AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2011 (9) TMI 632
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....king the following two additions: (i) Data Access Fees of Rs. 2,21,50,200/- paid to three companies disallowed by applying the provisions of section 40(a)(ia) of the Act. (ii) The assessee claimed to have paid Rs. 3,79,90,602/- to three companies as Business Process Outsourcing(BPO) charges. This amount was also disallowed. 4. Aggrieved, the assessee went before the ld. CIT(A), who has deleted these additions. Now, the Revenue is aggrieved and has raised the following grounds: "1. The order of the learned CIT(A) is contrary to law and facts and circumstances of the case. 2.1 The learned CIT(A) erred in directing the Assessing Officer to allow the expenses relating to BPO charges. 2.2 It is submitted that the order relied upon by the CIT(A) in the assessee's own case for the assessment year 2004-05 in ITA No. 868/Mds./06-07 dated 17.1.2008 has not become final and appeal to ITAT has been preferred by the department. 3.1. The learned CIT(A) erred in deleting the disallowance of Rs. 2,21,50,200/- towards data-access fee. 3.2 The learned CIT(A) failed to note that the agreement between the assessee company and other finance companies cast an obligation upon the finance co....
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....ght of material on record. We find that assessee had filed the copies of agreement entered into with the BPO companies (placed at Pages 161 to 188 of the paper book) as well as the nature of services provided vide letters dated 10.8.2006, 21.8.2006 and 26.12.2006 which are placed on the paper book at pages 126 to 157 before the Assessing Officer. The assessee-company is mainly engaged in two segments of business i.e. truck insurance business and corporate and retail line of business which has been termed as 'non-truck business'. For truck business, assessee-company had to provide services all over the country spread into more than 200 locations. Since assessee-company did not have offices, it had taken the services of three companies for providing office space and other infrastructure. For example, in the agreement entered into with Sriram Transport Finance Co. Ltd. the nature of services to be provided by HP company has been listed as under: "Support Services to be provided by the HP Company The HP Company hereby agree that it shall provide the following Client Support Services to Armour: (a) Provide client support services including inspection of Armour customers, collection a....
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....g inspection of Armour customers (truck owners), collection and payment of premium, mails, coordination with Insurance company/policy holders for payment of premium, delivery and collection of insurance policies etc and collection of proposal, vehicle inspection, client background details regarding truck portfolios as per Armour policies and guidelines. For market survey and data collection relating to potential business prospects in the topographical area of their respective branches. For follow-up work relating to claims management and all other after-sales servicing of clients for Trucks business and other retail clients of Armour. " 25. In the sample documents, for example, there is a letter dated 24.1.2004, addressed to Shri Jamalbhai Sindhi whereby cheque has been despatched to him by Sriram Transport Finance Co. and copy of this letter has been sent to the assessee-company for information. Then in the letter dated 15.11.2003, Sriram Transport Finance Co. Ltd despatched the spot report alongwith photographs to Shri Nitin Khole for doing correction in the report and action has been referred to the assessee company. These kinds of examples clearly show that while providing s....
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....stomers, with whom insurance business can be canvassed, the assessee-company, during the year entered into an agreement with three of its sister concerns, viz. Shriram Transport Finance Company Ltd., Shriram Overseas Finance Ltd. and Shriram Investments Ltd. for providing the assessee an access to their customer base. As per the agreement, the assessee-company has approached these Finance Companies to provide periodical access to the database containing the details of their depositors, debenture-holders and persons who have obtained finance. In turn, the finance companies agreed to provide the same by sharing relevant information, that they have, with the assessee-company. These agreements are for a fixed period of time of one year. As per these agreements, information with regard to the details of persons who have obtained finance, debenture holders and depositors are to be given on a regular basis. The assessee has paid an amount of Rs. 2,21,50,200/- to these three companies for the above purpose. But the assessee-company did not deduct tax at source(TDS) on these payments. Since the payments have been made in pursuance to a contract for providing access to the customer base of t....
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.... can be inferred. Now the Revenue is aggrieved. 8. It was argued by the ld. CIT/DR that as per agreement, the finance companies are required to constantly provide information about their customer base which is a continuous process. It was further argued that even if it is presumed that the contractors simply let the employee of the assessee-company to use its database, this database gets updated every now and then and it will amount to rendering of service. Therefore, rendering of service would be covered by the provisions of section 194C. Per contra, apart from relying on the appellate order, the ld. AR has argued that Circular no.681 on which heavy reliance has been placed by the Assessing Officer as well as by the ld. CIT/DR, has since been struck down and quashed by the Hon'ble Bombay High Court while deciding the case of East India Hotels Ltd. v CBDT [2010] 320 ITR 526. 9. We have circumspected the rival submissions vis-à-vis the available facts and evidence before us. There is no dispute with regard to the fact that the finance companies only allow access to information as discussed above and the contract between the parties is regarding access to database and not fo....
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....oads and airfields or railway-lines or erection or installation of plant and machinery, etc. In all these contracts, the execution of the contract by a contractor/sub-contractor results in production of the desired object or accomplishing the task under the contract. The facilities or amenities made available by a hotel to its customers do not constitute "work" within the meaning of section 194C. Consequently, Circular' No. 681, dated March 8, 1994 , to the extent it holds that the services made available by a hotel to its customers are covered under section 194C is bad in law and is liable to be quashed. " So, when the circular itself does not survive, the main basis of reliance by the Assessing Officer, to arrive at his conclusion, also goes to winds, and the reason becomes futile. 11. Above all, the hon'ble Madras High Court while rendering the decision in the case of Skycell Communication Ltd. v. Dy. CIT [2001] 251 ITR 53, has categorically stated that the paying companies should render service involving labour and/or skill, which are singularly absent in the assessee's case. In this case, three companies have done nothing or rendered no service to the assessee-company and h....
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....asset details etc. to arrange the insurance for them and for access to such database of the payee companies the assessee-company makes the payment. This exercise facilitates the work of the payee companies as they also want the vehicles which they are going to finance should have insurance cover. Normally, the payee companies are not obliged to render any services to the assessee-company. It is the case of the Assessing Officer that payee companies have rendered 'services' as part of their obligation to the assessee-company. Thus, all the conditions of section 194C except that there is a contract/agreement between the parties, no other conditions are satisfied. Here the work is to be carried out as per the terms and conditions and specification of the contractee. The companies are simply letting the employees of the assessee-company to use their database prepared for their own consumption. So, the work is done/carried out by the assessee-company itself with the help of the database maintained by the payee companies. Under these circumstances, one can safely conclude that there cannot be any obligation on the part of the assessee-company to deduct tax u/s 194C or under any other pro....