0 Tax Deducted at Source (TDS) Notes for AY 2015-16

8/18/2019 0 Tax Deducted at Source (TDS) Notes for AY 2015-16

http://slidepdf.com/reader/full/0-tax-deducted-at-source-tds-notes-for-ay-2015-16 1/72

20 6$,CA. Ajit Kr.

www.caajitmurarka.comPage |

A X D E D U C I

O

N A

S O

U R CE

C h a p t e r ± X V I I - B

TDS REFERENCER

Sections Payment Covered Deductor Deductee Eemption Rate o! TDS

192 Salary (including salary

to a whole-time ormanaging director)

Employer (whether carrying

on business/profession or not)

Any employee

(R/NR)

SS (! la"h)/

S (# la"h)/$thers (2%! la"h)

N&R

19# 'nterest on securities Any person responsible for paying such income%

Any resident

security holer (Refer details

ahead)

1*

19+ ,i-ien u/s 2(22)(e) ,omestic company Any resident

shareholer ` 2.! if paito an ini-iual by account payee cheue

1*

19+A 'nterest other than intereston securities

Any person (e0cept anini-iual or a 3)responsible for paying such

income (Refer Note 1)

Any resident

person` !. /

` 1.

1*

19+4 5innings from lotteries/crosswor pu66les/car

games/other games

Any person responsible for paying such income

Any person(R/NR)

1. #*

19+44 5innings from horseraces


Any person(R/NR)

` !. #*

19+ onsieration for anywor" contract(including supply of

labour for carrying out

any work)

Any person (e0cept anini-iual or a 3)responsible for paying suchincome (Refer Note 1 and

Note 2)

Any resident

contractor(contractorinclues sub7contractor)

` #. at one

time or `8!. in the

aggregate

1* forini-iual/3euctees 2* for others

19+, 'nsurance commission Any person responsible for paying such income

Any resident

person` 2. 1*

19+,A Any sum pai uner a lifeinsurance policy(incluing bonus) whichis not e0empt u/s 1(1,)e%g% :eyman 'nsurance

;lan. Section <,,(#).etc%= - W.e.f. 1.1.21!

Any person responsible for paying such income Any resident person No &,S ifaggregateamount paiuring thefinancial year is

less than `

1..

2*

19+E 'ncome referre to inSection 11!44A (e%g% participation in games.a-ertisement. contribution

of articles in newspapers.maga6ines etc%)


Any NRSportsman /SportsAssociation $R

an entertainerwho is not an

'nian citi6en

7 2*

19+> ommission on sale of

lottery tic"ets

Any person responsible for

paying such income

Any person

(R/NR)` 1. 1*

19+ ommission or bro"erage(not being insurance

commission commission on sale oflottery tic"ets)

Any person (e0cept anini-iual or a 3)

responsible for paying suchincome (Refer Note 1)

Any resident

person` !. 1*

19+7' Rent Any person (e0cept an

ini-iual or a 3)responsible for paying suchincome (Refer Note 1)

Any resident

person` 1.<. 3or use of ?

;@ 7 2* otherassets 7 1*

19+7'A onsieration for transfer of an immo-able property(other than ruralagricultural lan in 'nia)(w.e.f. 1.".21#)

Any person being transferee(other than the person

referred to in section

1$!%&)

Any resident transferor onsieration pai/payable is

less than `

!..

1*

http://www.caajitmurarka.com/




Sections Payment Covered Deductor Deductee Eemption Rate o! TDS

19+ 3ees for professional /technical ser-ices / royalty

' sum referre to inSection 2<(-a) /

Remuneration or fee or

commission to a director

which is not in nature of

salary (w.e.f. 1..212 )

Any person (e0cept anini-iual or a 3)responsible for paying suchincome (Refer Note 1 and

Note 2)

Any resident

person` #.

(No eemption

in case of

remuneration'

fee'commission

to a director

which is not in

nature of

1*

19+BA ;ayment of compensation(original/enhance) oncompulsory acuisition of immo-able property(e0cept urban/rural

agricultural lan)


paying such income

Any resident

person` 2..

uring a

financial year%

1*

19+B4 'nterest by aninfrastructure ebt funreferre to in section

1(+8)


NR 3oreigncompany

- !*

19+B 'nterest by a specifie'nian company on long7

term infrastructure bons


NR 3oreigncompany

- !*

19+B, 'nterest on rupeeenominate bon of an'nian company or>o-ernment securities

which is payable after @ay#1. 21# but before une 1.21! (w.e.f. 1.".21#)


A foreigninstitutionalin-estor or aualifieforeign in-estor

- !*

19! All sums payable to NRan foreign companiese0cept co-ere abo-e


paying such income

NR 3oreign

company

An application

can be mae toA%$% for non7euction of

&,S where thesum payable isnot ta0able in

'nia%

As per rates

prescribe by theannual

3inance Act%

Notes "

#$ For Section #%&'( #%&C( #%&)( #%&-I and #%&* "

An ini-iual or a 3 shall be liable to euct &,S only if total sales. gross receipts or turno-er

from the business or profession carrie on by him/it e0cee the monetary limits specifie uner

Section ++A4 (i%e% $ne crore/2! la"hs) uring the financial year immeiately preceing the financial

year in which such interest is creite or pai%+$ For Section #%&C and #%&* "

An ini-iual or 3 shall not be liable to euct &,S if aforesai payment is mae for ser-ices

a-aile for personal purposes%

,$ ner Section 192. 19+4. 19+44. 19+,A 19+BA &,S is to be eucte at the time of payment%

&$ 'n other cases &,S is to be eucte at the time of creit of such income to the account of the payee

or at the time of payment. whiche-er is earlier%

'ppica.iity o! Surchar/e( EC 0 S)EC !or cacuation o! E!!ective rate o! TDS

Effecti-e rate of &,S C Rate of &,S D Surcharge (if applicable) D E (if applicable) D SE (if

applicable)%



4asic rules for calculation of effecti-e rate of &,S are enumerate as uner ?


http://slidepdf.com/reader/full/0-tax-deducted-at-source-tds-notes-for-ay-2015-16 4/72www.caajitmurarka.comPage |

D 5here euctee is a Non-resident1Forei/n Company ? S (if applicable). E an SE are to be

ae with Rate of &,S%

D 5here euctee is a Resident ? S. E an SE are not to be ae with Rate of &,S%

owe-er. in case of payment of salaries to Resident ? S (if applicable). E an SE are to be

ae with Rate of &,S%

Ta.e sho2in/ appica.iity o! Surchar/e( EC 0 S)EC !or cacuation o! E!!ective rate o! TDS

Payments Person R1S Payment SC EC S)EC

Salary 'ni-iual R/NR pto 1 crore Nil 2* 1*

@ore than 1 crore 1* 2* 1*

$ther thansalary

3oreign o% R/NR pto 1 crore Nil 2* 1*

@ore than 1 crore but upto 1 crores 2* 2* 1*

@ore than 1 crore !* 2* 1*

$ther than

foreigncompany

R Any amount Nil Nil Nil

NR pto 1 crore Nil 2* 1*

@ore than 1 crore 1* 2* 1*

3ode o! payment o! Income-ta to Centra 4overnment

#$ &,S/&S ? ,eucte/collecte from income/purchase price by the payer/seller%

+$ A-ance ta0 ? ;ai uring the pre-ious year by the assessee himself%

,$ Self7assessment ta0 ? ;ai before filing the R$' by the assessee himself%

TDS !rom saaries 5Section #%+6

D &he employee may eclar e etails of his other incomes ( %*+,-.%*/ ,R00 -*.12 W31 314. 567#8

9- W

not any other loss) an ta0 eucte thereon by others% 'f the aforesai information is notsubmitte by the employee to the employer. then employer cannot ta"e into consieration other

income of the employee (e-en if the other incomes are "nown to the employer)%

D &he total ta0 to be eucte. on the estimate income of the employee for the rele-ant financial

year. is i-ie by the number of months of his employment uring that financial year% &he amount

so arri-e at is the monthly euction of ta0 at source%

Iustration "

&he estimate ta0able salary of the employee for the financial year 21+71!

,etermine the amount of ta0 to be eucte at source e-ery month by the employer%

is ` +.8.%

Soution "`

&a0 on ` +.8. (after eucting rebate u/s <8A) 2.

A ? Eucation cess 2* +

2.+

A ? Seconary an higher eucation cess 1* 2

Estimate ta0 liability 2.F

&a0 to be eucte e-ery month (&a0 liability/12) 1.818

D 5here uring the financial year. as assessee ?

(a) is employe simultaneously uner more than one employer. or

(b) has change the employment from one employer to another





he may furnish to the employer of his choice or the subseuent employer. as the case may be. such

etails of salaries ue or recei-e by him from other employer. the ta0 eucte at source therefrom





etc% 'n this case. the employer. so chosen. shall ta"e into account these etails while ma"ing

euction of ta0 at source on the aggregate salary%

Iustration "

,uring the ;%G% 21+71!. H is employe simultaneously by A Bt% (Salary ? ` 2!. per month)

an 4 Bt% (Salary ? ` #2. per month) on part7time basis% ,etermine the ta0 to be eucte at

source e-ery month by each company%

Soution "

H may select any of the two companies for eucting ta0 at source on aggregate salary% Suppose H

selects 4 Bt%. then ta0 will be eucte by both companies as follows ?

' 7td$

Estimate ta0able salary (` 2!. 0 12) #..

&a0 on ` #.. (after eucting rebate u/s <8A) #.

A ? Eucation cess 2* F

#.F

A ? Seconary an higher eucation cess 1* #Estimate ta0 liability #.9

&a0 to be eucte e-ery month (&a0 liability/12) 2!8%!

&he abo-e information pertaining to A Bt% will be submitte by H to 4 Bt% in Form No$ #+B% 4

Bt% will euct ta0 on the aggregate salary as follows ?

B 7td$

Estimate ta0able salary (` 2!. 0 12 D #2. 0 12) F.<+.

&a0 on abo-e F1.<

A ? Eucation cess 2* 1.2#F

F#.#FA ? Seconary an higher eucation cess 1* F1<

Estimate ta0 liability (roune7off) F#.F!+

Bess ? &a0 to be eucte by A Bt% #.9

&a0 to be eucte by 4 Bt% F.!F+

&a0 to be eucte e-ery month (&a0 liability/12) !.+8

Iustration "

G is employe by Bt% upto une #. 21+ (salary being ` !. per month)% $n uly 1. 21+. he

Ioins , Bt% (salary being ` !!. per month)% ,etermine the ta0 eucte by Bt% an to be

eucte by , Bt% at source e-ery month%

Soution "

C 7td$

Estimate ta0able salary (` !. 0 12) F..

&a0 on abo-e +!.

A ? Eucation cess 2* 9

+!.9A ? Seconary an higher eucation cess 1* +!

Estimate ta0 liability +F.#!

&a0 to be eucte e-ery month (&a0 liability/12) #.<F2%!

Actual ta0 eucte from 17+721+ to #7F721+ (`

#.<F2%! 0 #) 11.!<8%!&he abo-e information pertaining to Bt% will be submitte by G to , Bt% in 3orm No% 124% ,

Bt% will euct ta0 on the aggregate salary as follows ?



D 7td$

Estimate ta0able salary (` !. 0 # D !!. 0 9) F.+!.

&a0 on abo-e !+.





&a0 liability 19.!8

&a0 to be eucte e-ery month (&a0 liability/12) 1.F#1





Computation o! amount o! monthy ta to .e deposited .y ' 7td$ u1s #%+@#'A

Particuars `

'ncome chargeable uner the hea salaries(inclusi-e of peruisite in respect of rent7free unfurnishe house) !..

&a0 on ` !.. (after eucting rebate u/s <8A an incluing E an SE) 2#.F9

A-erage rate of ta0 (2#.F9/!.. 0 1) +%8#<*

&a0 payable on non7monetary peruisites (` F. 0 +%8#<*) 2.<+#

Amount reuire to be eposite each month u/s 192(1A) (` 2.<+#/12) 2#8

Now following conseuences shall follow ?

Employer shall euct ` 1F.828 (i%e% ` 19.!8 7 ` 2.<+#) '2R; 1;S$R M 11J J,$,2M H/J l92%

@onthly euction of ta0 shall be ` l.#9+ (B%1% lF.828/l2) '2R; 1;S$R M 11J J,$,2M %

Employer shall eposit ` 2.<+# (` 2#8 monthly) from his own poc"et u/s 192(1A)%

'n the hans of employee ` 2.<+# is not ta0able as salaries u/s 1(1)%

5hile calculating business income of A Bt%.`

2.<+# is not euctible as business e0penitureas per Section +(a)(-)%

&he employee shall get creit of the following amounts of &,S (because employer shall issue

&,S certificate to him) ?

Particuars `

&a0 euction at source u/s 192

&a0 eposite u/s 192(1A) on non7monetary peruisite

1F.828

2.<+#

Tota #%(98

D CIT v$ Ei 7iy 0 Co$ @IndiaA @PA 7td$ " @+88%A ++, CTR 88+8 @SCA "

Assessee entere into a Ioint -enture with a foreign company% 3oreign company sent some

employees for renering ser-ice to Ioint -enture in 'nia% ome salary an special allowance

(eucation allowance an retention allowance) was pai by foreign company abroa for renering

of ser-ices in 'nia an no wor" is foun to ha-e been performe for foreign company by such

employees%

Assessee faile to euct &,S u/s 192 on home salary an special allowance pai outsie 'nia by

the foreign company to its e0patriate employees in 'nia%

&he Supreme ourt hel that assessee was uty boun to euct ta0 at source u/s 192 particularly

when no wor" is foun to ha-e been performe for foreign company by such employees an the

total remuneration stoo pai only on account of ser-ices renere in 'nia uring the perio in

uestion%

D CIT v$ 7arsen 0 Tou.ro 7td$ " @+88%A ++# CTR 8+8 @SCA "

&he point in issue was whether the assessee (i%e% employer) was uner statutory obligation uner

'ncome &a0 Act. 19F1. an/or the Rules to collect e-ience to show that its employees ha actually

utili6e the amount pai towars lea-e tra-el concession/con-eyance allowance%

't was hel that the beneficiary of e0emption uner section 1(!) is an ini-iual employee% &here

is no circular of entral 4oar of ,irect &a0es (4,&) reuiring the employer uner section 192 tocollect an e0amine the supporting e-ience to the eclaration to be submitte by an employee%



3or the abo-e reason. it was hel that assessee (i%e% employer) was uner no statutory obligation to

collect e-ience to show that its employees ha actually utili6e the amount pai towars lea-e

tra-el concession/con-eyance allowance while eucting &,S%



20 6$,CA. Ajit Kr.


TDS !rom interest on securities 5Section #%,6

No ta0 is to be eucte at source in respect of the following ?

(a) any security of the entral >o-ernment or State >o-ernmentT

Note " ;erson responsible for paying to a resient any interest on Savin/s @Taa.eA Bonds(

+88, shall euct the income7ta0 if interest payable on such bons e0cees ` 1. uring a

financial year%(b) any interest payable on any security issue by a company. where such security is in ematerialise

form an is liste on a recognise stoc" e0change in 'nia%

Note " &his e0ception has been pro-ie in orer to facilitate e-elopment of corporate bon

mar"et for impro-ing the a-ailability of finances for infrastructure e-elopment%

(c) any interest payable to an ini-iual/3 (who is resient in 'nia). on any ebenture (whether

liste or unliste) issue by a company (in which the public are substantially intereste). if ?

(i) the amount of interest (or the aggregate amount of interest) pai or payable uring the financial

year by the company to such ini-iual/3 oes not e0cee ` !.T an

(ii) such interest is pai by the company by an account payee cheue%

TDS !rom Dividends 5Section #%&6

D &he principal officer of a omestic company (i%e% 'nian company or a company which has mae

the prescribe arrangements for eclaration an payment of i-ien within 'nia to a shareholer

who is resient in 'nia) is reuire. before ma"ing any payment for eeme i-ien uner

Section 2(22)(e). to euct ta0 at source from the amount of i-ien at the rate of 1*%

D ,i-ien may be interim i-ien $R normal (final) i-ien $R eeme i-ien KSections 2(22)

(a). 2(22)(b). 2(22)(c). 2(22)() an 2(22)(e)=% Section 19+ is applicable only if the i-ien is

co-ere uner Section 2(22)(e) because such i-ien is ta0able in the hans of the shareholer% No

ta0 is reuire to be eucte from interim i-ien or normal (final) i-ien or eeme i-ien

co-ere uner Sections 2(22)(a). 2(22)(b). 2(22)(c) an 2(22)() because these i-iens are

e0empt in the hans of the shareholer as per Section 1(#+)%

D No ta0 shall be euctible in the case of a shareholer. being an ini-iual if the following

conitions are satisfie ?

(a) &he i-ien is pai by the company by an account payee cheueT an

(b) &he amount of i-ien pai/payable uring the financial year oes not e0cee ` 2.!%

TDS !rom interest other than interest on securities 5Section #%&'6

3ollowing are the cases where ta0 is not reuire to be eucte u/s 19+A ?

#$ where the aggregate amount of interest creite or pai uring the financial year oes not e0cee ?

➢ ` 1. where payer is a ban"ing company/co7operati-e society carrying on business of

ban"ing/post7office

➢ ` !. in any other case%

+$ where interest is pai or creite to ?

➢ any ban"ing company. or any co7operati-e society engage in carrying on the business of ban"ing (incluing a co7operati-e lan mortgage ban"). or

➢ any financial corporation establishe by or uner a entral. State or ;ro-incial Act. or

➢ the Bife 'nsurance orporation of 'nia. or







,$ where interest is creite or pai by the firm to its partners(s)T

&$ where interest is creite or pai by a co7operati-e society to its member(s) or to any other co7

operati-e societyT

9$ where interest is creite or pai in respect of eposits uner the schemes of ;ost $ffice (&ime

,eposits). ;ost $ffice (Recurring ,eposits). ;ost $ffice @onthly 'ncome Account. :isan Ji"as

;atra. NS J''' 'ssue an 'nra Ji"as ;atraT

$ where interest is creite or pai on recurring eposits an sa-ing account by ban"s/co7operati-esociety engage in business of ban"ing% owe-er ta0 shall be eucte on interest on time eposits

i%e% 3,Rs with ban"s/co7operati-e society engage in business of ban"ingT

$ where interest is creite or pai in respect of eposits with a primary agricultural creit society or a

primary creit society or a co7operati-e lan mortgage ban" or a co7operati-e lan e-elopment ban"T

$ where interest is creite or pai by the entral >o-ernment uner any pro-ision of 'ncome7ta0

Act. 19F1 or 5ealth7ta0 Act. 19!8% owe-er. &,S shall be eucte u/s 19! where such interest is

pai to a non7resientT

%$ where interest is creite or pai on compensation aware by the @otor Accients laims

&ribunal if the amount of payment or the aggregate amount of such payment creite or pai uringthe financial year oes not e0cee ` !.T

#8$ where interest is creite or pai by an 'nfrastructure capital company/an infrastructure capital

fun/a public sector company/a scheule ban" in relation to a 6ero coupon bon issue by it%

U Circuar No$ ,1+8#8( Dt$ +-,-+8#8

'n case of ban"s using 4S software. interest payable on time eposits is calculate generally on aily

basis or monthly basis an is swept par"e accoringly in the pro-isioning account for the purposes

of macro7monitoring only% owe-er. constructi-e creit is gi-en to the epositorVs/payeeVs account either

at the en of the financial year or at perioic inter-als as per practice of the ban" or as per the

epositorVs/payeeVs reuirement or on maturity or on encashment of time epositsT whiche-er is earlier%

;ince no constructi:e credit to the depositor<s'payee<s account takes place while calculating interest

on time deposits on daily or monthly basis in the =>; software used by banks6 ta need not be

deducted at source on such pro:isioning of interest by banks for the purposes of macro monitoring

only% 'n such cases. ta0 shall be eucte at source on accrual of interest at the en of financial year or at

perioic inter-als as per practice of the ban" or as per the epositorVs/payeeVs reuirement or on maturity

or on encashment of time epositsT whiche-er e-ent ta"es place earlierT whene-er the aggregate of

amounts of interest income creite or pai or li"ely to be creite or pai uring the financial year by

the ban"s e0cees the limits specifie in section 19+A%

U Circuar No$ 1+8##( Dt$ #&-#8-+8##TDS on deposits in .ans in the name o! the Re/istrar1 Prothonotary and Senior 3aster attached

to the Supreme Court1 )i/h Court etc$ durin/ the pendency o! iti/ation o! caim1compensation

Section 19+A of 'ncome7ta0 Act. 19F1 (Wthe ActW) stipulates euction of ta0 at source (&,S) on

interest other than interest on securities if the aggregate of amount of such interest creite or pai to the

account of the payee uring the financial year e0cees the specifie amount%

+$ &he 4oar has recei-e references e0pressing ifficulties in implementation of pro-isions of section 19+A

of the Act in a situation where in the course of the proceeings before Supreme ourt/igh ourt/ any other

court or &ribunal (hereinafter Wthe courtW). one or more than one litigant (hereinafter the epositor) isirecte by the court that a specifie amount (hereinafter WepositW) be eposite in the ban" either irectly

or through the court in orer to protect the interest of litigants% Such eposits (usually time eposits) are "ept

in the ban" in the names of Registrar/;rothonotary an Senior @aster or any other name as per the orer of



the court% ,ifficulties are face in ma"ing &,S on the interest perioically accruing on such eposits/time

eposits an about the person(s) as euctee who is entitle to &,S certificate in 3orm 1FA%



20 6$,CA. Ajit Kr.


,$# &he matter has been e0amine in the 4oar an it has been ecie that. this circular shall be applicable

to cases where one or more than one litigant is irecte by the court that a specifie amount be

eposite in the ban" irectly or through the court% &he ban" shall in accorance with the pro-isions of

the Act. euct ta0 at source on the interest accruing on the abo-e mentione eposit(s) as per e0isting

proceure an at the rates in force% &he certificate of euction of ta0 shall be issue by the ban" in the

name of the epositor% 'f more than one person has been irecte to eposit any specifie amount. the

amount of &,S shall be corresponing to each such epositor for the portion of interest accrue in its

respecti-e share in the total amount eposite an &,S certificates shall be accoringly issue by the ban"%

,$+ At the time of ma"ing eposit of the amount orere by the court. the epositor(s) shall submit a

prescribe eclaration with the court for recor purpose an to facilitate the aministration of &,S% &he

Registrar/;rothonotary an Senior @aster or any person authori6e by the court will pass the

information furnishe therein to the ban" concerne for &,S properly in the name of the epositor(s) in

accorance with the pro-isions of the Act%

,$, Some of the instances co-ere by this circular are ?

(a) VV'n the course of appellate proceeings. the court irects an insurance company (the epositor) to eposit

a part of compensation aware by @otor Accient laims &ribunal% &his amount is eposite as &ime

,eposit in a ban" in such name as per the irections of the court. the creit of &,S on interest accruing

on such eposit will be allowe to the 'nsurance company which has mae the sai eposit%

(b) VV&he court while eciing the cases of lan compensation irects the authority concerne (liable for

ma"ing payment of compensation) to eposit any sum in time eposit in any ban". the &,S on time

eposit shall be in the name of the authority ma"ing eposit. if such authority is an entity liable for

charge to 'ncome7ta0 on its income% 'n case the eposit in the ban" is by entral or State >o-ernment no

ta0 will be eucte%

(c) VV&he court aIuicating upon financial ispute uring penency of proceeings irect any party(ies) to

eposit any amount as security in time eposit. the &,S on interest accruing on such eposit will be in

name of the epositor irrespecti-e of the fact that at the irections of the court such time eposit has

been rawn in the name of the officer of the court or Ioint name or any other name%

Rule #>&(2)(i) ?

Where under any provisions of the Act, the whole or any part of the income on which tax has been

deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or

any part of the tax deducted at source, as the case may be, shall be given to the other person and not to

the deductee provided that the deductee files a declaration with the deductor and the deductor reports

the tax deduction in the name of the other person to the income-tax authority or the person authorised

by such authority.

Rule #>&(2)(ii) ?

The declaration filed by the deductee under Rule 3!A"#$"i$ shall contain the name, address, permanent

account number of the person to whom credit is to be given, payment or credit in relation to which

credit is to be given and reasons for giving credit to such person.

TDS !rom 2innin/s !rom any ottery or cross2ord puGGe or card /ame and other

/ame o! any sort 5Section #%&B6

D 5here amount of winning is pai in instalments. the euction of ta0 is to be mae at the time of

actual payment of each such instalment%

D ;ri6es won by an agent/traer in respect of pri6es on unsol/unclaime lottery tic"ets in possessionof the agent/traer is '$S an not ;>4; an therefore liable to ta0 u/s 11!44 #* in the hans

of the agent/traer an &,S shall be eucte by the lottery company #* u/s 19+4 while

paying lottery pri6e to agent/traer%





❖ CIT v$ 3anHoo 0 Co$ " 5+8#86 #%9 Taman ,% @;eraa )CA

&he assessee was a wholesale istributor of lotteries organi6e by the State of :erala% ner the

istribution agreement. it was entitle to certain iscount on the purchase of lottery tic"ets% 'f the

tic"ets purchase by it were not fully sol out before the raw ate. then loss woul be to the

account of the assessee%

3or the rele-ant assessment years. certain unsol tic"ets hel by the assessee were the pri6e winning

tic"ets an on prouction of those tic"ets the Bottery ,irectorate pai the pri6e money to the assessee

,'512 213R G12M R ' 5,K ,5 JRH231 H/J l9+* X #$* 521,5BL 5:1 S,M;L5J ,J YOBLLBLAJ '2R; $R5512B1J%

Accoring to the assessee. it being engage in the business of purchase an sale of lottery tic"ets as a

wholesale istributor of lottery epartment of the State. the lottery tic"ets hel on the ate of raw were

stoc"7in7trae an. so much so. pri6e won on such tic"ets was income from business% &herefore. in the

return of income. it claime the pri6e money as its business income% &he Assessing $fficer. howe-er.

reIecte the claim holing that the pri6e money recei-e in the lottery was assessable at the special rate

pro-ie uner section 11!44 an it coul not be treate as its business income% $n appeal. the '&

(RSS1,$J) ,$$R O1> 5:1 ,JJ1JJ11 J 3$,B;% 8: 1 .8R8 HS:1$> 5:1 R 2>12 R ' 5:1 9.8 (RSS1,$J)%

2L 5:1 21G1LH1J ,SS1,$ B5 O,J :1$> EM 5:1 %12,$, DB: 9RH25 5:,5 ?

P2' 3RHJ. 5: SHchase an sale of tic"ets by the assessee was a business% owe-er. there

was no business acti-ity in claiming pri6e money from the Botteries ,epartment by proucing the

lottery tic"et which got the pri6e% @he entire lottery tickets ceased to be stock-in-trade on the date

of draw6 because after the draw those tickets were unsaleable and had no :alue ecept waste paper

:alue that the assessee would get on sale of the same%

At the time of raw the assessee was only a participant in the raw for all the tic"ets hel by it an

that i not in-ol-e any business acti-ity an. so much so. the pri6e won by it was only in its

capacity as the holer of the tic"ets% &herefore. income by way of winnings from lottery is always

Wincome from other sourceW%

'n -iew of the specific pro-ision containe in section 11!44. the special rate of ta0 is applicable to all

winnings from lotteries% 5hat is pro-ie in the sai section is that where the total income inclues

any income by way of winnings from lotteries or crosswor pu66le. etc%. the income7ta0 payable shall

be calculate at the rate of #*% Special rate of ta0. i%e%. #* pro-ie u/s 11!44 is applicable e-en if

OBLLBLAJ '2R; $R5512B1J ,21 BL 5:1 L,5H21 R ' EHJBL1JJ BL3R;1 ,J 3$,B;1> EM 5:1 ,JJ1JJ11Q%

D 'n a case where the winnings are wholly in "in or partly in cash an partly in "in but the part in

cash is not sufficient to meet the liability of euction of ta0 in respect of whole of the winnings.the person responsible for paying shall. before releasing the winnings. ensure that ta0 has been pai

in respect of the winnings%

Eampe # "

H. a resient ini-iual. wins a motor car in a luc"y raw hel by G Bimite% &he mar"et price of the car

is ` #..% ,iscuss the ta0 implication%

'ns2er "

'n this case before gi-ing car to H. G Bimite will reco-er ` 9. from H K#* of ` #.. D E C

Nil D SE C Nil=% 'f G Bimite cannot reco-er the ta0 as per terms of the raw. then G Bimite shallha-e to pay &,S itself calculate as uner ?

>ross 5inning C Net 5inning 0 1



C ` #..

0

#

1

1

1 7#

ate of T%&

C ` +.2<.!81/7

&herefore. the amount of &,S shall be C +.2<.!81 01

C 1.2<.!81/7

R



G Bimite shall eposit ` 1.2<.!81/7 as &,S an the gross income of H shall be ` +.2<.!81/7 (` #..

D ` 1.2<.!81)% G limite will issue &,S ertificate of ` 1.2<.!81 to H%

Eampe + "

Suppose in E0ample 1 there was also cash pri6e of ` 1.. in aition to motor car% ,iscuss the ta0

implications%

'ns2er "

'n this case before gi-ing car to H. G Bimite will reco-er ` 2. from H K#* of ` +.. D E C

Nil D SE C Nil 7 ash ;ri6e of ` 1..=% 'f G Bimite cannot reco-er the ta0 as per terms of the

raw. an it has to bear ta0 on entire winning of ` +.. then G Bimite shall ha-e to pay &,S itself

calculate as uner ?


C`

+..0

#

1

1

1 7#

ate of T%&

C`

!.81.+29/7

&herefore. the amount of &,S shall be C !.81.+29 01

C 1.81.+29/7

G Bimite shall eposit ` 1.81.+29/7 as &,S an the gross income of H shall be ` !.81.+29/7 (` +..

D ` 1.. D ` 1.81.+29)% G limite will issue &,S ertificate of ` 1.81.+29 to H%

Eampe , "

Suppose in E0ample 1 there was also cash pri6e of ` 1.. in aition to motor car% ,iscuss the ta0

implications if G Bimite cannot reco-er ta0 from winner but company can aIust cash pri6e of `

1.. towars ta0%

'ns2er "

'f G Bimite cannot reco-er ta0 from winner but company can aIust cash pri6e of ` 1.. towars

ta0 then G Bimite shall ha-e to pay &,S calculate as uner ?


1 ate of T%&

1C ` +.. 7 ` 1..0

#

1 7#C ` +.2<.!81/7

&herefore. the amount of &,S shall be C +.2<.!81 01

C 1.2<.!81/7

G Bimite shall eposit ` 1.2<.!81 as &,S (` 1.. from cash pri6e aIuste by it an ` 2<.!81 from

its own poc"et) an the gross income of H shall be ` +.2<.!81 (` #.. D ` 1.. D ` 2<.!81)% G

limite will issue &,S ertificate of ` 1.2<.!81 to H%

TDS !rom payments to contractors or su.-contractors 5Section #%&C6

D Ta is deducti.e on the entire consideration incudin/ Service Ta( i! any$

D 8:1 KS21JJBRL P3RL52,35QV J: ,$$ BL3$H>1 PJHE73RL52,35Q%

R

R





D &he e0 pression PVwor" J 3RL52,35Q shall inclue ?

(a) a-ertisingT

(b) broacasting an telecasting incluing prouction of programmes for such broacasting or

telecastingT

(c) carriage of goos an passengers by any moe of transport other than by railwaysT







Situations :hether TDS is to .e deducted

Single contract of ` #. in a year No

&wo contracts of ` #. each in a year No

&hree contracts of ` #. each in a year &,S is to be eucte on ` 9.


http://slidepdf.com/reader/full/0-tax-deducted-at-source-tds-notes-for-ay-2015-16 23/72www.caajitmurarka.com Page |

Situations :hether TDS is to .e deducted

Single contract of ` #1. in a year &,S is to be eucte on ` #1.

3i-e contracts of ` 1!. each in a year No

Si0 contracts of ` 1!. each in a year &,S is to be eucte on ` 9.

Single contract of ` 8!. in a year &,S is to be eucte on ` 8!.

D Section #%&C@A "

No euction shall be mae from any sum creite or pai uring the pre-ious year to the accountof a contractor uring the course of business of plying. hiring or leasing goos carriages. on

furnishing of his ;AN. to the person paying or creiting such sum%

Note " 'f ;AN is not furnishe then 2* &,S shall be eucte as per Section 2FAA%

D Section #%&C@A "

&he person responsible for paying or creiting any sum to the person referre to in Section 19+(F)

shall furnish. to the prescribe income7ta0 authority or the person authorise by it. such particulars.

in such form an within such time as may be prescribe%

D Rue ,#'@&A@viA ?

&he euctor at the time of preparing statements of ta deducted (i%e% &,S return) shall furnish

particulars of amount pai or creite on which ta0 was not eucte in -iew of the compliance of

pro-isions of Section 19+(F) by the payee%

D East India )otes 7td$ v$ CBDT " 5+88%6 #% Taman # @Bom.ay )CA

&he petitioner7company operate a number of fi-e star elu0e hotels all o-er 'nia% 't offere

-arious facilities. apart from boaring an loging. to its guests li"e house7"eeping of highest

stanar. selecte restaurants. ban" counter. beauty saloon. etc% 't file the instant writ petition

challenging the -aliity of the 4,& ircular No% F<1. ate <7#7199+. as a result whereof e-erycustomer of the petitioner7hotel. while ma"ing payment to the hotel for occupying its room an

a-ailing other facilities pro-ie by the hotel. was reuire to euct income7ta0 at the rate

specifie in section 19+%

4ombay hel that the ser-ices renere by a hotel to its customers by ma"ing a-ailable certain

facilities/amenities li"e pro-iing multi7lingual staff. 2+ hours ser-ice for reception. telephones.

ban" counter. beauty saloon. barber shop. car rental. shopping centre. launry. health club. etc%. do

not in:ol:e carrying out any work an. therefore. woul be outsie the pur-iew of section 19+%

D CIT @TDSA v$ Shree 3ahaami Transport Co$ " 5+8##6 ,,% ITR && @4uHarat )CA

:here assessee-transporter had /iven su.-contracts to dumper o2ners !or transportation o!

/oods and dumpers 2ere not taen on hire1rent( payments to su.-contractors 2oud attract

provisions o! section #%&C and not provisions o! section #%&-I$

&he high court hel that assessee has gi-en contracts to the umper owner for the transportation of

goos an has not ta"en machineries an euipment on rent% Since the transactions in uestion

being in the nature of contracts for shifting of goos from one place to another woul be co-ere as

wor"s contracts an such payments coul not be terme as rent pai for the use of machinery an

the pro-isions of section 19+7' woul not be applicable%

D Deduction o! ta at source on payment o! /as transportation char/es .y the purchaser o!

natura /as to the seer o! /as @Circuar No$ %1+8#+( dated #$#8$+8#+A "

'f the $wner/Seller of the gas sells as well as transports the gas to the purchaser till the point of

eli-ery. where the ownership of gas to the purchaser is simultaneously transferre. the manner of





raising the sale bill (whether the transportation charges are inclue in the cost of gas or shown

separately) oes not ,$512 5:1 E,JB3 L,5H21 R ' JH3: 3RL52,35 O: B3: 21;,BLJ 1JJ1L5B,$$M , Y3RL52,35 'R 2

J,$1 ,L> LR5 , YOR 2NJ 3RL52,35 ,J 1LGBJ,A1> BL F135BRL l9+% 8: 121'R21. BL JH3: 3B23H;J5,L31J.

8VF BJ LR5 >1>H35BE$1 RL 5:1

component of >as &ransportation harges pai by the purchaser to the $wner/Seller of the gas%





owe-er. transportation charges pai to a thir party transporter of gas. either by the $wner/Seller

of the gas or purchaser of the gas. shall continue to be go-erne by the appropriate pro-isions of the

Act an ta0 shall be euctible at source on such payment to the thir party at the applicable rates%

TDS !rom Commission or .roera/e 5Section #%&)6

D Third Proviso to Section #%&) "

No euction shall be mae uner this Section on any commission or bro"erage by 4harat Sanchar

Nigam Bimite (4SNB) or @ahanagar &elephone Nigam Bimite (@&NB) to their public call office

franchisees%

D Epanation @iA to Section #%&) "

A=ommission or brokerageA inclues any payment recei-e or recei-able. irectly or inirectly. by

a person acting on behalf of another person#

?

(a) for ser-ices renere (not being professional ser:ices+). or

(b) for any ser-ices in the course of buying or selling of goos. or

(c) in relation to any transaction relating to any asset. -aluable article or thing. not .ein/

securities,%

#&he element of agency must be present in all ser-ices or transactions in orer to fall within the

e0pression 5+RBB%00%R* R2 92RN124/18 % 3or e0ample commission to employees an employee

irectors shall form part of salary income an is subIect to &,S u/s 192 an not uner this section%

+Aprofessional ser:icesA means ser-ices renere by a person in the course of carrying on a legal.

meical. engineering or architectural profession or the profession of accountancy or technical

consultancy or interior ecoration or such other profession as is notifie by the 4,& for the purposes of Section ++AA%

,&he transactions relating to securities are not co-ere u/s 19+% &herefore. section 19+ is not

attracte on ?

(a) ommission or bro"erage pai to unerwriters%

(b) 4ro"erage or sub7bro"erage on public issue of securities%

(c) 4ro"erage on transaction of securities through stoc" e0change%

D 7etter F$ No$ +9181+88%-IT@BA "

ommission an supplementary commission recei-e by the tra-el agents from Airlines are liable

to &,S u/s 19+%

D CBDT Circuar No$ #%( Dated &-#+-#%%# " Commission and .roera/e retained .y the

consi/nee1a/ent "

A uestion may arise whether there woul be euction of ta0 at source uner Section 19+ where

commission or bro"erage is retaine by the consignee/agent an not remitte to the consignor or

principal while remitting the sale consieration% 't may be clarifie that since the retention of

commission by the consignee/agent amounts to constructi-e payment of the same to him by the

consignor/principal. euction of ta0 at source is reuire to be mae from the amount of

commission% &herefore. the consignor/principal will ha-e to eposit the ta0 euctible on the

amount of commission income to the creit of entral >o-ernment. within the prescribe time%



D CBDT Circuar No$ 1+88,( Dated ,-%-+88, " No TDS under Section #%&) on Turnover

Commission paya.e .y RBI to '/ency Bans "

&he wor" of receipt of ta0 payments an issue of refuns is conucte by ban"s authori6e for such

purpose by the R4'% As a compensation for the wor" so conucte. the entral >o-ernment pays to

5:1 E,LNJ. 5:2RHA: !*.. 3R;;BJJBRL 512;1> ,J P8H2LRG12 9R;;BJJBRLQ% 8:1 *V8 :,J >13B>1>



that ta0 woul not be reuire to be eucte by R4' on the amount of &urno-er ommission pai

or creite by it as the Agency 4an"s (4an"s authori6e for conucting >o-ernment business) are

performing the general ban"ing business of the entral an State >o-ernment on behalf of R4'%

D CIT v$ Director( Prasar Bharti " @+8#8A #% T'X3'N 8,#9 @;er-)CA "

An agreement was entere into with telecasting channel (,,) an a-ertising agencies to procure

a-ertisement from customers% Assessee (,,) i not euct ta0 at source uner section 19+ on

payment mae to a-ertising agents by way of commission% 't was hel by the :erala that there

was principal an agent relationship between ,, an a-ertising agents an. therefore. payment

mae to agents was clearly a commission payment an thus. assessee was reuire to euct &,S at

the rate of 1!* of the payment mae to the agent%

A-ertising agencies procure a-ertisement on behalf of ,oorarshan uner agreement between

them an the a-ertisement charges reco-ere from the customers were also in accorance with

tari!! prescri.ed .y Doordarshan which was incorporate in the agreement% &here was a

pro-ision in the agreement permitting a-ertising agencies to retain 1!* of the a-ertising charges

payable by them to ,oorarshan towars commission from out of the charges recei-e for a-ertising ser-ices from customers%

't was specifically state in the agreement that advertisement materia shoud aso con!orm to

the discipine introduced .y Doordarshan because it cannot telecast all what is esire to be

telecast by a-ertising agencies% ,oorarshan was also boun by a-ertisement contract procure

by a-ertising agencies an it was their duty under the a/reement .et2een them and the

advertisin/ a/encies to teecast advertisement materia in terms o! the contract 2hich the

a/ency si/ns 2ith the customer% &herfore court hel that there was pure agency arrangement

between the ,oorarshan an the a-ertising agencies because one acts for the other an the act of

the agent bins the ,oorarshan in their capacity as principal of the agent%

ourt also hel that commission or bro"erage efine uner E0planation (i) to section 19+ has a

wie meaning an it co-ers any payment received or receiva.e directy or indirectly by a person

acting on behalf of another person for ser-ices renere% A-ertisement charges collecte by agents

were for ,oorarshan an agents were allowe to retain 1!* of the commission by the responent

ony to avoid the hasse o! deposit o! !u amount and repayment o! #9 thereo! to2ards

commission% 't was also obser-e that when ,oorarshan recei-es <!* of the a-ertising charges

from the a-ertising agency concerne. ,oorarshan accounts full amount as recei-e from the

customer for whom a-ertisement was unerta"en. creiting <!* recei-e in their account an

simultaneously creiting 1!* in the account of the a-ertising agency% 'n clause 2(e) of the

agreement between ,oorarshan an a-ertising agencies it was state that agent will pay to the

,oorarshan through ,, or cheue the &,S amount payable on the commission retaine by agents%

D CIT v$ Idea Ceuar 7td$ " @+8#8A +,8 CTR 88&, @Dehi )CA "

Assessee7company. a cellular telephone networ" pro-ier. offere iscount to istributors "nown as

prepai mar"et associates (;@As) appointe by it to sale pre7pai cars or recharge coupons% &he

istributors appointe agents to pro-ie S'@ ars an/or recharge coupons to ultimate

consumers/subscribers% ;@As were reuire to pay in a-ance to assessee uner agreement% E-en

though. a-ance payment was mae. it coul not be sai sale as unsol S'@ ars an/or recharge

coupons coul be returne to assessee an amount recei-e as a-ance was to be returne byassessee% ,iscount offere by assessee to istributors of S'@ ars/recharge coupons is

commission an principal an agent relationship is establishe% Assessee i not euct &,S on the





iscount/commission% 't was hel that Assessee was liable to euct ta0 at source uner section

19+ an on non7euction of &,S. assessee was efaulter uner section 21%

D 'hmeda.ad Stamp Vendors 'ssociation v$ >nion o! India " 5+88+6 #+& Taman + @4uHarat )CA

&he petitioner was a registere association of the stamp -enors of Ahmeaba% &he 'ncome7ta0

,epartment as"e the State >o-ernment to euct ta0 at source uner section 19+ on the

commission or bro"erage pai to stamp -enors% &he petitioner approache the ourt for a





eclaration that section 19+ was not applicable on the groun that the licence -enor ha to pay

the price of the stamp papers less the iscount which -ary from %!* to +*% Stamp -enor oes not

collect the stamp papers from the >o-ernment. sells them to the retail customers an then eposits

the sale procees with the >o-ernment less the iscount% 't was further contene that the licence

-enor woul not be entitle to get any compensation or refun of the price if the stamp papers

were to be ost or destroyed an e-en when the stamp papers are returne. the >o-ernment pays

the stamp -enors 1* less than the face -alue of the stamp paper as against harly %!* to +* of iscount which the stamp -enor gets at the time of purchasing stamp papers%

&he crucial uestion is whether ownership in the stamp papers passe to the stamp -enor when the

&reasury $fficer eli-ers stamp papers on payment of price less iscount% ;erusal of the >uIarat

F5,;SJ FHSS$M ,L> F,$1J !H$1J. l9<8 BL>B3,51J 5:,5 5:1 YJ5,;S G1L>R2J ,21 SH3: ,J12J R' Jtamp

papers uner contract of sale an there is no contract of agency between the >o-ernment an the

stamp -enors% &reasury is neither paying commission nor bro"erage to stamp -enors% &reasury

only allows them iscount% ,iscount is neither pai by cash nor by cheue but it is allowe as less

payment%

Entry <+ in Scheule ' to the >uIarat Sales7ta0 Act. 19F9 specifically e0empts sale of stamp papers

by the license -enors% &he -ery basis of enacting the pro-ision by the State Begislature for gi-ing

e0emption from sales7ta0 in respect of sale of stamp papers by the license -enors was the fact that

the sale of stamp papers by the license -enors to the customers woul ha-e been otherwise liable

to sales7ta0% &he uestion of le-y of sales7ta0 woul arise only because the license -enors

themsel-es sell the stamp papers on their own an not as agents of the State >o-ernment% a they

been treate as agents of the State >o-ernment. the uestion of le-y of sales7ta0 on sale of stamp

papers by them woul not arise an conseuently there woul ha-e no necessity for any e0emption

pro-ision in this regar%

5hen the license stamp -enors too" eli-ery of stamp papers on payment of full price less

iscount an they sell such stamp papers to retail customers. neither of the two acti-ities (buying

from the >o-ernment an selling to the customers) can be terme as the ser:ice in the course of

buying or selling of goods%

'n -iew of the abo-e. >uIarat hel that the iscount mae a-ailable to the license stamp -enors >R1J

LR5 ',$$ OB5:BL 5:1 KS21JJBRL Y3R;;BJJBRL R2 YE2RN12,A1 HL>12 J135BRL l9+D%

&he Supreme ourt also ismisse the appeal of the epartment against the aforesai Iugment of

>uIarat an affirme the ecision of the >uIarat igh ourt holing that %!* to +* iscountgi-en to the Stamp Jenors is for purchasing the stamps in bul" uantity an the sai iscount is in

the nature of cash iscount% Supreme ourt also affirme that the impugne transaction is a sale an

conseuently. section 19+ of the 'ncome7ta0 Act. 19F1. has no application C=D@ :. &hmedabad

;tamp 0endors &ssociation ? C212E #!F D@R #F (;=)E %

D CIT v$ )ardarshan Sin/h " 5+8#,6 ,98 ITR 8&+ @Dehi )CA "

Assessee carrie on business of commission agent by arranging for transportation of goos through

other transporters% &he assessee use to collect freight charges from the clients who intene to

transport their goos through separate transporters% &he entire amount collecte from the clients is

pai to the transporters after eucting commission from the sai amount%



Assessee claime that contract was between clients an lorry owners/transportersT he acte only as a

facilitator or intermeiary an was not liable to euct ta0 at source while ma"ing payments to

transporters%

hel that the contract was actually between the clients an lorry owners/transporters an the

assessee was only an intermeiary an. therefore. it was not the Vperson responsibleV for euction of

ta0 at source in terms of section 19+ of the sai Act%



20 6$,CA. Ajit Kr.


TDS !rom rent 5Section #%&-I6

D 5here there are -arious co7owners then the limit of ` 1.<. shall separately apply to each co7

owner%

D &a0 is to be eucte e-en on a-ance rent% No &,S is reuire to be eucte at the time of

payment of security eposit since it cannot be treate as a-ance rent% owe-er. ta0 is reuire to

be eucte when the security eposit has been aIuste against rent%

D Epanation @iA to Section #%&-I "

<rent< means any payment. by whate-er name calle. uner any lease. sub7lease. tenancy or any

other agreement or arrangement for the use of (either separately or together) any ?

(a) lanT or

(b) builing (incluing factory builing)T or

(c) lan appurtenant to a builing (incluing factory builing)T or

() machineryT or

(e) plantT or

(f) euipmentT or

(g) furnitureT or

(h) fittings.

whether or not any or all of the abo-e are owne by the payee%

Notes "

#$ 5here builing is let7out along with furniture etc%. ta0 is reuire to be eucte on entire rent

1*%

+$ Section 19+7' is applicable e-en if the person to whom rent is pai is not the owner of the

builing% 'n other wors. ta0 is euctible e-en in case of sub7lease%

,$ Circuar No$ #( Dt$ ++--#%%9 "

&he 4oar recei-e a number of ueries from -arious persons regaring the application of the

pro-ision of Section 19+7'% &hese ueries were carefully consiere by the 4oar an the

following clarifications were issue for information an guiance of all concerne ?

*uery No. 1 ? Whether ta is reGuired to be deducted at source where a non-refundable

deposit has been made by the tenantH

'ns2er " 'n cases where the tenant ma"es a non7refunable eposit ta0 woul ha-e to beeucte at source as such eposit represents the consieration for the use of the lan or the

builing. etc%. an. therefore. parta"es of the nature of rent as efine in section 19+7'% 'f.

howe-er. the eposit is refunable. no ta0 woul be euctible at source% 't is further clarifie

that if the eposit carries interest. the ta0 to be eucte on the amount of interest will be

go-erne by section 19+A of the 'ncome7ta0 Act%

*uery No. 2 ? Whether the ta is to be deducted at source from warehousing chargesH

'ns2er " &he term VrentV as efine in E0planation (i) of section 19+7' means any payment by

whate-er name calle. uner any lease. sub7lease. tenancy or any other agreement or

arrangement for the use of any builing or lan% &herefore. the warehousing charges will be

subIect to euction of ta0 uner section 19+7'%





20 6$,CA. Ajit Kr.


*uery No. # ? ,n what amount the ta is to be deducted at source if the rentals include

municipal ta6 ground rent6 etc. H

'ns2er " &he basis of ta0 euction at source uner section 19+7' is Vincome by way of rentV%

Rent has been efine. in the E0planation (i) of section 19+7'. to mean any payment uner any







D Circuar No$ 91+88#( Dt$ +-,-+88# "

(a) &a0 is reuire to be eucte e-en on a-ance rent pertaining to more than one financial year%

;roblem arises because such a-ance rent is ta0able in more than one financial year while ta0 is

eucte in the first year itself when such a-ance rent is recei-e% 't is to be note that creit for



20 6$,CA. Ajit Kr.


entire amount of ta0 eucte at source is not allowe in terms of section 199 because the credit is to

be gi:en for the assessment year for which such income is assessable% &o remo-e practical

ifficulties it is clarifie that where a-ance rent is sprea o-er more than one financial year an ta0 is

eucte thereon. creit shall be allowe in the same proportion in which such income is offere for

ta0ation for ifferent assessment years base on the single certificate furnishe for ta0 so eucte on

the entire a-ance rent% ii) 5here ta0 has been eucte at source an pai to the entral

>o-ernment an the income is assessable o-er a number of years. creit for ta0 eucte at sourceshall be allowe across those years in the same proportion in which the income is assessable to ta0%

Rule #>&(#)(ii) ?

Where tax has been deducted at source and paid to the 'entral overnment and the income is

assessable over a number of years, credit for tax deducted at source shall be allowed across those

years in the same proportion in which the income is assessable to tax.

(b) ;roblem also arise when subseuent to the euction of ta0 at source on a-ance rent pertaining to

one or more financial years rent agreement gets terminate/cancelle (or rente property is

transferre by way of sale etc%) resulting into refun of balance amount of a-ance rent to the

tenant% &o remo-e practical ifficulties it is clarifie that in such a case creit for the entire balanceof ta0 eucte at source. which has not been gi-en creit so far. shall be allowe in the assessment

year rele-ant to the financial year uring which the rent agreement gets terminate/cancelle or

rente property is transferre an balance of a-ance rent is refune%

D Circuar No$ 91+88+( Dt$ ,8--+88+ " TDS on payment made to hotes "

Section 19+7' o not co-er any payment for rent mae by an ini-iual or 3 e0cept in cases

where the total sales. gross receipts or turno-er from business an profession carrie on by the

ini-iual or 3 e0cee the monetary limits specifie uner section ++A4% 5here an employee or

an ini-iual representing a company (li"e a consultant. auitor. etc%) ma"es a payment for hotel

accommoation irectly to the hotel as an when he stays there. the uestion of ta0 euction atsource woul not normally arise (e0cept where he is co-ere uner section ++A4 as mentione

abo-e) since it is the employee or such ini-iual who ma"es the payment an the company merely

reimburses the e0peniture%

&he meaning of VrentV in section 19+7' is wie in its ambit an scope% 3or this reason. payment mae to

hotels for hotel accommoation. whether in the nature of lease or licence agreements are co-ere. so

long as such accommoation has been ta"en on Vregular basisV% 5here earmar"e rooms are let out for

a specifie rate an specifie perio. they woul be construe to be accommoation mae a-ailable

on Vregular basisV% Similar woul be the case. where a room or set of rooms are not earmar"e. but the

hotel has a legal obligation to pro-ie such types of rooms uring the currency of the agreement%

owe-er. often. there are instances. where corporate employers. tour operators an tra-el agents

enter into agreements with hotels with a -iew to merely fi0 the room tariffs of hotel rooms for their

e0ecuti-es/guests/customers% Such agreements. usually entere into for lower tariff rates. are in the

nature of rate7contract agreements% A rate7contract. therefore. may be sai to be a contract for

pro-iing specifie types of hotel rooms at pre7etermine rates uring an agree perio% 5here an

agreement is merely in the nature of a rate contract. it cannot be sai to be accommoation Vta"en on

regular basisV. as there is no obligation on the part of the hotel to pro-ie a room or specifie set of

rooms% &he occupancy in such cases woul be occasional or casual% 'n other wors. a rate7contractis ifferent for this reason from other agreements. where rooms are ta"en on regular basis%

onseuently. the pro-isions of section 19+7' while applying to hotel accommoation ta"en on

regular basis woul not apply to rate7contract agreements%





20 6$,CA. Ajit Kr.


D Circuar No$ #1+88( Dt$ #8-#-+88 " 'ppica.iity o! the provisions o! section #%&-I to cooin/

char/es paid .y the various customers to the o2ners o! cod stora/es "

Representations ha-e been recei-e from -arious uarters regaring applicability of the pro-isions

of section 19+7' to cooling charges pai by the -arious customers to the owners of col storages% 't

has been represente that the col storage owners pro-ie a composite ser-ice. which in-ol-es





preser-ation of essential foo items incluing perishable goos at -arious temperatures suitable for

specific foo items for reuire perios an storage of goos being inciental to the acti-ity of

preser-ation% &he cooling of goos is controlle through mechanical process% &he customer brings

its pac"ages for preser-ation for a reuire perio an ta"es away its pac"ages after paying cooling

charges% &he customer oes not hire the builing. plant/machinery. etc%. in any manner an oes not

become a tenant of any "in%

+$ &he matter has been e0amine% &he main function of the col storage is to preser-e perishable

goos by means of a mechanical process. an storage of such goos is only inciental in nature% &he

customer is also not gi-en any right to use any emarcate space/place or the machinery of the col

store an thus oes not become a tenant% &herefore. the pro-ision of 19+7' is not applicable to the

cooling charges pai by the customers of the col storage%

,$ owe-er. since the arrangement between the customers an col storage owners are basically

contractual in nature. the pro-ision of section 19+ will be applicable to the amounts pai as

cooling charges by the customers of the col storage%

TDS !rom payment on trans!er o! certain immova.e property other than

a/ricutura and 5Section #%&-I'6

D &he pro-isions of section 2#A (i%e% reuirement to obtain &AN) shall not apply to a person reuire

to euct ta0 in accorance with the pro-isions of this section% 'n other wors purchaser is not

reuire to obtain &AN%

D ADmmo:able propertyA means any lan (other than rural agricultural lan) or any builing or part of

a builing%

D 'f 19+7'A is also applicable in case of transfer of urban agricultural land %

D &,S is euctible if asset is purchase !rom Ioint owners/co7owners an total consieration is ` ! la"hs

or more e-en though amount pai/payable to each Ioint owner/co7owner is less than ` ! la"hs%

Eampe " @r% A purchase an immo-able property for ` F la"hs on 1%<%21+ from @r% H @r%

G who are co7owners of the immo-able property ha-ing eual shares% 'n this case share of each co7

owner is ` # la"hs but &,S is euctible because total consieration for transfer of an immo-able

property is F la"hs (i%e% ! la"hs or more)%

D &,S is euctible if asset is purchase .y more than one person Iointly an total consieration is `

! la"hs or more e-en though amount pai/payable .y each purchaser (i%e% Ioint owner/co7owner) is

less than`

! la"hs%

Eampe " @r% 4 sol an immo-able property for ` F la"hs on 1%<%21+ to @r% ; @r% L who

purchase the property contributing ` # la"hs each% 'n this case consieration pai/payable by each

co7owner (i%e% @r% ; @r% L) is ` # la"hs but &,S is euctible because total consieration for

transfer of an immo-able property is F la"hs (i%e% ! la"hs or more)%

D &,S is euctible u/s 19+7'A e-en if immo-able property is purchase by a non-resident from a

person resident in 'nia%

Eampe " @r% @. a non7resient. purchase an immo-able property from @r% N. a resient for a

consieration of ` F la"hs on 1%<%21+% 'n this case &,S is euctible by @r% @ u/s 19+7'A%

D &,S is not euctible u/s 19+7'A if immo-able property is purchase from a non-resident but shall

be euctible u/s 19!%



Eampe # " @r% R purchase an immo-able property from @r% S. a non7resient for a consieration

of ` F la"hs on 1%<%21+% 'n this case &,S is euctible by @r% R u/s 19! an not u/s 19+7'A%

&,S will be 2%F* of B&> generate by @r% S%



Eampe + " @r% R purchase an immo-able property from @r% S. a non7resient for a consieration

of ` F la"hs on 1%!%21#% 'n this case &,S is euctible by @r% R u/s 19! e-en though property

was purchase before 1%F%21#% &,S will be 2%F* of B&> generate by @r% S%

D &,S is not euctible if consieration is less than ` ! la"hs% onsieration inicates eclare

consieration an not Stamp ,uty Jalue%

Eampe "@r% S purchase an immo-able property from @r% & for a consieration of ` + la"hs on 1%<%21+%

Registrar -alue the property at ` !2 la"hs for stamp uty purpose% 'n this case &,S is not euctible by

@r% S since eclare consieration is only ` + la"hs e-en though S,J is ` ! la"hs or more%

D &,S is euctible e-en if consieration is pai in instalments pro-ie total consieration is ` !

la"hs or more% &,S is reuire to be eucte at the time of payment of each instalment% &,S is

reuire to be eucte e-en if immo-able property is hel by the seller as stoc"7in7trae or

purchase by the buyer as stoc"7in7trae%

Eampe "

@r% H. a salaries person. boo"e 1 s% ft% office space from H Bimite. a resient construction

company for a total consieration of ` 9 la"hs% &he builing is uner construction an is li"ely to

be complete in 21+% onsieration is payable in 9 instalments% # instalments ha-e been pai before

1%F%21#% 'n this case &,S is euctible by @r% H on instalments pai on or after 1%F%21# (i%e%

from +th instalments an onwars) at the time of payment of each instalment% &,S u/s 19+7'A will

be euctible by @r% H e-en if he is a salarie person% 't is also immaterial that property is hel by

the H Bimite as stoc"7in7trae%

D

&,S is euctible at the time of creit or at the time of payment whiche-er is earlier% 'f account of the seller is creite before 1%F%21# but payment is mae on or after 1%F%21#. &,S is not

reuire to be eucte u/s 19+7'A%

TDS !rom !ees !or pro!essiona1technica services1royaty1sum re!erred to in Section

+@vaA1remuneration to a director 2hich is not in nature o! saary 5Section #%&*6

D Sum re!erred to in Section +@vaA "

Any sum ("nown as non7compete fee/compensation for restraint in trae) recei-e/recei-able in

cash/"in uner an agreement for KSection 2<(-a)=?

(i) not carrying out any acti-ity in relation to any businessT or

Eampe " H Bimite enters into an agreement with G Bimite% As per agreement G Bimite

pays ` 1 la"hs to H Bimite an H Bimite agrees for not selling its proucts within 'nia for !

years% ` 1 la"hs is ta0able in the hans of H Bimite as ;>4;%

(ii) not sharing any "now7how. patent. copyright. trae7mar". licence. franchise or any other

business or commercial right of similar nature or information or techniue li"ely to assist in the

manufacture or processing of goos or pro-ision for ser-ices%

Eampe " H Bimite enters into an agreement with G Bimite% As per agreement G Bimite pays

` 1 la"hs to H Bimite an H Bimite agrees for not sharing its "now7how to any other person

within 'nia for ! years% ` 1 la"hs is ta0able in the hans of H Bimite as ;>4;%





D 5%e%f% 1%8%212 any remuneration/fee (B%% >B2135R2NJ JB55BLA ')/commission pai to a irector is

subIect to &,S 1*% No e0emption is allowe whate-er may be the amount pai% 3or e0ample.

e-en if ` ! is pai to the irector as commission/sitting fee shall be subIect to &,S% E0cept

payment of salary (which is co-ere u/s 192) all payments to a irector are subIect to &,S u/s 19+%





D Section +(a)(ia) pro-ies that euction of any interest6 commission or brokerage6 rent6 royalty6

fee for professional or technical ser:ices6 or any payment to a contractor or sub-contractor for

carrying out any work (including supply of labour for carrying out any work) shall not be allowe

as business e0peniture. if ?

(i) the same is pai/payable to a resident in 'nia an

(ii) ta0 is euctible at source but has not eucte by the assessee or ta0 has been eucte at

source but after the euction it has not been pai to the >o-ernment%

't is to be note that section +(a)(ia) oes not co-er ?

(a) non7compete fee referre to in section 2<(-a) an

(b) sitting fee to irectors

'n other wors. in case of non7compete fee referre to in section 2<(-a) an sitting fee to irectors.

SRGBJBRL R' J135BRL +$(,)(B,) BJ LR5 ,SS$B3,E$1 ,L> 3,L5 E1 >BJ,$$RO1> H/J 2<(-a) e-en in case of

efault in euction/payment of &,S% owe-er. penalty an interest for non7euction/non7

payment of &,S shall be le-ie%

D Noti!ication No$ +#1+8#+( Dated #,--+8#+ "

No euction of ta0 shall be mae uner section 19+ if ?

#$ ;ayment is mae by a resient or non7resient person (i%e% transferee) for acuisition of

software from another resident person (i%e% transferor)%

+$ the software is acuire in a subseGuent transfer an the transferor has transferre the software

without any modification.

,$ ta0 has been eucte uner section 19+ on payment for any pre:ious transfer of such softwareT

&$ the transferee obtains a eclaration from the transferor that the ta0 has been eucte unerSection 19+ along with the ;ermanent Account Number of the transferor%

Eampes "

❖ G Bimite 'nia acuires a software from H Bimite 'nia for a consieration of ` 2! la"hs%

G Bimite 'nia shall be reuire to euct &,S u/s 19+ 1* on ` 2! la"hs pai to H Bimite

'nia%

G Bimite 'nia transfers this software to O Bimite 'nia for a consieration of ` # la"hs%

O Bimite 'nia shall not be reuire to euct &,S on payment of ` # la"hs to G Bimite 'niaif ?

D G Bimite has not mae any moification in software an

D O Bimite 'nia obtains a eclaration from the G Bimite 'nia that G Bimite 'nia has

eucte &,S u/s 19+ on payment mae to H Bimite 'nia%

❖ 4 Bimite 'nia acuires a software from A Bimite 3rance for a consieration of ` 2! la"hs%

4 Bimite 'nia shall be reuire to euct &,S u/s 19! 2!* (or rate gi-en in ,&AA.

whiche-er is lower) on ` 2! la"hs pai to A Bimite 3rance%

4 Bimite 'nia transfers this software to Bimite 'nia for a consieration of ` # la"hs%

Bimite 'nia shall not be reuire to euct &,S on payment of`

# la"hs to 4 Bimite 'niaif ?

D 4 Bimite has not mae any moification in software an



D Bimite 'nia obtains a eclaration from the 4 Bimite 'nia that 4 Bimite 'nia has

eucte &,S u/s 19! on payment mae to A Bimite 3rance%



'naysis "

Trans!eror Trans!eree

@i$e$

trans!eror

!or

su.seJuent

trans!ereeA

TDS

deducti.e

.y

trans!eree

Su.seJuent

trans!eree

:hether trans!eree

@i$e$ trans!eror !or

su.seJuent

trans!ereeA has

made any

modi!ication in the

so!t2are

TDS

deducti.e

.y

su.seJuent

trans!eree

Resient Resient 19+ 7 7 7

Resient Non7resient 19+ 7 7 7

Non7resient Resient 19! 7 7 7

Non7resient Non7resient 19! 7 7 7

Resient Resident 19+ Resient No No &,S

Resient Resident 19+ Resient Ges 19+

Resient Resident 19+ Non7resient No No &,S

Resient Resident 19+ Non7resient Ges 19+

Resient Non7resient 19+ Resient Ges/No 19!

Resient Non7resient 19+ Non7resient Ges/No 19!

Non7resient Resident 19! Resient No No &,S

Non7resient Resident 19! Resient Ges 19+

Non7resient Resident 19! Non7resient No No &,S

Non7resient Resident 19! Non7resient Ges 19+

Non7resient Non7resient 19! Resient Ges/No 19!

Non7resient Non7resient 19! Non7resient Ges/No 19!

D VRoyaltyV shall ha-e the same meaning as in 9planation 2 to ;ection $(1)(:i)%Epanation + to Section %@#A@viA "

Royalty means any consieration for ?

(i) the transfer of all or any rights in respect of any ? patent. in-ention. moel. esign. secret

formula or process or trae mar" or similar propertyT

(ii) the use of any ? patent. in-ention. moel. esign. secret formula or process or trae mar" or

similar propertyT

(iii) the gi-ing any information concerning the wor"ing of any ? patent. in-ention. moel. esign.

secret formula or process or trae mar" or similar propertyT

(i-) the renering of any ser:ices in connection with the acti-ities referre to in (i) to (iii) abo-e%

Epanation & to Section %@#A@viA "

&ransfer of all or any rights in respect of any right. property or information inclues transfer of all

or any right to use a computer software (incluing granting of a licence) irrespecti-e of the meium

through which such right is transferre%

&herefore. E0planation + ma"es it clear that consieration pai for transfer of all or any right to use

a computer software (incluing granting of a licence) is a royalty%

&herefore ?

❖ 'f a person (whether resient or NR) in 'nia ?

➢ imports a software from outsie 'nia =R







(c) the location of ser-er is outsie 'nia%

E0planation ! clarifies that the payment mae to foreigner shall be treate as royalty e-en if ?

(a) possession of ser-er is not with 'nian ban"%



(b)ser-er is not use irectly by 'nian ban"%

(c) the location of ser-er is outsie 'nia%

&herefore. on such payments. &,S shall be eucte u/s 19!%

Epanation to Section %@#A@viA "

&he e0pression <process< inclues transmission by satellite (incluing up7lin"ing. amplification.

con-ersion for own7lin"ing of any signal). cable. optic fibre or by any other similar technology.

whether or not such process is secret%

Eampe "

'nian &ele-ision hannels ma"e use of satellite of foreigner to transmit their programs% Now the

payment mae to foreigner for transmission of programs by satellite is treate as royalty liable to ta0

euction u/s 19!%

D Epanation @aA to Section #%&9* "

<Brofessional ;er:ices< means ser-ices renere by a person in the course of carrying on legal.

medicaZ. engineering or architectural profession or the profession of accountancy or technical

consultancy or interior ecoration or advertisin/ or such other profession as is notifie by the 4oar

for the purposes of section ++AA or o! this section @i$e$ Section #%&*AX%

ZCircuar No$ 1+88%( Dt$ +&-##-+88% " 'ppica.iity o! section #%&* on payments made .y

Third Party 'dministrators @TP'sA to hospitas on .eha! o! insurance companies !or settin/

medica1insurance caims etc$ 2ith the hospitas

&he ser-ices renere by hospitals to -arious patients are primarily medicaZ ser-ices an.

therefore. pro-isions of section 19+ are applicable on payments mae by &;As to hospitals etc%

3urther for in-o"ing pro-isions of section 19+. there is no stipulation that the professional ser-ices

ha-e to be necessarily renere to the person who ma"es payment to hospital% &herefore &;As whoare ma"ing payment on behalf of insurance companies to hospitals for settlement of

meical/insurance claims etc% uner -arious schemes incluing ashless Schemes are liable to

euct ta0 at source uner section 19+ on all such payments to hospitals etc%

XNoti!ication No$ 1+88 ( Dt$ +#--+88

'n e0ercise of the powers conferre by E0planation (a) to section 19+. 4,& hereby notifies the

ser-ices renere by following persons in relation to the sports acti-ities as V;rofessional Ser-icesV

for the purpose of the sai section. namely ?

[ Sports ;ersons.[ mpires an Referees.

[ oaches an &rainers.

[ &eam ;hysicians an ;hysiotherapists.

[ E-ent @anagers.

[ ommentators.

[ Anchors an

[ Sports olumnists%

D Circuar No$ +( Dt$ #-#8-#%%9 "

Any fees pai through regular ban"ing channels to any chartere accountant. lawyer. a-ocate or

solicitor who is resient in 'nia by the non7resients who o not ha-e any agent or business





connection or permanent establishment in 'nia shall not be subIect to the pro-isions of ta0

euction at source u/s 19+%







O t h e r p r o v i s i o n s r e l a t i n g t o T D S

No TDS !rom any sum paya.e to 4overnment( RBI or certain corporation 5Section #%6

No euction of ta0 shall be mae by any person from any sum payable to ?

(a) the >o-ernment. or

(b) the R4'. or

(c) a corporation establishe uner a Centra 'ct which is e0empt from income7ta0 on its income. or

() a @utual 3un specifie uner Section 1(2#,)%

=.tainin/ a certi!icate !or deduction at o2er rate !rom '$=$ 5Section #%6

D 5here. in the case of any income of any person. income7ta0 is reuire to be eucte uner the

pro-isions of Sections 1$26 1$#6 1$!6 1$!&6 1$!=6 1$!46 1$!6 1$!6 1$!-D6 1$!/6 1$!%& and

1$J. the Assessing $fficer is satisfie that the total income of the recipient Iustifies the euction of

income7ta0 at a lower rate or no euction of income7ta0. as the case may be. the Assessing $fficer shall. on an application (in Form No$ #,) mae by the assessee in this behalf. gi-e to him such

certificate as may be appropriate%

D 5here any such certificate is gi-en. the person responsible for paying the income shall. until such

certificate is cancelle by the Assessing $fficer. euct income7ta0 at the rate specifie in such

certificate or euct no ta0. as the case may be%

No deduction to .e made in certain cases 5Section #%'6

Section #%'@#'A " No ta0 will be eucte at source uner Section 19# (i%e% 'nterest on securities) an 19+A (i%e% 'nterest

other than interest on securities). in case of a person (not being a company or a firm). if such person

furnishes to the payer a eclaration in writing in uplicate in new Form No$ #94 to the effect that the

ta0 on his estimated total income (incluing such income) will be nil%

Section #%'@#BA "

Self7eclaration mentione in Section 198A(1A) cannot be gi-en by an assessee whose income from

interest on securities an/or interest other than interest on securities e0cees the ma0imum amount not

chargeable to ta0% &herefore. e-en if the ta0 on an ini-iual is N'B. still ta0 shall be eucte at source%3or e0ample. an ini-iual recei-es ` 2.!. interest from a company an he has no other source of

income% e has in-este ` 8. in ;;3 which ualifies euction u/s < an therefore the ta0

payable by him is N'B% ,eclaration cannot be gi-en by such ini-iual an ta0 shall be eucte% Such

ini-iual shall ha-e to claim either refun of &,S or he can obtain certificate from A%$% u/s 198 that no

&,S shoul be eucte% owe-er. if the aforesai ini-iual is senior citi6en. then he can gi-e a self7

eclaration u/s 198A(1) an ta0 shall not be eucte at source%

Section #%'@#CA "

No ta0 will be eucte uner Section 19#. 19+ an 19+A in the case of a resient ini-iual who is of

the age of F years or more at any time uring the ;%G%. if such ini-iual furnishes to the person

responsible for paying any income to the payer a eclaration in writing in uplicate in new Form No$

#9) to the effect that the ta0 on his estimated total income (incluing such income) will be nil%





Section #%'@#EA "

No euction of ta0 shall be mae from any payment to any person for. or on behalf of. the New

;ension System &rust referre to in section 1(++)%





20 6$,CA. Ajit Kr.

Section #%'@#FA "

1otwithstanding anything contained in this 'hapter, no deduction of tax shall be made from such

specified payment to such institution, association or body or class of institutions, associations or bodies

as may be notified2 by the 'entral overnment in the fficial a4ette, in this behalf CDnserted by

+inance &ct6 212E .

KNotification No. 21'212 has been issued by the =>4@ CRefer ;ection 1$!/E.

Section #%'@+A "

&he person responsible for paying any income of the nature referre to in Section 198(1A)/198(1) shall

eli-er to the '&/'& one copy of the eclaration referre to in Section 198(1A)/198(1) on or before

the se-enth ay of the month ne0t following the month in which the eclaration is furnishe to him%

(KFR P) ,DLDE=) <#): RI BD5? 5Section #%9'6

'n a case other than that referre to in section 192(1A). where uner an agreement or other arrangement.

the ta0 chargeable on any income referre to in the foregoing pro-isions of this hapter is to be borne

by the person by whom the income is payable. then. for the purposes of euction of ta0 uner those

pro-isions such income shall be increase to such amount as woul. after euction of ta0 thereon at the

rates in force for the financial year in which such income is payable. be eual to the net amount payable

uner such agreement or arrangement%

'n other wors. when ta0 is to be borne by the payer. the &,S has to be calculate by grossing up the

amount. since the ta0 itself (borne by the payer) represents the income of the assessee%

Ta deducted is income received 5Section #%6

All sums eucte in accorance with the pro-isions of hapter 7 HJ'' shall. for the purpose of

computing the income of an assessee. be eeme to be income recei-e% 'n other wors. for the purpose

of computation of total income of the payee amount actually recei-e plus the amount of &,S will ha-e

to be consiere% owe-er. the ta0 pai by the employer uner Section 192(1A) on the non7monetary

peruisites of the employee shall not be eeme to be income recei-e%

Credit !or ta deducted 5Section #%%6

Section #%%@#A "

Any euction mae in accorance with the pro-isions of hapter 7 HJ'' an pai to the entral

>o-ernment shall be treate as a payment of ta0 on behalf of the person from whose income the

euction was mae%

Section #%%@+A "

Any ta0 pai by the employer on non7monetary peruisites of the employee to the entral >o-ernment

shall also be treate as ta0 pai on behalf of the employee an creit shall be gi-en to such employee for

the amount so pai%

Section #%%@+A "

&he 4oar may. for the purposes of gi-ing creit in respect of ta0 eucte or ta0 pai by the employer

on non7monetary peruisites of the employee. ma"e such rules 5Rue ,B'6 as may be necessary.



20 6$,CA. Ajit Kr.

incluing the rules for the purposes of gi-ing creit to a person other than those referre to in sub7

section (1) an sub7section (2) an also the assessment year for which such creit may be gi-en%



20 6$,CA. Ajit Kr.


Credit !or ta deducted at source !or the purposes o! Section #%% 5Rue ,B'6

Rue ,B'@#A "

reit for ta0 eucte at source an pai to the entral >o-ernment in accorance with the pro-isions

of hapter HJ''. shall be gi-en to the deductee on the basis of information relating to euction of ta0

furnishe by the euctor to the income7ta0 authority or the person authorise by such authority%

Rue ,B'@+A "

@iA where uner any pro-isions of the Act. the whole or any part of the income on which ta0 has been

eucte at source is assessable in the hans of a person other than the euctee. creit for the whole

or any part of the ta0 eucte at source. as the case may be. shall be gi-en to the other person an

not to the euctee pro-ie that the euctee files a eclaration with the euctor an the euctor

reports the ta0 euction in the name of the other person in the information relating to euction of

ta0 to the income7ta0 authority or the person authorise by such authority%

@iiA &he eclaration file by the euctee uner clause (i) Ki%e% Rule #84A(2)(i)= shall contain the name.

aress. permanent account number of the person to whom creit is to be gi-en. payment or creit in

relation to which creit is to be gi-en an reasons for gi-ing creit to such person%@iiiA&he euctor shall issue the &,S certificate in the name of the person in whose name creit is shown

in the information relating to euction of ta0 to the income7ta0 authority or the person authorise

by such authority an shall "eep the eclaration in his safe custoy%

Rue ,B'@,A "

@iA reit for ta0 eucte at source an pai to the entral >o-ernment. shall be gi-en for the

assessment year for which such income is assessable%

@iiA 5here ta0 has been eucte at source an pai to the entral >o-ernment an the income is

assessable o-er a number of years. creit for ta0 eucte at source shall be allowe across those

years in the same proportion in which the income is assessable to ta0%Rue ,B'@&A "

reit for ta0 eucte at source an pai to the account of the entral >o-ernment shall be grante on

the basis of ?

@iA the information relating to euction of ta0 furnishe by the euctor to the income7ta0 authority or

the person authori6e by such authority? an

@iiA the information in the return of income in respect of the claim for the creit.

subIect to -erification in accorance with the ris" management strategy formulate by the 4,& from

time to time%

'nnua Ta Statement 5Section +8,''6

D &he prescribe income7ta0 authorityZ (or the person authorise by him)

D shall. within the prescribe timeZZ after the en of each financial year

D prepare an eli-er to e-ery person from whose income the ta0 has been eucte

D an Annual &a0 Statement in the prescribe 3ormZZZ specifying the amount of ta0 eucte uring

the financial year%

Rue ,#'B@iA "

Z&he ,irector >eneral of 'ncome7ta0 (Systems)





20 6$,CA. Ajit Kr.


ZZby the #1st uly following the financial year

ZZZ3orm 2FAS





2 !a"arie#

4A $%tere#t &t'er t'a% i%tere#t &% #e(uritie# 194) $%#ura%(e (&**i##i&%4+ C&**i##i&% &r r&kerage

-uarter". &% /u". 7, (t&er 7, /a%uar. 7 a%

Bar a/ainst direct demand on assessee 5Section +896

5here ta0 is euctible at the source uner the foregoing pro-isions of this hapter. the assessee (i%e%

euctee) shall not be calle upon to pay ta0 himself to the e0tent to which ta has been deducted from

that income. whether or not the euctor has pai the same to the creit of the entral >o-ernment%

Duty o! person deductin/ ta 5Section +886

Section +88@#A "

Any person eucting any sum in accorance with pro-isions of hapter 7 HJ'' shall pay within the

prescribe time. the sum so eucte to the creit of the entral >o-ernment%

Section +88@+A "

Any person being an employer. referre to in Section 192(1A) shall pay. within the prescribe time. the

ta0 to the creit of the entral >o-ernment%

Rue ,8 eals with the time limit for eposit of &,S as follows ?

Ta Deductor Time imit o! deposit

4overnment 5Rue ,8@#A6 ?

D &,S is eposite without hallan (i%e% through boo"entry)

D &,S is eposite with hallan

Same ay of euction

$n or before 8 ays from the en of

the month in which ?(i) the euction is mae or

(ii) income7ta0 is ue u/s 192(1A)%

'ny other person 5Rue ,8@+A6 "

D 5here the amount is pai or creite to the account of the

payee in the month of @arch

D 'n any other case

$n or before #th April%

$n or before 8 ays from the en of

the month in which ?

(i) the euction is mae or

(ii) income7ta0 is ue u/s 192(1A)%

Specia cases 2here ta deducted at source can .e deposited Juartery 5Rue ,8@,A6 "

'n the following cases. the Assessing $fficer may with the prior appro-al of the oint ommissioner.

allow payment of &,S uarterly as follows ?

Section +88@,A "

Any person eucting any sum in accorance with pro-isions of hapter 7 HJ'' or. as the case may be. any

person being an employer referre to in Section 192(1A) shall. after paying the ta0 eucte to the creit of

the entral >o-ernment within the prescribe time. prepare uarterly statements/return for the perio ening

on the #th une. the #th September. the #1st ,ecember an the #1st @arch in each financial year an

eli-er to the prescribe income7ta0 authority K,>'& (Systems)= within such time as may be prescribe%

Bro:ided that the person may also deli:er to the prescribed authority a correction statement for rectification of any mistake or to add6 delete or update the information furnished in the statement

deli:ered under this sub-section in such form and :erified in such manner as may be specified by the

authority - Dnserted by the +inance (No. 2) &ct6 21!.



&he following forms for filing uarterly statement/return ha-e been prescribe uner Rue ,#' ?



Payments Residentia Status o! Deductee Return Form

Salary Resient/Non7resient 3orm No% 2+L

$thers Resient 3orm No% 2FL

Non7resient 3orm No% 28L

As per Rule #1A. these uarterly statements shoul be eli-ere to the prescribe income7ta0 authority

on or before 1!th uly. 1!th $ctober. 1!th anuary in respect of the first three uarters of the financial

year an on or before the 1Jth Lay following the last uarter of the financial year%Noti!ication No$ 91+8##( Dated +&$#8$+8##

Reaation o! time imit !or su.mission o! Juartery statements in case o! 4overnment

Kuarter ended Due date o! !urnishin/ Juartery statement

#th une #1st uly

#th September #1st $ctober

#1st ,ecember #1st anuary

#1st @arch 1!th @ay

Certi!icate !or ta deducted 5Rue ,#6

&he payer of income is suppose to issue a certificate of ta0 euction (i%e% &,S certificate) in the

following forms as per Rule #1 ?

Payments Form No$

Salary 3orm No% 1F

$thers 3orm No% 1FA

&he time limit for issue of &,S certificate as per Rule #1 ?

Payments Time 7imit

Salary 'nnuay by #1st @ay of the financial year immeiately following

the financial year in which the income was pai an ta0 eucte

$thers Kuartery within 1! ays from the ue ate for furnishing the

statement of &,S uner Rule #1A i%e% #th uly. #th $ctober. #th

anuary #th @ay%

Note "

All euctors (incluing go-ernment euctors who eposit &,S in the entral >o-ernment Account

through boo" entry) shall 'ssue &,S certificate generate through TR'CES Porta an which is

ownloae from the &RAES ;ortal with a uniue &,S certificate number% &he euctor shall

therefore. ownloa such certificate from the &RAES ;ortal. -erify the correctness of the contents

mentione therein an authenticate the correctness of the contents before issue of the sai certificate

either using igital signature or manual signature%

Processin/ o! statements1return o! TDS 5Section +88'6

❖ Section +88'@#A

D Section 2A pro-ie for computeri6e processing of statements of &,S or a correction statement

so that liabilities on account of interest an other efaults in &,S payment are promptly calculate

an intimate to the euctor%





D &he following aIustments can be mae uring the computeri6e processing of statements of &,S or

a correction statement ?

a) Any arithmetical error in the statementT or





20 6$,CA. Ajit Kr.

b) An incorrect claim. if such incorrect claim is apparent from any information in the statement (i%e%

where &,S rate is not in accorance with the pro-isions of the Act or an entry in the statement of an

item. which is inconsistent with another entry of the same or some other item in such statement)%

D After ma"ing aIustments. ta0 an interest woul be calculate an sum payable by the euctor or

refun ue to the euctor will be etermine%

D An intimation will be sent to the euctor informing him of his ta0 liability or granting him the

refun ue within one year from the en of the financial year in which the statement is file%

D 3urther it is pro-ie that the processing of these statements can be unerta"en in a centrali6e

processing centre%

❖ Section +88'@+A

3or the purposes of processing of statements u/s 2A(1). the 4oar may ma"e a schemeZ for

centralise processing of statements of ta0 eucte at source to e0peitiously etermine the ta0 payable

by. or the refun ue to. the euctor%

K=entralised Brocessing of ;tatements of @a 4educted at ;ource ;cheme6 21#

M 'mendments made .y Finance 'ct( +8#+

[ Section 1!F has been amene to pro-ie that where any sum is etermine to be payable by the

assessee u/s 2A(1) Ki%e% 'ntimation of &,S=. the intimation sent u/s 2A(1) shall be eeme to be

a notice of eman%

[ Section 2+FA has been amene to pro-ie that an appeal can be file to '&(A) against an

intimation u/s 2A(1) where the euctor obIects to ma"ing of aIustments u/s 2A(1)%

[ Section 1!+ has also been amene to pro-ie that with a -iew to rectB'M ,LM P;BJ5,N1 ,SS,21L5 '2R ;213R2>Q. 5:1 .L3R;17ta0 Authority refer re to in Section 11F may Amen any &,S intimation passe

uner Section 2A(1)%

Ta Deduction 0 Coection 'ccount Num.er 5Section +8,'6

D E-ery person. eucting ta0 or collecting ta0 in accorance with the pro-isions of hapter 7 HJ''.

who has not been allotte a &a0 ,euction Account Number (i.e. @&N) or. as the case may be. a &a0

ollection Account Number (i.e. @=N). shall. within one month from the en of the month in which

ta0 is 1>H351> R2 3R$$1351>. ,SS$M 5R 5:1 JJ1JJBLA 2''B31 'R2 5:1 ,$$R5;1L5 R' , P8,K

V1>H35BRL L> 9R$$135BRL 33RHL5 1H;EQ (i.e. @4=&N)%

D 5here a &AN/&N/&,AN has been allotte to a person. such person shall uote such number ?

(a) in all challans for the payment of &,S/&S to the >o-ernmentT

(b) in all &,S/&S certificatesT

(c) in all the &,S/&S ReturnT

() in all other ocuments pertaining to such transactions as may be prescribe%

'ppication !or aotment o! a ta deduction and coection account num.er 5Rue ##&'6 "

➢ An application for the allotment of a &,AN shall be mae in uplicate in +orm No. !$>%

➢ &he application in 3orm No% +94 shall be mae ?

(a) in cases where the function of allotment of &,AN has been assigne by the '&/'& to any particular A%$%. to that A%$%T

(b) in any other case. to the A%$% ha-ing Iurisiction to assess the applicant%



20 6$,CA. Ajit Kr.


ReJuirement to !urnish Permanent 'ccount Num.er @P'NA 5Section +8''6

D E-ery person whose receipts are subIect to &,S (i%e% the ,euctee) shall furnish his ;AN to the

,euctor% 'f the ,euctee oes not furnish ;AN to the ,euctor. the ,euctor will euct ta0 at

source at higher of the following rates ?

(a) the rate prescribe in the 'ncome &a0 Act. 19F1

(b) the rate mentione in the 3inance Act

(c) at the rate of 2*

Notes "

#$ Section 2FAA o-erries entire 'ncome7ta0 Act%

+$ 5here the amount pai to the ;ayee is upto the limit on which ta0 is not reuire to be eucte

then e-en if ;ayee oes not furnish his ;AN. pro-ision of Section 2FAA shall not apply%

D 5here the ;AN pro-ie to the ,euctor is in-ali or oes not belong to the ,euctee. it shall be

eeme that the ,euctee has not furnishe his ;AN to the ,euctor an accoringly &,S woul

be euctible at the abo-e7mentione rates%

D &hese pro-isions will also apply to non7resients where ta0 is euctible on payments or creits

mae to them%

Note ? w.e.f. 1.".21#6 in respect of payment of interest by a specified Dndian company on long-

term infrastructure bonds to NR M +oreign company as referred to in ;ection 1$!%=6 ta will be

deducted JO6 e:en if recipient does not furnish B&N. (Dnserted by +inance &ct6 21#).

D No certificate u/s 198 (i%e% obtaining a certificate for euction at lower rate from A%$%) shall be

grante unless the application mae uner that Section contains the ;AN of the applicant%

D&he pro-ision that &,S woul be euctible at the abo-e7mentione rates. will also apply in cases

where the ,euctee files a eclaration uner Section 198A in 3orm No% 1!> or 1! but he oes not

pro-ie his ;AN%

D &o ensure that the ,euctor "nows about the correct ;AN of the ,euctee. there is a pro-ision for

manatory uoting of ;AN of the ,euctee by both the ,euctor an ,euctee in all

corresponences. bills an -ouchers e0change between them%

D 'n the case of a transport operator engaged in the business of plying6 hiring and leasing goods

carriagesT ta0 will not be eucte u/s 19+ if he furnishes his ;AN to the ,euctor% 'f ;AN is not

furnishe. the rate will be 2*%

Iustration "

G is reuire to pay ` 1.. to H on which ta0 is reuire to eucte 1*% 5hat will be the rate

of &,S if ?

(a) H oes not furnish his ;AN to G

(b) H furnishe incorrect/in-ali ;AN to G

(c) H furnishe ;AN of O to G

() H gi-es a eclaration in 3orm 1!>/1! u/s 198A to the effect that the ta0 on his estimated total

income (incluing such income) will be nil% 3orm 1!>/1! oes not contains ;AN of H%

(e) H ma"es an application to the A%$% u/s 198 for obtaining a certificate for euction at lower rate

from A%$% Application oes not bear ;AN of H%





20 6$,CA. Ajit Kr.


(f) H oes not furnish his ;AN to G because he is NR an contens that as per ,&AA &,S rate cannot

be more than 1*%





'ns2er "

(a) Section 2FAA is attracte% Rate of &,S shall be 2*%

(b) Section 2FAA is attracte% Rate of &,S shall be 2*%

(c) Section 2FAA is attracte% Rate of &,S shall be 2*%

() Section 2FAA is attracte% 3orm 1!>/1! shall not be -ali an hence rate of &,S shall be 2*%

(e) Section 2FAA is attracte% A%$% shall not entertain application u/s 198 an hence rate of &,S shall

be 2*%

(f) Section 2FAA o-erries entire 'ncome7ta0 Act% &herefore. 2FAA also o-erries pro-ision of

section 9 relating to ,&AA% Section 2FAA is also applicable to non7resients% &herefore. in the

present case rate of &,S shall be 2*%

ConseJuences o! !aiure to deduct or pay TDS 5Section +8#6

Section +8#@#A "

D5here a person who is reuire to euct ta0 at source ?

oes not euct whole or any part of the ta0 =R

[ after eucting fails to pay. the whole or any part of the ta0.

D then such person shall be eeme to be an assessee in efault in respect of ta0 not so eucte or not

so pai

D an conseuently shall be liable for ?

@iA interest uner ;ection 22(2) (i%e% 1* per month or part thereof for the perio of efault) and

(ii) penalty uner ;ection 221(1) (i%e% A%$% may impose penalty of an amount not e0ceeing the

amount remaining unpai)%

Note " 4esies interest an penalty as aforesai isallowance u/s +(a) will also be attracte%

+irst Bro:iso to ;ection 21(1) ? Dnserted by the +inance &ct6 2126 w.e.f. 1--212 ?

D any person who fails to deduct the whole or any part of the tax in accordance with the provisions of

'hapter - 56(( on the sum paid to a resident or on the sum credited to the account of a resident

shall not be deemed to be an assessee in default in respect of such tax if such resident "i.e.

payee7deductee$ 8

"i$ has furnished his return of income under &ection 3 9i.e. on due date or belated:;

"ii$ has ta<en into account such sum for computing income in such return of income; and "iii$ has paid the tax due on the income declared by him in such return of income,

D and the person "i.e. =ayer7deductor$ furnishes a certificate to this effect from a chartered accountant

in such form as may be prescribed.

Section +8#@#'A "

'f a person fails to euct ta0 at source or after euction fails to eposit &,S. is liable to pay interest

(Such interest shall be pai before furnishing uarterly return) as follows ?

Section Rate o! interest

@per month or partA

Period !or 2hich interest is paya.e

21(1A)(i) 1*3rom the ate on which ta0 was euctible to the

ate on which ta0 is actually eucte



21(1A)(ii) 1%!*3rom the ate on which ta0 is actually eucte to

the ate on which ta0 is actually pai



20 6$,CA. Ajit Kr.


Iustration "

Date o!

payment1Credit

Ta actuay

deducted on

Ta actuay

paid on

Rate o!

interestPeriod !or 2hich interest is paya.e

1F7<721+ #17#721! #178721! 1*3rom 1F7<721+ to #17#721!

(i%e% for < months)

1%!*3rom 17+721! to #178721!

(i%e% for + months)

1F7<721+ 1F7<721+ #178721! 1%!*3rom 1F7<721+ to #178721!

(i%e% for 12 months)

1F7<721+ #7+721! #79721! 1*3rom 1F7<721+ to #7+721!

(i%e% for 9 months)

1%!*3rom 17!721! to #79721!

(i%e% for ! months)

#17#721! #17#721! #17+721! N%A% No interest is payable as ta0 has been

eposite within the ue ate

Bro:iso to ;ection 21(1&) ? Dnserted by the +inance &ct6 2126 w.e.f. 1--212 ?

(n case any person fails to deduct the whole or any part of the tax in accordance with the provisions of

'hapter - 56(( on the sum paid to a resident or on the sum credited to the account of a resident but is

not deemed to be an assessee in default under the first proviso of &ection #>"$, the interest under

&ection #>"A$"i$ shall be payable from the date on which such tax was deductible to the date of

furnishing of return of income by such resident .

Section +8#@,A "

No orer shall be mae u/s 21(1) eeming a person to be an assessee in efault for failure to deduct

the whole or any part of the ta 2 from a person resident 22 in 'nia. at any time after the e0piry of

years from the end of the financial year in which payment is made or credit is gi:en%

Note " Section 21(#) is not applicable (i%e% there is no time limit for passing the orer u/s 21(1) an theorer can be passe at any time) if ?

D Z&he euctor has eucte but not eposite the &,S because this woul be a case of efalcation

of go-ernment ues%

D ZZ&he euctee is non7resient because it may not be aministrati-ely possible to reco-er the ta0

from the non7resient%

D 'f assessee agrees to bear &,S on non7monetary peruisites pro-ie to its employee but fails to

eposit the ta0 on same%

Iustration "

Date o!

payment1Credit

Ta actuay

deducted on

Ta actuay

paid on

Date o! !iin/

TDS return

R1S o!

deductee

=rder u1s +8#@#A can

.e passed upto

2711721+ Not eucte Not pai 1!71721! Resient #17#7222

2711721+ Not eucte Not pai Not file Resient #17#7222

2711721+ 2711721+ Not pai 1!71721! Resient No time limit

2711721+ Not eucte Not pai 1!71721! Non7resient No time limit





Pena provisions reatin/ to TDS

Section Nature o! de!aut Penaty

281 3ailure to euct the whole or any part of

&,S

Sum eual to the amount of ta0 which the

assessee has faile to euct

28244(1) 3ailure to obtain &,AN an uoting the

same in challans. certificates an return of &,S%

` 1./7 for each failure/efault

28244(1A) Luoting a false &,AN in the challans or

certificates or return of &,S or other

ocuments

` 1./7 for each failure/efault

28F4 3ailure to pay the ta0 eucte at source to

the creit of entral >o-ernment

Rigorous imprisonment for a term which

shall not be less than # months but which

may e0ten to 8 years an with fine

282A(2)(g) 3ailure to issue &,S certificates as

reuire by Section 2#` 1 for e-ery ay uring which the

failure continues but the penalty shall not

e0cee the amount of ta0 eucte

Note "

5here the assessee pro-es to the satisfaction of the Assessing $fficer that the efault was for goo an

sufficient reasons. no penalty shall be le-ie%

Fee !or de!auts in !urnishin/ statements o! TDS 5Section +,&E6

@#A 5here a person fails to eli-er a statement/return of &,S within the time prescribe in Section

2(#). he shall be liable to pay. by way of !ee. a sum of ` 2 for e-ery ay uring which the failure

continues% &his fee will be in aition to other conseuences uner the 'ncome7ta0 Act. 19F1%

@+A &he amount of aforesai fee shall not e0cee the amount of ta0 euctible%

@,A &he amount of aforesai fee shall be pai before eli-ering a statement/return of &,S%

Penaty !or !aiure to !urnish statements o! TDS 5Section +#)6

@#A A person shall be liable to pay penalty. if. he ?

@aA fails to eli-er a statement/return of &,S within the time prescribe in Section 2(#)T or

@.A furnishes incorrect information in the statement of &,S which is reuire to be eli-ere uner

Section 2(#)%

@+A &he amount of aforesai penalty shall be a sum which shall not be less than ` 1. but which may

e0ten to ` 1..%

@,A No penalty shall be le-ie for the failure referre to in clause (a) of sub7section (1) Ki%e% failure to

eli-er statement/return of &,S=. if the person pro-es that after paying ta0 eucte along with the

fee u/s 2#+E an interest u/s 21(1A). if any. to the creit of the entral >o-ernment. he ha

eli-ere the statement of &,S before the e0piry of a perio of one year from the time prescribe

for eli-ering such statement% &herefore. if uarterly return of &,S which were to be file on 1!th

uly. 21+ is file upto 1!th

uly. 21! an assessee has pai &,S along with the fee u/s 2#+E an

interest u/s 21(1A). if any. to the creit of the entral >o-ernment. then penalty u/s 281 shall not

be le-ie%



HEL (India)

CGP (Mauritius) & its subsidiariesHolding 67% shares in HEL

HTIL (Hong Kong)Holding !!% shares o" CGP

HEL (India)

CGP (Mauritius) & its subsidiariesHolding 67% shares in HEL

#IH$# (etherland)Purhased !!% shares o" CGP "ro' HTIL

HTIL (Hong Kong)


Voda!one Internationa )odin/s B$V$ v$ >nion o! India " 5+886 #9 Taman ,%%

@Bom.ay )CA

Sta/e I

Sta/e II

utchison Essar Bimite (EB) was an 'nian company an a oint Jenture of foreign utchison group

an 'nian company Essar% EB was pro-iing telecommunication (cellular) ser-ice in 'nia%

Name of shareholers of EB an their shareholings were as follows ?

Sharehoders Sharehodin/

>; 'n-estments (olings) Bt% Kregistere in ayman 'slan. @auritius= (>;)

Subsiiaries of >;

'nian company Essar

!1%9!*

1!%!*

##*

Tota #88

utchison &elecommunications 'nternational Bt% (&'B) Ka foreign company registere in ong :ong=

was holing 1* shares of >;%

'n other wors. &'B was holing F8* interest (i%e !1%9!* D 1!%!*) in EB through its 1*

subsiiary >; its subsiiaries. while Essar hel ##* interest%

Joafone 'nternational olings 4%J% (J'4J) Ka foreign company registere in Netherlan= with a

-iew to acuire the controlling interest in EB purchase 1* shares in >; from &'B%

'ncome7ta0 ,epartment contene that ?

#$ &'B has earne income in 'nia as it has transferre its business/economic interest in EB (by way

of selling shares of >; to J'4J) an conseuently liable to capital gain ta0 in 'nia%

+$ J'4J was liable to euct &,S u/s 19! from the sale consieration pai to &'B%





'ncome7ta0 ,epartment. therefore. issue show cause notice u/s 21 to J'4J as to why it shoul not

be treate as an assessee in efault for not eucting &,S u/s 19! on the payment mae to &'B which

is ta0able in 'nia in the hans of &'B as capital gains%

J'4J file a writ petition in 4ombay challenging the legal -aliity of the show cause notice%





J'4J argue before 4omaby that u/s section 9(1)(i) (which is a eeming pro-ision) income

accruing or arising Athrough the transfer of a capital asset situate in DndiaA is eeme to accrue or

arise in 'nia% &he transaction in the present case is the transfer of share capital of a non7resient

company an is not a transfer of a capital asset situate in 'nia% &herefore no capital gain will arise on

sale of shares in >;%

&he 4ombay hel that ?

Shares in themsel-es may be an asset but in some cases li"e the instant one. shares may be merely a

moe or a -ehicle to transfer some other asset(s)% 'n the instant case. the subIect7matter of transfer as

contracte between the parties (i%e% &'B J'4J) was not actually the shares in >;. but the assets

situate in 'nia% &he -ery purpose of entering into agreements in the case between two foreigners (i%e%

&'B J'4J) was to acuire the controlling interest which one foreign company (i%e% &'B) hel in

the 'nian company (i%e% EB). by other foreign company (i%e% J'4J)% &his being the ominant

purpose of the transaction. the transaction woul certainly be subIect to 'nian 'ncome7ta0 Act% J'4J

was. therefore. liable to euct &,S u/s 19! from the sale consieration pai to &'B an conseuently

show cause notice issue u/s 21 is a -ali notice%

4ombay ismisse the writ petition of the J'4J an hel that section 9(1)(i) is attracte an income

earne by &'B is eeme to ha-e accrue or arisen in 'nia Athrough the transfer of a capital asset (i.e

controlling interest) situate in DndiaA an hence. chargeable to income7ta0 uner the hea apital >ains%

$n the basis of Iugement of 4ombay . the A%$% passe orer u/s an le-ie penalty an interest on

J'4J for being assessee in efault%

Voda!one Internationa )odin/s B$V$ v$ >nion o! India " 5+88%6 #% Taman #+%

@Supreme CourtA

J'4J file a petition in Supreme ourt for re-iew of the case an Supreme ourt re-erse the

Iugement of 4ombay holing that the A%$% in 'nia has no Iurisiction to ta0 the transaction which

too" place outsie 'nia an what transferre was the shares of a foreign company (i%e% >;) an not the

controlling interest in 'nian business% Supreme ourt hel that ?

#$ &ransfer of shares of foreign company (i%e% >;) which has an 'nian company as its subsiiary

oes not amount to transfer of capital asset situate in 'nia within the meaning of Section 9(1)(i)%

&he legal fiction in Section 9(1)(i) oes not mean that if foreign company has a subsiiary in 'nia.

then shares of a foreign company are eeme to be situate in 'nia%

+$ Section 9(1)(i) co-ers only the income arising from transfer of a capital asset situate in 'nia anoes not co-er the income arising from indirect transfer of capital asset situate in 'nia%

,$ &he source of income in relation to a transaction is construe to be where the transaction of sale

ta"es place% 5here a foreign holing company (i%e% &'B) sells the shares of its foreign subsiiary

3R;S,LM (B%1% Z#). 5:1L B5 3,L5 21JH$5 BL K5BLAHBJ:;1L5 R' 'R21BAL :R$>BLA 3R;S,LM J (B%1 D8./)right of controlling the 'nian company (i%e% EB) nor it can be sai that it constitutes

e0tinguishment an transfer of asset / management an control of property situate in 'nia%

&$ &he 4ombay ha hel that J'4J on purchase of shares of >; got inirect interest in EB%

J'4J acuire controlling right of &'B in EB namely the right to appoint irectors in EB. the

right to use utch 4ran in 'nia an non7compete agreement with utch 4ran in 'nia. which all

constitute a capital asset as per Section 2(1+)% &he Supreme ourt re-ersing the Iugement of 4ombay hel that controlling interest in not an ientifiable or istinct capital asset inepenent

of holing shares an therefore oes not satisfy the efinition of capital asset in Section 2(1+)%



Supreme ourt hel that the subsiiary company is not a puppet of holing company an it has a

separate e0istence% &he controlling interest of holing company in subsiiary company is not a capital

asset%

Supreme ourt hel that since the capital gains was not ta0able in 'nia. J'4J was not reuire to

euct &,S on the sai capital asset (i%e% from the sale consieration pai to &'B)%



&herefore to nullify the aforesai Iugement of Supreme ourt an affirm the Iugement of 4ombay

. 3inance Act. 212 mae following retrospecti-e amenments w%e%f% 1%+%19F2 ?

#$ (KV)>:7R K RI @5 S=DKD:7 R K :R )F:7RK +@#& A M;7F ; 4) I7K) V <0DS7: D = OVV):?

Epanation to Section +@#&A "

<Broperty< inclues an shall be eeme to ha-e always inclue any rights in or in relation to an 'niancompany. incluing rights of management or control or any other rights whatsoe-er%

&hus after the aforesai amenment. capital asset shall inclue the right of &'B in 'nian company (i%e%

EB) incluing right of management an control. e%g%. right to appoint irectors in EB. the right to use

utch 4ran in 'nia an non7compete agreement with utch 4ran in 'nia% &herefore. &'B has

transferre to J'4J a capital asset in 'nia. being rights in an 'nian company incluing right of

management an control%

+$ (KV)>:7R K RI @5 S=DKD:7 R K + :R 7K V) F:7RK +@&A M;7F ; 4) I7K)V < B>D K VI)>?

Epanation + to Section +@&A "

D 5W24*0D128 inclues an shall be eeme to ha-e always inclue ?

isposing of or parting with an asset or any interest therein. or

creating any interest in any asset in any manner whatsoe-er.

D irectly or inirectly. absolutely or conitionally. -oluntarily or in-oluntarily.

D by way of an agreement (whether entere into in 'nia or outsie 'nia) or otherwise.

D notwithstaning that such transfer of rights has been characteri6e as being effecte or epenent

upon or flowing from the trans!er o! a share @or sharesA o! a company re/istered orincorporated outside India%

&herefore. as per amenment. &'B has mae transfer of its interest in EB to J'4J by trans!er o!

shares o! a company re/istered or incorporated outside India @i$e$ C4PA%

,$ Insertion o! Ep anati o n 9 to Sectio n % 2 hich 4)D= V M7:; <(KFR P ) 4) )P)4 :R DFF>X ) R> D>7V )

7K

(K47D?

Epanation 9 to Section % "

➢ an asset (or a capital asset)

➢ being any share'interest in a company'entity registered'incorporated outside Dndia

➢ shall be deemed to be situated in Dndia6

➢ if the share'interest deri:es6 directly'indirectly6

➢ its :alue substantially from the assets located in Dndia.

&herefore.

➢ shares of >;

➢ being the share in a company registere/incorporate outsie 'nia (i%e% @auritius)

➢ shall be eeme to be situate in 'nia.

➢ as the shares of >; eri-es. irectly/inirectly.





➢ its -alue substantially from the assets (i%e% 4usiness of 'nian company) locate in 'nia%





Documents

0 Tax Deducted at Source (TDS) Notes for AY 2015-16