Tds on construction of a premises to be used for renting
C..a......STUDENT
(Querist) 27 November 2013
This query is : Resolved
An individual is doing business as a wholesaler and files his return under the "business" head.
If he makes payment from his saving bank a/c which is not a part of his business balance sheet to a construction co. for construction of a building that will be used for rental purposes and the income will be shown in the Head " House Property",
Will the TDS provisions be applicable?
Does the liability to deduct TDS arise?
Please reply
C. SANJEEVA RAO
(Expert) 27 November 2013
Yes, the TDS provisions shall be applicable
C. P. CHUGH
(Expert) 28 November 2013
1. In the absence of fact whether his accounts were liable to be audited in the immediately preceeding year, it is wrong to conclude that tax is deductible.
2. Even other wise where payment is made on account of construction of a house to be used for personal purposes, no deduction of tax is required. Please refer sub-section (4) of section 194C of the Act. the same is reproduced below for ready reference.
194C
(4) No individual or Hindu undivided family shall be liable to deduct income-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.
C. SANJEEVA RAO
(Expert) 28 November 2013
In his question it self contains, he is intend to give on rent and show the income under the Income from House Property. Hence, it is not used for his personal purpose or by any member of the HUF in my opinion, personal use means by himself or by his parents. However, the stipulation is applicable for the deductor who is taking the property on rent. Assuming the rent exceeds the threshold limit. The tax audit provisions shall be applicable in the cases of business turnover.
C..a......STUDENT
(Querist) 28 November 2013
Yes sir, he is currently under TDS provisions,
sir, if income is shown in the head "House Property", then will TDS dis-allowance be there? since TDS provisions are applicable under section 44AB which deals with income under the Head "Business/Profession"?
If the building being constructed is an S.C.O., is shown in personal Balance Sheet and and has not generated any income as yet and neither is the assessee sure whether or when it will generate income....will still be TDS provisions apply?
C..a......STUDENT
(Querist) 28 November 2013
Thank You Rao Sir.
Sir, can you give reference of some proviso in this regard? or some case law?
C. P. CHUGH
(Expert) 02 December 2013
Unless the property to be constructed forms part of business asset, there is no requirement of deduction of tax at source. Sub-section (4) of section 194(C) is very clear about it and there is no need for seeking any other proviso or case law.
