No.717 dated August 14,1995


Payment by an Advertising agency to Print/electronic media is not subjected to TDS.


 

Following Payments are subjected to TDS u/s 194C


Courier, clearing/Forwarding agents : 

Provisions of TDS would be applicable for Payments made to Courier, clearing/forwarding agents – Circular No.715.


Freight: 

Payment on freight is subjected to TDS even when goods are received on freight to pay basis. - Circular No.715.


Payment to an Electrician:

Payments to an Electrician or contractor for electrical services are subjected to TDS– Circular No.715.


Maintenance contracts:

Routine/normal maintenance contracts which include supply of spares are covered u/s 194C (if technical services are rendered 194J is applicable) – Circular No.715.


Cooling charges:

194C is applicable in respect of cooling charges paid by customers of the cold storage- circular No.1/2008 dated January 10, 2008.


Transportation of Passengers:

Transportation of passengers is covered u/s S.194C (not 194J) – CIT Vs Delhi public school (2013)144   ITD 670/24 ITR 531 (Delhi)


Broadcasting/telecasting contract:

Payment made by a cable operator to get license of TV channels  is covered u/s 194C –    Kurukshetra Darpens (P) Ltd Vs CIT (2008) 169 Taxmann 344 ( Punj & Har)


Hiring of rooms in hotels & availing catering services:

Tax is to be required to be deducted at source  u/s194I for hiring of rooms and banquet in hotels ,and   also u/s 194C for availing catering services – Hero Moto Corp Ltd Vs CIT(2013) 60 SOT 25(Delhi)


Bidi Manufacturing:

Payments made to Munshis(who give the work  to workers who work at home )are subject to TDS- Circular No.433 dated September25,1985.


However, no tax is deductible if workers (employed through the medium of agency such as munshis) bring bidi to factory for quality check & for getting payments- Circular No.487 dated June 8,1987.


Non Applicability of S.194C in the following cases:


Payment to Travel agent/an airline

Payment made to Travel agency or an airline for purchase of a ticket for travel is not liable for TDS u/s 194C. However, if any plane/bus/any other mode of transport is chartered, TDS is applicable. – Circular No.713 dated Aug 2, 1995.


Serving food in Restaurant

Catering does not include serving food in restaurant in the normal course of running of restaurant/café, hence TDS is not applicable on serving food in restaurant. - Circular No.715


Hire charges

194C is not applicable in case of payments made for hiring/renting of Equipments etc.-  Circular No.781 dated March 8, 1994.


Fixed deposit commission/Brokerage

Fixed Deposit commission/Brokerage is not covered u/s 194C - Circular No.715


Procurement of orders

Rendering services for procurement of orders is not covered by S.194C (But covered by 194J) - Circular No.715


Other Issues under S.194C


Repair of Transformers :

Tax is deductible u/s 194C only on labour charges by excluding the value of material used by contractor for   repair.- CIT Vs Executive Engineer (Electricity stores)[2013] 217 Taxman 199(Mag) (All)


Reimbursement:

Reimbursements cannot be deducted out of the Bill amount for the purpose of TDS U/S 194C Circular No.715


NO TDS on service tax


If service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source on the amount paid/credited without including such service tax component.  – Circular No.1/2014 dated January 13,2014.