Examine & explain the TDS implications in the following cases along with reasons thereof, assuming that the deductees are residents and having a…

(i) On payment of fee for professional services and royalty - Under section 194J, the threshold limit of 30,000 is specified separately for, inter alia, fees for professional services and royalty. Therefore, Akash (P) Limited is not required to deduct tax at source under section 194J either on fee of 22,000 for professional services or on royalty of 18,000 paid to Mr. Santosh, since the payment under each category does not exceed the independent threshold of 30,000 specified thereunder. (ii) On payment for purchase of bag according to specifications - As per section 194C, the definition of “work” does not include the manufacturing or supply of product according to the specification by customer in case the material is purchased from a person other than the customer or its associate, being a person related to the customer in such manner as defined u/s 40A (2) (b). Therefore, M/s Packaging Limited is not required to deduct tax at source in respect of payment of 1,75,000 to Mr. Ankit, for purchase of bag according to its specifications, since it did not supply the material for such bag and nor was the material supplied by any of its associates. Hence, the contract is a contract for 'sale' and not a works contract.