AI Drafter 
TaxTMI 
TaxTMI 
2023 (1) TMI 517
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....he impugned orders of the CIT(Appeals) on the 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....
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....arating/ dividing the composite work of printing work from application to reporting the results, as contract and technical services 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 hea....
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.... no adverse inferences qua furnishing of the details was called for in its hand. 5. On a perusal of the details, it was, inter alia, observed by the A.O that the assessee 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 Alth....
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.... the assessee and the vendors. Considering the aforesaid factual position, the A.O was of the view that as the assessee had entered into a composite contract, therefore, he was liable to deduct tax at source on the payments made to the vendor as per the provisions of Section 194C of the Act. Also, as the assessee 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....
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.... to the processing agency in connection with making of envelopes, admit card, attendance sheets, scanning, general report, printing of data on admit card and other items with respect to the exams conducted for the students. It was further submitted by the appellant that he has complied with the provisions of the Act and made TDS on every payment to those agencies u/s.194C on the pretext that there is a contract 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 spe....
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....ture of such payments made and wrong application of the provisions will render the deductor liable for default for short deduction of tax. From the agreement between the appellant and the vendor which has been reproduced by the AO in his order it is noticed that the contract between the payer and the payee is a contract for providing technical services and not a contract of technical services. The vendors are professionally competent in carrying out work relating to technical matters on conducting 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 sat....
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.... not made available to the assessee. As can be seen from the facts of the case that the payments were to a contractor for inspection and maintenance support agreement. The next case relied upon is Jaipur Vidyut Vitran Nigam Ltd. v. Dy. CIT [2009] 123 TTJ (Jp. Trib). In this case the assessee was a electricity distribution company paid charges to transmission company as operation and maintenance of transmission line which according to the court did not result in any technical service mg rendered to the assessee. In ITO vs. Fino Fintech 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....
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....payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to [two per cent of such sum in case of fees for technical services (not being a professional services) or royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic films and ten per cent of such sum in other cases,] as income-tax on income comprised therein : Provided that no deduction shall be made under this section- (A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or (B) where the amount of such 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) ....
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....t towards "fees for professional services". In so far the term "professional services" is concerned, the meaning/definition of the same can be traced in the "Explanation" (a) to Section 194J of the Act, which reads as under: "(a) 'professional services" means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section." Considering the services which would fall within the meaning of the "professional services", the scope of the said term can be culled out as under: Under 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 P....
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....online services, being in the nature of "professional services" would fall within the realm of Section 194J of the Act, but I am unable to persuade myself to concur with the same. On a perusal of the specific services which have been brought within the meaning of "professional services" under Explanation (a) to Section 194J of the Act r.w. Notification No.2085(E), dated 21.08.2008, I am unable to comprehend as to how the aforesaid services received by the assessee from the processing agency, viz. tabulation, checking and preparation of marksheets by using computers and online services could be brought within the scope and gamut of the provisions of Section 194J of the Act. Although, the A.O had emphasized that as the processing agency had provided its services to the assessee by deploying its computers and software, therefore, the same would suffice for bringing the same within the meaning of "professional services" as contemplated in Section 194J of the Act, 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 standa....
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.... and not only for the reason that services are rendered to others by using technical systems. The aforesaid view is supported by the order of the ITAT, Jaipur in the case of Jaipur Vidyut Vitran Nigam Ltd. Vs. Dy. CIT (2009) 123 TTJ 888 (Jaipur). In the said case the Electricity Distribution company had paid charges to a transmission company, inter alia, for operation and maintenance of transmission lines and usage of the said lines by the assessee for transmitting energy. Although, the department had brought the said services within the meaning of "technical consultancy", but on appeal the Tribunal observed that as no technical services were rendered to the assessee, therefore, no obligation was cast upon the assessee to deduct tax at source u/s.194J of the Act. Also, a similar view was taken by the ITAT, Mumbai in the case of ITO Vs. Fino Fintech Foundation, 159 ITD 743 (Mum-Trib), wherein it was observed that the provision of section 194J would be applicable 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 ....
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.... expertise, therefore, the same on the said count could safely be brought within the meaning of "professional services", I am afraid the same does not find favour with me. As observed by me hereinabove, the term "professional services" had been specifically defined in "Explanation (a)" of Section 194J of the Act. On a perusal of the aforesaid definition, it transpires that the same either refers to certain specified services, i.e., services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section. To sum up, the services in order to fall within the meaning of "professional services" for the purpose of triggering the provisions of Section 194J of the Act, are either to be those which finds a specific mention in the "Explanation (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 m....