Thursday, January 16, 2014

No TDS on Service Tax under Section 194J of the Income Tax Act, 1961 (circular 01/2014)


on Thursday, January 16, 2014

Central Board of Direct Taxes has issued Circular No. 01/2014 dated 13.01.2014 clarifying that TDS under Section 194J (chapter XVII-B of the Income Tax Act, 1961)(professional and technical services) shall be deducted on the amount paid/payable without considering the Service tax portion if indicated separately in terms of the agreement/contract between the payer and the payee .

This circular has come after judgement of the Hon'ble Rajastlian High Court dated 01.07.2013, in the case of CIT(TDS) Jaipur vs 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. 

The Central Board of Direct Tax (“the CBDT”) vide its Circular No. 4/2008, dated 28.04.2008 held that TDS under Section 194I of the Income Tax Act would be required to be made on the amount of rent paid/payable without including the Service Tax. However, the CBDT vide its Circular No. 275/73/2007-IT(B), dated 30.06.2008 decided not to extend the scope of Circular No. 4/2008 to payment made under Section 194J of the Income Tax Act since it covers any sum paid.

Circular 01/2014 dated 13.01.2014 reproduced hereunder.

F. No_ 275/59/20124T(B) 
Government of India 
Ministry of Finance 
Department of Revenue 
Central Board of Direct Taxes 
Circular No.01/2014 
New Delhi, the 13th January-'2014 

Subject: TDS under Chapter XVII-,13 of the Income-tax Act, 1961 on service tax component comprised in the payments made to residents - clarification regarding 

1. 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 194-1 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 Rajastlian High Court dated 01.07.2013, in the case of CIT(TDS) Jaipur vs 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 officers for compliance. 

5. Hindi version shall follow. 

Under Secretary to Government of India 

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  1. Sir,
    As per point no 3 is seems that it is applicable for all section of TDS

    ReplyDelete
    Replies
    1. yES , YOU ARE CORRECT ,we have also given the details on link below
      http://www.simpletaxindia.net/2014/01/no-tds-on-service-tax-if-shown.html

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