TDS u/s 194Q on payments made to Kachha Arahitia

Tax Deducted at Source under section 194Q on payments made to Kachha Arahitia

Meaning of Kachha Arahitia

• A kachha arahtia enters into a privity contract. in order for his constituent and the third party to be held responsible for one another, moreover that A kachha arhatia acts only as an agent of his constituent and never acts as a principal.
• On the other hand, Pacca Arhtia makes himself answerable under the contract to both his constituents and the third party. A pacca arhatia, on the other hand, is entitled to substitute his own goods towards the contract made for the constituent and buy the constituent’s goods on his personal account & so kachha arahtia acts as a principal as regards his constituent.

Tax Deducted at Source u/s 194Q on payments made to Kachha Arahitia

• Kachha Arahitia are involved in selling crops on behalf of farmers. Kachha Arahitia are agents for an unnamed principal. The Kachha Arahitia remuneration consists solely of commission & Kachha Arahitia is not interested in P&L made by his constituent. The Kachha Arahitia does not have any dominion over the goods.
• Tax Deducted at Source under section 194Q is deducted by the purchasers from Kachha Arahitias. Buyer in such cases is treating kachha Arahitias as a seller so covering transaction under section 194Q for the purposes of Tax Deducted at Source. Sale transaction by the Kachha Arahitia is not part of his business receipts/ turnover.
• The Centralized Processing Centreof the Income Tax department (CPC) while processing the returns of Kachha Arahitia raises the objection that the sales/ turnover is not declared in the gross receipts.
• Central Board of Direct Taxes in its circular: No 452 (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 & only commission (gross) has to be considered for the purpose of Income tax section 44AB.
• So some clarification is required on this issue from the Central Board of Direct Taxes , on whether Tax Deducted at Source required to be deducted on the transaction of sale via Kachha Arahitias.

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