Refer to previous feed on TDS on service tax in which we have referred the matter in line with the Board's clarification for the sake of knowledge of our netizens.

After going through the same, one of our learned netizen, Sh. Sivarman V. Chartered Accountant from Chennai, has sent us some comments. His comments are being reproduced as such herein below:

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Please read last line of Sec 194J (1) just before the proviso which reads as under:

"..deduct an amount equal to 10 per cent of such sum as income tax on income comprised there in:

The very same section defines a professional service as under:

Explanation. For the purposes of this section,

(a) professional services means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section;

Where does the service tax come into any of these legal definition or provisions in the Income Tax Act passed by parliament and attested by the President?

The TDS is to be on the income component only. The service tax can never be an income component of an assessee [ of course it is an income to the GOVT]

Just because some department official sends a clarification thinking "thru his hat" why the entire Community at large should suffer.

An organization like you must take up this matter. A department clarification CAN NOT OVER RIDE an Act of Parliament.

When the service tax is itself a tax, then where is the question of tax on tax?

One should not accept a lame excuse like "tds is only an advance tax" etc."

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Sh. D. K. Kothari, the learned and renowned chartered accountant from Kolkatta, wrote an article dated 21-8-2008. He has expressed his views in detail and requested the board to issue a broader circular. (Also refer to his article dated 11-6-2008 on the same issue)

 

We are thankful to our learned netizens for their valuable suggestions.

TDS on income: service tax should not be included as taxable income; departmental clarification cannot override statute. The note argues that TDS applies only to the income component and that service tax, being a tax payable to the government, cannot form part of an assessee's income for deduction; contributors rely on the statutory definition of professional services and the phrase requiring deduction 'as income tax on income comprised therein' to support exclusion of service tax from the TDS base and call for a broader authoritative circular rather than reliance on departmental clarification.