Tribunal rules no tax deduction needed for payments to RSAMB under Income Tax Act

The Tribunal held that the assessees were not required to deduct tax at source under sections 194C and 194J of the Income Tax Act for payments made to RSAMB. The Tribunal noted that RSAMB itself deducted tax at source for payments to contractors, and as the works were executed by RSAMB, not the assessees, section 194C did not apply. Additionally, as there was no contract for technical services, section 194J was also deemed inapplicable. Consequently, the appeals were allowed, relieving the assessees of tax deduction liabilities as per the orders of the ld. CIT(A).

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Issues Involved: The judgment involves issues related to deduction of tax at source u/s 194C and u/s 194J of the Income Tax Act, 1961 for payments made to Rajasthan State Agricultural Marketing Board (RSAMB) for construction projects and statutory contributions.

Issue 1 - Deduction of Tax u/s 194C:
The appellants challenged the order of the ld. CIT(A) confirming the liability for deduction of tax at source u/s 194C in relation to payments made to RSAMB for construction projects. The Hon'ble Jurisdictional High Court's decision in the case of CIT Vs. Krishi UPaj Mandi Samiti was cited, emphasizing that the amount given by the assessee to the Board for specific purposes is not refundable and must be treated as an application of income. The High Court clarified that the works of planning and development are executed by the Board, not the committee, hence Section 194C is not applicable to the assessee.

Issue 2 - Deduction of Tax u/s 194J:
Regarding the statutory contributions to RSAMB, the AO contended that tax should be deducted at source u/s 194J. However, it was argued that Section 194J applies to fees for professional or technical services, not statutory contributions. As there was no contract for technical services between the parties, Section 194J was deemed inapplicable.

Decision and Conclusion:
The Tribunal found that the assessees were not obligated to deduct tax at source for payments to RSAMB, whether as contributions or for development work execution. It was noted that RSAMB itself deducted tax at source for payments to contractors, complying with Section 194C. Consequently, the appeals were allowed, and the assessees were relieved of the tax deduction liabilities as per the orders of the ld. CIT(A). The judgment in favor of the assessees was pronounced on 05-08-2011.

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