I provide skills and IT training service to an IT company based in Bangalore through a third party company in Mumbai with whom I have a contract for providing such training services. This Mumbai company now wants to deduct TDS. There was a ruling a while back from Delhi court that 'training' or 'knowledge transfer' services dont come under the gambit of 'professional or technical' services, and therefore no TDS should apply. Am I justified on that grounds to request that no TDS be deducted from payments to me for the training services I render?
Dear Sir,
Training of any sort of new knowledge and technology which requires expert knowledge come under ambit of Professional Services any other type of training fall under the category of contract and not professional service and accordingly limit of TDS and rates shall be applicable.
You havent addressed the specific ruling that I refer to from the Delhi tribunal which in fact states the contrary that 'training' does not fall under 194J or 194c for that matter. Can you please refer to that ruling and comment?
Sir, whenever there is general provision you should not considered any ruling. Its settled law that you should rely upon direct tax provision, rules, notification and circular and in case if there is controversy you can refer to rulings. So I would advise not to go by ruling directly to avoid legal dispute and incurred unnecessary cost of litigation.
If you read the provisions under 194J, the definitions are ambiguous, which is why it was contested to begin with and the Delhi tribunal court clearly brought out a ruling favoring an interpretation, which has not been contested by any other court. Saying that 'go with the general law' rather than the ruling does nothing to clarify the ambiguity in the law itself. Need a clear resolution here, and not one which simply skirts the issue.
Sir, send me the citation of the case.
If its tribunal judgement it will not held any validity on your case since generally any tribunal does not required to following judicial prudence by any other tribunal ruling except of its own jurisdiction.
Also the most important things in case of interpretation of the judicial pronouncement is facts of the case and emphasis laid down by the authority. If our case have very similar facts and the applicability than also tribunal may reject it and you need to go till high court. Which cost i am sure you must be the aware of which runs into lacs of rupees so whenever a decision is taken the most important thing is materiality and financial prudence. Since TDS is any way refundable so whether to contest for the same or not.
It is in your own interest to get the tax deducted and claim it in your IT return, instead of trying to sail in troubled waters. Even the deductor will get into problems and you will be unnecessarily getting into litigations.
Now on merits, training can be considered as professional service. Tribunal decision is not binding on the IT Department. Only the High Court decision is binding in the state(s) under the jurisdiction of such High Court.
Hello Sir,
There is no straight jacket formula which will bail you out of this situation. Secondly, you cannot just rely on a judgement by any tribunal saying that this was the decision ruled by an XYZ court and the same should be applicable here. Difference of Opinion is sure to arise.
In your case, the onus to deduct TDS is on the person who is making you the payment. I doubt if he or his Chartered Accountant will agree or have a comfort in not deducting TDS based on a mere ruling. He will obviously prefer saving his skin and deduct TDS.
Considering these factors it is any time beneficial to get your TDS deducted rather than getting into a hassle.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
