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No TDS on Service Tax u/s 194J of the Income Tax Act

The CBDT hass issued a Circular No. 01/2014 dated 13.01.2014 regarding deduction of TDS under Section 194J (chapter XVII-B of the Income Tax Act, 1961) on professional and technical services.  This circular clarifies that on Professional and technical services fees paid by the payee to payer is not undercome TDS Deduction. 

This circular has issued by CBDT after 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. Therefore on Professional and Techical service fees no TDS is required  u/s 194J of the Income Tax Act. 

Circular 01/2014 dated 13.01.2014 reproduced hereunder. 

 

F. No_ 275/59/20124T(B)

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

Circular No.01/2014

New Delhi, the 13th January-’2014 

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

1. The Board had issued a Circular No.4/2008 dated 28-04-2008 wherein it was clarified that tax is to be deducted at source under Section 194-1 of the Income-tax Act, 1961 (hereafter referred to as ‘the Act’), on the amount of rent paid/payable without including the service tax component. Representations/letters has been received seeking clarification whether such principle can be extended to other provisions of the Act also.

2. Attention of CBDT has also been drawn to the judgement of the Hon’ble Rajastlian High Court dated 01.07.2013, in the case of CIT(TDS) Jaipur vs Rajasthan Urban Infrastructure (Income-tax Appeal No.235, 222, 238 and 239/2011), holding that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service tax component u/s 194J of the Act.

3. The matter has been examined afresh. In exercise of the powers conferred under section 119 of the Act, the Board has decided that wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.

4. This circular may be brought to the notice of all officers for compliance.

5. Hindi version shall follow.

Under Secretary to Government of India

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