TaxTMI 
TaxTMI 
2017 (8) TMI 846
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....2009-10, wherein the latter assailing the 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 sourc....
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....of rate difference (194J (-) 194C) at the rate of 8%. Rs.2,10,874/- Rs.82,241/- 3 Short 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 assai....
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....54,149/- raised by the A.O in the hands of the assessee company u/ss. 201(1)/201(1A). (B). As regards deduction of tax at source in respect 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 ....
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.... have taken recourse to deduction of tax at source u/s. 194J. The CIT(A) on the basis of her aforesaid observations thus set aside the order of the A.O 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....
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.... consideration to the contentions raised by the assessee before her in the backdrop of the facts of the case, therein concluded that as the aforesaid concern, viz. 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 backd....
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..... 194J in respect of the payments made towards 'Web Hosting Charges' could not be sustained and was liable to be vacated. Alternatively, it was averred by the ld. A.R that as an amount of only Rs. 17,292/- 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 ....
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.... that the popular meaning associated with "technical" is "involving or concerning applied and industrial science", but however mere collection of a fee for use of standard facility provided to all those willing 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 th....
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....tter had upheld the order of the A.O treating the assessee as being in default u/ss. 201(1)/201(1A) in respect of the amounts of Rs. 2,23,004/- paid towards renewal of SAP Licence. It was averred by the ld. A.R that 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 p....
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....houghtful consideration to the issue before us, and are of the view that pursuant to the payment of the aforesaid amount for renewal of SAP licence, what is transferred to the assessee is neither the copyright in the software, nor the use of the copyright 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 pai....
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....Hosting Charges' and fees for renewal of SAP license fee, therefore, the present ground of appeal would be rendered as infructuous. The Ground of appeal no. 3 is dismissed as having been rendered as infructuous. The Ground of appeal No. 4 being general in 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 squar....
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....ssessee remained under no obligation to deduct tax at source u/s. 194H. The ld. A.R in support of his aforesaid contention relied on an order passed by a coordinate bench of ITAT, Hyderabad, Bench 'B', in the case of DCIT, Hyderabad Vs. M/s. Vah Magna Retail (P) Ltd., Hyd (ITA No. 905/Mum/2011, dated 10.04.2012, 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 establishme....
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....he CIT(A) and therein submitted that the latter had rightly concluded that the assessee was liable for a deduction of tax at source u/s. 194C and the applicability of the provisions of Section 194J stood excluded. 21. We have heard the authorized Representatives for both the parties, perused the orders of the lower 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 C....
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....of the A.O treating the assessee as being in default u/ss. 201(1)/201(1A) for short/deficit deduction of tax at source under Section 194C in respect of 'hoarding charges' paid by it, as the same attracted the provisions of Section 194I. That at the very outset of the hearing of the appeal on the issue under consideration, the ld. 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 a....
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.... charged u/s. 201(1A) would merely be consequential in nature. We are unable to agree with the aforesaid contention so raised before us, as we find that it is only where the CIT(A) had deleted the demand towards 'tax' raised in the hands of the assessee u/s. 201(1), that a further direction for deletion of the consequential interest charged u/s. 201(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 treate....
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.... to add, alter or amend the grounds of appeal which are without prejudice to one other". 29. That at the very outset of the hearing of the appeal it was averred by the ld. A.R that the Grounds of appeal no. 1 to 4 raised in the present appeal of the assessee; therein involved the same issues as had been raised by the assessee in its appeal for A.Y. 2009-10, marked as ITA No. 1460/ 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 dismisse....
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....of appeal No. 1 to 3' raised by the revenue in the present appeal were the same as were involved in the appeal of the revenue for A.Y. 2009-10, marked as ITA No. 1263/Mum/2014. 34. We have perused the records and find that as the issues involved and the 'Grounds of appeal No. 1 to 3' raised before us in the present appeal of the revenue are the same as were there before us in the appeal filed by the revenue for A.Y. 2009-10, therefore, 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....
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.... Commissioner of Income Tax (Appeals) has erred confirming the levy of interest u/s. 201 (1A) for a period of 39 months in respect of the tax determine u/s. 201 in respect of the two items referred to the Ground No. 1,2 &3 above. The appellant prays that the levy of interest as computed by the Assessing Officer is not justified and be deleted. 5. The appellant craves leave to add, alter or amend the grounds of appeal which are without prejudice to one other". 38. We 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 ap....
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....nd 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. 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. A....
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....ing to Rs. 9,91,912/-. 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 for renewal of annual maintenance charges on maintenance of software. 2. Without prejudice to ground No.1, the appellant prays that the provisions of Section 201(1) of the income tax, 1961 may not be invoked, as the recipient of the amount has paid the tax on the payments made to them and following the ratio of the Hon'ble Supreme court decision in the 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 & circumst....
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....herwise as the respective payees had paid the taxes on the aforesaid amounts received from the assessee company, therefore, in light of the judgment of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (supra), the assessee could not be treated as being in default u/s. 201(1) in respect of the aforesaid amount of Rs. 9,91,912/- (supra) so paid by it towards AMC of computers. The ld. CIT(A) however did not find himself to be in agreement with the submissions of the assessee and upheld the order of the A.O on the issue under consideration. 48. The assessee 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 i....
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....eters contemplated by the CBDT in its aforesaid Circular No. 715, dated 08.08.1995. Needless to say, the A.O while re-adjudicating the aforesaid issue shall afford reasonable opportunity of being heard to the assessee, who shall remain at a liberty to adduce additional evidence to substantiate its contention. 50. We find that the ld. A.R had further averred before us that as the payees who were in receipt of the AMC charges had included the same in their respective 'returns of income' and paid taxes on it, therefore, the assessee cannot be held to be in default u/s. 201(1) in respect of the said tax 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 ass....
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....early excluded. The ld. A.R had further averred that even otherwise the CIT(A) had erred in confirming the levy of interest in the hands of the assessee company u/s. 201(1A) for a period of 18 months. Per contra, the ld. D.R relying on the orders of the lower authorities submitted that as the payments made to M/s. Makani Creative Pvt. Ltd.(supra) were clearly in respect of the latters professional services, therefore, the assessee was liable for deduction of tax at source u/s. 194J. 53. We have heard the authorized Representatives for both the parties, perused the orders of the lower authorities and the material 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 th....
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....ound to be in order, the A.O shall give effect the same. Needless to say, the A.O while adjudicating the aforesaid issue shall afford reasonable opportunity of being heard to the assessee. The Ground of appeal no. 6 is allowed for statistical purposes. 55. That as the Ground of appeal no. 7 raised by the assessee before us is general in nature, therefore, the same is dismissed as not pressed. 56. The appeal of the assessee for A.Y. 2012-13, marked as ITA No. 3528/Mum/2015 before us is partly allowed for statistical purposes, in terms of our aforesaid observations. A.Y. 2012-13 ITA No. 4015/Mum/2015 57. The revenue assailing the 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 t....