Rental income from industrial park letting, "Business Income"

HC : Rental income from industrial park letting, "Business Income"; Follows Velankani ruling

Toyota Techno Park India (P) Ltd. [TS-190-HC-2014(KAR)]

RBI allows FDI in LLPs

RBI allows FDI in LLPs via capital contribution or transfer of share of profit; notifies form to report FDI

VIDE NOTIFICATION [NO.FEMA.298/2014-RB]/GSR 190(E), DATED 13-3-2014

Source: Taxmann

Account payee cheque mandated u/s 40(A)

HC : Upholds disallowance on cross cheque payment; Account payee cheque mandated u/s 40(A)(3). Rajmoti Industries [TS-198-HC-2014(GUJ)].Source: Taxsutra.

TDS on Contracts under section 194C of Income Tax Act, 1961

Q.1 Who is responsible to deduct taxu/s 194C?

A.1. Any person responsible for paying any sum to any resident contractor for carrying out any work (including supply of labour for carrying out any work) under a contract in pursuance of a contract between contractor and person specified, shall deduct in context at the time of such payment thereof in cash of by issue of a cheque or draft or by any other mode or its credit to contractor’s account or any other account, by whatever name called, whichever happens earlier. Specified person are referred in explanation to section 194C, as under:-

(a)   the Central or State Government; or

(b)    any local authority; or

(c)     any corporation established by or under a Central, State or Provisional Act; or

(d)    any company; or

(e)    any co-operative society; or

(f)    any authority constituted in India by or under any law, engaged either for the purpose of dealing with the satisfying the needs for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages or for both (e.g. CIDCO, HUDCO, etc.] ; or

(g)    any society registered under the Societies Registration Act, 1860 or under any such corresponding law; or

(h)    any trust; or

(i)      any university or deemed university; or

(j)     any government of a foreign state or foreign enterprise or any association or body established outside India; or

(k)    any firm;

(l)      any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not other than those falling under any of the preceding clauses, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor.

W.e.f. 1-10-2009 as per newly inserted section 194C(6), no deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum.

Q.2.     At what rate TDS has to be deducted u/s 194C  ?

A.2 (a) 1 % where the payment is being made or credit is given to an individual or a HUF.

(b) 2% where the payment is being made or credit is to be given to any other entity.

W.e.f. 1-10-209, the nil rate will be applicable if the transporter quotes his PAN. The rate of TDS will be 20% in all the above cases, if PAN is not quoted by the deductee on or after 1-4-2010.

No surcharge, education cess and SHEC shall be added. Hence, TDS shall be deductible at basic rates.

Q.3.     What is the meaning of work for the purpose of section 194C?

A.3. Meaning of work for the purpose of section is contained in clause (iv) of Exoplanation (iv) to section 194C(7) “Work” shall include‑

(a)   Advertising;

(b)    Broadcasting and telecasting including production of programmes for such broadcasting or telecasting;

(c)     carriage of goods or passengers by any mode of transport other than by railways;

(d)    catering;

(e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer.

Q.4. Whether contract for Sale shall also be covered by TDS u/s 194C?

A.4. No, the provisions of S. 194C shall not apply to contract for sale, it has been provided that “work” shall not include manufacturing or supply a product according to the requirement or specification of a customer by using raw material purchased from a person other than such customer as such a contract is a contract for `sale’, please refer Circular : No. 681, dated 8-3-1994.

Purchase of advertisement material from a person without supplying any material used in preparation of said material shall be a contract for sale. Please refer Dy. CIT v. Eastern Medikit Ltd.* [2012] 135 ITD 461 (ITAT-Delhi)

Q.5. Whether Individuals and HUF are laible to deduct tax if the payment  made to a contractor is for personal use?

A.5. Section 194C(4) provides that no individual or a Hindu undivided family shall be liable to deductincome-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family.

Q.6. Under what circumstances TDS u/s 194C is not deductible?

A.6. (i) Where single payment does not exceed Rs.30000/-

(ii)   Where the aggregate payment does not exceed Rs.75000/-

(iii)   In case of transporter TDS u/s 194C is not deductible if the transporter provides its PAN No.

(iv) In case, where payee applied in form 13 to AO for non deduction, being his taxable income including rent below taxable limit, and has obtained certificate thereof.

Q.7. Are Individuals and HUF also covered by the provisions of section 194C for deduction of tax on payments to contractors?

A.7. As per proviso to section 194C(2) individuals and HUF whose total sales/turnover/receipts from the business/profession carried on by him

in the immediately preceding financial year exceeded the monetary limit specified under section 44AB(a) or (b) (i.e. it exceed Rs.6,00,000 / 15,00,000, as the case may be), are also required todeduct tax at source.

Q.8. Whether provision of S. 194C shall also apply to hiring or renting of equipment?

A.8. The provisions of section 1 94C would not apply in relation to payments made for hiring or renting of equipments, etc. Hiring of an assets does not amount to a contract to carrying out any work. Please refer CIT v. Poompuhar Shipping Corporation Ltd. (2006) 282 ITR 3 (Mad). See also Roy Mitra Enterprise v. ACIT [2012] 20 taxmann.com 86 (ITAT­Kol.), Jaiprakash Enterprises Ltd. v. ACIT [2012] 49 SOT 1 (ITAT-Luck.)

Q.9. Whether supply of out sources, manufactured goods under contract will be treated as a works contract u/s 194C.?

A.9. It was held that the supply of outsourced manufactured goods by the contract manufacturer constituted an outright sale and could not be treated as a works contract within the scope of section 1 94C. Consequently, the assessee was not liable to deduct tax at source from the purchase price of the goods paid by it to the contract manufacturer or the supplier. [Tuareg Marketing (P) Ltd. v. ACIT (2009) 28 SOT 1 (Del); Novartis Healthcare (P) Ltd. v. ITO, TDS (Mum). See also CIT v. Nova Nordisk Pharma India Ltd. [2012] 341 ITR 451 (Kar.), CIT v. Glenmark Pharmaceuticals Ltd. (2010) 324 ITR 199 (Bom), Dy CIT v. Reebok India Co. (2006) 10 TTJ 976 (Del). Also see Whirlpool of India Ltd. v. Jt. CIT (2007) 16 SOT 435 (Del)].

Q.10. Whether Service contract covered by S. 194C?

A.10. Yes, Circular : No. 681, dated 8-3-1994

Q.11. Whether provisions of section 194C shall apply in respect of all  contracts?

A.11. Before a person can be called a contractor his status must have nexus in its characteristics as carrying out work for another person as a contractor in the ordinary sense and not merely carrying on activities of his own business or profession in the ordinary course by charging fees or remuneration. [All Gujarat Federation of Tax Consultants v CBDT (1995) 214 ITR 276 (Guj)].

Q.12. Is there any circular that may help in differentiating between works contract and any other contract?

A.12. Yes, Circular No.681, dated 8-3-1 994 issued by CBDT elaborates upon various kinds of contracts that may fall within the definition of works contract and also specifies the nature of contract that shall fall out of the preview of section 1 94C.

Q.13. Whether the provisions of section 194C are also applicable to non resident?

A.13. No, the payments made to non resident contractor would come within the preview of section 195.

Q.14. Whether provisions of section 194C shall apply to franchise agreements?

A.14.  No, the provisions of section 194C shall not apply to franchise agreement as under the franchise arrangement, their consist mutual obligations and rights. Please refer CIT v. Career Launcher India Ltd. (2012) 250 CTR 240 (Del)].

Q.15. Where the assessee entered into contract with transporter for transporting goods from plant to various destination, whether such  contract shall attract TDS u/s 194C or 194I?

A.15. (i) That to decide whether a contract is one for “transportation” or for “hiring”, the crucial thing is to see who is doing the transportation work. If the assessee takes the trucks and does the work of transportation himself, it would amount to hiring. However, if the services of the carrier were used and the payment was for actual transportation work, the contract is for transportation of goods and not an arrangement for hiring of vehicles, and as such provisions of section 194C shall apply.Please refer ITO v. Indian Oil Corporation (Del) (Trib), see also CIT (TDS) v. Swayam Shipping Services P. Ltd. (2011) 339 ITK 647 (Guj)].

(ii) Payments made by assessee to transporters providing vehicles and driver to pick and drop employees is liable to TDS under section 1 94C and not section 194-I. Bharat Electronics Ltd. v. Dy. CIT (TDS), [2012] 50 SOT 172 (ITAT-Delhi)

However in case of payments made by transport contractor for hiring tankers to use them in transport contract business is not liable to

TDS under section 194C, in such case S. 194I shall apply. Bhail Bulk Carriers v. ITO [2012] 50 SOT 622 (ITAT-Mum.)

Q.16. Whether provisions of S. 194C shall apply to subcontracting?

A.16. Yes, where assessee contractor got work done through another party under his supervision and control, there existed relationship of ‘contractor’ and ‘sub-contractor’ requiring assessee to deduct tax at source under section 194C. Ratan J Batliboi v. ACIT [2012] 24 taxmann.com 96 (ITAT-Mum.)

Q.17.  Whether, having a contract is a primary requirement for deduction of tax u/s 194C?

A.17. Yes, In absence of any contract between assessee-contractor and sub­contractor, assessee was not liable to deduct TDS under section 194C on payments made to them. Ratnakar Sawant, Dinesh N. Shah & Co. v. ITO, [2012] 22 taxmann.com 218 (ITAT-Mum.)

Q.18.  Whether the provisions of Section 194C shall also apply in a situation  when assessee entered in to a separate contract for supply of goods and erection work?

A.18.   In a case where three separate agreements were entered into : one for supply of goods, second for erection works and third for civil engineering work, section 194C cannot be pressed into service to deduct tax at source on payment for supply of material merely because said agreement is a part of composite transaction. CIT v. Karnataka Power Transmission Corporation Ltd. [2012] 21 taxmann.com 473 (Kar.)

Q.19. Whether TDS u/s 194C deductible on erection and commissioning of plan even in case of composite contract?

A.19.   In case of common purchase order for supply of plant and for erection and commissioning of plant, the pre dominant object of the contract is the purchase of the plant and the erection and commissioning is only incidental. However in the cases where two contracts are separable contracts TDS shall be deductible on the amount attributable to the erection and commissioning and not on the gross sum paid by the assessee. Please refer Senior Accounts Officer (O & M), Haryana Power Generation Corpn. Ltd. v. ITO (2006) 103 TTJ 584 (Del).

Q.20.Whether Contract for carrying goods and passengers by trailer, utility vans, water tanker, sumos, etc., is covered by section 194C or by section 194-I?

A.20. Contract for carrying goods and passengers by trailer, utility vans, water tanker, sumos, etc., is covered by section 194C and not by section 194-I. CIT (TDS) v. Reliance Engineering Associates (P.) Ltd. [2012] 21 taxmann.com 539 (Guj.)

Q.21. Whether Production of motion films or cinematographic films would  fall within meaning of expression ‘work’ as contemplated under section 194C?

A.21. Yes, production of motion films or cinematographic films would fall within meaning of expression ‘work’ as contemplated under section 1 94C. Nitin M. Panchamiya v. ACIT*[2012] 50 SOT 468 (ITAT- Mum.)

Q.22. Whether contract for supply of labour shall attract TDS u/s 194C?

A.22. Yes, payment made to Calcutta Dock Labour Board for supply of labor for assessee’s business, attracted TDS provisions of section 1 94C Dy. CIT v. Kamal Mukherjee & Co. (Shipping) (P.) Ltd.* [2012] 51 SOT 73 (ITAT- Kol.), see also Associated Cement Co. Ltd. v. CIT (1979) 120 ITR 444 (Pat).

Q.23. Whether sponsorship money paid shall attract TDS u/s 194C?

A.23. Where assessee-management consultant was organizing conferences and sponsorship money was paid to it after conceptualization of conferences, it could not be said that assessee had undertaken to organize said conference at instance of sponsors and, hence, provisions of section 194C (2) could not be invoked. Dr. Raju L Bhatia v. JCIT* [2012] 134 ITD 615 (ITAT-Mum.),however Circular: No. 715, dated 8-8-1 995, provides for TDS u/s 1 94C on sponsorship.

Q.24. Whether payments made to finance companies in consideration of  providing access to their customer database shall attract TDS u/s  194C?

A.24. Where assessee entered into agreements with finance companies to provide access to their customer database, it was not a contract for service and, thus, assessee was not required to deduct tax at source while making payments to finance companies. Dy. CIT v. Armour Consultants (P.) Ltd.* [2012] 50 SOT 140 (ITAT-Chennai)

Q.25. Whether provisions of section 194C shall apply to payment made to Security Guard?

A.25. Yes, please refer Glaxo Smith Kline Pharmaceuticals Ltd. v. ITO (TDS) (2011) 48 SOT 643 (Pune)(Trib).

Q.26. Whether payment made to daily wager shall attract TDS u/s 194C?

A.26. No, please refer CIT v. DewanChand (2009) 17 DTR 337 (Del).

Q.27. Whether the provision of section 194C shall also apply to the  collections made by contractor?

A.27. Tax u/s 1 94C has to be deducted from the payments made to a contractor at the time of such payment to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or any other more and therefore no tax deductible on the amount collected by contractor on behalf of municipal committee. {S.S. and Co. Octroi Contractors v. State of Punjab and Others (204) 268 ITR 398 (P&H)].

Q.28. What is the criteria to distinguish between works contract and  contract for sale of goods?

A.28. The question whether a particular contract is a contract for sale or works contract shall depend upon the facts and circumstances of each case. Please refer State of Gujarat v Variety Body Builders 38 STC 176 (SC) and Anamolu Seshagiri Rao & Co. v. State of Andhra Pradesh (1973) 32 STC 51 (AP), P.S.& Company v. State of Andhra Pradesh 56 STC 283, Sentinel Rolling Shutters & Engineering Co. (P) Ltd. v. CST (1978) 42 STC 409 (SC).

Q.29. Whether a contract to improve customers goods will amount to works contract?

A.29. Yes, please refer Shankar Vittal Motor Co. v. State of Mysore (1964) 15 STC 771 (Mys).

Q.30. Whether provisions of section 1 94C shall apply to bottling contracts ?

A.30. yes, please refer United Exercise v. CST 28 STC 16.

Q.31. Whether provisions of section 194C shall apply to periodic repairing?A.31. yes, please refer Eastern Typewriter Service v. State of Andhra Pradesh (1978) 42 STC 18 (AP), also refer Circular: No. 715, dated 8-8-1 995.

Q.32. Whether provisions of section 194C shall apply on supply of packing material?

A.32. Where assessee-company purchased printed cartons with its own specifications from different suppliers for packing plastic containers in which rolls films were packed, payment for said purchases was not contractual payment requiring deduction of tax under section 1 94C. Please refer Jindal Photo Films Ltd. v. ITO [2006] 5 SOT 272 (Delhi),  see also Wadilal Dairy International Ltd. v. Asssitant CIT (2001) 70  TTJ (Pune-Trib) 77. Also see Balsara Home Products Ltd. v. ITO (2005)  94 TTJ (Ahd.) 970. See also ITO v. Dr.Willmar Schwabe India Pvgt.  Ltd. (205) 3 SOT 71 (Del).

Q.33 Whether provision of section 194C shall apply on supply of printed  labels by printer to assessee?

A.33. The supply of printed labels by the printer to the assessee amounted to sale and not a works contract and that the provisions of S. 194C were not attracted. Please refer CIT v. Dabur India Ltd. (2005) 198 CTR (Del) 375. BDA Ltd. v. ITO, (TDS)(2006) 281 ITR 999 (BOM), CIT v.  Dabur India Ltd. (2006) 283 ITR 197 (Del) also refer Circular: No. 715, dated 8-8-1995.

Q.34. Whether provisions of section 194C shall apply to clearing and  forwarding agent?

A.34. Payment made to clearing and forwarding agent is of the nature of payment made for carrying out any work. Please refer National Panasonic India Pvt. Ltd. v. DCIT (TDS) (205) 3 SOT 16 (Del). See also Glaxo Smith Kline Consumer Healthcare Ltd. v. ITO (2007) 12 sot 221 (Del Trib).

Q.35. What would be the scope of an advertising contract for the purpose of section 194C of the Act?

A.35. The term ‘advertising’ has not been defined in the Act. During the course of the consideration of the Finance Bill, 1995, the Finance Minister clarified on the Floor of the House that the amended provisions of tax deduction at source would apply when a client makes payment to an advertising agency and not when advertising agency makes payment to the media, which includes both print and electronic media. The deduction is required to be made at the rate of 1 per cent. It was further clarified that when an advertising agency makes payments

to their models, artists, photographers, etc., the tax shall be deducted at the rate of 5 per cent as applicable to fees for professional and technical services under section 194J of the Act. Circular: No. 715, dated 8-8- 1995.

Q.36. At what rate is tax to be deducted if the advertising agencies give a consolidated bill including charges for art work and other related jobs as well as payments made by them to media?

A.36.   The deduction will have to be made under section 194C at the rate of 1 per cent. The advertising agencies shall have to deduct tax at source at the rate of 5 per cent under section 194J while making payments to artists, actors, models, etc. If payments are made for production of programmes for the purpose of broadcasting and telecasting, these payments will be subjected to TDS @2 per cent. Even if the production of such programmes is for the purpose of preparing advertisement material, not for immediate advertising, the payment will be subject to TDS at the rate of 2 per cent. Circular: No. 715, dated 8-8-1995.

Q.37 Where the tax is required to be deducted at source on payments  made directly to the print media/Doordarshan for release of  advertisements?

A.37.   The payments made directly to print and electronic media would be covered under section 1 94C as these are in the nature of payments for purposes of advertising. Deduction will have to be made at the rate of 1 per cent. It may, however, be clarified that the payments made directly to Doordarshan may not be subjected to TDS as Doordarshan, being a Government agency, is not liable to income-tax. Circular: No. 715,  dated 8-8-1 995.

Q.38. Whether a contract for putting up a hoarding would be covered  under section 194C or 194-I of the Act?

A.38. The contract for putting up a hoarding is in the nature of advertising contract and provisions of section 194C would be applicable. It may, however, be clarified that if a person has taken a particular space on rent and thereafter sub lets the same fully or in part for putting up a hoarding, he would be liable to TDS under section 194-I and not under section 1 94C of the Act. Circular: No. 715, dated 8-8-1995.

Q.39. Whether payment under a contract for carriage of goods or  passengers by any mode of transport would include payment made to  a travel agent for purchase of a ticket or payment made to a clearing  and forwarding agent for carriage of goods?

A.39. The payments made to a travel agent or an airline for purchase of a ticket for travel would not be subjected to tax deduction at source as the privity of the contract is between the individual passenger and the airline/travel agent, notwithstanding the fact that the payment is made by an entity mentioned in section 194C(1). The provision of section 1 94C shall, however, apply when a plane or a bus or any other mode of transport is chartered by one of the entities mentioned in section 1 94C of the Act. As regards payments made to clearing and forwarding agent for carriage of goods, the same shall be subjected to tax deduction at source under section 194C of the Act.Circular: No. 715, dated 8-8-  1995.

Q.40. Whether a travel agent/clearing and forwarding agent would be  required to deduct tax at source from the sum payable by the agent to  an airline or other carrier of goods or passengers?

A.40. The travel agent, issuing tickets on behalf of the airlines for travel of individual passengers, would not be required to deduct tax at source as he acts on behalf of the airlines. The position of clearing and forwarding agents is different. They act as independent contractors. Any payment made to them would, hence, be liable for deduction of tax at source. They would also be liable to deduct tax at source while making payments to a carrier of goods, Please refer CIT v Cargo Linkers (2008) 218 CTR 695 (Del), ACIT v Grandprix Fab.(P) Ltd. (2010) 34 DTR 248 (Del – Trib). Circular: No. 715, dated 8-8-1 995.

Q.41. Whether section 194C would be attracted in respect of payments  made to couriers for carrying documents, letters, etc.?

A.41. The carriage of documents, letters, etc., is in the nature of carriage of goods and, therefore, provisions of section 1 94C would be attracted in respect of payments made to the couriers.Circular: No. 715, dated  8-8-1995.

Q.42. In case of payments to transporters, can each GR be said to be a separate contract, even though payments for several GRs are made under one bill?

A.42. Normally, each GR can be said to be a separate contract, if the goods are transported at one time. But if the goods are transported continuously in pursuance of a contract for a specific period or quantity, each GR will not be a separate contract and all GRs relating to that period or quantity will be aggregated for the purpose of the TDS. Circular: No.  715, dated 8-8-1995.

Q.43. Whether there is any obligation to deduct tax at source out of payment of freight when the goods are received on “freight to pay” basis?

A.43. Yes. The provisions of tax deduction at source are applicable irrespective of the actual payment. Circular: No. 715, dated 8-8-1 995.

Q.44. Whether a contract for catering would include serving food in a restaurant/sale of eatables?

A.44. TDS is not required to be made when payment is made for serving food in a restaurant in the normal course of running of the restaurant/cafe. Circular: No. 715, dated 8-8-1995.

Q.45. Whether payment to a recruitment agency can be covered by section  194C?

A.45. Provisions of section 194C apply to a contract for carrying out any work including supply of labour for carrying out any work. Payments to recruitment agencies are in the nature of payments for services rendered. Accordingly, provisions of section 1 94C shall not apply. The payment will, however, be subject to TDS under section 194J of the Act. Circular: No. 715, dated 8-8-1995.

Q.46. Whether section 194C would cover payments made by a company to a share registrar  ?

A.46. In view of answer to the earlier question, such payments will not be liable for tax deduction at source under section 194C. But these will be liable to tax deduction at source under section 194J.Circular: No. 715,  dated 8-8-1 995.

Q.47.  Whether FD commission and brokerage can be covered under section  194C?

A47. No Circular: No. 715, dated 8-8-1995.

Q.48. Whether section 194C would apply in respect of supply of printed  material as per prescribed specifications?

A.48. Yes. Circular: No. 715, dated 8-8-1 995.

Q.49. Whether tax is required to be deducted at source under section 194C  or 194J on payment of commission to external parties for procuring  orders for the company’s product?

A.49. Rendering of services for procurement of orders is not covered under the provisions of section 194C. However, rendering of such services may involve payment of fees for professional or technical services, in which case tax may be deductible under the provisions of section 1 94J. Circular: No. 715, dated 8-8-1 995.

Q.50. Whether advertisement contracts are covered under section 1 94C  only to the extent of payment of commission to the person who arranges release of advertisement, etc., or whether deduction is to be made on the gross amount including bill of media?

A.50. Tax is to be deducted at the rate of 1 per cent of the gross amount of the bill. Circular: No. 715, dated 8-8-1995.

Q.51. Whether deduction of tax is required to be made under section 194C for sponsorship of debates, seminars and other functions held in colleges, schools and associations with a view to earn publicity through display of banners, etc., put up by the organisers?

A.51. The agreement of sponsorship is, in essence, an agreement for carrying out a work of advertisement. Therefore, provisions of section 194C shall apply. Circular: No. 715, dated 8-8-1 995.

Q.52. Whether deduction of tax is required to be made on payments for cost of advertisement issued in the souvenirs brought out by various organisations?

A.52. Yes. Circular: No. 715, dated 8-8-1995.

Q.53. Whether a maintenance contract including supply of spares would be  covered under section 194C or 194J of the Act?

A.53. Routine, normal maintenance contracts which includes supply of spares will be covered under section 1 94C. However, where technical services are rendered, the provision of section 194J will apply in regard to tax deduction at source. Circular: No. 715, dated 8-8-1995.

Q.54. Whether the deduction of tax at source under sections 194C and  194J has to be made out of the gross amount of the bill including  reimbursements or excluding reimbursement for actual expenses ?

A.54. Sections 194C and 194J refer to any sum paid. Obviously, reimbursements cannot be deducted out of the bill amount for the purpose of tax deduction at source. Circular: No. 715, dated 8-8-1 995.

Q.55 Whether provisions of S. 194C shall apply to cooling charges paid to  cold storage owners?

A.55 Yes, the arrangement between the customer and cold storage owners are basically contractual in nature and hence the provisions of section 194C (instead of section 194-I) will be applicable to the amount paid as cooling charges by the customers of the cold storage. [Circular No.  1/2008, dated 10/01/2008].

Q.56 Whether provisions of S. 194C shall also apply to banks in relation to  services rendered by it?

A.56 The provisions of section 1 94C would not apply in relation to payments made to banks for discounting bills, collecting/receiving payments through cheques/drafts, opening and negotiating Letters of Credit and transactions in negotiable instruments. Circular : No. 681, dated 8-3-1994.

(Source – Book on Practical Aspects of Tax Audit, TDS, HUF & Capital Gains  written by CA Agarwal Sanjay)