TDS Deduction

[siddharth desai]

i m working on an annual cotract with an MNC. my monthly retainer fees is inr 200,000 + 18% GST. company's taxation department is pressing for 10% TDs deduction under section 194J wherin all these years, my previous companies has always deducted 2% under section 194C. my nature of work is providing them with techincal man power to make creative artworks. need some expert opinion / clarity on what shud i do

[DR.MARIAPPAN GOVINDARAJAN]

TDS under section 194C is for works contract and under section 194J is for professional services. Your fees amounts to professional services and therefore the contention of the taxation department is correct.

[YAGAY and SUN]

In our view it should be 10% as you providing technical/creative artworks as a professional.

[YAGAY and SUN]

2018 (5) TMI 850 - ITAT MUMBAI

ACIT (LTU) -1, Mumbai Versus M/s WTI Advance Technology Ltd. (Now merged with Tata Consultancy Ltd.)TDS u/s 194C OR 194J - scope of work of the contracts entered into by the assessee with the parties/contractors - tds liability - TCS had entered into an agreement with the assessee company for creation of Geographical Information system in the State of Maharashtra and Gujarat - Held that:- As the payments made to the vendors for the work done by them by deploying semi-skilled personnel, did not involve any technical or professional knowledge on their part, the same could not be brought within the sweep of Sec. 194J and had rightly been subjected to deduction of tax at source by the assessee under Sec. 194C.

We thus being of the view that the assessee had correctly deducted tax at source on the payment made to the vendors, therefore, no disallowance under Sec.40(a)(ia) as regards the same was liable to be made in the hands of the assessee. We thus finding no infirmity in the order of the CIT(A), uphold the same in context of the issue under consideration.- Decided against revenue

[Ganeshan Kalyani]

In my view , TDS is deductible @2% under 194C.

AI Summary

TDS classification: identify whether services are professional or works contract to determine applicable withholding treatment.
Whether payments for supplying technical manpower to produce creative artworks fall under the works contract provision or the professional services provision turns on the substantive nature of the services: services involving professional or technical skill point to the professional services provision, whereas payments for work performed by semi skilled personnel without technical knowledge have been treated as works contract payments.