TDS on Car Repair--Amt borne by Insurance Co.

Hi Jagdeesan and Anoop,

An important word to note in Section 194C is "responsible". TDS isto be made by the person who's responsible for making the payment tothe contractor. In this case, since the company had taken out aninsurance policy on the car, the primary responsibility to meet theexpenses arising out of getting the car fixed up consequent to anaccident lay on the insurance company. True, the bill was raised bythe Repair Shop in the name of the company. But I don't think theinsurance company acted as an agent of the assessee company whilstmaking the payment to the repair shop. It was discharging its ownliability and therefore duly made the TDS on its part of the burdenof expense.Even if the same amount being subjected to tax twice isn't a goodenough argument here, it still doesn't seem the company can be madeliable to make TDS on the amount it never paid and never wassupposed to pay. The repairer should have raised a net bill of Rs15000 on the company after it'd got Rs 185000 from the insurancecompany. So we'll book an expense of only Rs 15000. But the repairerseems to have raised the entire bill of Rs 200000 in the name of thecompany without reflecting therein any adjustments on account ofpayment already realized from the insurance company. Still, I feelTDS, if at all it is deductible, need be deducted only on Rs 10000.These repair and insurance agreements these days are mostlytripartite in nature, the parties being the assessee, the repairerand the insurance company. The insurance company stepped into thepicture the moment the car met with an accident; it didn't reimbursethe amount to the assessee company. If the assessee had got thecheque for Rs 185000 from the insurance, crediting it to CarExpenses account, then I might have had a different opinion on this.Anyways, if this was a one-off payment, then the discussion we arehaving is merely academic in nature. TDS u/s 194C isn't required tobe made if the individual payment doesn't exceed Rs 20k and theaggregate during the year is below Rs 50001.Thanks,CA Sanjeev Bedi--- In ICAI_CIRC_MEERUT_CA@yahoogroups.com, Anoop Bhatia wrote:>> Dear Mr. Jagdeesan>> It's an interesting query. I may say if bill of Rs.50000/- is madein the> name of company and the company books an amount of Rs.50000/- inits books> as expenditure of repairs of car as well as it books the claimreceived> from the insurance company to the tune of Rs. 40000/- (which isreceived by> way of direct payment to the repair agency by the insurancecompany) the> TDS on the balance payment of Rs. 10000 should be applicable.>> But if bill is booked with an amount of Rs.10000/- only and noamount is> shown in the books as receivables from the Insurance company onaccount of> insurance claim, I may say TDS may not be applicable.>> But in TDS one may follow a golden rule, "in case of doubt deductthe tax> at source". So being on a practical side I suggest to deduct TDSu/s 194C.>> I know some memeber may not be agreeing to the opinion framed byme, their> valuable opinion on the issue is welcome.>> Warm regards>> Anoop Bhatia> Jaipur>>>>> Dear Esteemed Members,>> A car owned by a company met with accident and it was> sent for repair. The repairer sent quotation and as> per the quotation Rs. 1,50,000 is payable towards> material cost and Rs. 50,000 is payable towards> labour.>> Insurance company sanctioned Rs. 1,45,000 towards> material cost and Rs. 40,000 for labour charges> relating to repairing the vehicle. The insurance> company paid the above amount directly to repairer and> deducted TDS on Rs. 40,000 being the labour charges it> sanctioned.>> The balance amount of Rs. 15,000 is payable by the> company to the repairer.>> The query is while making the balance amount of Rs.> 15,000, whether TDS is be made on the entire labour> charges of Rs. 50,000 or TDS is required to be made on> the balance Rs. 10,000 (Rs. 50,000 - Rs.40,000 - TDS> made by the insurance company).>> Regards,>> V. Jagadeesan.>>>>>> Disclaimer :The information contained herein (including anyaccompanying documents) is confidential and is intended solely forthe addressee(s). If you have erroneously received this message,please immediately delete it and notify the sender. Also, if you arenot the intended recipient, you are hereby notified that anydisclosure, copying, distribution or taking any action in relianceon the contents of this message or any accompanying document isstrictly prohibited and is unlawful. The organisation is notresponsible for any damage caused by a virus or alteration of the e-mail by a third party or otherwise . The contents of this messagemay not necessarily represent the views or policies of HousingDevelopment Finance Corporation Limited.>