Representations have been received from various quarters regarding applicability of the provisions of Section 194-I to cooling charges paid by the various customers to the owners of cold storages.
It has been represented that the cold storage owners provide a composite service, which involves preservation of essential food items including perishable goods at various temperatures suitable for specific food items for required periods and storage of goods being incidental to the activity of preservation. The cooling of goods is controlled through mechanical process. The customer brings its packages for preservation for a required period and takes away its packages after paying cooling charges. The customer does not hire the building, plant/machinery etc. in any manner and does not become a tenant of any kind.
The main function of the cold storage is to preserve perishable goods by means of a mechanical process, and storage of such goods is only incidental in nature. The customer is also not given any right to use any demarcated space/place or the machinery of the cold store and thus does not become a tenant. Therefore, the provision of 194-I is not applicable to the cooling charges paid by the customers of the cold storage.
However, since the arrangement between the customers and cold storage owners are basically contractual in nature, the provision of section 194-C will be applicable to the amounts paid as cooling charges by the customers of the cold storage.
As per amendment through Finance Act(2) ,2009,new Section 194C has been substituted for old section 194C .New Section is applicable from the 01.10.2009.The main changes in the new section is given as under:
- Separate rates for contractor and subcontractor has been removed. Now the tax rate has been categorized according the status of deductee and new TDS rates for contractors are as under:
For payment made to Individual & Hindu undivided family=1 %
payment to others =2%
- Concessional rate of 1 % for advertisement Contracts has been removed and now rates as defined under (1) above is applicable on all type of contractor including Advertisement contracts.
- No TDS on payment to transport operator (i.e. in the business of playing, hiring or leasing goods carriage), if he/it furnishes his PAN to payer.
- No surcharge and cess applicable on basic TDS rate in FY 2009-10 on payments made to resident except salary
- Basic limit of 20000 and 50000 per annum remains unchanged.
- No tds in case of payment of Job work, if raw material has not been supplied by the payer.