payment for supply of materials as per prescribed specifications is liable to TDS u/s 194c, Income Tax

[shahida shaikh]

The supply of visiting Cards/ letter heads/ notes as per sample prescribed is liable to TDS u/s 194 c or not. ???  The visiting Cards merely 500 Nos etc are supplied by the Seller irrespective of bifurcation of amount of materilas used and amount of printing charges etc. Kindly clarify.

Posts / Replies

[CA GOPALJI AGRAWAL]

It is a works contract. But no tds is to be deducted if the a contract is lesser than 30000/- in a year. or multiples contract with single payee is more than 75000/ - in a year.

[MUKESH SHAH]

Dear Friend,

You may refer CBDT circular No. 13 of 2006 dtd. 13.12.2006 F. No. 275/75/2004-IT(B) wherein CBDT has clarified that "he provisions of section 194C would apply in respect of a contract for supply of any article or thing as per prescribed specifications only if it is a contract for work and not a contract for sale as per the principles in this regard laid down in para 7(vi) of Circular No. 681 dated 8.3.1994..

The entire circular is reproduced hereunder for your immediate reference:

CIRCULAR NO

13/2006, Dated: December 13, 2006

Subject: Applicability of TDS provisions of section 194 C on Contract for Fabrication of Article or Thing as per Specifications given by the Assessee - Contradiction between Two Circulars of CBDT - Resolution thereof - reg.- Co

Representations have been received in the Board seeking clarification on the applicability of section 194C on such transactions, where the assessee has outsourced certain work relating to fabrication or manufacturing of article or thing in accordance with the specifications given by the assessee. Circular No. 681 dated 8.3.94 of the Board clarifies in Para 7(vi) that the provisions of section 194C would not apply to contracts for sale of goods and further clarifies that where the property in the article or thing so fabricated passes from the fabricator-contractor to the assessee only after such article or thing is delivered to the assessee, such contract would be a contract for sale and so outside the purview of the section 194C. However, in reply to question No. 15 in Circular No. 715 dated 8.8.95 on the subject of applicability of Section 194C, in respect of contract for supply printed material as per prescribed specifications, it has been said that such contracts would also be covered under Section 194C. It has been represented that the views expressed in these two Circulars, to the extent as pointed out above, are in contradiction to each other.

2. The matter has been examined by the Board and it is considered that exclusive reliance on Question/Answer No. 15 of Circular No. 715, without taking into account the principles laid down in Circular No. 681 is not justified. Before taking a decision on the applicability of TDS under section 194C on a contract, it would have to be examined whether the contract in question is a 'contract for work' or a 'contract for sale' and TDS shall be applicable only where it is a 'contract for work'.

3. It is, therefore, clarified that the provisions of section 194C would apply in respect of a contract for supply of any article or thing as per prescribed specifications only if it is a contract for work and not a contract for sale as per the principles in this regard laid down in para 7(vi) of Circular No. 681 dated 8.3.1994.

F.No.275/75/2004-IT (B)

(Anand Jha) 
Director (Budget)

You may take recourse to this circular and accordingly ascertain the nature of contract whether the same is for supply or for work and accordingly apply the provisions of Sec. 194C.

CA Chandresh S. Shah

Ahmedabad