Tds / service tax on car on rent from wife
ashok thakker
(Querist) 15 April 2013
This query is : Resolved
Sir,
Mine is a proprietorship concern one car was bought in name of my wife, the bank instalments are paid by me from company account every month to the credit of her S/B account, apart from all monthly maintenance costs. I want to show these expenses as rental to her,would it attract deduction of TDS on payments or any service Tax payable by any of us straight or under reverse tax mechanism ?
Pl advise we still have time to deposit TDS for last year FY 2012-13.
Regards,
ashok thakker
sharad
(Expert) 16 April 2013
Under section 64 of the i.tax Act, spouse's income from a source for which funds have been provided by the assessee will be clubbed with the assessee's income. Also, please note that a proprietary concern is not a separate legal entity ( the taxable entity is the proprietor- individual). It appears that you wish to pay car rentals more than the running expenses of the car, thereby generating a surplus in your wife's hands. This may not be taken favourably by tax deptt, specially if the funds have been provided by you. And yes; it shall attract Service tax under reverse charge mechanism, and may be subjected to TDS provisions if other conditions are fulfilled.
ashok thakker
(Querist) 16 April 2013
Sharadji,
Thanks for elaboration in the matter,suppose wife does not take any profit and actual cost of instalments are reimbursed only,yes TDS will attract that is one % only,what if we go in this this scheme,Service tax is not attracted am attaching a note on this for your information,
8.9 Reverse charge in renting or hire of Motor vehicle designed to carry passengers
¨ Reverse charge when renting to a person who is not in similar line of business.
¨ Service Provider should be HUF, Individual, firm
¨ Service receiver – Business entity registered as body corporate
¨ Tax on 40%, if Cenvat credit is not availed by the service provider – No Cenvat credit in most of the cases – hence cost to company.
¨ If motor vehicle is taken on hire (operating lease) without driver, it is ‘transfer of right to goods’. Then it is deemed sale of goods and Vat will apply – not service tax.
Thanks,your advice in the matter as above is awaited and welcome,
regards,
ashok thakker
sharad
(Expert) 16 April 2013
Apparently you are well aware of S.tax and TDS provisions and have studied the applicable laws in detail.
We have two issues:
TDS
We agree that 1% TDS would be applicable if prescribed conditions are fulfilled.
S.Tax -
Provision of Car without driver – but an operating lease
Please note that for deemed sale of goods it has be established that there was ‘ a transfer of right to use’ by transferring possession and effective control. With these facts it may be considered as transaction of ‘deemed sale’ and hence liable to VAT instead of Service tax. Please also go through the details of both the services “ Rent a cab” and “ supply of tangible goods for use “ to match your facts.
In absence of complete knowledge of objectives , I am not clear of reasons of such kind of planning. In my very personal opinion, such tax planning may lead to litigations, cost of which in terms of time, effort and money, may outweigh the benefits derived
ashok thakker
(Querist) 16 April 2013
Sharadji,
I absolutely agree with you, sorry to bother you here, but i must tell you the exact reason behind all this imaginary planning.
I issue a cheque every month for car instalments to my wife that at the end of year stands as her liability towards my company,that is the reason i want to offset that by charging rental and maintenance cost,Is there, in your opinion any other way to offset that then i agree with you i should not opt for any this option.There is no intention of getting any earning in her file.
Hope i could clear my point your suggestion are welcome.
Thanks once again for giving your kind attention to my problem.
regards,
ashok yhakker
R.K Nanda
(Expert) 18 April 2013
no more to add.
Raj Kumar Makkad
(Expert) 19 April 2013
You have already adequetly been advised.
Guest
(Expert) 10 December 2014
Well Advised
Anirudh
(Expert) 10 December 2014
SHAME ON THIS FELLOW TO ATTEND THIS ONE YEAR OLD QUERY.
HE IS TRYING ALL THESE GIMMICS TO HIDE HIS FALSE AND FRADULENT PROFILE.
This fellow cannot even be a last person one can consult for any advice.
This fellow is good for nothing. Many a times he gives advices which are not supported by law.
TAKE THIS FELLOWS FALSITY IN HIS PROFILE. THIS FELLOW ATTACHES MORE IMPORTANCE TO THE PROFILE, WHILE HE IS FILLING UP TOTAL FALSE HOOD IN HIS PROFILE.
please visit the following link:
http://www.lawyersclubindia.com/lawyers_search/N-J-S-Rajkumar-alias-narasimha-254519.asp#.VIcRwmeHPFx
where he claims that he is practising from 2001, while as already indicated by me, he was enrolled only in the year 2012!!! CAN ANYBODY PRACTICE BEFORE ENROLMENT? IF ONE DOES SUCH A PRACTICE IS HE NOT FIT TO BE CALLED A "FRAUD"?
N.J.S.Rajkumar alias narasimha's Details
Listed Under
Business Law
Civil Law
Criminal Law
Practicing Since
2001
Specialization
SEBI and SEBI RELATED CASES
Court
Others
Address
54,PARASURAMA EASWARAN KOIL WEST MADA STREET,AYANAVARAM,CHENNAI 600023
Other Details
rajkumar_wins@rediffmail.com 9444036927
Therefore, before taking advice, the querist should be too careful
