tds on contract 194c

[Guest]

if i have construction the capital asseates(building)those work i have give to contractor.tn those case tds is applicable or not.& pls sent case law relared .

[CA Rachit Agarwal]

TDS is applicable on the contract. It is not important that the contract is for Capital or Revenue item.

If construction has been carried, then TDS will be applicable. However TDS will not be for the amount of cement, bricks provided it is separately mentioned in the bill. Further it is recommended that separate bill should be raised for the cements and bricks if these are provided by the contract.

Refer the Case of Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435

In case of non deduction of TDS, if the tds is on revenue expenditure, then the expenditure would be disallowed pursuant to Section 40(a)(ia).

AI Summary

TDS on contractor payments applies to construction contracts even for capital works; segregate material charges to avoid withholding. TDS on payments to contractors applies to construction contracts even when the work creates a capital asset; material charges (e.g., cement, bricks) are excluded from TDS if separately billed. Separate invoices for supplied materials are recommended. Non-deduction of TDS may lead to disallowance of the related expenditure under the relevant disallowance provision, so payers should withhold TDS on contract payments and segregate material charges to avoid tax adjustments.