Profits in tent biz aren’t rent

QI am a contractor bonded by an agreement under “hiring of tent house material” with a chain of hotels. Kindly advise me under which category do I fall for the TDS being deducted on my bills for the materials being supplied by me to them. I am facing hardship for the amounts being deducted and held with the I-T department over a period of time. Can I claim TDS under the category of contractors or under the category of rent?

In my opinion, the provision of Section 194C i.e., payment to contractors shall be applicable to you. Section 194I of the Income-Tax Act, 1961, contemplates the deduction of tax at a much higher rate on rental charges paid in excess of `2,40,000 during a financial year for lease, sublease or tenancy of land, buildings, machinery, plant, equipment, furniture & fittings.

The mere use of the word “hiring of tent house material” will not change the character of the transaction which also happens to be part of your business. Moreover, the agreement entered by you is wholly attributable to your business. The mere use of the word “hiring of tent house material” shall not change the character of the transaction which also happens to be part of your business. ■

QCHAITANYA Via email

When I was residing in Berlin, I bought a house. I was an NRI, when I bought the house. After returning to India, a couple of years later, I sold the house in Berlin. Sale proceeds are remitted to my account in India. Does this attract capital gain tax in India? ASHOK REDDY

Via e-mail

As per your query, it appears that you are a resident of India at the time of selling the house you purchased in Germany. Since your status is that of a “Resident in India”, you will be liable to tax on global income, as per Indian Income Tax Law. However, if the residential house has suffered capital gains tax in Berlin, the taxes paid by you in that country would have been eligible for set off against your Indian income tax paid (As per the relevant provisions of DTAA).

However, had you sold the house in Berlin with your status as per Indian Income Tax Law as nonresident, then the same would not have suffered any capital gains liability because as non-residents, the liability to pay tax in India arises only for income earned in India.

Since the asset under consideration has been held by you for a period of two years, hence being a long term capital asset, you are eligible to apply the cost inflation index on the cost of acquisition of the property and also the long term capital gains are taxed at a special rate of 20.8 per cent (including surcharge and education cess).

Further, you can also invest in a residential house to the extent of long term capital gains on the sale of property and/or invest in the specified capital gain bonds under section 54EC of the Income tax Act.

(The writer is a Hyderabad-based chartered accountant. He can be reached at info@rathiandmalani.com)