The Hindu Business Line : Two TDS rates on a single contract?

We are organising a workshop through a nodal agency. We are paying Rs..... to that nodal agency as coordination fee. Can we apply Section 194J on the coordination fee and Section 194C on the balance payments made under the contract? Can we apply two TDS rates on a single contract?

Sumeet Malhotra, email

From the facts of the case, it appears that two rates can be applied if warranted. If a part of the nodal agency's services come under the definition of `professional services', as given in Section 194J, and the remaining come under the purview of Section 194C, you would be perfectly justified in effecting two separate deductions from a composite payment. An assessee also wears several hats. As an investor in shares he gets away with special rates. Similarly for deduction of tax at source one has to go into the substance and composition of payments.

Service tax liability

I recently purchased a flat. In the sale agreement it was mentioned that I would have to bare the expenses towards the payment of service tax.

However, at the time of making the agreement, the builder assured me that it would be to the tune of 6 per cent. Now he is demanding money from me at 12.5 per cent.

I have three queries here: i) Am I responsible to pay the service tax?; ii) If yes, what is the correct percentage? and iii) The percentage is on total cost of the flat or the cost written on the sale deed?

Anant Khangaonkar, Hyderabad

Service tax is on the service provider just as excise duty is on the manufacturer and sales tax is on the seller. But being indirect taxes, the incidence of these taxes is invariably on the ultimate customer unless he is in such a commanding position as to dictate terms wriggling himself out of the tax.

In other words, if the customer is in a position to assert himself he can insist on a clause forbidding the service provider from passing on the service tax to him. But the customer is always at the receiving end, powerless, as he is in the face of the clout of the service provider in economic terms.

For example, no one can possibly excuse himself from service tax duly passed on by MTNL or BSNL. There is of course nothing to prevent a buyer of services, say, a chain of hotels, using the services of a telephone company in a big way to insist on such a clause at the pain of the business being shifted to a more agreeable telephone company.

At the end of the day therefore, might is right. Your builder has most probably got your signature on the dotted line. The agreement perhaps says all taxes are to the clients' account.

At the point of signing the agreement, the rate might have been 6 per cent but what you have to pay is the prevailing rate. But the service tax is not on the entire cost of the flat — it is only on the labour portion. Materials thus cannot form a part of the base on which the service tax is fixed.

Tax on dollar deposit

I was employed in the Gulf for 25 years. I came to India two years back and am settled here. I have $150,000 in deposits as FCNR and RFC (Resident Foreign Currency) of 150,000.

Please clarify whether I am liable for income-tax on the interest on dollar deposits. My tax consultant, a chartered accountant, says no. I am an income-tax payee for my rupee accounts. Please advice.

C. N. Shankaran, email

The exemption to such interest income granted to non-residents and not-ordinarily residents has been withdrawn with effect from April 1, 2005. Therefore, the interest is very much taxable.

Pensioner's doubt

I am a Central Government pensioner drawing my pension through a nationalised bank. My husband who was also a pensioner passed away few months back and I became eligible for family pension. As my income, including the family pension, exceeds the exemption limit for the senior citizens I am a taxpayer.

As per Section 57 (iia) of Income Tax Rules (given in page 300 of `Nabhi`s Income-Tax Guidelines for 2006-07, 2007-08') income from family pension falls under `Income from other sources' and a deduction of 33 1/3 per cent of this income or Rs 15,000, whichever is less, is admissible from this income.

I presume that the net amount is to be exhibited under `Income from other sources' in my IT return. I request that it may kindly be clarified whether this presumption of mine is correct. Kindly confirm.

S. Jayalakshmi, email

Yes your presumption, nay understanding, is perfect!

(ASK! Send in your queries to ask@thehindu.co.in.)

http://MentorQA.blogspot.com

S. Murlidharan

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