TDS U/S 194Q on payments made to Kachha Arahitia

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TDS U/S 194Q on payments made to Kachha Arahitia

  1. Kachha Arahitia are involved in selling crops on behalf of farmers. They are agents for an unnamed principal. The remuneration of the Kachha Arahitia consists solely of commission and he is not interested in the profits and losses made by his constituent. The Kachha Arahitia does not have any dominion over the goods.
  1. TDS U/S 194Q is deducted by the purchasers from Kachha Arahitias. The buyer in such cases is treating the kachha Arahitias as a seller therefore covering the transaction U/S 194Q for the purposes of TDS. The transaction of sale by the Kachha Arahitia is not part of his turnover/ business receipts.
  1. The CPC while processing the returns of Kachha Arahitia raises the objection that the turnover of sales is not declared in the gross receipts.
  1. CBDT in its circular: No 452 [F.No. 201/3/85-IT(A-II)], Dt. 17/03/1986 had clarified in Para 4 of circular that so far as Kachha Arahitias are concerned the turnover does not include the sales effected on behalf of principals and only the gross commission has to be considered for the purpose of section 44AB.
  1. So some clarification is required on this issue from the CBDT, on whether TDS needs to be deducted on the transaction of sale through Kachha Arahitias.
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