Hi Mr Pavan,
Section 194C gets activated the moment you hire someone to perform a piece of work for you. In Birla Cement Works v. CBDT [1997] 95 Taxman 377 (Raj.), the Rajasthan High Court said that the expression "CARRYING OUT ANY WORK" is the soul of Section 194C and whether or not this section gets attracted to a particular payment hinges on the interpretation of this expression. But sometimes it may become hard to tell a works contract apart from a contract for the sale of goods. Suppose a company throws a dinner party at a hotel; the hotel staff organizes all the stuff. The bill comes to Rs 1 lac. Would the company be liable to deduct TDS on it u/s 194C? In my opinion: No.The answer is No because this isn't a Catering Service Contract at all. The waiters, etc all belonged to the hotel. The company officials went there and dined; it is a simple contract for sale of goods. Serving the food to the customers was part and parcel of the duty of the hotel staff in pursuance of the contract for the provision of food. Now suppose the same company arranges the dinner within its own premises, on its own lawns. The hotel staff provide service pretty much the same way they'd have provided if the party had been held at the hotel. The bill comes to Rs 1 lac. Should the company make TDS on it? In my opinion: Yes. The answer is Yes, because if this isn't a Catering contract, then what is? Here the company has hired the hotel staff to manage the service of eatables, etc at the party. Within the hotel, catering was their job anyway. But on the company premises, they're clearly "carrying out a piece of work" outsourced to them. It is no longer a contract for the mere sale of eatables, notwithstanding that VAT may have been charged in the bill. The TDS will have to be deducted on the entire amount paid to the hoteliers. Thanks,CA Sanjeev Bedi--- In http://us.f508.mail.yahoo.com/ym/Compose?To=ICAI_CIRC_MEERUT_CA%40yahoogroups.com, "Pavan Kumar Bayyana" wrote:>> *Whether banquet in Star hotels will come under the purview of catering (and> hence in the purview of 'work') as defined in 194C. ?*> > * *> > The following are the relevant in this regard> > Section 194C provides the following> > *Any person responsible for paying any sum to any resident (hereinafter in> this section referred to as the contractor) for carrying out any> work(including supply of labour for carrying out any> work) in pursuance of a contract between the contractor and ……*> > Explanation III to the above section provides that the expression> '*work' *shall> also include 'catering'.> > However as per Department Circular No: 715, dated: 8/8/1995,> > TDS is not required to be made for serving food in a restaurant in the> normal course of running of the restaurant/cafe.> > The following is the relevant extract from the circular.> > *Question 11 : Whether a contract for catering would include serving food in> a restaurant/sale of eatables ? *> > *Answer: 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.> *> > > > *My question is whether providing of banquet (i.e.Lunch/Dinner for parties &> conferences) will come under the purview of catering (i.e. should they be> treated as 'serving food in a restaurant in the normal course of running of> the restaurant/cafe' ) *> > * *> > *Please just don't give vague opinions, *> > *but substantiate your answers with relevant Circulars / Case laws if any*> > > > > Thanks & Best Regards> > -- > Pavan.> > - 9948 23 9958>
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