TaxTMI 
TaxTMI 
2013 (10) TMI 595
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3. That the Ld CIT(A) has erred in law and on facts by not appreciating the fact that the short deduction of the tax is very much covered u/s 40(a)(Ia) of the IT Act. 4. That the order of the Ld CIT(A) deserves to be set aside and the order of the Assessing Officer be restored. 2. The brief facts of the case are that the assessee is providing Engineering consultancy services. The return of income was filed on 28.10.2007 declaring an income of `.14,61,390/-. The case of the assessee was selected for scrutiny. During assessment proceedings, the Assessing Officer observed that assessee had deducted tax u/s 194C in respect of certain payments which in his opinion was required to be deducted u/s 194J. The Assessing Officer observed the following payments which required tax deduction u/s 194J instead of u/s 194C: a) Strategic Consultants (SCOPE) Rs. 5,6,500/- b) V.D. Surveyors & Surveying Systems. Rs.42,63,704/- c) Sri Ram Computers. Rs. 2,10,735/- d) R.B. Computers. Rs. 3,51,225/- e) Sipp Engineers. Rs. 5,61,000/- f) Pushpa Enterprises. Rs. 2,70,500/- 3. The assessee was asked to explain as to why propor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ayable was to M/s VD Surveyors as on 31.3.2007. Since the assessee has made the actual payment of all other amounts provisions of section 40a(ia) were not applicable. Reliance was placed in the case law of Jaipur Vidyut v. DCIT 123 TTJ 888. It was further submitted that provisions of section 40a(ia) were intended to show better compliance and curb bogus payments and non genuine payments. It was further submitted that CBDT Circular No.5 of 2005 dated 15.7.2005 has also clarified that the provisions of section 40a(ia) is to regulate compliance of TDS provisions in case of a resident and curb bogus payments. In view of the above, it was submitted that in the present case the payments were not in dispute and on the issue as to whether tax was to be deducted u/s 194C or section 194J of the Act, it is clear from the nature of work that section 194C was applicable and therefore the provisions of section 40a(ia) were not applicable in the facts of the present case. The Ld CIT(A) after going through the submissions made by the assessee deleted the addition by holding as under:- "Now coming to the issue regarding payments made by the assessee to the six parties mentioned "in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Sec. 194C does not govern the payments of fees towards professional or technical services. The term "any 'work" in sec. 194C is aimed at the type of work resulting in tangible material and by virtue of special inclusion, supply of labour to carry out any work also is brought into the net of tax deduction at source. This inclusive clause ropes in the consideration for the supply of labour. The word supply connotes the meaning of procuring, securing or bringing in, and not rendering of one's own professional or technical services. Similarly in CIT Vs. Bharti Cellular ltd.(2009) 319 ITR 139 (Del) Hon'ble court observed that the services rendered qua interconnection/port access did not involve any human interface and, therefore, the services could not be regarded as technical services as contemplated u/s 194J (although the facility of interconnection and port access provided by MTNL other companies was technical in sense that it involved sophisticated technology) MTNL or other companies did not provide any assistance or aid or help to the assessee in managing, operating, settling up their infrastructure networks. The expression 'fees for technical services" ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....XVII-B, there are separate TDS provisions under the Income Tax Act and matter can be separately examined by ITO(TDS). But that legal debate cannot be made a basis for applying section 40(a)(ia). Section 40(a)(ia) has no role to play in such circumstances when the assessee under bonafide belief complied the provisions of Chapter-XVII-B & deposited the tax in time. Further in the assessment framed by AO, he has disallowed proportionate expenses of the assessee (11) but on a combined reading of sec 40a(ia) & sec. 40, it is clear that sec40a(ia) no where talks about the proportionate disallowance of expenses, it only says that if deduction of tax has not been made under Chapter-XVII-B & the same has not been deposited in time, the amounts shall not be deducted in income chargeable under the head Profits & gains of Business & Profession. There is no scope for further interpretation to justify the proportionate disallowance of expenses. Regarding alternate argument of the assessee that sec.40a(ia) applies only when the amount is payable and not where the expenditure paid. In view of full relief given to the assessee on the issue, there is no need to go into th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f CIT(A) on this issue, we do not see any reason to interfere in the order of the Ld. CIT(A). As far as the second fold of submissions raised by the Ld. Counsel for the assessee is concerned, we are of the opinion that evidence possessed by the Ld. AO is not sufficient to say that all these persons have performed technical duties. The AO has been harping upon the statement given by representative of Jai Ambey and S.K. Nigam HUF. Both these persons have given undertaking that they have performed non-technical works which include computer job work, data entry etc. The copies of the undertakings are available on page Nos-32 to 40B of the paper book. In view of this contrary stand, it is difficult to infer that all the entities were rendering technical services. The Ld. First Appellate Authority has examined the quality of evidence available on the record vis-a-vis the explanation made by the assessee. We do not see any reason to interfere the order of Ld. CIT(A) on this aspect also. With regard to third proposition that once tax was deducted by the assessee though under a wrong provision then on account of short deduction of tax, the assessee ....