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Question no.1:
Mr.Y, an individual whose total sales in business during the year ending 31.03.2020 was Rs.3.20
crores, pays Rs.9 lakhs by cheque on 1.1.2021 to a contractor for construction of his business
premises in full and final settlement. Whether Mr.Y has to deduct tds?

Answer:
Turnover of Mr.Y exceeds Rs.1 crore during the previous year 2019-20. Hence tds provisions are
attracted for P.Y. 2020-21. Mr.Y is required to deduct tax at source on the payment made to a
contractor for construction of his business premises.

Question no.2:
Mrs.Rakshita, a Cost Accountant has raised a fees bill on LMN P Ltd., for Rs.3,00,000 and in
addition, has charged separately GST of 18% i.e. Rs.54,000, the total amount of the bill being
Rs.3,54,000. The amount of tax to be deducted at source by LMN P Ltd. is:

A) Rs.22,500 C) Rs.35,400
B) Rs.31,200 D) none of the above

Answer:
Payment to a Cost Accountant attracts tds u.s.194J (professional services) @ 7.5% if the amount
exceeds the limit of Rs.30000. Tax is required to be deducted on the income portion excluding GST.
Tax is required to be deducted on Rs.300000 @ 7.5% which is Rs.22,500. option: A

Question no.3:
Mr.M is regular in deducting tax at source and depositing the same. In respect of the quarter
ended 31st December, 2020 a sum of Rs.80,000 was deducted at source from the contractors. The
statement of tax deducted at source under section 200 was filed on 23rd March, 2021 for the
quarter ended 31.12.2020.

a. Is there any delay on the part of Mr.M in filing the statement of TDS?
b. If the answer to (i) above is in the affirmative, how much amount can be levied on Mr.M for
such default under section 234E?
c. Is there any remedy available to him for reduction/waiver of the levy?

Answer:
TDS return for the quarter ended 31.12.2020 should be filed on or before 31st January, 2021. However,
the tds return was actually filed on 23rd March, 2021. Hence there is a delay in filing.

Total no. of days delay is 51 days (28 + 23). Therefore, late fee @ Rs.200 per day is Rs.10,200
(Rs.10,200 or Rs.80000 whichever is less). Late fee shall not exceed the tds amount.

The assessee can file an application to CBDT for waiver of the fee under section 234E.
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Question no.4:
BNG Ltd., a domestic company has deducted TDS of ₹ 28,451 during the Qtr 1 of FY 2020-21. They
had filed the TDS return for Qtr 1 on 15.09.2020. The Income Tax Department had sent a notice of
demand to the company, wherein a fee was levied u.s.234E for ₹ 8,800. The Company paid the
demand raised by the Department and also claimed such payment as business expenditure during
the A.Y. 2021-22.

Discuss whether the demand raised by the Department is correct, as per the provisions of the Act.
Also, explain whether fee paid under section 234E can be claimed as deduction while computing
the income under the head "Profits and gains of business or profession".

Answer:
TDS return for the I quarter has to be filed on or before 31 st July, 2020. However, the tds return was
actually filed on 15.09.2020. Hence there is a delay of 46 days. Late fees: Rs.9,200 (200 x 46). The
demand raised by Department is therefore not correct.

Regarding admissibility of late fee while computing PGBP

Late fee is neither a penalty nor interest for delayed payment of tds. Hence allowed u.s.37(1).

Question no.5:
Ravi Kumar, aged 61 years, derived ₹ 6,50,000 as salary from his employer, XYZ Ltd. for the year
ended 31-03-2021. The following details are provided by him to the employer.

Particulars ₹
Loss from self-occupied house property at Mumbai 2,00,000
Net loss from let-out property 2,00,000
Net loss from business activity 1,00,000
Interest income from fixed deposit with bank 3,20,000

Compute tax liability for deduction of tax at source by the employer.

Answer: Refer “excel” sheet

Question no.6:
Nath Ltd., an Indian company, pays Rs.9,00,000 to its Chief Financial Officer Mr.Raman as gross
salary including taxable allowances and bonus. Besides that, it also provides non-monetary
perquisites which cost the company Rs.1,50,000. Discuss the TDS implication in the hands of Nath
Ltd. as well as in the hands of Raman as regards non-monetary perquisite. CA final

Answer: Refer “excel” sheet

Question no.7:
Mr.S, an employee of M/s.ABC Ltd. since 10-04-2017 resigned on 31-03-2021 and withdrew
Rs.90,000 being the balance in his EPF account. State with reasons whether the provisions of
Chapter XVII-B are attracted and if so, what is the net amount receivable by Mr.S?

Answer:
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Section 192A: Limit Rs.50000 or more: tds rate with PAN is 10%; tds amount Rs.9000. Net amount
receivable by Mr.S is Rs.81000.
Question no.8:
X won first prize in a lottery on 15.01.2021 and the prize was a Car worth Rs.5 lakhs. According to
section 194B, tax has to be deducted at source from the winnings of lottery at the time of payment
of prize money. What is the procedure to be adopted before handing over the car to X?

Answer:
In a case where the winnings are in kind, the payer shall, before releasing the winnings, ensure that tax
has been paid. Failure to deposit tax, shall prompt the A.O. to treat the payer as assessee-in-default
and thereby legal consequences shall follow.

Section 194B; Limit Rs.10,000; Tds rate with or without PAN is 30%; tds amount Rs.150000

Question no.9:
Examine the applicability of Section 194DA in the following cases:

a. Mr.X, a resident, is due to receive Rs.4,50,000 on 31.3.2021, towards maturity proceeds of

LIC policy taken on 1.4.2018, for which the sum assured is Rs.4,00,000 and the annual
premium is Rs.1,25,000.

b. Mr.Y, a resident, is due to receive Rs.3,25,000 on 31.3.2021 on LIC policy taken on

31.03.2012, for which the sum assured is Rs.3,00,000 and annual premium is Rs.35,000

c. Mr.Z, a resident, is due to receive Rs.95,000 on 1.10.2020 towards maturity proceeds of LIC
policy taken on 1.10.2014 for which the sum assured is Rs.90,000. The annual premium
was Rs.12,000.

Answer:
A. Policy issued after 01.04.12. (i.e. on 01.04.2018)
Premium paid is Rs.1,25,000 which is more than 10% of sum assured (Rs.40,000)
Therefore, maturity amount is taxable.
Tds @ 3.75% on income of Rs.75,000 as the maturity amount exceeds Rs.1,00,000.
Income = Rs.4,50,000 (-) Rs.3,75,000 (1,25,000 x 3) = Rs.75,000
TDS amount u.s.194DA is Rs.2,813.

B. Policy issued before 01.04.12. (i.e. on 31.03.2012)

Premium paid is Rs.35,000 which is less than 20% of sum assured (Rs.60,000)
Therefore, maturity amount is exempt u.s.10(10D). No Tds

C. Policy issued after 01.04.12. (i.e. on 01.10.2014)

Premium paid is Rs.12,000 which is more than 10% of sum assured (Rs.9,000)
Therefore, maturity amount is not exempt u.s.10(10D). It is taxable.
Maturity amount, however, does not exceed Rs.1,00,000.
TDS amount u.s.194DA is Nil.
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Question no.10:
Mr.R sells his house property in Chennai as well as his agricultural land in rural area for a
consideration of Rs.60 lakhs and Rs.15 lakhs respectively to Mr.S on 1.8.2020. He purchased the
house property and land in 2019 for Rs.40 lakhs and Rs.10 lakhs respectively. The Stamp Duty
Value on the date of transfer was Rs.85 lakhs and Rs.20 lakhs. Determine the tax implications in
the hands of Mr.R and Mr.S and the TDS implications, assuming both are resident Indians.

Answer:

In the hands of Mr.R (seller):

A. Capital Gains on sale of house at Chennai:

Sale consideration (as per section 50C) 85 lakhs (85 / 60 x 100 > 110%)
Less: Cost of acquisition 40 lakhs
Short term capital gain (<24 months) 45 lakhs

B. On sale of agricultural land in rural area:

Not a capital asset. No capital gain tax

In the hands of Mr.S (buyer):

A. Income from other sources:

The house is acquired for an inadequate consideration. Hence the difference between stamp
duty value and purchase price is taxable under the head “IFOS”.
Taxable amount Rs.25 lakhs (85 – 60) (difference is > 10% and also > Rs.50,000)

B. TDS provisions:
U/s.194IA tax has to be deducted at source @ 0.75% if the purchase price is Rs.50 lakhs or more.
Therefore, tds amount Rs.45,000 (60 lakhs x 0.75%)

C. Agricultural land in rural area is not a capital asset. Gift provisions are not applicable.

Question no.11:
Mr.A, a CA employed as CFO with Google India Ltd draws a salary of Rs.5,00,000 p.m. He has taken
on rent an independent house from Mr.B. With this information, determine the amount of TDS
u.s.194-IB for the financial year 2020-21 under the following situations:

a. If the amount of rent is Rs.55,000 p.m.

b. If the amount of rent is Rs.55,000 p.m. and Mr.B does not furnish PAN;

c. If the amount of rent is Rs.55,000 p.m. and Mr.A vacates the property by 31 st July, 2020 and
Mr.B does not furnish PAN;
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d. In case Mr.A is carrying on the profession of Chartered Accountancy (instead of

employment) and his gross receipts from the practice for the year ended 31 st March, 2020 is
Rs.60,00,000 and the rent paid for his residence to Mr.B is Rs.55,000 p.m.

Answer:
Tds Rs.24,750 (55,000 x 12 x 3.75%) shall be deducted in the month of March, 2021
being the last month of the previous year.

Tds Rs.55,000 (55,000 x 12 x 20% = Rs.1,32,000; but cannot exceed rent payable for the last month)

Tds Rs.44,000 (55,000 x 4 x 20%) to be deducted at the time of vacating the property being July 2020.

Gross receipts from such profession exceeds Rs.50 lakhs, Section 194I is applicable (not 194IB). TDS
shall be deducted @ 10% and 7.5% respectively.

Question no.12:
When Mr.Gautam doing business paid hall rent of Rs.80,000 for 3 days for doing diwali sales, the
amount of tax deductible at source under section 194IB would be:

A) Rs.8,000 @ 10% C) Nil

B) Rs.16,000 @ 20% D) Rs.3,000 @ 3.75% option D

Question no.13:
Mr.A, who has a piece of land, has entered into an agreement with XYZ Ltd., a real estate
developer. As per the terms of the agreement, Mr.A is entitled to receive 5 flats whose stamp duty
value as on the date of completion is Rs.70,00,000 and a monetary consideration of Rs.30,00,000.
Compute the tax to be deducted for A.Y.2021-22.

Answer:
i. In respect of non-monetary consideration: Nil.
ii. In respect of monetary consideration: TDS Rs.2,25,000 being 7.5% of Rs.30,00,000

Question no.14:
Alap Ltd. has made following payments on various dates in financial year 2020-21 to Vilambit Ltd.
towards work done under different contracts:

Contract Number Date of payment Amount (₹)

1. 5.5.2020 20,000
2. 6.6.2020 15,000
3. 8.8.2020 25,000
4. 10.12.2020 25,000
5. 29.01.2021 17,000

Alap Ltd. claims that it is not liable for deduction of tax at source under section 194C. Examine the
correctness of the claim made by the company. What would be the position if the value of the
contract no.5 is ₹ 14,000 only and there was no further contract during the year?
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Answer: Refer “excel” sheet

Question no.15:
Godrej Ltd. gives cloth to Mr.X and asks Mr.X to stitch shirts as per the specifications given by
Godrej Ltd. Mr.X charges in his invoice Rs.200 per shirt for stitching 10,000 shirts and raises a bill
for Rs.20,00,000. Discuss whether Godrej Ltd. has to deduct tax at source.

Answer:
Godrej Ltd has to deduct tax u.s.194C. The material (cloth) is supplied by Godrej Ltd. Mr.X has to do
only the stitching job. Hence it is a contract of work. Tax will be deducted @ 1% or 0.75% on the
payment made as the contractor is an individual. Tds amount Rs.15,000.

Question no.16:
Deer Co Ltd is engaged in the business of manufacture of furniture items on contract basis. It sub-
contracted the production of cushion for the chairs to M/s.Lion & Co, a sole proprietary concern.
The sub-contractor M/s.Lion & Co procured the raw materials for production of cushions,
performed further labour works and supplied the same to Deer Co Ltd, showing the cost of raw
materials Rs.4,00,000 and labour charges Rs.1,50,000, separately. Explain briefly the tax
deduction requirement in the hands of Deer Co Ltd.

Answer:
Material is not supplied by the customer (Deer Co Ltd). It is a contract of sale. Hence no tds u.s.194C.

Question no.17:
Beta Ltd, gave a contract to Alpha Ltd. for the supply of 2000 pens on which the logo of Beta Ltd.
was printed. The raw materials were purchased by Alpha Ltd. from C Ltd., which is not related to
Beta Ltd. The consideration paid for the pens was Rs 1,50,000.

Answer:
Material is not supplied by the customer (Beta Ltd). It is a contract of sale. Hence no tds u.s.194C.

Question no.18:
M/s.Taba Ltd. enters into a contract with Mr.Babu for the transportation of its products from its
plant to warehouses. It pays a lump-sum amount of Rs.2,50,000 to Mr.Babu for the year at the
year end. Mr.Babu is engaged in the business of plying goods carriages on hire. Mr.Babu is not an
assessee under Income-tax Act and thus did not provide PAN to Taba Ltd.

Answer:
As per section 194C, payment to a transport operator can be made without tds. The transport
operator is required to furnish a declaration stating that he does not own more than ten trucks and
also furnishes PAN. In the present situation, Mr.Babu has not provided PAN to M/s.Taba Ltd. Hence,
tax is required to be deducted @ 20% (pan not furnished) on the payment made.
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Question no.19:
Rs.19,50,000 credited to the account of Digitec Studios (a partnership firm) on 31.03.2021 by B-
TV, Television channel towards part consideration for shooting of Tele Episode for 10 weeks as
per the storyline, contents and specifications of B-TV channel.
Answer:
Tds u.s.194C. “Work” includes broadcasting and telecasting including production of programmes.
Hence tds is required to be deducted @ 1.5% on the payment made. Tds liability would be Rs.29,250
(being 1.5% of Rs.19,50,000).

Question no.20:
X Ltd credited Rs.28,000 towards fees for professional services and Rs.22,000 towards fees for
technical services to the account of ABC Ltd in its books of account on 6.9.2020. The total sum of
Rs.50,000 was paid by cheque to ABC Ltd on 18.12.2020. Examine whether tds is applicable.

Answer:
Section 194J; Limit Rs.30,000 should be considered separately for each item. Tds rate 10% for
professional services and 2% for technical services. Fees for professional services does not exceed
Rs.30,000 and fees for technical services does not exceed Rs.30,000; tds nil.

Question no.21:
XYZ Ltd is a back office engaged as a call centre for ICICI with effect from 01.04.2020. During the
financial year 2020-21, ICICI has paid a sum of Rs.2 crores towards call centre services provided
by XYZ Ltd. Determine the amount of TDS u.s.194J. Would your answer differ if XYZ Ltd is also
engaged in the business of providing cab services to HDFC Ltd.

Answer:
If XYZ Ltd is engaged in providing call centre services only:
Tds @ 1.5% u.s.194J on Rs.2 crores is Rs.3,00,000

If XYZ Ltd is also engaged in providing CAB services (multiple businesses):

Tds shall be deducted @ 7.5% u.s.194J on Rs.2 crores which is Rs.15,00,000

Question no.22:
Mr.Janak’s turnover during the year ended 31.03.2020 was Rs.3 crores. He has paid a sum of Rs.3
lakhs to an engineer for supervision of a residential house for his own occupation. The amount of
tax to be deducted at source from such payment u.s.194J is:

A) Rs.3 lakhs B) Rs.3.30 lakhs

C) Rs.30,000 D) Nil

Answer:
Turnover of Mr.J from business during the previous year ended 31.03.2020 exceeds Rs.1 crore.
Therefore, TDS provisions are applicable for the previous year 20-21. Payment made to engineer for
supervision of a residential house for his own occupation does not attract tds. Section 194-J is not
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applicable for expenditure of personal nature. Hence tds is nil. If Section 194J is not applicable then
tds has to be deducted u.s.194M @ 3.75% provided the payment exceeds Rs.50 lakhs.

Question no.23:
Examine whether tds provisions would be attracted in the following cases, and if so, under
which section. Also specify the rate of tds applicable in each case. Assume that all payments
are made to residents.

Mr.GANESH, an individual carrying on retail business with turnover of Rs.2.5 crores in the
previous year 2019-20 made the following payments:

A. Contract payment for repair of residential house Rs.5 lakhs.

B. Payment of commission to Mr.Vinodh for business purpose Rs.80,000

Mr.RAJESH, a wholesale trader whose turnover was 95 lakhs in P.Y.2019-20 made contract
payment for reconstruction of residential house Rs.20 lakhs in January, 2021; Rs.15 lakhs in
February, 2021 and Rs.20 lakhs in March, 2021.

Mr.SATISH, a salaried individual paid brokerage for buying a residential house in March,
2021 amounting to Rs.51 lakhs.

Mr.DHEERAJ, a pensioner made contract payment during October-November, 2020 for

reconstruction of residential house amounting to Rs.48 lakhs.

Answer:

Mr.Ganesh: Turnover exceeded Rs.1 crore during P.Y.1-20. Hence, tds provisions are attracted
for A.Y.21-22

Contract payment for residential house:

Section 194C is not attracted as it is a personal payment
Section 194M is not attracted as the amount does not exceed Rs.50 lakhs. Hence tds: nil

Payment of commission to Mr.Vinodh for business purpose

Section 194H: Tds is required to be deducted @ 3.5% on Rs.80,000. Tds Rs.3,000

Rajesh: Turnover of PY 19-20 does not exceed Rs.1 crore, Section 194C is not applicable:
Section 194M: The aggregate amount exceeds Rs.50 lacs. Tds @ 3.75% on Rs.55 lacs: Rs.2,06,250
Section 194C is not applicable as turnover of Mr.Rajesh does not exceed Rs.1 crore in the P.Y.2019-20
and payment made is also a personal payment.

Satish: Payment of brokerage for buying a residential house:

Section 194M: Amount exceeds Rs.50 lacs. Tds @ 3.75% on Rs.51 lacs: Rs.1,91,250
Section 194H is not applicable as Mr.Satish is a salaried employee
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Dheeraj: Contract payment made during Oct-Nov. 2020 for reconstruction of res house:
Section 194M: Amount does not exceed Rs.50 lacs. Hence no tds
Section 194C is not applicable as Mr.Dheeraj is a pensioner

Question no.24:
Mr.A has two bank accounts maintained with ICICI Bank and HDFC Bank. From 01.04.2020 till
31.03.2021, Mr.A withdrew the following amounts as cash from both the said accounts:

HDFC Bank: Rs.50 lakhs

ICICI Bank: Rs.120 lakhs

Compute the amount of tax to be deducted at source u.s.194N by HDFC Bank and ICICI Bank,
respectively, while making payment in cash to Mr.A.

a) Rs.1,00,000 and Rs.2,40,000

b) Nil and Rs.40,000
c) Nil and Rs.2,40,000
d) Rs.50,000 and Rs.1,20,000 option B

What will by your answer if Mr.A had not filed his returns of income for last 3 years and the time
allowed for filing belated returns has expired?

Answer: HDFC Bank will deduct 2% of Rs.30 lakhs Rs.60,000 (withdrawal exceeds Rs.20 lakhs); and
ICICI Bank will deduct 5% of Rs.20 lakhs; Rs.1,00,000 (withdrawal exceeds Rs.1 crore).

Question no.25:
Bhargav doing textiles business furnishes you the following information:

Turnover for the financial year:

2019-20 Rs.2,05,00,000
2020-21 Rs.95,00,000

State whether the provisions of tax deduction at source are attracted for the following expenses
incurred during the financial year 2020-21:

a. Interest paid to Indian Bank on Term Loan Rs.92,800

b. Advertisement expenses to Mr.R (two individual payments of
Rs.24,000 and Rs.34,000) Rs.58,000
c. Factory rent paid to C Rs.2,50,000
d. Brokerage paid to Mr.B, a sub-broker Rs.16,000

Answer:
Turnover during the immediately preceding previous year 19-20 exceeds Rs.1 crore. Tds provisions
are applicable for A.Y.2021-22.
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a. Payment to banks are not subject to tds.

b. Section 194C; Limit Rs.30,000 in case of a single contract or Rs.1,00,000 in case of all the
contracts; Tds rate 0.75%; Tds amount Rs.255

c. Section 194I; Limit Rs.2,40,000; Tds rate 10% and 7.5%

d. Section 194H; Limit Rs.15,000; Tds rate 3.75%; Tds amount Rs.600

Question no.26:
State the applicability of TDS provisions and TDS amount in the following cases:

a. Rent paid for hire of machinery by B Ltd. to Mr.Raman Rs.2,50,000

b. ABC Ltd paid Rs.19,000 to one of its Directors as sitting fees on 01.01.2021
c. Mr.X sold his house to Mr.Y on 01.02.2021 for Rs.60 lakhs (SDV Rs.72 lakhs)
d. Payment of Rs.2,00,000 made to Jacques Kallis, a South African Cricketer, by an Indian
newspaper agency on 02.12.2020 for contribution of articles in relation to the sport of
cricket.

Answer:
a. Section 194I; Limit Rs.240000; tds rate 2% or 1.5%
b. Section 194J; Limit not specified; tds rate 7.5% and tds amount Rs.1,425
c. Section 194IA; Limit Rs.50 lakhs or more; tds rate 0.75% and tds Rs.45000. SDV not relevant
d. Section 194E; Limit not specified; tds rate 20.8% and tds amount is Rs.41600

Question no.27:
Examine the applicability of provisions relating to deduction of tax at source and compute the
liability, if any, for tds in the following cases for the financial year ended 31-03-2021:

(i) ₹ 80,000 towards interest on compensation credited to the account of the payee by Motor
Accidents Claim Tribunal on 30-11-2020.

(ii) ₹ 9,00,000 paid on 30-09-2020 as consideration to Mr.B, a resident in India, on account

of compulsory acquisition of his residential building acquired for laying railway tracks.

(iii) Ram gave a building on sub-lease to M Ltd. with effect from 1-7-2020 on a rent of ₹
25,000 per month. The company also took on hire machinery from Ram with effect from
1-11-2020 on hire charges of 10,000 per month. The rent for building and hire charges of
machinery for the year 2020-21 were credited by the company to the account of Ram in
its books of account on 31-3-2021.

Answer:
i. Section 194A; Limit Rs.50000; tds rate 7.5% and tds amount Rs.6,000

ii. Section 194LA; Limit Rs.2,50,000; tds rate 7.5% and tds amount Rs.67,500

iii. Section 194I; Limit Rs.240000; tds rate 7.5% of building and 1.5% for plant and machinery
Rent for building (25000x9) 225000
Rent for machinery (10000x5) 50000
Total rent payable to Ram 275000 > Rs.240000
 115

Tds on building (225000 x 7.5%) 16875

Tds on machinery (50000 x 1.5%) 750
17625

Question no.28:
Compute the amount of tax deduction at source on the following payments made by M/s.S Ltd
during the financial year 2020-21 as per the provisions of the Income-tax Act, 1961.

S. No. Date Nate of Payment

1. 01.10.2020 Paid Rs.2 lacs to Mr.R a transporter who owns 6 trucks and having
PAN. Declaration is also given by Mr.R.

2. 01.11.2020 Payment of fee for technical services of Rs.25,000 and Royalty of

Rs.20,000 to Mr.Shyam who is having PAN

3. 01.01.2021 Payment of Rs.2,00,000 made to Mr.A for purchase of diaries made

according to specifications of S Ltd. However, no material was supplied
for such diaries to Mr.A by S Ltd.

4. 01.01.2021 Fees paid to Mr.K Rs.25,000 who is a Director of S Ltd. Mr.K is not an
employee in S Ltd

Answer:
a. No tds (PAN and declaration is furnished) u.s.194C
b. No tds (limit Rs.30,000 should be applied for each and every item separately) u.s.194J
c. Contract of sale. No tds (not a contract of work) u.s.194C
d. Tds u.s.194J @ 7.5% Rs.1,875

Question no.29:
Discuss the TDS/TCS applicability in context of A.Y. 2021-22 in the following cases and state the
amount of the TDS/TCS as per Income-tax Act 1961. (All issues as under are independent)

i. Mr.Shan, an individual, whose turnover from the business carried on by him during the
financial year immediately preceding the financial year 2020-21 exceeds ₹ 100 lakhs paid
fee to an architect of ₹ 50,000 for furnishing his residential house.

ii. Mr.Shyam purchased a house in Mumbai for consideration of ₹ 90 lakh by cheque from the
builder for the use of his residence.

iii. Mr.Soham purchased licensed copy of computer software from the software vendor
(resident of India) along with all right to use it for ₹ 50,000 to be used for business
purposes.

Answer:
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i. Turnover of Mr.Shan in the immediately preceding financial year 2019-20 has exceeded Rs.1 crore.
Hence, tds provisions are attracted. U/s.194J, tds is not required to be deducted on personal
payments. However, if the payment exceeds Rs.50 lakhs, tds is required to be deducted @
3.75% u.s.194M.

ii. Tds u.s.194IA; Limit Rs.50 lacs or more; Tds 0.75% and Tds amount Rs.67500.

iii. Any payment for transfer of all or any rights to use a computer software including granting of a
license for computer software is “Royalty”. Hence tds u.s.194J @ 7.5% on Rs.50,000.
Question no.30:
State whether the TDS provisions are attracted in the following cases: CMA DEC - 2017

i. Mr.Mahadevan engaged in trading business with a turnover of ₹ 80 lakhs for the previous
year 2019-20 and turnover of ₹ 125 lakhs in the financial year 2020-21 paid interest of ₹
30,000 to Mr.Swami.

ii. Mr.Singhvi engaged in manufacturing activity paid salary of ₹ 8,50,000 to Mr.Ghosh

during the previous year 2020-21 which is the first year of commencement of business.

iii. Cure well Hospitals Ltd. paid professional charges to Dr.Sakthikanal ₹ 40,000.

iv. Garg & Co. a firm of Cost Accountants paid rent of ₹ 2,70,000 (₹ 22,500 per month) to a
partner’s son by cash.

v. Ramnath & Co. paid interest on term loan taken for car of ₹ 31,000 to UCO Bank.

vi. Mr.Rajan resigned from MT Pharma after rendering service for 4 years. He received ₹
60,000 from recognized provident fund account.

vii. Padmaja & Co. made contract payments of ₹ 7,500 per month aggregating to ₹ 90,000 to
CD & Co. during the year 2020-21.

viii. Shiva industries Ltd. paid brokerage of ₹ 18,000 to Sanvitha Ltd. on 30.01.2021.

Answer:
i. No tax is deductible at source as the turnover of Mr.Mahadevan during the financial year 2019-20
did not exceed Rs.100 lakhs. He is not required to deduct tax at source under section 194A for the
interest paid to Mr.Swami.

ii. When the employer pays salary to an employee and the salary income exceeds the limit
(Rs.2,50,000) which is not chargeable to tax, the responsibility of deducting tax at source lies on the
employer. In this case regardless of the turnover of Mr.Singhvi, tax is deductible at source on salary
paid to Mr.Ghosh as the salary exceeds the basic limit which is not chargeable to tax.

iii. As the payment of professional charges exceeded the threshold limit of Rs.30,000, tax is deductible
at source on professional charges paid at 7.5% u.s.194J.

iv. When the rent paid exceeds Rs.2,40,000 the liability to deduct tax at source under section 194-I
would get attracted. Merely because the payment was made by cash will not provide any exception
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for the reason that such cash payment is liable for disallowance u.s.40A(3). Additionally penal
consequences for non deduction will follow.

v. Interest on loan paid to UCO Bank is not subject to tds.

vi. Section 192A; Limit Rs.50,000 or more; tds rate 10%; tds amount Rs.6,000 (no covid rate)

vii. As the aggregate payment does not exceed Rs.1 lakh, tax need not be deducted under section 194C.

viii. Section 194H; Limit Rs.15,000; tds rate 3.75%; tds amount Rs.675

Question no.31:
Pradhan (P) Ltd. gives you the following information for the financial year 2020-21:

i. It paid a refundable deposit of ₹ 5 lakhs to the landlord where the company has
commenced manufacturing activity during the year.

ii. It paid ₹ 3 lakhs to a hotel accommodation where the training programme for the
marketing force was conducted.

iii. Paid non-compete fee of ₹ 10 lakhs to a director who was associated with the company for
the last 15 years.

iv. It filed the quarterly statement of TDS for the quarter ended 30.09.2020 on 05.01.2021.
The amount of tax deducted and remitted in the quarter is ₹ 60,000.

v. It engaged a famous tennis player Mr.Mahesh as Brand Ambassador for promoting its
product and paid ₹ 2 lakhs as fee to him.

vi. It acquired a luxury car for ₹ 15 lakhs by making payment by cheque on 01.10.2020.

vii. It paid ₹ 30,000 to travel agents for purchase of train and air tickets to the company
officials during the year.

You are requested to state in brief the consequences of the above transactions as per TDS/TCS
provisions of the income–tax Act, 1961. CMA – June 2017

Answer:

i. Payment of refundable deposit to landlord would not attract TDS provisions of section 194-I (As
per CBDT Circular).

ii. Section 194I; Limit Rs.2,40,000; Tds rate 7.5%; Tds amount Rs.22,500

iii. Section 194J; Limit Rs.30,000; Tds rate 7.5%; Tds amount Rs.75,000

iv. Due date for filing Q2 tds return is 31 st October, 2020. But tds return was filed on 05.01.2021.
There is a delay of 66 days. Therefore, late fee @ Rs.200 per day is Rs.13,200 (66x200). Late fee
shall not exceed the amount of tds (i.e. Rs.60,000).
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v. Payment to brand ambassador being a sports person covered by notified profession u.s.44AA, tax is
deductible at source @ 7.5% u.s.194J. Limit is Rs.30,000 and tds amount is Rs.15,000.

vi. Purchase of car exceeding Rs.10 lakhs is liable for tax collection at source @ 0.75%. Hence the
vendor is required to collect Rs.11,250 from the company.

vii. CBDT Circular: Payment to travel agents for purchase of tickets would not attract the provisions of
section 194C and hence no tax is deductible at source.

Question no.32:
BLUE MOON, a popular television channel, incurred the following expenses:

a) It paid Rs.50 lakhs as prize money to the winner of a famous quiz programme “Who will be a
Millionaire?”

b) It paid Rs.6 lakhs to a cameraman for shooting multi-episodes of a long documentary serial.

Examine TDS obligation in the hands of television channel for the above said payments.

Answer:
Section 194B; Limit Rs.10,000; Tds rate 30% with or without PAN; tds amount Rs.15 lakhs

Section 194J; Limit Rs.30,000; Tds rate 7.5%; tds Rs.45,000 (“film artist” includes a cameraman)

Problems on Section 194-O:

33. Samsung India Ltd. has sold 1,000 television sets at ₹ 50,000 each through Reliance Digital on
01.12.2020. Reliance Digital receives payment of ₹ 5,00,00,000 from various buyers and deducts
commission of 10% and wants to remit ₹ 4,50,00,000 to Samsung India Ltd. Advise.

Answer:
Samsung India Ltd is the E-Commerce Participant and Reliance Digital is the E-Commerce Operator.
Reliance Digital shall deduct TDS of 0.75% on ₹ 5,00,00,000 i.e. ₹ 3,75,000. Therefore, Reliance Digital
will remit ₹ 4,46,25,000 to Samsung India Ltd after deducting TDS of ₹ 3,75,000.

There is no liability of Samsung India Ltd to deduct TDS under section 194H on the commission it pays
to Reliance Digital since:

A transaction on which tax has been deducted by e-commerce operator u.s. 194-O, shall not be liable to
tax deduction under any other section. TDS has been deducted on the entire transaction of ₹
5,00,00,000.

34. Suppose in Question 33, all facts remaining the same and instead of Samsung India Ltd, it was
Samsung Japan, a non-resident foreign company.

Answer:
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As per section 194-O, "E-Commerce Participant" means a person resident in India. Samsung Japan is a
non-resident and therefore it does not fall in definition of "E-Commerce Participant" and hence TDS
under section 194-O shall not be deducted.

35. Suppose in Question 33, all facts remaining the same and instead of Reliance Digital, it was
AMAZON USA selling products through its website in India. AMAZON USA is a non-resident.

Answer:
As per section 194-O, "E-Commerce Operator" includes resident as well as non-resident. Therefore,
AMAZON USA being a non-resident is “E-Commerce Operator”
and it is required to deduct TDS under section 194-O @ 0.75% on ₹ 5,00,00,000.

36. Suppose in Question 33, Reliance Digital sold televisions of ₹ 4,00,00,000 to Indian buyers and ₹
1,00,00,000 to foreign buyers.

Answer:
Section 194-O does not distinguish as to whether buyers should be residents or non-residents.
Therefore section 194-O shall apply and TDS shall be deducted on ₹ 5,00,00,000.

37. Mr.A, a resident manufactures perfumes and sells through Flipkart. The total sales made by Mr.A
through Flipkart are ₹ 5,00,000 for the previous year ending 31.3.2021. Flipkart deducts
commission @ 10% and remits ₹ 4,50,000 to Mr.A.

Answer:
Section 194-O shall not be applicable since the gross sales does not exceed ₹5,00,000. Hence, Flipkart
shall not deduct TDS provided that Mr.A gives his PAN or Aadhaar to Flipkart. If he does not give
PAN/Aadhaar to Flipkart, then TDS shall be deducted @ 5% on ₹ 5,00,000. TDS on commission paid to
Flipkart is also not required to be deducted.

38. Will your answer be different if in Question 37, M/s ABC partnership was there instead of Mr.A.

Answer:
Scction 194-O shall be applicable since exemption is only in case of individuals and HUF whose gross
sales through E-Commerce Operator does not exceed ₹ 5,00,000. Flipkart will deduct TDS @ 0.75%
under section 194-O on ₹ 5,00,000. M/s ABC shall not deduct TDS on commission paid to Flipkart.

39. M/s.ABC sells Women Apparel through Myntra and total sales of M/s.ABC through Myntra are
₹2,00,00,000 during the previous year ended 31.3.2021. Myntra charges 10%, commission on
sales made by it. The payment gateway of Myntra is so designed that ₹ 20,00,000 comes to
Myntra from customers and ₹ 1,80,00,000 goes to M/s.ABC directly.

Answer:
As per Explanation to section 194-O, any payment by purchaser directly to E-Commerce participant for
sale of goods facilitated by an E-Commerce Operator shall be deemed to be the amount credited or
paid by E-Commerce Operator to E-Commerce Participant and shall be included in gross amount of
sale for purpose of tax deduction under section 194-O. Tds will be on 2 crores @ 0.75%.
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40. A Chartered Accountant renders professional advices to various clients through “Consult-CA", a
website run by E-Commerce Operator. Various clients pays ₹ 1,00,00,000 to Consult-CA and
Consult-CA deducts 20% commission and remits ₹ 80,00,000 to the Chartered Accountant for the
financial year ending 31.3.2021.

Answer:
As per section 194-O, "Services" include professional services. Therefore Consult-CA will deduct
0.75% TDS on ₹ 1,00,00,000 and remit ₹ 79,25,000 to the Chartered Accountant. Section 194J shall
not apply and TDS shall not be deducted @ 7.5%.

Problems on issues, case laws:

Question no.41:
Vishal Hotels Ltd., runs a famous restaurant. Customers frequenting the same, add tips to be
given to the servers in the food bill while making the payment. The tips so collected by the hotel is
pooled and distributed to all the employees. The Assessing Officer of the TDS Ward has issued a
notice stating that the assessee should deduct tax at source from the tips distributed to the
employees, since the same is nothing but payment of salaries. Assessee seeks your advice.

Question no.42:
MNC Ltd. is engaged in this business of managing and operating hotels. The assessee allowed the
employees to accept tips from customers. Some customers paid the bill and tips to the employees
through credit card. The assessee, being employer collected the amounts and disbursed tips to
the employees on monthly basis. The assessee did not deduct tax at source on the said payments
as the amounts were not in the nature of salary. Does the action of the assessee satisfy the legal
requirements?

Answer: TDS on tips distributed by the employer to its employees:

Issue involved:
The issue is whether tax is required to be deducted at source u.s.192 from the tips distributed by the
employer to the employees. Whether tips distributed to be treated as salary?

Provisions applicable:
Section 192 provides that tax is to be deducted at source by the employer from salary at the time of
payment, if the amount of salary exceeds basic exemption.

Analysis of the issue:

Tips collected by Hotel from customers and paid to employees did not amount to salary and hence
employer was not liable to deduct tax at source on such payments u.s.192.

Conclusion:
Therefore, no tax was required to be deducted u.s.192 on the tips distributed by the company.
Therefore, Assessing Officer is not correct in treating the assessee as assessee-in-default. (SC)

Question no.43:
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Mr.Ramesh is employed in R Ltd. as senior executive. He availed leave travel assistance (LTA) of ₹
60,000 in January 2021. He did not produce any evidence for the expenditure incurred. His salary
income (computed) before allowing exemption for LTA is ₹ 24,00,000. Mr.Ramesh claimed
interest on moneys borrowed for acquisition of his residential house of ₹ 96,000 but did not
produce the name, address and PAN of the lender. As employer, how will you treat the claim of
exemption of LTA and deduction of housing loan interest claimed by Mr. Ramesh?

Answer:
Mr.Ramesh is required to furnish to his employer,
a. the evidence/proof of expenditure for claiming exemption in respect of LTA, and
b. the name, address and PAN of the lender for claiming deduction of interest under the head IFHP.

Since Mr.Ramesh has not submitted the evidence, exemption in respect of LTA and deduction in
respect of housing loan shall not be allowed by the Employer. Accordingly, tax has to be deducted at
source u.s.192 on Rs.24,00,000, being salary income (computed) without considering LTA exemption
and loss from house property.

Question no.44:
M/s.Avtar Limited entered in to an agreement for the warehousing of its products with ABC
Warehousing and deducted tax at source as per the provisions of section 194C out of warehousing
charges paid during the year ended on 31.03.2021.

The A.O. while completing the assessment for Assessment Year 2021-22 of Avtar Limited, asked the
company by treating the warehousing charges as rent, as defined in section 194-I, to make
payment of difference amount of TDS with interest. It was submitted by the company that the
recipient had already paid tax on the entire amount of warehousing charges and therefore, now
the difference amount of TDS be not recovered. However, it was prepared to make the payment of
due interest of the difference amount TDS. Examine critically the correctness of the action or the
treatment given.

Answer:
Any person who fails to deduct the tax, shall not be deemed to be an assessee-in-default in respect of
such tax if the payee has included the warehouse charges for computing its total income, paid tax
thereon and filed its return of income u.s.139(1).

Avtar Limited shall not be treated as assessee-in-default since, ABC Warehousing has paid the difference
amount of tax. Therefore, the difference amount cannot be recovered from Avtar Ltd. However, Avtar
Ltd. has to pay interest @ 1% p.m. or part of a month from the date on which such tax was deductible to
the date of furnishing of return of income by ABC Warehousing.

Question no.45:
Syed & Co., a dealer in motor cycles conducted motor cycle race on the occasion of its' 25th year
anniversary. The prize was given to first 3 winners by way of a luxury motor cycle which was worth
₹ 2 lakhs each. The assessee did not deduct tax at source on the prize given to the winners. The AO.
treated the assessee as an assessee-in-default and passed order u.s.201(1) and 201(1A). The
assessee seeks your advice on the validity of the order and other legal consequences. Advise.

Issue involved:
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Where the assessee fails to deduct tax at source in respect of the winnings, can he be deemed as an
assessee-in-default.

Provisions applicable:
The payer shall deduct tax u.s.194B if the amount of winnings exceeds Rs.10,000 @ 30%. However,
where the winnings are in kind, the payer shall, before releasing the winnings, ensure that tax has been
paid in respect of the winnings. Where the payer does not deduct tax, then, such person would be
deemed to be an assessee in default.

Analysis:
If the payer either fails to deduct the tax or after deducting fails to pay the tax as required, then, such
person shall be deemed to be an assessee-in-default in respect of such tax. However, if winner has paid
the tax on the winning and Syed & Co has ensured that winner has paid the tax before releasing the
winnings, then Syed & Co. shall not be treated as assessee in default.
Conclusion:
The AO can treat the assessee Syed & Co. as assessee in default if the winner has not paid tax on the
winnings before the winnings were released to them. The AO will be justified in levying interest and
penalty.

Question no.46:
India Telephones Ltd. paid ₹ 15 lakhs per annum to Bharat Mobiles Ltd. for each of the mobile
towers used by it. During the financial year 2020-21, India Telephones Ltd. paid ₹ 435 lakhs to
Bharat Mobiles Ltd. It deducted tax at source u.s.194C and whereas the Assessing Officer claimed
that the assessee must have deducted tax at 7.5% u.s. 194-I. Decide the correctness of the action of
assesse vis-a-vis the Assessing Officer. Discuss the liability for tax deduction at source in the
following case for the A.Y. 2021-22. cma final

Answer:
The renting of mobile tower cannot be called as renting of land. The arrangement is for the use of
machinery, plant or equipment. It was necessary to house/install the equipment in some premises. The
renting of mobile tower (machinery) is liable for tax deduction under section 194-l at the rate applicable
for the payment made for use of P and M i.e. 1.5% and not 7.5%. Hence, the action of the AO. is not
correct.

Question no.47:
Discuss the liability for tax deduction at source in the following case for the A.Y.21-22:
Balaji Airlines Ltd. paid ₹ 10 lakhs to Airport Authority of India (AAI) towards landing and parking
charges. The payment was towards use of land in the airport besides technical services involving
navigation, security and other ancillary services. The tax was deducted at source under section
194C at 1.5%. The Income Tax Officer (TDS) held that the assessee ought to have deducted tax
under section 194-I i.e. towards rent. Discuss the consequence of the action of the A.O. and also the
correctness of such decision. CMA – June 2017

Answer:
The assessee has deducted tax at source u.s.194-C at 1.5% and the Assessing Officer holds that the tax
ought to have been deducted u.s.194-I @ 7.5%.

In this case, the assessee has not paid the amount merely for use of land. The payment is also towards
other services such as use of airport land for landing, the technical services involving navigation,
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security, air traffic services, ground safety services, aeronautical communication facilities and
meteorological services at the airport. As the payment was not for use of land alone, the provisions of
section 194-I are not attracted.

The payment is for various composite services and hence the provisions of section 194C could be
applied and not section 194-I. Thus the disallowance contemplated by the Assessing Officer is not
tenable in law. (SC)

Question no.48:
Maha Bank Ltd accepted fixed deposits of Rs.20 crores in the name of Registrar General of the High
Court and issued a fixed deposit receipt in compliance with a direction passed by the court in
relation to certain proceedings. The Bank did not deduct tax on the interest accrued. The A.O.
issued a notice to the bank to show cause as to why it should not be treated as an assessee-in-
default u.s.201(1) and 201(1A) for not deducting tax at source on interest accrued. Examine
whether the bank is correct in not deducting tax on the interest accrued. CA final

Answer:
The issue under consideration is whether the bank is required to deduct tax at source on the amount of
interest paid or payable on fixed deposits in the name of Registrar General of High Court.

Under Section 194A, the bank has to deduct tax on payment of interest exceeding Rs.40000 on time
deposits. However, in this case, the actual payee is not ascertainable and the person in whose name the
interest is credited is not a person liable to pay tax under the Act. The Registrar General is recipient of
neither the amount credited to its account nor to interest accruing thereon. Therefore, he cannot be
considered as a ‘payee’ for section 194A. In the absence of a payee, tds provisions are not attracted.

The credit by the bank in the name of the Registrar General would, thus, not attract the provisions of
section 194A. Therefore, the bank is correct in not deducting tax on the interest accrued. This is as per
CBDT Circular.

Question no.49:
Ramu Ltd., engaged in manufacturing of paper, pays Rs.4,00,000 to the head of labour union to be
distributed to various workmen as per work done by them. The AO wants the assessee to deduct
tax on such payment under section 194C. Is the action of AO tenable in law? CA final

Answer:
Payments made to a contractor for carrying out any WORK (including supply of labour for carrying out
any work), in connection with a contract or a sub-contract attracts tds u.s.194C. Labour union cannot be
termed as contractor as labour union is not supplying labour to the assessee. There is no works
contract in the present case. Therefore, TDS shall not be deducted and action of A. O. is not correct.
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Question no.50:
X Ltd. is a producer of natural gas. During the year, it sold natural gas worth Rs.20,50,000 to
M/s.Hawa Co., a partnership firm. It also incurred Rs.2,00,000 as freight for the transportation of
gas. It raised the invoice and clearly bifurcated the value of gas as well as the transportation
charges. Discuss whether tds is attracted on transportation charges u.s.194C. CA final

Answer:
TDS u.s.194C is attracted on any sum payable to a resident contractor for carrying out any work. Since X
Ltd., the producer of natural gas sells as well as transports the gas to the purchaser, M/s.Hawa Co., a
partnership firm, till the point of delivery, where the ownership of gas is simultaneously transferred, the
manner of raising the sale bill (whether the transportation charges are included in the cost of gas or
shown separately) does not alter the basic nature of such contract which remains essentially a ‘contract
of sale’ and not a ‘works contract’.

Therefore, in such circumstances, TDS provisions u.s.194C are not applicable on the component of Gas
Transportation Charges payable by M/s.Hawa Co. to X Ltd. Consequently, there is no liability to deduct
tax at source u.s.194C in this case.

Question no.51:
AKL Ltd., a third-party administrator on behalf of an Insurance Company has settled medical bills
of ₹ 5,00,000 submitted by Kay Hospitals Ltd. from a patient under a cashless scheme.

Answer:
CBDT Circular: clarified that since the services rendered by hospitals to various patients are primarily
medical services, TPAs (Third Party Administrators), who are making payment on behalf of insurance
companies to hospitals for settlement of medical/insurance claims etc. under various schemes including
cashless schemes are liable to deduct tax at source on all such payments to hospitals. TDS u.s.194J:
500000 x 7.5% = Rs.37,500.

Question no.52:
M/s.Sunivesh Investors is engaged in the business of stock broking, depositories, mobilisation of
deposits and marketing of public issues. It is a registered member of Bombay Stock Exchange.
Every year it makes payment amounting to Rs.10 lakhs to the Stock Exchange by way of transaction
charges in respect of fully automated online trading facility. This service is available to all
members of the stock exchange in respect of every transaction that is entered into. Would it be
liable for tax deduction under section 194J? CA final

Answer:
U/s.194J, TDS is attracted in respect of fees for technical services. Technical services like managerial
and consultancy services are in the nature of specialized services made available by the service provider
to cater to the special needs of the customer (user). It is the above feature that distinguishes or
identifies a service provider from a facility offered.

However, the service provided by the BSE for which transaction charges are paid does not satisfy the
test of specialized, exclusive and individual requirement of the user or the consumer who may approach
the service provider for such assistance or service. Therefore, the transaction charges paid to BSE by its
members are not for technical services but are in the nature of payments made for facilities provided by
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the stock exchange. Such payments would, therefore, not attract the provisions of tax deduction at
source u.s.194J.

Accordingly, payment of transaction charges of Rs.10 lakhs by M/s.Sunivesh Investors to BSE in respect
of fully automated online trading facility would not be liable for tax deduction at source u.s.194J

Question no.53:
Discuss whether liability to deduct tax at source arises in the under mentioned (independent)
situations in respect of following payments made by residents in India:

i. D & Co., a partnership firm, has credited a sum of Rs.67,000 and Rs.24,000 respectively, as
interest to partners L (resident in India) and M (non-resident) respectively.

ii. Payment of Rs.5 lakhs made by S & Company (partnership firm) to J Ltd for organizing debate
competition on the subject ‘Rural Heritage of Rajasthan’.

Answer:
D & Co. shall not deduct tax at source u.s.194A on interest paid to partner L (resident in India) of
Rs.67,000. The interest so paid is treated as business income and therefore, tds is not required.
However, tax shall be deducted u.s.195 on interest payment to Non-Resident Partner Mr.M.

The services of Event Managers in relation to sports activities have been notified by CBDT as
“professional services” for the purposes of Section 194J. In the present case, payment of Rs.5 lakhs has
been made to an event management company for organizing of a debate competition. Hence, tds
provisions u.s.194J will not be attracted. However, TDS provisions u.s.194C relating to payment to
contractors will be attracted and consequently, tax has to be deducted @ 1.5% u.s.194C by Shiv & Co
while making payment to Jyoti & Company Ltd. The tax deductible u.s.194C would be Rs.7,500 being
1.5% of Rs.5 lakhs.