#TaxmannPPT | Section 194R – TDS or FRINGE BENEFITS TAX in a New Avataar?

PRACTICAL QUERIES

MEANING OF BENEFIT OR PERQUISITES Query 1 A manufacturing company provides reimbursement to its distributor for the free goods given by him to retailers.

Are these benefits or perquisites?

MEANING OF BENEFIT OR PERQUISITES Query 2 An FMCG company provides reimbursement to the distributor for the goods delivered to location of the retailers.

Are these benefit or perquisite?

MEANING OF BENEFIT OR PERQUISITES Query 3 Whether complimentary copies of the books given to the authors by the publisher is a benefit or perquisite?

WHO IS PROVIDER OF BENEFIT OR PERQUISITE? Query 4

A company agrees to arrange foreign tours for its dealers and distributors/agents who achieve specific targets. It is the company that has to comply with Section 194R, not the tour operator/hotels/airlines who, after accepting payment from the company, delivers the agreed/promised foreign tour to the dealers/distributors/accounts.

NEXUS WITH BUSINESS OR PROFESSION Query 5

An assessee imparts knowledge and values based on Shrimad Bhagawad Gita to his disciples/followers. The gift made by the followers, without being under any contractual or legal or customary obligations. Can gifts be treated as a benefit or perquisite arising out of carrying of vocation?

NEXUS WITH BUSINESS OR PROFESSION Query 6

Waiver of the outstanding dues towards any expense or trading liability are taxable under Section 41(1). Is tax deductible under Section 194R

NEXUS WITH BUSINESS OR PROFESSION Query 7 If the debtor writes off any trading liability by a unilateral act in his books of account, such act of unilateral writing-off of a liability tantamount to remission or cessation of liability, and the amount of liability so written-off is deemed to be business profits of the year in which the liability has been written-off. How the tax shall be deducted in this case?

COMPLIMENTARY OFFERRINGS Query 8 A client pays additional sum to an architect for his good services.

As it is a monetary-benefit, which provision should apply – Section 194R or Section 194J?

COMPLIMENTARY OFFERRINGS Query 9 A publisher provides complimentary books to the authors. These books are sold to the distributor at 40% discount and 10% discount to end customers. What shall be the value of benefit or perquisite?

COMPLIMENTARY OFFERRINGS Query 10 The author gets the complimentary books which he further distributes to the teachers and library. Whether the author will get the deduction for the books further distributed by him. If yes, then the usual payment of an advance-tax in the upcoming instalment would be sufficient evidence of payment of tax to discharge the provider from deduction of tax under Section 194R.

IMPACT ON PROMOTIONAL SCHEMES Query 11 A company intends to gift a watch worth Rs 50 lakhs to a film actress who has undertaken advertisements and promotional activities on a remuneration basis. The ITAT in the case of Priyanka Chopra v. Dy. CIT [2018] 89 taxmann.com 287 (Mumbai- Trib.) has confirmed the additions under Section 28(iv).

IMPACT ON PROMOTIONAL SCHEMES Query 12 A company arranges a sales conference for the dealers. A dealer comes with his wife to attend the event. The company spends Rs. 10 lakhs on the entire event. How much would be the taxable portion of the benefit extended to the dealer due to his wife attending the event?

IMPACT ON PROMOTIONAL SCHEMES Query 13 An FMCG company distributes free sachets of a new shampoo to the retailers which can be sold by them to the customers. The FMCG distributes them to check the response from the consumer.

On acceptance of the product, the company would launch the product on pan India basis. Whether it is a benefit or perquisite?

IMPACT ON PROMOTIONAL SCHEMES Query 14 Giving free after-shave lotion on buying 10 quantities of razor. The retailer can sell both the products seperately. Whether it is a benefit or perquisite?

IMPACT ON PROMOTIONAL SCHEMES Query 15 Whether distribution of free samples during pre-production or postproduction should be treated as same?