THE CHAMBER OF TAX CONSULTANTS

3, Rewa Chambers, Ground Floor, 31, New Marine Lines, Mumbai - 400 020
Tel.: 2200 1787 / 2209 0423 Fax: 2200 2455 E-mail: citcindia@vsnl.net
Visit us at: Website: http://www.ctconline.org

FULL DAY WORKSHOP ON TDS on 15th JUNE, 2013

QUERIES FOR BRAINS TRUST
Section 194IA
1.

Section 194IA which is inserted with effect from 1-6-2013, provides for TDS on purchase of
immovable properties. Whether the provisions of section 194IA will be applicable in a case of
redevelopment where the developer makes payment to a co-operative society for allowing
construction on plot owned by society under the following situations
(a)

The building of the society is demolished and a new building alongwith additional
construction is constructed by acquiring TDR from open market

(b)

The building of the society is not demolished but additional construction is made on the
plot either horizontally or vertically

Whether there will be any change in the situation if the payment is made to an individual plot
owner instead of a co-operative society under both the above situations?
The above issue arises due to the fact that in few of the cases it has been held that provisions
of section 50C of the Act apply to Development Rights.
(KB)

2.

Whether provisions of section 194IA apply to conversion of tenancy rights to ownership

rights in a scheme of redevelopment ? Whether provisions of section 194IA apply to a case
where tenancy right is acquired by an individual from the earlier tenant ?
(KB)

3.

As per Redevelopment Agreement, the developer makes payment for monthly rent for
temporary alternate accommodation for the flat owners. Whether such payment of rent will be
subject to TDS u/s. 194I or any other section in the following situations :
(a) The developer makes payment to individual flat owners and flat owners makes payment
for their respective flats
(b) The developer directly makes the payments to the lessees for the flats leased to the flat
owners
(GN)

4.

Section 194IA comes into existence w.e.f. 1-6-2013. In a case where a flat is purchased for
Rs. 1 Crore vide Sale Agreement Dated 15-5-2013. Payment of Rs. 20 Lakhs is made upto
31st May, 2013 and the balance payment of Rs. 80 Lakhs is made subsequent to 1st June
2013, whether the provisions of section 194IA will be applicable in such a case. If yes,
whether the tax shall be deducted on Rs. 80 Lakhs or on Rs. 1 Crore. What will be the
situation where agreement is made on 15-5-2013 but registered on 5-6-2013. Whether a letter
of allotment will be considered as a Sale Agreement ?
(GN)

5.

In case of joint ownership if payment made to each transferor is less than 50 Lakh, whether
the provisions of 194IA will be applicable ?
(KB)

6.

Mr. A buys a flat from Mr. B for Rs. 80 Lakhs. The stamp duty value of the property is Rs. 90
Lakhs, whether the TDS u/s. 194IA will have to be deducted on Rs. 80 Lakhs or on Rs. 90
Lakhs.
(KB)

7.

Mr. A buys a flat from Mr. B for Rs. 75 Lakhs. Mr. A does not have a TAN. Whether it is
compulsory for him to obtain a TAN and file TDS Return? If not, how Mr. B will get credit
for the tax deducted by Mr. A.
(GN)

8.

If a non-resident is buying a flat from a resident for Rs. 2 Crores, whether the provisions of
section 194IA will be applicable ? The non-resident does not have any income in India and
does not hold PAN. Whether he will be required to obtain PAN and TAN ? Whether he will
be liable to file TDS Return for the same.
(MN)

9.

Mr. A and Mr. B are both resident Indians. Mr. A buys a flat of Mr. B situated in Dubai for
Rs. 5 Crore. Whether provisions of section 194IA will be applicable in this case ? Whether
the answer will change if (a) Mr. A is a non-resident but Mr. B is a resident (b) Mr. A is a
resident but Mr. B is a non-resident (c) both Mr. A and Mr. B are non-resident
(MN)

10

If the seller of the property does not possess a PAN, whether the tax u/s. 194IA will be
deducted at 1% or @ 20% following provisions of section 206AA.
(KB)
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As per the provisions of section 194IA, tax shall be deducted at the time of payment or credit
to the account of transferor. When can it be said that amount is credited to the account of the
transferor particularly when no books of accounts are maintained by the transferee (GN)

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The provisions of 197 & 197A are not applicable to section 194IA. Can transferee of
immovable property not deduct tax in following cases :-

(a) The transferor of immovable property gives an affidavit that he will invest the amount in
Bonds u/s. 54EC or invest in residential house & claims exemption u/s. 54 or 54F
(b) The Transferor directs him to pay the amount directly in bank account opened under capital
gains account scheme in the name of transferor.
(KB)
Section 195 Part 1

13.

Mr. A makes payment to Mr. B for Royalty on 5th April, 2013. Mr. B is a resident on 5th April,
2013. However, Mr. B shifts to USA in May 2013 and becomes a non-resident in the F.Y.
2013-14. Mr. A has not deducted any TDS u/s. 195 on the Royalty while making payment to
Mr. B on 5-4-2013. Whether the provisions of section 195 are violated in this case. How one
will be able to decide the residential status of the payee when the payment is made in the first
quarter of the financial year?
(MN)

14.

Mr. A is a non-resident. He sells his flat to Mr. B, a resident, for Rs. 1 Crore. LTCG
computed in the hands of Mr. A after considering indexation is Rs. 45 Lakhs. Mr. A wishes to
make investment in 54EC bonds and hence requests Mr. B not to withhold any tax u/s. 195.
Mr. B insists for no deduction certificate from the ITO and makes payment of Rs. 91 Lakhs
but holds back payment of Rs. 9 Lakhs. He agrees to release balance Rs. 9 Lakhs on receipt of
no deduction certificate. Mr. A approaches the ITO in Non-resident section for Nil deduction
certificate. The ITO contends that since the payment of Rs. 91 Lakhs is already made the Nil
deduction certificate can be issued only for proportionate capital gains i.e. Rs. 4.05 lakhs and
not for Rs. 45 Lakhs (45/100 X 9). Whether the view of the ITO is correct ? What is the way
out to overcome the above problem.
(MN)

15.

A Ltd opened foreign Buyer credit through a foreign bank / foreign branch of Indian bank.
Whether usance interest paid to bank is covered u/s 195, Please explain applicability of
section 195 for both type of bank.
(MN)

Salaries

16.

Whether it is mandatory for an employer to include the other incomes of the employees while
computing the Tax Liability u/s. 192 of the Act in a case where the other income is not known
to the employer and is not reported by the concerned employee.
Whether the answer will be different in a case where the employer (or a sister concern of the
employer) pays interest to the employee on loans and is accordingly aware of the other
incomes of the employee though not actually informed (in writing) by the employee.
(GN)

17.

Whether an employer can adjust tax deducted by other deductors (outsiders) from the incomes
of the employees while computing the tax liability u/s. 192 ? Whether this type of adjustment
is permissible in respect of the tax deducted by the employer himself or his sister concerns
under any other section ?
(GN)

18.

A company has a policy wherein if an employee dies or is permanently incapacitated during

his employment, the nominee of the employee is given a lump sum of Rs.5 Lakh and a
monthly family pension of the basic salary last drawn, till the employee would have attained
superannuation at the age of 60. Are each of these i.e the lump sum payment and the pension
taxable? If yes, in whose hands and under which head. What will be the applicability of TDS
provisions ?
(KB)

19.

Leave Travel Allowance : An employee plans his vacation through a tour operator for a trip to
Singapore. The tickets are purchased for a flight from Mumbai to Kolkatta and Kolkatta to
Singapore and the same route return. Since LTA benefit is available for any place in India
only, the claim is made by the employee for the air fare from Mumbai to Kolkatta and return.
Can the exemption be considered for the purpose of deduction u/s. 192?
(KB)

20.

An employee resigns from his job and encashes the unavailed leave standing to his credit.
What is the taxability under section 10(10AA)? (Resignation Vs. Retirement on super
annuation)
(GN)

21.

Leave Travel Allowance : Section 10(5) :An employee avails of his privilege leave for going
on a vacation to Darjeeling with his family consisting of wife and two children. However he
falls ill and he and his wife do not travel. The son proceeds to Darjeeling, but the daughter
decides to go for a Yoga camp to Kanykumari. Can the Air/train fare of the children be
claimed as exempt under section 10(10B)? What would be the position of an employer as
regards TDS provisions, if the children travel independently on dates which do not coincide
with the privilege leave of the employee?
(GN)

22.

An employee retires at the age of sixty years. He was a member of the Superannuation Fund
to which the employer had been contributing monthly 10% of the basic salary since last 25
years. Contribution was not taxed in the hands of the employee till 2009. However since 2007
the employer has paid FBT for contribution in excess of Rs. 100000. Since 2009 the
contribution in excess of Rs. 100000 was taxed in the hands of the employee. On retirement
the employee received one third of the sum lying to his credit by way of cheque which has
been considered as tax free u/s 10(13). The balance two third has been invested in the Annuity
policy of LIC and a monthly pension is received by the retired employee. What is the
taxability of the pension/annuity in the light of the fact that the contribution has been taxed
already (partially)?
(KB)

Section 195 Part 2

23.

Whether the provisions of section 206AA overrides the rate of tax prescribed in DTAAs in
respect of a non-resident deductee ?
(MN)

24.

Section 195 covers every person within its ambit. A question therefore arises as to whether
Form 15CA and 15CB is compulsory for all persons even if the payment is made for personal
purpose. In some cases, banks remit money even without Form 15CA / 15CB.
Is it
mandatory to issue Form 15CA /15CB even if the bank does not insist for these forms (MN)

25.

Whether services of independent personnel nature provided by an employee of the company

will fall under independent personal services clause like services of lawyers provided by
Company form of entity. Some DTAA exclude company specifically from this clause. Also
some DTAA extend the clause to firms specifically. In view of this will payment to company
will be covered under clause Independent personal services of DTAA ?
(MN)

26.

M/s. C Ltd. is an Indian manufacturing company. M/s. C Ltd. is regularly required to make
the payment of technical service charges to M/s. X Inc., USA. The payment to M/s. X Inc.,
USA was not liable for withholding tax u/s. 195 in view of the provisions contained in
Articles 12(4) of India-US-DTAA since there was no transfer or make available of technical
knowledge, skill etc. M/s. C Ltd. was required to make such payment in the month of April
2013. M/s. C Ltd. insisted for a Tax Residency Certificate (TRC) containing certain specified
information from M/s. X Inc., USA. It was clearly indicated to M/s. X Inc., USA that if TRC
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with the specified details is not submitted before 30th April 2013 then the tax will be deducted
at 25.75%. M/s. X Inc., USA could not produce the TRC from the US Tax authority before

30th April, 2013. M/s. C Ltd. made the payment to M/s. X Inc., USA after deducting TDS
@25.75% on 30th April, 2013. Subsequently, on 3rd May, 2013, M/s. X Inc., USA furnished
TRC in a standard format obtained from the US authority & requested M/s. C Ltd. to refund the
tax deducted from the remittance made on 30th April, 2013. M/s. C Ltd. is under dilemma
whether the tax amount (TDS amount) can be refunded/remitted back to M/s. X Inc., USA since
the tax withhold on 30th April, 2013 was not deposited with Government treasury but
15CA/15CB were furnished by M/s. C Ltd. to tax authority as if TDS is deducted on the
remittance contained therein. Please suggest the best course of action to enable M/s. C Ltd. to
remit back the TDS amount to M/s. X Inc., USA while making remittance in subsequent month.
(MN)
Other Sections

27.

The Turnover of Mr. A for the F.Y. 2012-13 is Rs. 50 Lakhs. Though the accounts are not
subject to audit u/s. 44AB of the Act, Mr. A wishes to get his accounts audited u/s. 44AD of
the Act. Whether Mr. A is required to deduct TDS u/s. 194A, 194C, 194I etc. for the financial
year 2013-14.
(GN)

28.

A company participates in an exhibition organized by a Trade Body. Whether the payment

made for the Stall Hire Charges will be subject to TDS. If yes, under which section, whether
Section 194C or section 194I ? The nature of service includes stall charges, ready furniture in
the stall, electricity, security in the stall and in the exhibition etc.
(GN)

29.

A telecom company makes payment to a co-operative housing society for display of hoarding
on the terrace of the society. Whether this payment will be subject to TDS ? If yes, whether
the tax will be deducted under section 194I or section 194C or section 194IA ? Will the
answer be different in a case where the payment is made for mobile tower instead of the
hoarding ?
(KB)

30.

The Bombay High Court in the case of Maharashtra Chamber of Housing Industry and Others
Vs. State of Maharashtra (MCHI decision) has held that sale of flat under construction is a
Works Contract. If a company buys an under construction flat for the purpose of its office
premises from a builder, whether the provisions of section 194C will be applicable to the
payments made to the builder ?
(KB)

31.

A Ltd is a software company. It employs software engineers on contract basis. The engineers
are not taken on pay rolls of the company but are bound to follow all the rules and regulations
like office timings, discipline etc. They are also liable to report to their head of the team who
is an employee of the company. The engineers hired on contract basis are working exclusively
for this company only during the period of their contract. Whether the payments made to the
engineers are subject to TDS ? If yes, under which section Whether section 192 or section
194C or section 194J ?
(GN)

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32.

A & Co. is a partnership firm. The firm pays accounting charges of Rs. 60,000/- to Mr.
Sachin, their part-time accountant, for the F.Y. 2012-13. Whether the payment made to Mr.
Sachin is liable to TDS in the following situations

a. Mr. Sachin is undergraduate but an expert in Tally Data entry

b.
He is a commerce graduate
c.
He is a practicing chartered accountant
If yes, please clarify as to under which section in all the above situations whether section
194C or section 194J.
(GN)

33. A partnership firm makes payment of EMIs on car loan taken from a NBFC. The repayment
schedule gives the break up of Principal and Interest. The Interest per year exceeds Rs.
5,000/-, whether the tax will have to be deducted u/s. 194A of the Act. If yes, how it will be
administered since the NBFC insists for post dated cheques of fixed EMIs for the tenure of
the loan.
(KB)

34. ABC is a partnership firm. Mr. A is one of the partners of the firm. The car loan is taken in
the name of Mr. A from a NBFC and the EMIs are also paid from his personal savings
account. However, the Motor-car and Car Loan are recorded in the books of the firm. The
firm is also claiming interest on car loan as expenses and also depreciation on the Motor-car.
The firm reimburses the EMIs to Mr. A on a monthly basis. Whether the provisions of section
194A will be applicable in respect of the interest on car loan ? If yes, how it will be
administered ? Is there any way in which the TDS on this can be avoided ? Would it be
different, if ABC is a Ltd. Co. and Mr. A is a director of that Company.
(KB)

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35. D Enterprises is a proprietor firm subject to Tax Audit. It hires trucks from truck owners for
delivery of goods to its customers. Fixed monthly compensation of Rs. 40,000/- is paid for
each truck. The fuel cost for operation of the trucks is borne by D Enterprises. The salary for
Drivers and Cleaners are also debited to profit and loss account of the firm. Whether the tax
will have to be deducted under the provisions of section 194C or section 194I ?
Will there be any change if the drivers and cleaners salaries are borne by the truck owner and
the corresponding amount is added in the compensation payable to the truck owner to cover
up the same.
(GN)

36.

Whether TDS provisions are applicable for expenses reimbursed to professional clearing and
forwarding agents alongwith the fees / charges
(GN)

37.

M/s. M. & Co. is a partnership firm engaged in retail trade for various household items. It
accepts the payment by credit cards from its customers. The acquiring bank, which provides
swiping machine to the retailers, makes the payment of the credit card dues after deducting its
charges for the transaction. The acquiring bank recovers the money from the bank issuing
credit card latter on. The charges deducted by the acquiring bank are loosely termed as
Commission. The department has adopted a view that the credit card commission deducted
by the acquiring bank is subject to TDS under section 194H and has treated the assessee as
assessee in default in respect of the TDS not so deducted.
Please advice as to whether such transaction can be covered under the provisions of section
194H of the Act or any other provisions of TDS. What is the remedy available to the retail
merchants to overcome this difficulty?
(KB)

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38.

Whether TDS provisions are applicable in case of tour operators booking hotel rooms on
behalf of tourists while making payment to hotel?
(KB)

39.

Whether TDS is required to be deducted on lease premium paid to CIDCO on allotment of

tender plot to the applicant. I have learned from the department that they have issued such
notices to the applicants
(GN)

40.

TDS on transporter u/s. 194C - In case of builder assessee, when he buys sand from vendor,
he receives bill in two parts; i) portion (50%) of the bill for sand and ii) portion (say 50%) for
transportation of sand till site address. I have learned that the sand vendor does this so as to
minimize the VAT liability. The question which arises, whether to deduct TDS on such
transportation charges. The reason for this is because the condition of non applicability of
TDS on transportation is i) obtaining PAN and ii) the contractor should be in the course of
plying, hiring or leasing goods carriages. Thus, can we claim that such sand vendor is in the
regular course of plying of goods carriages?
(GN)

Section 195 Part 3

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41.

If an Indian company does shooting of a film in Mauritius (i.e not either of contracting state),
and receives services from resident of USA for this shooting. Will it be liable to deduct TDS
as per India USA DTAA ?
(MN)

42.

Please explain the difference between technical services and execution of work carried out in
India
(MN)

43.

If an individual does a trade mark research outside India on behalf of an Indian company,
whether it will fall under fees for technical services. If yes, please explain as to whether it is
because the Indian Company is the beneficiary recipient of the services or is it related to any
income arising or will arise in India ?
(MN)

44.

In case of open offer of shares, whether the acquirer / persons acting in concert need to
deduct TDS from the payments made to FIIs if the FIIs surrender their shares in the open
offer ?
(MN)

Section 206AA and Section 40(a)(ia)

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45.

Mr. A is liable to make payment of Rent to Mr. B during F.Y. 2012-13 of Rs. 3,00,000/-.
Mr. B was not having the PAN during the F.Y. 2012-13 and hence Mr. A deducted tax at
20% following provisions of section 206AA. Mr. B obtained his PAN on 10 th April, 2013
and furnishes his PAN card to Mr. A. He insists that the extra tax deducted by Mr. A shall

be refunded to him. Whether the contention of Mr. B is legally justified. What is the way
out to overcome the extra deduction of tax.
(KB)

46.

A & Co., a partnership firm has made a provision of Rs. 75,000/- to be paid to an Advocate.
The firm deducted Rs. 7,500/- as TDS u/s. 194J. However, subsequently the bill was
received from the advocate for Rs. 1,00,000/-. While making payment for the same, the
TDS on excess amount was missed out. Whether, the entire amount of Rs. 1,00,000/- will
be disallowed or only Rs. 25,000/- will be disallowed u/s. 40(a)(ia) of the Act.
(KB)

47.

Whether the provisions of section 40(a)(ia) are applicable to charitable trusts / Co-operative
Societies not having Business Income ? What are the consequences of non-deduction of tax
in the case of such charitable trusts / Co-operative Societies ?
(GN)

48.

In a case where the assessee obtains Form 15G / 15H but fails to submit the same to the CIT,
whether the assessee can be treated as assessee in default for non deduction of tax at source
u/s. 194A of the Act. Whether the corresponding interest can be disallowed u/s. 40(a)(ia) on
account of non-furnishing of the declarations to the CIT. If Form 15G/ 15H are in old Form
whether disallowance is called for? Since from Feb. 2013 Form 15G/ 15H are changed. (GN)

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