TDS on payments to Port Trust Authorities
Querist :
Anonymous
(Querist) 24 November 2009
This query is : Resolved
Dear Expert,
we have paid some amount to PTA- channai as port dues.
is TDS deducted on such payments or not?
Please clarify my doubt.
is there any special circular or case law in this regard?
by
Raj
A V Vishal
(Expert) 24 November 2009
Any TDS on any Government or government corporation which is exempted from Income tax is not done. Please refer the provisions of TDS for the same.
Vineet
(Expert) 24 November 2009
Port Trust is a taxable entity and hence TDS is to be deducted on certain payments such as rent or contractor payments.
However payment of any statuary levy by Port Trust is not taxable and hence not subjected to tax.
Please refer to following circular no 93
Circular 93 of 26th September, 1972
TDS - Payments to Contractors & Sub Contractors
F. No. 275/100/72-ITJ
Deduction of income-tax at source - Section 194C of the Income-tax Act, 1961
Deduction from payments to contractors-
Instructions regarding.
1. Reference is invited to this Ministry's Circular No. 86 , 29th May, 1972, on the subject mentioned above.
2. This Ministry has received several enquiries from various trade associations and members of the public seeking clarification on several points arising out of the scheme of tax deduction at source from payments made to contractors and sub-contractors in certain cases. The points on which enquiries have been made and clarifications in the matter are given below.
Q1: Does the requirement of deduction of income-tax at source apply in relation to payments made under oral contracts?
A1: Yes. The provision is wide enough to cover not only written contracts but also oral contracts.
Q2 : Does the requirement apply in relation to payments made after 31-5-72 in respect of work done prior to that date?
A2: Yes. Where the value of the contract exceeds Rs. 5,000 income-tax will have to be deducted from all payments made after 31-5-72, notwithstanding that the contract was entered into earlier or the work in connection therewith was carried out before that date. The amount to be deducted will, however, be calculated only with reference to the payments made after the aforesaid date.
Q3: Will the provision apply in a case where a contract of work is given on piece-rate basis without any stipulation regarding the total quantum of such work?
A3: If the total payment under the contract is likely to exceed Rs. 5,000 for the entire period during which the contract will remain in force, income-tax will have to be deducted at source. In a case where, at the time when the contract was entered into, it was expected that the total payment thereunder would not exceed Rs. 5,000 but later on it is found that the payment exceeds that amount, deduction should be made in respect of earlier payments as well.
Q4: Does the requirement apply in a case where payments are made under several contracts during a financial year and the total payments made exceed Rs. 5,000 but the consideration for any individual contract does not exceed Rs. 5,000?
A4: No.
Q5: Does the requirement apply to transport contract?
A5: A transport contract cannot ordinarily be regarded as "contract for carrying out any work" and, as such, no deduction in respect of income-tax is required to be made from payments made under such a contract. In the case of a composite contract involving transport as well as loading and unloading, the entire contract will be regarded as "works contract" and income-tax will have to be deducted from payments made thereunder. Where, however, the element of labour provided for loading and unloading is negligible, no income-tax will be deductible.
Q6 : Does the requirement apply in relation to payments to a sub-contractor by a contractor to whom the provisions of section 194C(1) do not apply?
A7: No. The provisions of section 194C(2) relating to deduction of income-tax at source from payments made to a sub-contractor by a contractor are applicable only where the contractor is a resident person referred to in section 194C(1) , that is to say, he has taken a contract for carrying out any work, or for supply of labour for carrying out any work, from the Central Government or any State Government, a local authority, a statutory corporation or a company.
Q7: Does the requirement apply in relation to payments made to commission agents for arranging sales or to advertising agents rendering professional services?
A7: No. Service contracts not involving the carrying out of any work are outside the scope of the provision.
Q8: Has the quantum of deduction of 2% in respect of payments to contractors and 1% in the case of sub-contractors to be calculated with reference to "income comprised in the payment" or the amount of payment itself?
A8: The percentage of deduction prescribed in law is with reference to the amount of payment itself and not "income comprised in the payment". The person responsible for payment is not, therefore, required to estimate the income comprised in the payment at all.
Q9: Does the requirement apply in relation to payments made for hiring of equipments, rental, etc.?
A9: No.
Q10: In a case where advance payments are made during the execution of a works contract and such payments are to be adjusted at the time of final settlement of accounts, is tax required to be deducted at the time of making advance payment?
A10: Yes.
Q11: Does the requirement apply in relation to payments made to banks for discounting bills, collecting/receiving payments through cheques/drafts, opening and negotiating letters of credit, etc.?
A11: No.
Q12: Does the requirement apply to the following payments made to port trusts?
(a) Wharfage for use of port trust facilities.
(b) Pipeline/pumping charges for use of pipelines owned and operated by port trusts for movement of petroleum products by pipeline from refinery to port installations.
(c) Port charges, such as, pilot charges, pier dues, lighterage, etc., levied by port trust for navigating, docking, anchoring, bunkering of tankers carrying petroleum products within the harbour limits.
A12: Payment other than lighterage charges paid to port trusts will not attract the provisions of section 194C. It is, however, to be noted that a port trust, being a local authority, is exempt from income-tax in respect of income accruing from the supply of a service within its own jurisdictional area and, as such, lighterage charges received by it will not be liable to tax in its own hands. The port trust could, therefore, obtain a certificate from the Income-tax Officer under section 194C(4) of the Income-tax Act and thus receive payments without deduction of tax at source.
These instructions may please be brought to the notice of all disbursing officers and State Undertakings under the control of the State Government.
(Sd.) K. R. Raghavan,
Deputy Secretary to the Govt. Of India.
(F. No. 275/100/72-ITJ).
Querist :
Anonymous
(Querist) 26 November 2009
Dear Mr.Vineet,
thaks you very much for your great co-operation and i am having one more doubt,
that we have imported some of the capital goods through a CHA, who paid the customs duties on behalf of us to the port trust authorities, and he has sent a consolidated invoice for both customs duty and his service charges also.
Basing on that we have deducted the TDS on total bill amount.
But the CHA is deniying the deduction of tds on total amount.
Hence hereby i am requesting you to kindly tell me whether the deduction is correct or not?
if it is correct, let me know is there any circular or notice in this regard available to show as a proof to him?
Vineet
(Expert) 26 November 2009
TDS is deductible only on Custom Agency Commission or service charges.
Customs Duty is a statuary levy paid on your behalf and in way connected with serviced provided by CHA. Hence, no TDS is deductible for reimbursement of such amount.
Querist :
Anonymous
(Querist) 26 November 2009
Dear Mr.Vineet,
thans for your early reply.
and i also thought the same, but some of the experts have told that when a single bill for both customs duty and service charges, the tds must be deducteed on the gross amount but not on the respective service charges.
do you agree that?
the party is not agreeing to deduct the TDS on total bill amount.
i do the deduction only on service charges of CHA only.
by
Raj
