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T. Banusekar

I WORK in UTI Bank Ltd and my spouse in a private limited company. My spouse and myself had gone on a holiday. Am I eligible to get the benefit of exemption under Section 10(5) in respect of the leave travel concession (LTC) for the expenses of my spouse though he is not dependant on me?

Soumya Srinivas

Reply

There is no requirement in Section 10(5) that the spouse should be dependant for getting the exemption. You can, therefore, claim the exemption even though your spouse is not dependant on you.

Query

I and an NRI. I hold an account with ICICIdirect.com on a repatriable basis. I sell shares which I hold and the transactions of sale are usually after about 5-6 months of holding of shares. I earn short-term capital gains from such sale.

The transactions are delivery based. My profits are repatriated to me after deducting tax at source.

I am also liable to pay securities transaction tax at the time of entering into the transactions. Am I liable to file income-tax returns if my taxable profit exceeds Rs 50,000 from such transactions?

Lijoo

Reply

You will be required to file a return of income if your total income exceeds the maximum amount not chargeable to tax which, at present, is Rs 50,000. It may be mentioned that you may authorise any other person to sign the return on your behalf since you are a non-resident and absent from India.

Query

Should tax be deducted at source on payments made to telephone operators, broadband Internet connection providers, mobile service providers and the electricity department.

Suresh Sanjani

Reply

In the context of mobile service providers, it has been held by the Madras High Court in Skycell Communications Ltd vs DCIT (2001 251 ITR 53 Madras) that no tax needs to be deducted at source under Section 194J while making payment to cellular service providers. This decision was rendered on the reasoning that the user does not get a technical service in the real sense though there may be a substantial amount of technology involved in providing the service from the point of view of the service provider.

This decision will apply not merely on payments to mobile service providers but also to fixed line telephones, Internet connection and electricity. So far as deduction of tax at source under Section 194C is concerned, the same will not arise since this section only requires deduction where there is a contract for any work. In all these cases, though there is a contract, the contract is not for any work but for providing a service and, hence, Section 194C will not apply. There will, therefore, be no need to deduct tax at source on such payments.

Query

When we receive bills for any contract work towards building maintenance, repairs, and so on, the amount of bill includes the material cost and labour charges. In such a case should tax be deducted on the gross sum or only on the labour charges component in the bill?

Anurag Goel

Reply

Tax is to be deducted at source on the gross payment and not merely on the labour charges component of the bill. Reference may be made to Circular No. 681 dated March 8, 1994, and the Supreme Court decision in Associated Cement Company Ltd vs CIT (1993 67 Taxman 346 SC).

Query

We purchased a compressor for an air-conditioner. The cost of the compressor is Rs 80,000. We are also engaging the same supplier for installing the compressor. Towards such installation, he levies us a service charge of Rs 18,000. He raises two separate invoices, one for supply of the compressor and the other for service charges. Should tax be deducted at source on service charges?

Pramod Jain

Reply

Normally, tax should be deducted at source on the service charges. Tax should normally be deducted at source under Section 194C at 2 per cent (as increased by the appropriate surcharge). If, however, the nature of service is technical, tax should be deducted at source under Section 194J at 5 per cent (as increased by the appropriate surcharge).

However, in your case, as the payment is only Rs 18,000, you may verify whether the aggregate of payments made to such person during the previous year exceeds the limits stipulated in these sections in arriving at a conclusion on whether tax needs to be deducted at source under these sections.

Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai 600 002.

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