TaxTMI 
TaxTMI 
2014 (7) TMI 85
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....arges but on the expenditure booked towards software development, TDS was done u/s. 194C but not u/s. 194J as required. After verifying the invoices/bills and agreements for the expenditure booked towards software development charges, A.O. noticed that the software development charges in India in fact were the payments towards technical services/fees and liable for TDS u/s. 194J. After examining the agreement copies with the companies with which assessee entered into agreement for the A.Y. 2004-05 for software development services, A.O. concluded that expenditure was fees for professional services and technical services and covered by section 194J of the Act and accordingly calculated the tax and interest of Rs.18,06,000/- u/s. 201(1) r.w.s. 194J and Rs.14,17,170/- u/s.201(1A) of the Act and reduced the amount of Rs.7,22,4090/- of TDS made u/s. 194C by assessee and raised the total demand of Rs.25,01,310/-. 3.1. Likewise, in Financial Year 2006-07 the demands are raised as under : (i) TDS u/s. 194J Rs.10,96,452/- (ii) Interest u/s.201(1A) Rs. 7,28,674/- &nbs....
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....ence of contract is not decisive in itself for categorizing the activity. The vendor companies have provided the technical services for an effective management information system for exchange of information between the head office in India and its employees working at various client sites in respect of diversified sectors such as health care, telecom, banking and financial etc., Since the need for such software is for reviewing the progress of work executed by the employees of the appellant company at client's sites which requires technical expertise in all these diverse fields and therefore, the nature of services rendered can only be categorised as technical services/professional services. Accordingly, the A.O. is justified in applying the provisions of section 194J of the I.T. Act and therefore, the ground raised by the appellant is dismissed." 5. While confirming the action of the A.O., Ld. CIT(A) however, gave direction to the A.O. that the taxes cannot be collected again once the taxes have been paid by the deductees in view of the decision of Hon'ble Supreme Court in the case of M/s. Hindustan Coca Cola Beverages P. Ltd., 293 ITR 226 (SC) and the A.O. was directed to verify....
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.... in applying the provisions of sec. 194J instead of the provisions of Section 194C of the I.T. Act, 1961. 4. The Ld. CIT(A)-II, Hyderabad ought to have appreciated that the contract payments made are covered under the provisions of section 194C and accordingly TDS has to be made. 5. The Ld. CIT(A)-II, Hyderabad ought to have appreciated that the appellant has entered into contract agreements for performing the services with various parties. 6. Assessee may add, alter or modify any other point to the grounds of appeal at any time before or at the time of hearing of the appeal." 9. As briefly stated, assessee has entered into agreements with M/s. CAM Soft India P. Ltd. Integra Telecommunications & Software Ltd., Zuda Information Technology P. Ltd., Hightec Computech P. Ltd., M/s. Global Infosystems Ltd., vendors who are located in India for undertaking certain works in information systems. Assessee deducted tax at source under section 194C and remitted the same to the Government account. It was the contention that the works undertaken were not of contract to fall under section 194C, but fees for technical services. Assessee....
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.... telecom, banking and financial services. The requirement for each sector is distinct as they are into specialized activities like insurance, healthcare etc. The software solutions I services required by assessee company are highly specialized in nature and they are made to order as per the requirements of assessee company. It is worth mentioning here that assessee himself has laid down the clause that the required software/services should be provided within the period of 90 days by these companies and that if the solutions offered by these companies is not found acceptable, then such companies would modify and provide with new solutions. Therefore, it is evidently a case of assessee company procuring "professional services" from' various companies for developing its own MIS Software which inturn would help assessee, monitor the progress of work at various client's sites who are engaged in highly specialized and diversified activities having no commanolity in the nature of business. Therefore, the services obtained by assessee is not a case of mere "execution of any contract". On the other hand, the professional services procured by assessee are highly specialized calling for t....
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....s but as far as assessee is concerned, it has got a product in the form of software package and this is nothing but works contract. It was further submitted that assessee has already deducted tax under section 194C and so the opinion of the A.O. that these services should be considered as technical does not hold good. He then referred to the definition of fees for technical services as per Explanation-2 to section 9(1)(vii) referred to under 194J. It was the submission that services are not technical services so as to consider under section 9(1)(vii) but ordinary contractual services which come under 194C. 11. Ld. D.R. however, supported the orders of the A.O. and Ld. CIT(A) who have considered the issue. 12. Issue as can be seen from the above is whether the payments for work undertaken by assessee can be categorised under section 194C or 194J. As seen from the contracts assessee is not asking the other company to render any personal services in the field of computers but assigned the contract for development of information systems so as to manage the on-site employee work for which various amounts were paid. There is no dispute with reference to the fact that those packages are....
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....sustained. 14. Even though, Ld. CIT(A), considering the Hon'ble Supreme Court Judgment in the case of Hindustan Coca Cola Beverages Ltd. (supra), directed the A.O. to exclude amount which are offered to tax by the vendors that may become academic now as we have held that payments are not covered under the provisions of section 194J. To that extent orders of CIT(A) are reversed and A.O. is directed to delete the amounts raised. Assessee's grounds are allowed. ITA.No.1040/Hyd/2013 - A Y 2007-2008 15. In this appeal similar issue is involved. However, as seen from the Order of the A.O. there are two sorts of payments involved. One sort of payment was similar to payments made in A.Ys. 2005-06 and 2006-07 to Indian Resident Companies. This issue on payments made to domestic companies which was brought under section 194J as against 194C is similar to the issue decided in earlier years. For the reasons stated in above appeals, we are of the opinion that assessee has correctly deducted tax under section 194C from these amounts. Therefore, grounds raised in this year are allowed accordingly. 16. The other issue which was raised in A.Y. 2007-08 is with reference to payments made abroad b....
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....ture of service rendered and not the contract per se. A contract may be entered into for completing a civil work or for rendering legal consultancy or for rendering any technical services but the nature of services being rendered in all these three instances is different and mere existence of contract is not decisive in itself for categorizing the activity. The vendor companies have provided the technical services for an effective management information system for exchange of information between the head office in India and its employees working at various client sites in respect of diversified sectors such as health care, telecom, banking and financial etc. Since the need for such software is for reviewing tile progress of work executed by the employees of the appellant company at client's sites which requires technical expertise in all these diverse fields and therefore, the nature of services rendered can only be categorized as technical services/professional services. Accordingly, the A.O. is justified in applying the provisions of section 194J of the I.T. Act and therefore, the ground raised by the appellant is dismissed. 5.1. However, the appellant'....