Deduction of TDS from the payment to a Rehri wala etc.

[Guest]

FOR WORKERS & STAFF REFRESHMENT WE R TAKING THE TEA & SNACKS FROM REHRI WALA & PAYING AMT. 10K/MONTH & THEY HV NO PAN NO. PLS CONFIRM IS IT LIABBLE TO DEDUCT TDS.

[CA Rachit Agarwal]

TDS u/s 194 is deducted on the contract of service and not on the contract of sale of goods. Though we have entered into contract for purchase of tea and snacks, however it is for goods. TDS not deductible. Refer Supreme Court judgment dated 23rd March, 1993, in Associated Cement Co. Ltd. v. CIT

AI Summary

TDS on contracts applies to service arrangements, not payments for purchase of goods, so no TDS required. The rule is that Tax Deduction at Source applies to contracts for service and not to contracts for sale of goods; payments to a vendor for supply of tea and snacks are treated as purchase of goods and therefore TDS is not deductible, with a Supreme Court precedent cited in support.