2017 (8) TMI 1292

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....ied Engineering company holding TAN-MUML-03180-C, was treated as assessee-in-default u/s 201(1) read with section 201(1A) of the Income Tax Act, 1961 vide Assessing Officer [AO] order dated 21/03/2014. The assessee was subjected to a survey action on 12/01/2012 wherein certain discrepancies were noted with respect to compliance of TDS provisions against which the assessee was saddled with following demands, which are the subject matter of present appeals:- No. Description Amount (Rs.) Rate at which TDS ought to have been deducted Amount of TDS to be deducted (Rs.) TDS Made (Rs.) Short Deduction/dem and u/s 201 (Rs.) Interest demand u/s 201(1A) (Rs.) 1. Bank Guarantee Charges 8,33,59,262/- 10% 83,35,926/- Nil 83,35,926/- 25,84,137/- 2. Internet Charges 15,96,662/- 10% 1,59,662/- Nil 1,59,662/- 49,494/-         84,95,588/- Nil 84,95,588/- 26,33,631/- 3.1 Facts qua bank guarantee charges are that during assessment proceedings, it was noted that the assessee paid bank guarantee charges to certain Indian & foreign Banks. The assessee explained that bank guarantee charges were in the nature of interest u/s 2(28A) and the payments bein....

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....2/2012 which clearly says that no TDS is required against bank guarantee commission paid to bank listed in the second Schedule to RBI Act, 1934. However, foreign bank is excluded from the scope of said circular. Therefore, at the outset, we are inclined to hold that there was no requirement to deduct TDS on bank guarantee commission of Rs. 371.25 Lacs paid by assessee to domestic bank. 3.6 However, as already stated, it is noted that the CBDT circular do not cover payment to foreign banks and further, the provisions of Section 194H apply only to payment made to residents. The lower authorities have failed to examine the issue from correct perspective by appreciating the relevant facts, statutory provisions, Treaty provisions, relationship between parties, nature of services availed / payment made etc. Since the AY involved is 2012-13 and therefore, at this stage, we are not inclined to afford another opportunity to revenue to improve upon their case. Consequently, the impugned payments, being not covered within the ambit of Section 194H, the resultant demand raised against the same for non-deduction of TDS does not survive. 3.7 Resultantly, Ground No.1 of revenue's appeal stands ....

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....ity in a satellite is covered under the provisions of Section 9(1)(vi). With these observations, impugned demand against payment so made for Rs. 15,96,662/- was raised against the assessee for non-deduction of tax u/s 194J. 4.2 Aggrieved, the assessee assailed the same without any success before Ld. CIT(A) vide impugned order dated 13/04/2015 where the assessee reiterated that the impugned payments were towards use of standard internet facility. It was further explained that reimbursement of data card expenses to employees was akin to telephone expenses only and therefore, no TDS was required against the same. The Ld. CIT(A) after appreciating the provisions of Section 194J and retrospective amendment made in the definition of 'royalty' made by Finance Act, 2012 and in particular the meaning of 'process' as per Explanation 6 to 9(1)(vi) and the judgment of Hon'ble Madras High Court rendered in Verizone Communications Singapore Pvt Ltd [ITA No. 149 of 2011 and 230 of 2012 order date 19/11/2013] concluded that, 'process' included internet charges and hence royalty requiring TDS u/s 194J. Reliance placed by the assessee on the decision of this Tribunal in Channel Guide India Ltd. Vs ....

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....he said contention and decide accordingly as per law. Needless to say, any reimbursement of mere data card expenses to employees, which are primarily in the nature of telephone expenses do not fall within the meaning of 'Fees for technical services' or 'royalty'. 5.4 Regarding, internet charges, we find that the lower authorities have failed to appreciate the true nature of services being availed by the assessee. The assessee has contended that the same are payment towards usage of standard internet facility obtained from the service provider whereas the Ld. AO opines that the same are in the nature of 'Fees for Technical Services' as well as 'royalty'. The Ld. CIT(A) went a step further in noting that the said expenditure was not only 'fees for technical services' but also covered u/s 194I being in the nature of rent for usage of equipment. A perusal of the sample invoice placed in the paper book, prima facie, reveals that the said expenditure is towards 'internet services' & 'internet dedicated line'. Therefore, this being the case, the nature of services being availed by the assessee requires re-appreciation by lower authorities and hence, the matter is remitted back to the fil....