TaxTMI 
TaxTMI 
2023 (1) TMI 517
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.... following grounds of appeal before me : "1. The impugned order passed by the learned Commissioner of Income-tax [Appeals] u/s.250 and that of the learned Assessing Officer under Section 201(1) r.w.s (1A) of the I.T Act, 1961 of the Act is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case. 2. The appellant denies the tax liability determined by the learned assessing officer as short deduction under section 201(1) amounting to Rs.24,67,932/- (and interest thereon under section 201(1A) Rs.20,77,260/-) and confirmed by the learned Commissioner of Income-tax [Appeals], as against the income reported by the appellant on the facts and circumstances of the case. 3. The Honourable CIT-(A), passed an order, without providing an opportunity of being heard (i.e. without proposal notice) whereby the assessee is aggrieved by the order passed u/s 250, being violation of principle of Natural Justice. 4. The Honourable CIT(A) relied on Judicial decisions which is not applicable under fact and circumstance, which deals with Disallowance under section 40(a)(ia) is not relevant to fact of the case to ascertain default under section 201(1) &....
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....es 13. Without prejudice The appellant submit that the appellant is covered by the proviso to section 200(1) i.e., The Deductee has filed his return of income under section 139(1) taking into Account of the amount paid by the appellant and tax has been paid by him. 14. The appellant submits that the appellant is covered by proviso to section 201(1A), i.e., Interest is not applicable for a period of time beyond the due date of filing the return of income of deductee. 15. The learned assessing officer also erred in levying the interest u/s.201(1A) of the Act and the same are not in accordance with law on the facts and circumstances of the case. Further, the quantum, period and rate are not discernible from the assessment order. 16. The appellant craves leave of the Hon'ble Members of Income Tax Appellate Tribunal, to add, alter, modify, delete or substitute any or all of the above grounds of appeal as may be necessary at the time of hearing. 17. For these and other grounds that may be urged at the time of hearing of appeal, the Appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity." 3. Succinctly stated, the asses....
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....see had wrongly deducted tax at source on the payments made to the processing agency u/s.194C of the Act, as against that which ought to have been made u/s.194J, as under: F.Y. Payment made for processing TDS deducted & deposited u/s.194C @2% ( in Rs.) Actual TDS to be deducted u/s. 194J@10% (in Rs.) Shortfall of TDS (D-C) Interest u/s. 201(1A) Gross Amount (E + F) A B C D E F G 2011-12 31007354 632805 3100735 2467932 2077260 4545192 2012-13 15021442 306761 1502144 1195383 890679 2086080 2013-14 8812829 179854 881283 701429 448583 1150012 2014-15 9866721 201363 986672 785309 402485 1187794 2015-16 8534522 174463 853453 678990 266037 945027 2016-17 13173278 268843 1317328 1048485 295142 1343627 2017-18 11508185 234863 1150819 915956 143215 1059171 Total 97924331 1998952 9792434 7793484 4523419 12316903 Although the assessee had on a suo-moto basis deducted tax at source u/s.194C of the Act on the payments made to the printing agency, but thereafter it came forth with a novel claim that it was under no obligation to deduct any tax at source at all on the said payments. On a perusal of the records, it transpires th....
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.... had though deducted and deposited tax at source which was verifiable from records, but had failed to submit particulars of the deductee's in its quarterly TDS returns, therefore, the A.O for the said default initiated penalty proceedings u/s. 271H of the Act. 7. Adverting to the payments which were made by the assessee under the head confidential expenses, it was observed by the A.O that the same were payments made to a processing agency for tabulation, checking and preparation of marksheets etc. involving use of computers and online services of net connectivity. Considering the nature of the services, the A.O was of the view that as the processing agency had rendered professional services to the assessee by using its computers and software expertise, therefore, the assessee was obligated to have deducted tax at source on the payments made to the said agency u/s.194J of the Act. On the basis of his aforesaid conviction that the nature of services rendered by the processing agency to the assessee were beyond doubt in the nature of professional services, for the reason that the nature of work executed involved professional skill and expertise, the A.O called upon the assessee to pu....
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....t for regular supply of material required for examination purposes. The provisions of Section 194J was compared with the provisions of Section 194C whereby the appellant submitted that the TDS was correctly made by him as he is not liable to deduct TDS u/s. 194J. The appellant has been making payments for availing services from the vendors pertaining to designing of admit cards, formatting of attendance sheets and examination papers and scanning image portion of application forms along with spaces for Roll No., Center list, alphabetical list as per the technical requirements of the examination board. The name of the appellant itself is "Chhattisgarh Professional Exam Board" which indicates the professional nature of exams conducted by it and for which professional specifications of exam material are assigned to the printing and processing agencies for the examination work. The work specifications cannot be done by vendors who do not possess technical and professional expertise to design attendance sheets and examination papers which require professional competence for undertaking this sensitive task. To take an example, designing of question papers is a highly technical matter in....
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....cting examinations by providing the desired and specific material. On the above issues it is fruitful to refer to judicial pronouncements and observations of the Hon'ble Courts. In the case of CIT-1 Kochi v PVS Memorial Hospital Limited reported in 234 Taxman 46 the Hon'ble Kerala High Court held that the expression tax deductible at source under Chapter-XVII B occurring in section 40(a)(ia) has to be understood as tax deductible at source under appropriate provision of Chapter-XVII B and deduction under a wrong provision of law will not save an assessee from section 40(a)(ia) therefore where tax was deductible u/s. 194J but was deducted u/s. 194C such a deduction would not satisfy requirements of section 40(a)(ia). From the impugned decision it is clear that the statute mandates that the deduction has to be made under the appropriate provisions of the Act and not to an incorrect provision as a precedence, which the appellant has claimed to have made u/s. 194C regularly, which cannot be used as a defense in the light of the above observations of the court and in the facts of the case. The Hyderabad ITAT Bench-A in the case of Assistant Commissioner of Income Tax, Circle....
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....ntech Foundation [2016] 71 taxmann.com 224/159 ITD 743 (Mum. Trib.) it was held that the assessee company was providing banking services in extreme rural areas through its network of agent by use of device called point of transaction machine. It has incurred expenses on annual maintenance charges, enrolment charges, POT user charges which the Tribunal held that since there was no specific skill required to provide the said services the provisions of section 194J were not applicable. In the instant appeal the facts are at variance with those appearing in the ratio of the case laws quoted by the appellant. Under no circumstances the payments made by the appellant can be called job work charges as they are payments made on account of professional and technical fees to professionals who possess computer skills for working on customized software and have the requisite competence for adhering to the changes in examination patterns, recruitment procedures and printing of question papers and admit cards. No recruitment body, especially a government organization, which makes selection of candidates through the system of conducting competitive examination will assign the above work of prep....
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....ch sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed- (i) thirty thousand rupees, in the case of fees for professional services referred to in clause (a), or (ii) thirty thousand rupees, in the case of fees for technical services referred to in clause (b), or (iii) thirty thousand rupees, in the case of royalty referred to in clause (c), or (iv) thirty thousand rupees, in the case of sum referred to in clause (d) : Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed [one crore rupees in case of business or fifty lakh rupees in case of profession] during the financial year immediately preceding the financial year in which such sum by way of fees for professional services or technical services is credited or paid, shall be liable to deduct income-tax under this section : Provided also that no individual or a Hindu undivided family referred to in the second proviso shall be liable to deduc....
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....r explanation (a) to Section 194J, the term 'professional services' means- (a) Services rendered by a person in the course of carrying on any of the following professions: Legal profession Medical Profession Engineering profession Architectural profession Profession of accountancy Profession of interior decoration (b) Services rendered by a person in the course of carrying on any notified procession. The professions notified in this regard so far are as follows: (i) (i) 'Authorised representative' i.e., a person who represents any other person, on payment of any cee or remuneration before any tribunal or authority constituted or appointed by or under any law for the time being in force but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy. (ii) 'Film artist' i.e., any person engaged in his professional capacity in the production of a cinematograph film, whether produced by him or by any other pers....
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....t, I am unable to concur with the view so taken by him. As stated by the Ld. AR, and, rightly so, as on date rendering of almost every service would involve, more or less, usage of computers and internet facilities. On the standalone basis that the processing agency had rendered services to the assessee by deploying computers /internet services, there can be no justification for dubbing the same as "professional services". Also, I find substance in the claim of the Ld. AR that as the very nature of services, i.e., tabulation, checking and preparation of marksheets etc. provided by the processing agency to the assessee, though involving usage of computers and internet services, would not require any professional skill or expertise, therefore, the same cannot be brought within the realm of "professional services" as contemplated u/s.194J of the Act. Apart from that I also concur with the Ld. AR that a work/service in order to fall within the present meaning of the term "professional services" under consideration, would not only require that the provider of the services must possess a professional degree, but also that the same falls within the meaning of the services that either find....
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....le only, if any, managerial, technical or consultancy services were provided to the assesee and a mere use of technology would not suffice to bring the same within the sweep of the said services. Observing, that as no specific skill was required to provide the service in the case before them which could be held in the nature of managerial, technical or consultancy services, the Tribunal was of the view that a mere use of the technology would not suffice for concluding that technical services were provided. 14. Considering the issue in hand in a broader perspective, the Hon'ble High Court of Madras in the case of Skycell Communications Ltd. Vs. DY. CIT (2001) 251 ITR 53(Mad.) had observed, that payment made for using of standard facilities by the public at large, in which some form of 'technical service' is inherent would not be covered u/s.194J of the Act. For the sake of clarity, the relevant observation of the Hon'ble High Court is culled out as under: "Section 194J, was not intended to cover the charges paid by the average house-holder or consumer for utilising the products of modern technology, such as, use of the telephone fixed or mobile, the cable T. V., the internet, the....
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....a)" of the said section; or had been notified by the CBDT either for the purpose of Section 44AA or Section 194J of the Act. 17. As observed by me at length hereinabove, there is nothing which would persuade me to conclude that the services rendered by the processing agency, i.e., tabulation, checking and preparation of mark sheets, though involving use of computers and online services, can either be traced in the specified services as mentioned in the "Explanation (a)" of Section 194J; nor in those that have been notified by the CBDT for the purpose of Section 44AA or Section 194J of the Act. Also, the Ld. DR could not take us through any such notification (supra) wherein the services under consideration were found to be notified. Apart from that, I find substance in the contention of the Ld. AR that as rendering of the aforesaid services would not require any professional skill or expertise, much the less any professional degree on the part of the service provider, therefore, the same clearly takes the same beyond the scope and gamut of the definition/meaning of the term "professional services" as envisaged in Section 194J of the Act. I have even otherwise approached the issue i....