TDS on director remuneration and applicability of Service Tax

[Tarun Agarwalla]

194J...
[(ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company,

The notes to finance bill 2012....
Clause 71 of the Bill seeks to amend section 194J of the Income-tax Act relating to fees for professional or technical services.

The existing provisions in sub-section (1) of the aforesaid section 194J provide that a person, not being a individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of fees for professional services, fees for technical services royalty or sums referred to in clause (va) of section 28 shall deduct an amount equal to ten per cent, of such sum as income-tax.

It is proposed to amend the aforesaid sub-section (1) to insert a new clause (ba) so as to provide that the person referred to in sub-section (1) of the aforesaid section who is responsible for paying to a director of a company any sum by way of any remuneration or fees or commission, by whatever name called (other than those on which tax is deductible under section 192), shall deduct an amount equal to ten per cent, of such sum as income-tax in accordance with the provisions of the aforesaid section.
This amendment will take effect from 1st July, 2012
Comment
the said provision might have been drafted to have a track over the director fees etc paid by companies on which service tax is liveable and to be collected as per section 68(2) of the finance act 1994 read with rule 2(d)(i)(EE) of service tax rule. This provision is with effect from 7th august 2012.

Hence only in case where no employer and employee relationship exist between the director and the company TDS under section 194J(ba) to be deducted.

The director may be entitled to any fees, commission from the company and he may not be providing any technical or professional services to the company and hence 194J was not applicable before insertion of the respective provisions during period prior to finance act 2012.

Hence probably to plug the matter the amendment in section 194J is being brought in the finance act 2012 and also to keep track over the service tax collection from the companies by way of reverse charge u/s 68(2)
thank you