INCOME TAX TDS ON GOODS SECTION: 393(1) SI.NO. 8(ii)

[Hithik]

AS PER NEW SECTION FOR TDS ON PURCHASE OF GOODS, IS THE DEFINATION OF BUYER HAS BEEN DEFINED YET OR ANY CLARIFICATION BY CBDT IN THIS REGARD.?, AS A NEW COMPANY INCORPORATED IN CURRENT FINANCIAL YEAR HAVING PURCHASES OF FIXED ASSETS >50LACS WOULD TDS BE APPLICABLE CONSIDERING WIDE SCOPE OF "BUYER"?

[Sanjeev Agarwal]

TDS on Purchase of Goods - Applicability to a Newly Incorporated Company

The new TDS provision on purchase of goods (corresponding to erstwhile Section 194Q) does not define "buyer" independently. Instead, a person becomes liable to deduct TDS only if the prescribed turnover/gross receipts threshold in the immediately preceding financial year is satisfied.

A newly incorporated company, having no turnover in the immediately preceding financial year, cannot satisfy this statutory condition. Therefore, despite purchases (including fixed assets) exceeding Rs. 50 lakh during its first financial year, it does not qualify as an eligible buyer for this provision.

Further, CBDT has not issued any clarification expanding the definition of "buyer" to include newly incorporated companies merely because their purchases exceed Rs. 50 lakh. Under the earlier Section 194Q regime, CBDT also clarified that the turnover test must be applied with reference to the immediately preceding financial year, effectively excluding first-year companies.

Although capital goods/fixed assets are generally covered within the expression "goods", this becomes relevant only if the purchaser first qualifies as an eligible buyer.

Conclusion:
A company incorporated during the current financial year is not liable to deduct TDS on purchases of goods, including fixed assets exceeding Rs. 50 lakh, in its first financial year, since it does not meet the prerequisite turnover condition of the immediately preceding financial year. This is the legally sustainable and litigation-defensible position in the absence of any contrary statutory amendment or CBDT clarification.

AI Summary

TDS on goods purchases does not apply to first-year companies without the required preceding-year turnover eligibility.
TDS on purchase of goods applies only where the purchaser meets the prescribed turnover or gross-receipts threshold in the immediately preceding financial year. A newly incorporated company with no prior-year turnover does not qualify as an eligible buyer in its first financial year. Purchases exceeding the applicable threshold, including fixed assets or capital goods, do not independently trigger TDS. The possible inclusion of fixed assets within "goods" becomes relevant only after buyer eligibility is established.