TDS DEDUCTION

[ricky chopra]

SIR,

         MY SELF BSNL FRANCHISEE & SELLING RECHARGE,EASY RECHARGE & SIM CARDS TO MY MORE THAN 1500  RETAILERS DAILY ON CASH OR THROUGH BANK. SIR WE ARE PAYING TDS TO BSNL ON EACH & EVERY PURCHASE. & WE ARE SELLING WITHOUT DEDUCTING  TDS FROM RETAILERS BECAUSE THEIR COMMISSION IS VERY LOW & ALSO NUMBER OF RETAILERS IS MORE, & MOREEVER WE PURCHASING FROM BSNL & DIRECTLY SELLING  ON BEHALF OF BSNL & OUR PROFIT IS ONLY 0.5 % FOR WHICH WE ARE GIVING INCOME TAX.  NOW  IT DEPTT.TAKING WHOLE COMMISSION RECIEVED BY US FROM BSNL IN OUR ACCOUNT    & SAYING TO DEPOSIT THE  TDS FOR EACH PARTY. SO KINDLY HELP US BY GIVING SOME SOLUTION.WAITING FOR AN EARLY REPLY

THANKS

[CA. Pawan Tiwari]

You can avail the benifit of section 197 of income tax. According to this section,  first you have to apply for less deduction of TDS or no deducton of TDS ( i.e. NOC) to AO . after getting certificate you produce it to BSNL and take benifit.

 Thanks 

CA. Pawan Tiwari.

[DEV KUMAR KOTHARI]

On consideration of correct nature, there is no commission but there is difference in buying and selling rate or different disocunts. BSNL is selling to you cards at whole sale price. Price charged by BSNL to its different dealers is also not uniform but is differential due to varying discounts allowed. However, unfortuantely the matter was not argued properly, therefore some courts have held that the differnece is commission.

Similarly you are selling to your sub-dealers cards. I hope you also follow differential pricing in relation to various sub-dealers, and again sub-delaers also sell cards at differential price ( by offering discounts at different rates).

Therefore, on correct interpratation and cosnideration of true nature of  difference being discount, there should not be TDS.  The matter is not yet final.

 IMportance of TDS is now more due to provisions of disallowance of entire expenses, if tax is not deducted or deposited. Therefore, one should play safe.

AI Summary

TDS deduction: franchisee can apply for a lower/no deduction certificate or argue margins are discounts, not commission. Franchisees selling recharge cards can seek a TDS certificate for lower or no deduction and present it to their supplier to reduce withholding; alternatively, they may argue their retail margins are discounts, not commission, so withholding would not apply. Because courts have reached differing conclusions and tax rules can disallow expenses if withholding is not made, the position remains unsettled and taxpayers should adopt conservative compliance or obtain formal relief.