CBDT has clarified that No Tax on Tax principle
hereafter. Circular no. 1/2014 dated 13 JAN 14 has clarified that no TDS to be deducted,
if payer agrees to pay the ST component on Service separately as per the
contract bounded between Payee and payer. Hence, it brought conclusion to long waited
justice to Tax payer.
The circular detailed as follows
1.
The Board had issued a Circular No.4/2008 dated 28-04-2008
wherein it was clarified that tax is to be deducted at source under Section
194-1 of the Income-tax Act, 1961 (hereafter referred to as 'the Act'), on the
amount of rent paid/payable without including the service tax component.
Representations/letters has been received seeking clarification whether such
principle can be extended to other provisions of the Act also.
2.
Attention of CBDT has also been drawn to the judgement of the
Hon'ble Rajastlian High Court dated 01.07.2013, in the case of CIT(TDS) Jaipur
vs Rajasthan Urban Infrastructure (Income-tax Appeal No.235, 222, 238 and
239/2011), holding that if as per the terms of the agreement between the payer
and the payee, the amount of service tax is to be paid separately and was not
included in the fees for professional services or technical services, no TDS is
required to be made on the service tax component u/s 194J of the Act.
3.
The
matter has been examined afresh. In exercise of the powers conferred under
section 119 of the Act, the Board has decided that wherever in terms of the
agreement/contract between the payer and the payee, the service tax component
comprised in the amount payable to a resident is indicated separately, tax
shall be deducted at source under Chapter XVII-B of the Act on the amount
paid/payable without including such service tax component.
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