TMI Blog2008 (2) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... represented on behalf of the assessee. 2. The facts that have led to this appeal are that the assessee is a Bank which had entered into agreements with various persons known as Direct Selling Associates (DSAs) for the purpose of marketing its loans. The assessee had on the basis of a legal opinion obtained from its counsel, deducted TDS at 2.1 per cent under section 194C on the payments made to the DSAs. In the course of proceedings under section 201(1), the Assessing Officer had taken the view that the provisions of section 194J applied to the payments made to the DSA s and TDS was liable to be made at the rate 5.25 per cent and had consequently held the assessee to be in default and had levied the differential tax and also interest un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services etc. to the bank and there existed a fiduciary relationship between the DSAs and the Bank. Consequently, the Assessing Officer held that the assessee was liable to deduct TDS under section 194J and on the ground that the assessee had no reasonable cause for not deducting tax at the appropriate rate levied penalty under section 271C. Aggrieved with the levy of penalty the assessee filed first appeal to the Commissioner of Income-tax (Appeals) who had vide his order in appeal No. 606/03-04 dated 30-12-2004 allowed the assessee s appeal holding that the default committed by the assessee could be termed one where the breach flows from a bona fide belief that the appellant is not liable to act in the manner prescribed by the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en accepted by the assessee, then it is submitted that the penalty under section 271C was leviable. He also relied upon the decision of the Jurisdictional High Court in the case of Woodward Governor India (P.) Ltd. v. CIT [2002) 253 ITR 745 (Delhi) to explain the term reasonable cause . He further submitted that the assessee could not be held to have no knowledge of the law insofar as the assessee has been involved in substantial litigation in tax matters and there are also Third Member decisions in the case of the assessee itself reported in ABN AMRO Bank N.V. v. Jt. CIT [2005] 97 ITD 1 (Kol.) and ABN AMRO Bank N.V. v. Asstt. CIT [2005] 97 ITD 89 (Kol.) (SB). In reply, the ld. Counsel for the assessee submitted that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DS was liable to be made on the payments to the DSAs and which was supported by the opinion expressed by the Counsel, which is also placed at pages 44 to 58 of the paper-book no TDS was made under section 194J but under section 194C. In the said opinion he submitted that the Counsels had opined that the provisions under section 194C nor 194J nor 194H were applicable on the payments made by the assessee to the business associates, the bank to err on the side of caution had deducted TDS on such payments under section 194C of the Act, the bank was at its option to continue to do so. Thus, he submitted that there was no dishonest or contumacious conduct, or disregard of any laws, on the part of the assessee but it is on the basis of bona fide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciple basis whereas the facts of the agreement and the other clauses of the agreement did not give such indication. Further he drew our attention to the opinion of the Counsel wherein in para 1.14 the Counsel has recorded that the activities of the business associates as detailed in the agreement clearly indicate that it is carrying out a business of its own with all attendant benefits and risks and this was also not true as per the clauses of the agreement. He further submitted that the opinion was on the wrong set of facts and the services rendered by the DSA s constitute technical services. The ld. AR in reply had submitted that the first clause of the agreement it is held that the agreement has been entered into by the bank with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Assessing Officer under section 201(1) which were found at pages 26 to 32 of the paper book show that he has held that the assessee-bank was not properly deducting the TDS on the remuneration payments to the DSAs on the professional services provided by them and has held that the provisions of section 194J applied. Thus, the Assessing Officer has taken the view that the provisions of section 194J( a ) is applicable. Professional services have been given a meaning in the Explanation (2) to the provisions of section 194J and it is to include various services rendered and as notified by the Board for the purpose of section 44AA or for section 194J. The services rendered by the DSAs, it is noticed, does not fall within any o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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