Query Regarding TDS Deduction

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  1. INVESTURU

    INVESTURU Member

    Sir, i am a CA Student. i have one query about TDS deduction. i have a
    case regarding the same, which is as follows:-

    Suppose If There is a government department (say Environment
    Department) and that department gives Lump sum grant to the the
    divisions (Division level officers) of the state for the development
    of environment; and Divisions give amount out of received grant to the
    Ranges (Part of Divisions) and officer of respective range utilise
    that amount for main objective, i.e. development & save environment,
    by growing more and more trees. For achieving this objective, range
    officers hire CASUAL Labour (labour of Bihar). here, casual labour
    means, same labour which is not worked for the entire project,
    different-different labourers are hired for different parts of
    project, but this is based on orally agreed basis only, prior to work.

    Now i want to know, who will deduct TDS, out of the following parties,
    in the given case:-
    1) Govt. Department
    2) Division officer (Govt. Employee)
    3) Range Officer (Not a Govt Employee)

    Please note that it is assumed that the limits u/s 194C has been
    crossed and no any written contract is entered into between any of the
    aforesaid parties.
     
  2. ZED

    ZED Well-Known Member


    This indicates that as such there is no organisation or other entity under which these labourers are working.

    Since there are multiple labourers the tax deduction will have to be seen for each labourer (because they are all independent)

    Let's just go through the provision once.

    194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to—

    (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;

    (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family,

    of such sum as income-tax on income comprised therein.




    Ok, so on the basis of above study we can conclude that tax has to be deducted by the person who is responsible for paying the sum (wait the sentence hasn't completed yet).....in pursuance of a contract between the contractor and a specified person shall.....


    Now, who is the person who is responsible for paying AND who also has contracted with the labourer?

    It can't be 1) Govt. Department because that department is merely giving the money to the Divisions. There are several divisions and at different locations and the labour are also scattered.
    Therefore it should't be the Govt. Department

    2. Division, well it to has ranges and division is not a person who has contracted to pay to different labourers nor it is the person responsible for paying the sum.

    Third person i.e Range, satisfies the conditions

    The amount is so much that Tax deduction is required. The transaction individually appears to be material and more so since its INDIRECTLY by Govt. How will geniune expense be proved in absence of any contract? Plus range officer is not a Govt. employee....????
     
  3. INVESTURU

    INVESTURU Member

    Firstly, i am very thankful for your respective and truthful reply.
    Yes, We can prove genuine expenses in the absence of contract, by showing annual progress report.
    Secondly, Range officer here means a normal person (Not a Government Employee), who is appointed by division officer (A Govt. Employee) in the different- different ranges of his division. This is because, a single person can not do a large amount of work.
    Thirdly, Range officer appoints different-different persons as a casual labour, of his own range for different parts of project. but no any written contract is entered, only oral conversations is made for agreed pricing purposes.
    Now i want to know, who will deduct TDS, out of the following parties,
    in the given case:-
    1) Govt. Department
    2) Division officer (Govt. Employee)
    3) Range Officer (Not a Govt Employee)
     
  4. INVESTURU

    INVESTURU Member

    Annual Progress report shows:- standard work assigned and actual work performed..
     
  5. INVESTURU

    INVESTURU Member

    Firstly, i am very thankful for your respective and truthful reply.
    Yes, We can prove genuine expenses in the absence of contract, by showing annual progress report.
    Secondly, Range officer here means a normal person (Not a Government Employee), who is appointed by division officer (A Govt. Employee) in the different- different ranges of his division. This is because, a single person can not do a large amount of work.
    Thirdly, Range officer appoints different-different persons as a casual labour, of his own range for different parts of project. but no any written contract is entered, only oral conversations is made for agreed pricing purposes.
    Now i want to know, who will deduct TDS, out of the following parties,
    in the given case:-
    1) Govt. Department
    2) Division officer (Govt. Employee)
    3) Range Officer (Not a Govt Employee)
    Annual Progress report shows:- standard work assigned and actual work performed..
     
  6. ZED

    ZED Well-Known Member

    So you mean to say that the contract is with range officer?
    It appears that there will be TDS at two points.

    I do not have the copy of agreement to study the nature of contract between the range officer and the division officer.

    Division officer should deduct tax while making payment to the range officer (who is not an employee)

    Range officer will deduct tax of labours.

    This is my prima facie opinion.
    Do give due respect to the language of S.194C aswell.
    The person should also be liable to pay , and he should also be the party to the contract.
     
  7. INVESTURU

    INVESTURU Member

    Sir, there is not any written contract between division officers and range officers. division officers invite quotations from various labourers, residing in the respective range, for working on proposed project. And, quotation of lower amount is accepted.
     
  8. ZED

    ZED Well-Known Member

    Even if there is no written contract, there still exists an agreement and as per Indian Contract Act agreements can be written or verbal.
    TDS provision would apply to an agreement as they apply to a contract.
     
  9. INVESTURU

    INVESTURU Member

    or, sir....thanks a lot...
     
  10. INVESTURU

    INVESTURU Member

    means TDS now will deduct at two point:-
    Division officer and range officer.
     
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