TaxTMI 
TaxTMI 
2017 (8) TMI 846
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....e order of the CIT(A) had raised before us the following grounds of appeal:- "1. On the facts & circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in confirming that the provisions of Section 201(1) of Income Tax Act, 1961 is applicable and treating the appellant as assessee in default by invoking the provisions of Section 194J in respect of the payment for web hosting charges amounting to Rs. 2.07,500/-. The appellant prays that the conclusion reached by the Learned Assessing Officer is erroneous as the appellant was not liable to deduct tax at source u/s 194J on the payment of annual maintenance contracts. 2. On the facts & circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in confirming that the provisions of Section 201(1) of Income Tax Act, 1961 and treating the appellant as assessee in default by invoking the provisions of Section 194J in respect of the payment for renewal of SAP licence of Rs. 2,23,004/-. The appellant prays that the conclusion reached by the Learned Assessing Officer is erroneous as the appellant was not liable to deduct tax at source u/s 194J on the payment of annual maintenance contr....
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....t deduction of TDS on payments made towards Short Deduction of TDS on account of Rs.20,66,550/- Rs.8,05,955/- 'hoarding charges' wrongly made by the assessee u/s. 194C, as against Section 194I. rate difference (194 I (-) 194C at the rate of 8%. 4 Deduction of tax at source on payments made towards retainership fees paid to M/s. Makani creative Pvt. Ltd. wrongly made by the assessee u/s. 194C as against Section 194J. ( The assessee due to payment of taxes by the payee was thus not held to be in default as regards 'tax' u/s.201(1)) Short deduction of TDS on account of rate difference (194J (-) 194C) at the rate of 8%. Rs.1,87,514/- Rs.73,130/- The A.O thus deliberating on the aforesaid defaults on the part of the assessee for having failed to deduct and/or carried out short deduction of tax at source, therein raised an additional demand aggregating to Rs. 47,92,899/- u/s. 201(1)/201(1A) in the hands of the assessee company. 4. The assessee being aggrieved with the order of the A.O passed u/ss. 201(1)/201(1A), therein assailed the same before the CIT(A). The CIT(A) after deliberating on the contentions raised by the assessee before him in the backdr....
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....t of payment on Annual maintenance contracts, (AMC):- (i). The CIT(A) being of the considered view that while for the 'Web Hosting Charges' of Rs. 2,07,500/-(out of total amount of Rs. 3,97,476/-) were paid by the assessee to a person who was technically qualified, therefore, the same was inescapably covered within the meaning of 'fees for technical services' as provided in Explanation 2 of Section 9(1)(vii). The CIT(A) in the backdrop of her aforesaid observations concluded that the A.O had rightly held that the assessee was liable to deduct tax at source u/s. 194J in respect of the aforesaid payments, and thus upheld the order of the A.O treating the assessee as being in default u/ss. 201(1)/201(1A) in respect of the payments made towards web hosting charges. (ii) The CIT(A) further observed that as the balance payment of Rs. 1,84,236/- was made by the assessee for purchase of computer parts, therefore, there was no obligation on its part to have deducted tax at source in respect of the said amount. The CIT(A) thus on the basis of her aforesaid observations set aside the order of the A.O treating the assessee as being in default u/ss. 201(1)/201(1A) in respect of the aforesaid....
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....holding the assessee company as being in default in respect of short/deficit deduction of tax at source u/ss. 201(1)/201(1A) in respect of the aforesaid payments. (C) TDS on 'Hoarding Charges': The assessee submitted before the CIT(A) that as the payments for advertisements on Hoardings/Bill boards aggregating to Rs. 1,09,50,477/-, were made pursuant to contracts with the respective parties, viz. individuals or society/owner of building/land for providing the right of display on the hoarding sites, and were not for use of any land or building, therefore, the payments made therein could not be characterized as being in the nature of amounts paid towards rent for taking on lease, sub-lease, tenancy or any other agreement or arrangement for in respect of land or building, pursuant whereto no obligation was cast upon it to deduct tax at source u/s. 194I. It was submitted by the assessee before the CIT(A) that as the respective payments were made to the parties for facilitating display of advertisements on such hoarding/bill boards, therefore, the assessee company had rightly deducted tax at source u/s. 194C. 5. The CIT(A) after deliberating on the contentions raised by the assessee....
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..... M/s Makani Creative Pvt. Ltd., (supra) had provided professional services to the assessee company in respect of various activities, viz. art work, advertisement, visual merchandiser, therefore, it was clearly established that the assessee was availing the professional services of the aforesaid concern. The CIT(A) further observed that even the 'bill' raised by the said concern, viz. M/s Makani Creative Pvt. Ltd. (supra) on the assessee company was in respect of retainership fees. The CIT(A) thus concluded that the A.O was principally right in concluding that the assessee was liable to deduct tax at source u/s. 194J, and as such was to be treated as being in default u/ss. 201(1)/201(1A) for the short/deficit deduction of tax at source u/s. 194C. 7. The CIT(A) however finding herself to be in agreement with the contention of the assessee that as the aforesaid payee, viz. M/s. Makani Creative Pvt. Ltd. (supra) had paid the tax in respect of the amount received from the assessee company, therefore, the latter in the backdrop of the judgment of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Ltd. (Supra) Vs. CIT (2007) 293 ITR 226 (SC) was therefore not to be t....
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....7,292/- out of the total 'Web Hosting Charges' of Rs. 2,07,500/- pertained to the year under consideration, therefore, even otherwise the liability as regards deduction of tax at source was liable to be restricted to the latter amount, viz. Rs. 17,292/-. Per contra, the ld. Departmental Representative (for short D.R.) placed reliance on the orders of the lower authorities, and therein submitted that as the payments made by the assessee towards 'Web Hosting Charges' squarely fell within the scope and gamut of 'technical services', therefore, the assessee was liable to deduct tax at source u/s. 194J. It was thus averred by the ld. D.R that the assessee having failed to deduct tax at source under Sec. 194J, had thus rightly been held by the lower authorities as being in default u/ss. 201(1)/201(1A). 10. We have heard the Authorized Representatives for both the parties on the aforesaid issue under consideration, perused the orders of the lower authorities and the material produced before us. We find that the term 'fees for technical services' defined in Explanation 2 of Section 9(1)(vii), therein reads as under:- "Explanation [2].-For the purposes of this clause, "fees for technical....
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....ng to pay for it does not amount to the fee having been received for technical services. That demonstrating the aforesaid view on the basis of an exemplary situation, it was observed by the High Court that where a person decides to subscribe to a cellular telephone service in order to have the facility of being able to communicate with others, he does not contract to receive a technical service. What he does agree to is to pay for the use of airtime for which he pays a charge. The fact that the telephone service provider had installed sophisticated technical equipment in the exchange to ensure connectivity to its subscriber, does not on that score, make it provision of a technical service to the subscriber. What applies to cellular mobile service is also applicable in fixed telephone service, and neither of the said services could be categorized as 'technical service' for the purpose of Section 194J. We thus find that the Hon'ble High Court after deliberating on the scope of the term 'technical service' had therein concluded that collection of fees by a person for use of a standard facility which is provided by him to all those willing to pay for it, irrespective of the fact that t....
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....hat the CIT(A) had wrongly concluded that the payment by the assessee towards renewal of SAP Licence was in the nature of payment towards 'technical services'/'royalty', as provided in Explanation 2 of Section 9(1)(vii)/Section 9 (1)(vi), and thus rendered the assessee liable for deduction of tax at source u/s. 194J. The ld. A.R. in support of his aforesaid submissions placed reliance on the following judicial pronouncements:- (i) SMC Demag (P.) Ltd. V. DCIT (38 SOT 496) (ITAT, Delhi) (ii) DIT Vs. Infrasoft Ltd. (39 taxmann.com 88) (High Court of Delhi). (iii) DIT Vs. Ericsson A.B., New Delhi (16 taxmann.com 371) (High Court of Delhi). (iv) DIT Vs. Nokia Networks OY (25 taxamann.com 225) (High Court of Delhi). (v) ADIT Vs. Baan Global BV (71 taxmann.com 213) (ITAT Mumbai). Per contra, the ld. D.R submitted that a statutory obligation was cast upon the assessee to deduct tax at source under Sec. 194J at the time of making the payments towards renewal of SAP licence, failing which the lower authorities had rightly held the assessee as being in default u/ss. 201(1)/201(1A) in respect of the aforesaid amount. 13. We have given a thoughtful consideration to the facts of the ....
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....ight in the software, but what is transferred is the right to use the copyrighted material or article, which is clearly distinct from the rights in a copyright. Thus, now when the right that is transferred to the assessee company is not a right to use the copyright, but is only limited to the right to use the copyrighted material, therefore, the same cannot be characterized as a payment towards 'royalty' by the assessee company. We find that our aforesaid view stands fortified by the judgment of the Hon'ble High Court of Delhi in the case of DIT Vs. Infrasoft Ltd. (2013) 39 taxmann.com 88 (Del). 14. We further find that the coordinate bench of ITAT, Mumbai, in the case of DDIT Vs. Reliance Industries Ltd. [ITA(s). Nos.1980 - 1982,1884,1986,2523,2529/Mum/2008, dated 26.05.2016, had further observed that as the Explanation 4 of Section 9(1)(vi) had been inserted by the Finance Act, 2012 w.r.e.f 01.06.1976, vide which consideration paid for the right for use or right to use a computer software (including granting of a licence) is to be deemed to fall within the sweep of the term 'royalty' u/s. 9(1)(vi) of the 'Act', being clarificatory in nature is to be taken as had always been ava....
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....n nature is thus dismissed. 16. The appeal of the assessee for A.Y. 2009-10, marked as ITA No. 1460/Mum/2014, is partly allowed in terms of our aforesaid observations. ITA No. 1263/Mum/2014 A.Y. 2009-10 17. We now advert to the appeal of the revenue for A.Y. 2009-10, wherein the latter had assailed the setting aside by the CIT(A) of the order of the A.O treating the assessee as being in default u/ss. 201(1)/201(1A) for having failed to deduct or carrying out short/deficit deduction of tax at source, in respect of certain payments. The revenue had raised before us the following grounds of appeal:- "1 Grounds of appeal: (i) On the facts and circumstances of the case and in law, the Id. CIT(A) has erred by holding that provisions of sec. 194C are applicable and not the provisions of section 194H as held by the A.O without appreciating the fact that such payments made for the use of the credit card is squarely covered by the definition of "Commission or brokerage" given in explanation (i) below the third proviso to section 194H of the I.T. Act, and thereby erred in deleting the short deduction u/s.201(1). (ii) On the facts and circumstances of the case and in law, the Id. C....
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....4.2012, wherein the Tribunal upholding the order of the CIT(A), had therein concurred with the latters view that the assessee was not liable for deduction of tax at source u/s. 194H in respect of the commission retained by the Credit Card company, and observed as under:- "1.8 On going through the nature of transactions, I find considerable meri t in the contention of the appellant that commission paid to the credi t card companies cannot be considered as falling within the purview of S.194H. Even though the definition of the term "commission or brokerage" used in the said section is an inclusive definition, it is clear that the liability to make TDS under the said section arises only when a person acts behalf of another person. In the case of commission retained by the credit card companies however, it cannot be said that the bank acts on behalf of the merchant establishment or that even the merchant establishment conducts the transaction for the bank. The sale made on the basis of a credit card is clearly a transaction the merchants establishment only and the credit card company only facilitates the electronic payment, for a certain charge. The commission retained by the credit ....
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....r authorities and the material produced before us in respect of the issue under consideration. We have given a thoughtful consideration to the contention raised by the respective parties as regards the payments made by the assessee towards AMC charges in respect of computer software, air conditioner and pest control, and record our observations as regards the same, as under:- (i) AMC for computers:- We find that the CIT(A) observing that as each of the respective payments made by the various retail dealers of the assessee company in respect of computer AMC was lower than Rs. 20,000/-, therefore, no liability was cast upon it for deducting tax at source. That during the course of the hearing of the appeal nothing was submitted before us by the ld. D.R to dislodge the aforesaid factual observations of the CIT(A). We thus, finding no infirmity with the order of the CIT(A) on the issue under consideration, therefore, uphold the same. (ii) AMC for Pest control:- We find that the CIT(A) being of the considered view that the payments made by the assessee towards AMC for pest control did not involve any professional or technical services, but as definitely there was a contract of wor....
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.... A.R drew our attention to the copy of the CBDT Circular no. 715, dated 08.08.1995 (Page 1-3 of APB), wherein the CBDT had held that an assessee would be liable to deduct tax at source in respect of 'hoarding charges' u/s. 194C and not u/s. 194I of the 'Act'. The ld. A.R. drew our attention to Question no.6 reproduced in the aforesaid CBDT Circular No. 715 (supra), which reads as under:- Question 6: Whether a contract for putting up a hoarding would be covered under section 194C or 194I of the Act? Answer: The contract for putting up a hoarding is in the nature of advertising contract and provisions of section 194C would be applicable. It may, however, be clarified that if a person has taken a particular space on rent and thereafter sub lets the same fully or in part for putting up a hoarding, he would be liable to TDs under section 194I and not under section 194C of the Act". It was further submitted by the ld. A.R that the CBDT in its aforesaid circular had further observed that if in case the assessee had further sub-let his right towards the hoarding, it was only then the provisions of Section 194I would be attracted. Per contra, the ld. D.R. though relied on the order o....
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....01(1A) had been given by her. We are of the considered view that the CIT(A) had separately given a 'direction' for deletion of interest u/s. 201(1A) for the reason that while giving effect to her order, the office of the A.O may not restrict the relief only with respect to the demand raised towards 'tax' u/s. 201(1). We find no infirmity in the aforesaid findings of the CIT(A) in issuing a clear and specific direction for deletion of interest u/s. 201(1A), because in case the demand towards 'tax' liability raised u/s. 201(1) would be revived at any stage, then the charge of the interest u/s. 201(1A), being consequential in nature, would also stand revived. We thus dismiss the Ground of Appeal No. 1(iv) raised by the revenue. 26. The Grounds of appeal no. 2 and 3 raised by the revenue are general in nature, therefore, the same are treated as not pressed. The appeal of the revenue is thus dismissed. 27. That while for the appeal of the assessee for A.Y. 2009-10, marked as ITA No. 1460/Mum/2014 is partly allowed, the appeal of the revenue, marked as ITA No. 1263/Mum/2014 is dismissed. A.Y. 2010-11 ITA No. 1461/Mum/2014 28. We now advert to the appeal of the assessee for A.Y. 2010....
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..../ Mum/2014, vide Grounds of appeal no. 1 to 4 raised in the said appeal. The ld. D.R had not controverted the aforesaid factual position. 30. We have perused the records and find that as the issues involved in the present appeal of the assessee are the same as those involved in its appeal for A.Y. 2009-10, marked as ITA No. 1460/Mum/2014, therefore, the order passed by us while disposing of the 'Grounds of appeal no. 1 to 4' in the appeal of the assessee for A.Y. 2009-10, marked as ITA No. 1460/Mum/2014, shall apply mutatis mutandis in the present appeal. That in terms of our aforesaid observations, the Ground of appeal no. 1 is allowed, Ground of appeal no. 2 is allowed, Ground of appeal no. 3 is dismissed as being rendered infructuos and the Ground of appeal no. 4 being general in nature is dismissed. 31. The appeal of the assessee is partly allowed in terms of our aforesaid observations. A.Y.2010-11 ITA No. 1264/Mum/2014 32. We now take up the appeal filed by the revenue for A.Y. 2010-11. The revenue being aggrieved with the order of the CIT(A) setting aside the order of the A.O treating the assessee as being in default u/ss. 201(1)/201(1A), in respect of certain amounts, ....
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....e, the order passed by us while disposing of the Grounds of appeal No. 1(i) to (iv), Ground of appeal No.2, and Ground of appeal no. 3, shall apply mutatis mutandis for adjudicating the respective grounds of appeal involved in the appeal of the revenue for A.Y. 2010-11, marked as ITA No. 1264/Mum/2014. Thus the Grounds of appeal No. 1(i) to (iv), Ground of appeal No. 2 and Ground of appeal No 3 raised by the revenue before us in the present appeal are dismissed. 35. The appeal of the revenue for A.Y. 2010-11, marked as ITA No. 1264/Mum/2014 is dismissed in terms of our aforesaid observations. 36. That the appeal of the assessee for A.Y. 2010-11, marked as ITA No. 1461/Mum/2014 is partly allowed, the appeal of the revenue, marked as ITA No. 1264/Mum/2014 is dismissed. A.Y. 2011-12 ITA No. 1462/Mum/2014 37. We now take up the appeal of the assessee for A.Y. 2011-12. The assessee assailing the order of the CIT(A), wherein the latter had upheld the order of the A.O treating the assessee as being in default u/ss. 201(1)/201(1A) in respect of certain amounts, had therein carried the matter in appeal before us. The assessee being aggrieved with the order of the CIT(A) had raised befo....
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.... find that the Ground of appeal no.1, Ground of appeal no.2, Ground of appeal No. 4 and Ground of appeal no.5 raised by the assessee in its present appeal for A.Y 2011-12, marked as ITA No. 1462/Mum/2014, are the same as were raised by the assessee as Ground of appeal no. 1, Ground of appeal no. 2, Ground of appeal no. 3 and Ground of appeal No. 4, respectfully, in its appeal filed before us for A.Y. 2009-10, marked as ITA No. 1460/mum/2014. That in light of the aforesaid factual position, our order passed while disposing of Ground of appeal no. 1, Ground of appeal no. 2, Ground of appeal no. 3 and Ground of appeal No. 4, in the appeal of the assessee for AY: 2009-10, marked as ITA No. 1462/Mum/2014, shall apply mutatis mutandis for adjudicating the Ground of appeal no. 1, Ground of appeal no. 2, Ground of appeal No. 4 and Ground of appeal No. 5, respectively, in the present appeal of the assessee for A.Y. 2011-12, marked as ITA No. 1462/Mum/2014. That in terms of our aforesaid observations, the Ground of appeal no. 1 is allowed, Ground of appeal no. 2 is allowed, Ground of appeal No. 4 is dismissed as infructuous and the Ground of appeal no. 5 being general in nature is dismissed.....
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....mstances of the case and in law, the Id. CIT (A) has erred in not appreciating the fact that Annual maintenance contract for Computer software, air conditioner and pest control require technical skill and human element and are subjected to TDS u/s. 194J and not u/s. 194C of the Act. (iii) On the facts and circumstances of the case and in law, the Id. CIT (A) has erred in deleting the short deduction on hoarding charges u/s.1941 of the Act and not considering the same as "rent" but a "work contract" u/s.194C of the Act. (iv) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in deleting the interest u/s 201(1A) of the I.T. Act, 1961, determined by the A.O as the tax determined has already been deleted by her and interest deletion is consequential to the quantum deletion for which further appeal has been recommended vide ground Nos. (i), (ii) & (iii). 2. The appellant craves leave to add, amend, alter or modify any ground which may be necessary at the time of the hearing of the case or thereafter. 3. The order of the CIT(A) being erroneous be set aside and A.O's order be restored". 43. We find that the 'Grounds of appeal no. 1....
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....e case of Hindustan Coca Cola v/s. CIT, no liability be cast upon the appellant u/s. 201(1). 3. On the facts & circumstances of the case the Learned Commissioner Of Income Tax (Appeals) has erred in confirming the levy of interest u/s. 201(1A) of the Income Tax Act, 1961. The learned Commissioner Of Income Tax (Appeals) has erred in confirming the levy of interest u/s. 201(1A) for a period of 36 months in respect of the tax determined u/s.201 in respect of the ground no. 1 above. The appellant prays that the levy of interest as computed by assessing officer is not justified and be deleted. 4. On the facts & circumstances of the case the Learned commissioner of income tax (Appeals) has erred in conf irming that the payments made M/s. Makani Creatives Pvt. Ltd. are in the nature of retainership fees liable to deduction of tax under Section 194J. The appellant prays that all the payments made to M/s. Makani Creatives Pvt. Ltd. including monthly lump sum payments are in the nature of contractual payments and are not professional fees. The appellant further prays that conclusion reached by Learned Assessing Officer is erroneous and contrary to the facts. 5. On the facts & circu....
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....ee being aggrieved with the order of the CIT(A) had therein carried the matter in appeal before us. That at the very outset it was submitted by the assessee that as it had made payments towards AMC for computers on the basis of a composite contract for supply of spare parts and services, therefore, it was liable for deduction for tax at source u/s. 194C, and the applicability of the provisions of Section 194J stood clearly excluded. Alternatively, it was submitted by the ld. A.R that even otherwise as the respective payees to whom payments had been made towards AMC charges had duly included the same in their 'return of income' and paid taxes on the same, therefore, in light of the judgment of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd.(supra), the said tax liability could not once again be recovered from the assessee company. Per contra, the ld. D.R. relied on the orders of the lower authorities and therein submitted that as the assessee had failed to deduct tax at source u/s. 194J, therefore, it had rightly been held as being in default in respect of short/deficit deduction of tax at source. 49. We have heard the authorized representatives for....
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....liability. We are of the considered view that in light of the judgment of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (supra), the aforesaid contention of the assessee is found to be well placed. We thus direct the A.O to verify the factual position as to whether the payees (supra) had paid the taxes in respect of the AMC charges received from the assessee company, and if that be so, the assessee company would not be held as being in default in respect of the corresponding tax liability u/s. 201(1). It may however be clarified that in case the assessee is principally held liable towards 'tax' liability determined u/s 201(1) in respect of the aforesaid payments, then the latter would continue to remain liable in respect of interest liability u/s. 201(1A) pertaining to the aforesaid tax liability, for the period starting from the date on which the tax was liable to be deducted, till the date of payment of tax by the payees. The Grounds of appeal no. 1 and 2 so raised by the assessee before us are thus allowed for statistical purposes. 51. The ld. A.R had further averred before us that the CIT(A) had erred in confirming the levy of interest u/s. 2....
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....terial available on record. We find from record that the assessee was availing multiple services of M/s Makani Creative Pvt. Ltd. (supra), which can be briefly culled out as under:- (i) Shoot Production. (ii) Advertising Campaign. (iii) Media Releases. We further find that even the 'bills' raised by M/s. Makani Creative Pvt. Ltd (supra) on the assessee company were clearly in respect of 'retainership fees'. We thus in light of the aforesaid facts, are thus of the considered view that the assessee was clearly availing the professional services of the aforesaid concern, viz. M/s Makani Creative Pvt. Ltd.(supra). We find that the nature of services rendered by M/s. Makani Services Pvt. Ltd.(supra) as elaborated by us hereinabove, squarely falls within the sweep of the definition of 'Professional services' as stands contemplated in the Explanation (A) of Section 194J of the 'Act'. We thus in light of our aforesaid observations are not persuaded to accept the contention of the ld. A.R. that it was under no obligation to deduct tax at source u/s 194J in respect of payments made to the aforesaid concern, viz. M/s Makani Creative (P) Ltd., and being of the considered view that the a....
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....order of the CIT(A), wherein the latter had set aside the order of the A.O treating the assessee as being in default u/ss. 201(1)/201(1A) in respect of certain amounts, had therein filed an appeal before us, raising the following grounds of appeal:- "1. Grounds of appeal : (i) On the facts and circumstances of the case and in law, the Id. CIT(A) has erred by holding that provisions of sec. 194C are appl icable and not the provisions of section 194H as held by the A.O without appreciating the fact that such payments made for the use of the credi t card is squarely covered by the def ini t ion of "Commission or brokerage" given in explanation (i) below the third proviso to section 194H of the I.T. Act, and thereby erred in deleting the short deduction u/s. 201(1) of the/. I.T. Act. (ii) On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating the fact that Annual maintenance contract for air conditioner and pest control requires technical skill and human element and are subjected to TDS u/s. 194J and not u/s. 194C of the Act. (iii) On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in deleting the shor....