TDS applicability- 194H or 194J

[Prerna Birla]

Whether an amount charged on profits made by managing portfolio of an individual will be referred to as professional services or commission/brokerage for the purpose of TDS deduction?

[Padmanathan KV]

Prerna Ma'am,

1. Section 194H not applicable:

(i) "commission or brokerage" includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities;

DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-6, KOLKATA VERSUS NOBLE ENCLAVE & TOWERS (P.) LTD. 2011 (11) TMI 454 - ITAT KOLKATA

2. Applicability of 194J:

Tribunals have held that TDS u/s 194J is also not applicable on portfolio management fee

Hiren Valves Pvt Ltd  - 2014 (9) TMI 1275 - ITAT AHMEDABAD

Taraben Jayantibhai vs ITO - 2015 (10) TMI 2844 - ITAT AHMEDABAD

These are only some of the decisions which reflects the views in this aspect and should not be taken as final inference. At best, they will serve in defending a case if TDS is not deducted. However, the decision to deduct TDS or not should be taken based on facts and circumstances. A conservative approach will be to treat it as fee for technical service and deduct TDS u/s 194J.

AI Summary

TDS Applicability on Portfolio Management Fees: Section 194H Not Applicable, Section 194J May Not Apply. A discussion on the applicability of TDS under sections 194H or 194J for fees charged on profits from managing an individual's portfolio concludes that section 194H is not applicable as it pertains to commission or brokerage not related to professional services. Furthermore, tribunals have indicated that section 194J, which covers fees for technical services, may also not apply to portfolio management fees, referencing cases such as Hiren Valves Pvt Ltd and Taraben Jayantibhai vs ITO. The decision to deduct TDS should be based on specific circumstances, with a conservative approach suggesting treatment as a fee for technical service.