The Reader

I am sorry to have put the words “no” in my below mail. My answer is in both the cases TDS needs to be effected as the amounts “likely to be credited” is in excess of Rs. 20,000/-. Mode of payment does not matter. If for the 49,000/- separate contracts can be signed and each in case it is less than 20,000/-, then no TDS need to be deducted.

Dear Mr Karve,

Is section 194C contradictory in terms of what you have analyzed? Just because the quantum of payment made is 24K and 25K, TDS is effected on the entire contract value of 49K and the for the same contract just because the payment is made as 30K and 19K then TDS is on 30K and not on the full value of the contract as the second payment is not covered by 194C?

I think there is an anomaly here. In the second type of payment, while issuing TDS certificate and filing TDS returns will you mention that the value of the contract is 49K and TDS deducted on 30K?

I feel we need to interpret the section differently. Subsection 5 and the provisio should be interpreted in a manner that you either effect TDS on the contract or not, irrespective of the method of payments.

My interpretation would be, in both the situations mentioned by Mandhana Associates,  no TDS need be effected because 194C provides for the following situation

a)      When there are separate contracts entered into and each do not exceed 20K, then no TDS is required, BUT

b)      If the aggregate of all such individual contracts exceed 50K, TDS is to be effected on all the contracts and not just those in excess of 50K.

In the given case the individual payments do not reflect individual contracts but a single contract for 49K which is less than the 50K mentioned in the proviso. Otherwise it will only be logical for the contractor to deduct TDS on the entire 49K irrespective of the method and installment of payment.

Agreed the wordings of the section say “amounts paid / credited”, but I feel that we need to interpret the words in such a manner to give effect to the section as it was intended.

Mr. Karve, no offence meant, but just to give a different view on the matter that’s all.

Thanks