ITAT Indore directs deletion of demands for non-TDS on internet charges & non-TCS on scrap sale

The ITAT Indore allowed the appeal of the assessee, directing the Assessing Officer to delete the demands related to non-deduction of TDS on internet charges and non-collection of TCS on the sale of scrap.

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Issues Involved:
1. Non-deduction of TDS on internet charges.
2. Non-collection of TCS on sale of scrap.

Issue 1: Non-deduction of TDS on internet charges

The appeal was against the order of the Ld. CIT(A) confirming the Assessing Officer's decision that tax should have been deducted under section 194J on payments made for internet services. The Assessing Officer raised a demand for non-deduction of TDS on internet and lease line services. The CIT(A) upheld the demand, stating that the payment for internet charges fell within the definition of fees for technical services, requiring TDS deduction. However, a similar issue was decided in favor of the assessee by the ITAT Kolkata in a different case. The ITAT Kolkata held that no TDS was required on payments for internet and communication charges, citing the judgment of the Hon'ble Supreme Court in CIT Vs. Kotak Securities Ltd. The ITAT Indore directed the Assessing Officer to delete the demand of Rs. 67,271, allowing the appeal on this ground.

Issue 2: Non-collection of TCS on sale of scrap

The second ground of appeal was related to the non-collection of TCS on the sale of scrap, leading to a demand of Rs. 27,472. The CIT(A) confirmed the demand, stating that the appellant failed to prove why they were not liable to collect TCS. However, the assessee argued that as a hotel, they did not generate scrap through manufacturing or mechanical working, as required by Section 206C. Citing a precedent from the Ahmedabad ITAT, it was held that Section 206C applies only to sellers engaged in manufacturing or mechanical working of materials. Therefore, the ITAT Indore directed the Assessing Officer to delete the demand of Rs. 27,472 on account of non-collection of TCS and interest thereon, allowing the appeal on this ground.

In conclusion, the ITAT Indore allowed the appeal of the assessee in both issues, directing the Assessing Officer to delete the demands related to non-deduction of TDS on internet charges and non-collection of TCS on the sale of scrap.

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