Applicability of section 194C to service contracts - Clari­fication regarding Supreme Court judgment in Associated Cement Co. Ltd. v. CIT [1993] 67 Taxman 346/201 ITR 435

Deduction at source under section 194C covers service and transport contracts, expanding withholding obligations where payments exceed threshold.

Applicability of section 194C expands withholding obligations to payments for any work, including service and transport contracts, and covers both written and oral contracts where work is performed for the payer. Exclusions include contracts that are in substance sales of goods, hiring or renting of equipment, and specified banking services. Compliance rules require deduction when total payments exceed the statutory threshold, treatment of advance payments, retrospective deduction if expectations change, and availability of exemption certificates for recipients not liable to tax; contractors must deduct on payments to resident sub-contractors at a lower prescribed rate.