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Due date of filing Service Tax Return for the period of April 2014 to September 2014 extended to 14th November 2014

Central Board of Excise & Customs vide Order No. 02/2014-ST dated 24th October, 2014 has extended the due date of filing Service Tax Return, for the period of April 2014 to September 2014, from 25th October 2014 to 14th November 2014. 

F.No.137/99/2011-Service Tax
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
***
New Delhi, the 24th October, 2014 

ORDER NO. 02/2014-SERVICE TAX

In exercise of the powers conferred by sub-rule (4) of rule 7 of the Service Tax Rules, 1994, the Central Board of Excise & Customs hereby extends the date of submission of the Form ST-3 for the period from 1st April 2014 to 30th September 2014, from 25th October, 2014 to 14th November, 2014.

The circumstances of a special nature, which have given rise to this extension of time, are as follows:

“Natural calamities in certain parts of the country.” 

Himani Bhayana

Under Secretary (Service Tax)
Central Board of Excise and Customs

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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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TDS on Service Tax

According to Indian Tax Laws, the receiver of service is required to do two things at the time of making any payment:- 

1. Pay Service Tax on the services received

2. Deduct TDS on the payment made 

However, the confusion is whether TDS has to be deducted on amount including service tax or on amount excluding service tax. 

For example:- 

Value of services =

Rs. 1,00,000

Service tax on Rs. 1,00,000 @ 12.36% =

Rs. 12,360

Total =

Rs. 1,12,360

So, whether TDS should be deducted on Rs. 1,00,000 (i.e. amount exclusive of Service Tax) or Rs. 1,12,360 (i.e. amount inclusive of Service Tax) ? 

Government’s explanation of TDS on Service Tax 

The CBDT vide Circular No. 4/2008 dated 28-04-2008 announced that at the time of payment of rent i.e. payments under section 194I, TDS should be deducted on the amount exclusive of service tax as the landlord is only acting as a collecting agent for government for collecting the service tax. Therefore, TDS on rent should be deducted on the amount without including service tax. 

However for payments other than rent, TDS should be deducted on amount inclusive of service tax (i.e. on Rs. 1,12,360 as per above example). 

Click here to read the announcement released by government on the above subject. 

TDSMAN’s Point of View 

TDS should be deducted only from the income of the recipient. The service tax charged on the services is not the income as the same has to be submitted to the government. So logically TDS should be deducted from the income exclusive of service tax. Sadly, as per government rules, on payments other than rent the TDS has to be deducted on total amount (Amount inclusive of service tax). 

Source: Income Tax Website, CharteredClub.com

 

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No TDS on Service Tax on Professional or Technical fees

Here is an important judgement of the Hon’ble Rajasthan High Court, in the case of Commissioner of Income Tax (TDS), Jaipur Vs. M/s. Rajasthan Urban Infrastructure [2013 (8) TMI 12 – RAJASTHAN HIGH COURT] on following issue:

Issue:

Whether TDS is to be deducted on the amount of Service Tax charged on professional/ technical fees under Section 194J of the Income Tax Act, 1961?

Facts & Background:

M/s Rajasthan Urban Infrastructure Development Project (“the Respondent”or “the RUIDP”or “the assessee”) is a project of Government of Rajasthan for the Infrastructure Development and Civic Amenities in the specified areas/ cities in the state of Rajasthan. The RUIDP appoints the technical and project consultants and deducts income tax at source from the amount of fee payable as per the agreement and deposit the same as per the relevant provisions of the Income Tax Act, 1961 (“the Income Tax Act”) and subsequently files the return for the same within due time.

The Assessing Officer, vide its order dated 30.01.2009 raised a demand of Rs. 1,70,881/- along with interest thereon amounting to Rs. 44,776/-, on account of TDS on the amount paid as Service Tax pertaining to Financial Year 2005-06. The assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Jaipur which was allowed. Being aggrieved with the same, the Revenue filed an appeal before the Income Tax Appellate Tribunal, Jaipur but the same was dismissed. Hence the revenue preferred an appeal before the Hon’ble Rajasthan High Court.

Held:

It was held by the Hon’ble Rajasthan High Court that if Service tax is payable in addition to professional/ technical fees under the contract, the withholding tax will be restricted to the professional fees. Hence, examination of contract terms is imperative.

The Hon’ble Rajasthan High Court held that the words “any sum paid” used in Section 194J of the Income Tax Act, relate to “fees for professional services or fees for technical services”. In terms of the agreement, the amount of Service Tax was to be paid separately and was not included in the fees. Hence the orders passed by Appellate Authority as well as the Appellate Tribunal are in accordance with the provisions of Section 194J of the Income Tax Act.

Points to note:

The Central Board of Direct Tax (“the CBDT”) vide its Circular No. 4/2008, dated 28.04.2008 held that TDS under Section 194I of the Income Tax Act would be required to be made on the amount of rent paid/payable without including the Service Tax. However, the CBDT vide its Circular No. 275/73/2007-IT(B), dated 30.06.2008 decided not to extend the scope of Circular No. 4/2008 to payment made under Section 194J of the Income Tax Act since it covers any sum paid.

Therefore, it remains to be seen that whether the Revenue files another appeal before the Hon’ble Supreme Court or accepts the above judgment of the Hon’ble Rajasthan High Court and gives relief to assessees.

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