TDS on works contract

[THYAGARAJAN KALYANASUNDARAM]

Dear experts,

one of my client has not been deducted TDS on works contract under section 13 of Tnvat act for the past many years. Suddenly the enforcement wing officer came for audit of my client and says that for non deduction of TDS under works contract executed by the contractor in my client factory, will lead to the client has to pay the TDS along with interest n penalty. However, the contractor who executed the contract at my client place have paid tax under section 5 only. My question is whatever revenue to be paid everything has been collected by the contractor from my client and remit the same to the revenue authority. There is no revenue loss to the government. Some where I have gone through tribunal case laws to support this case. Can any one will share the tribunal case laws or any other cases to support this issue either high court of madras or Supreme Court. Kindly help me in this regards it's very urgently needed.

[Ganeshan Kalyani]

Sir, though there is no revenue loss to the Government there is compliance lapse. When the provison states that the contractee has to deduct TDS and pay to the Govt the assesse is ought to comply the provison.

Sir, your case would be won at Tribuanl level. The lower authority may not accept your contention. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Sir, The same is the situation in Service Tax. Sub-contractor is required to pay ST though the main contractor will take credit and hence it is revenue neutral. I agree with you that relief is possible at Tribunal stage. I think in Income Tax there are so many judgements on this issue. Do you agree ? You know I am a layman in Income Tax.

[Ganeshan Kalyani]

Sir, in sales tax the conplaince lapse in case of TDS provision attracts penalty. Thanks.

[Ganeshan Kalyani]

Sir, I agree with you. Thanks.

AI Summary

TDS on works contract: failure to deduct creates statutory liability for payment with interest and penalty despite contractor remittance. Non deduction of tax at source by a contractee under TDS rules for works contracts creates a statutory compliance lapse, exposing the contractee to liability to pay the deducted tax amount with interest and penalty even if the contractor collected and remitted the underlying tax; contributors noted analogous positions in other tax regimes and indicated that relief is typically sought at tribunal level though lower authorities may enforce sanctions.