Withholding tax on installation charges

Recently, the Pune tribunal has held that installation/erection and related service charges formed an integral part of the purchase price of machinery and the situation would remain unaffected, whether the charges were embedded in the cost of purchase price or, were charged separately. Thus, there was no obligation on the payer to withhold tax on entire payment. Based on this, tax payers could consider reviewing their agreement to evaluate whether installation/ erection and related services form an integral part of purchase price of machinery and accordingly determine the applicability of withholding tax on the payments.