TDS on Hostel--Boarding and Lodging

Hi Ganesh,

I would put my money on tax being deductible u/s 194I rather than Section 194C. The meaning of "rent" given in Section 194I is pretty wide. Amount paid to a hostel owner for accommodating the company's workers seems to fit more snugly into Section 194I than Section 194C. You yourself have said that your company has contracted with the hostel owner to rent out a dormitory with a view to cut down attrition rates. So it's basically a contract for "accommodation" . You can't prevent employees from changing jobs by holding out the incentive of boarding alone. Primarily it's the guarantee of lodging that you hope to bring down your attrition rate with. The hostel owner is always going to argue in favour of Section 194C as the TDS rate for Rent is 7.5 times. And it doesn't really matter what's the structure of the bill—a predominant part of the hostel bill may constitute expenses on account of boarding. That wouldn't alter the nature of this payment. The following case law is an instructive one:[The definition, for the purpose of the Income-tax Act, of the nomenclature `rent' as expounded in the Explanation to section 194-I itself amply reveals that the same is projected as the generic term which includes within its ambit payment made ON WHATSOEVER ACCOUNT for occupation of a tenanted portion. After taking into account the definition of rent, it apparently appears to be a composite concept. Once the rent is comprehended as a composite concept then it is not capable of being fragmented - Smt. Bishaka Sarkar v. Union of India [1996] 219 ITR 327 (Cal.).]In view of the above interpretation of "rent" by the court, I think you can't even bifurcate the payment into Boarding and Lodging Expenses and deduct TDS at two different rates. The whole of the amount paid to the hostel owner would be subjected to TDS u/s 194I.How about the employees directly paying up to the hostel owner and getting reimbursement from the company?Thanks,CA Sanjeev Bedi--- In http://us.mc508.mail.yahoo.com/mc/compose?to=ICAI_CIRC_MEERUT_CA%40yahoogroups.com, "Ganesh P." wrote:>> Dear Professionals> > I have a query on TDS on the amount payable to the Hostel owner. I give> below the facts of the case and seek your valuable advise:> > Facts of the case:> We have introduced a dormitory system in order to tackle the attrition> problem with relation to our Operators. We have tied up with a Working> employees hostel who will provide an entire floor of the premises> exclusively for us to use for our operator purposes. We would be paying> a flat amount as the Accommodation charges (as we refer presently) which> includes the charges for a minimum of 100 employees for their stay, food> and other charges viz. electricity, water etc.> > Query:> Now would like to know whether the above payment would attract TDS u/s> 194I or u/s 194C as the predominant portion is for the catering services> only as arguable by the Service provider. The net inflow for the> service provider would be very less if the case is argued as "Rent" as> the rate is higher.> > Your views please...> > Best regards,> Ganesh> Senior Executive - Finance Intimate Fashions (India) Pvt Ltd Ph: +91> 44 6740 4400 Extn: 4452 Ph: +91 44 6740 4452 (D) Fax: +91 44 6740> 4692 Mobile: 98400 89137