2017 (3) TMI 1617 - AT - Income Tax

TDS u/s 194C - TDS liability - Held that - Contentions of the assessee requires re-consideration as the Assessing Officer has picked up the payment made for assessment year 2012-13 for fixing the liability of the assessee for the impugned assessment year. However we make it clear that if the assessee s claim that the payee TAM Media Research Pvt. Ltd. has offered the amount as income and paid tax on such amount the assessee cannot be treated as a assessee in default in respect of such payment. Similarly the Assessing Officer must examine assessee s claim made in respect of provisions made of Rs. 5 lakh which was subsequently reversed. Another glaring error committed by the Assessing Officer which has come to our notice is though the Assessing Officer in the impugned order has mentioned that the payments were made to Star India Pvt. Ltd. however from the details submitted by the assessee we do not find any payment made to Star India Pvt. Ltd. This fact also requires verification. Thus restore the matter back to the file of the Assessing Officer for considering afresh

Summary

Issues Involved:
1. Applicability of Section 194J vs. Section 194C for Market Research Expenses and Media Monitoring Expenses.
2. Exclusion of certain amounts while calculating short deduction of tax at source.
3. Assessee’s liability as an assessee in default for non-deduction of tax at source.
4. Interest chargeable under Section 201(1A) of the Act.
5. Verification of the actual amounts paid and the corresponding TDS deductions.

Issue-wise Detailed Analysis:

1. Applicability of Section 194J vs. Section 194C for Market Research Expenses and Media Monitoring Expenses:
The primary issue was whether the tax should be deducted under Section 194J (fees for technical services) or Section 194C (contract work) for payments made towards market research and media monitoring expenses. The assessee argued that these payments were for research activities and media monitoring services related to advertisement work, thus falling under Section 194C. However, the Assessing Officer contended that these payments were for technical services, necessitating deduction under Section 194J. The Tribunal noted that the assessee had deducted tax at source under Section 194C for these payments, but the Assessing Officer raised a demand under Section 201(1) and 201(1A) for short deduction.

2. Exclusion of Certain Amounts While Calculating Short Deduction of Tax at Source:
The assessee sought exclusion of specific amounts while calculating the short deduction of tax. These included amounts covered by lower deduction certificates, amounts where TDS at 10% was already deducted, provisions reversed within the same year, reimbursements to group companies, and amounts not exceeding threshold limits. The Tribunal observed that the assessee had deducted tax at appropriate rates for some payments and had valid lower deduction certificates for others. Therefore, these amounts should be excluded from the calculation of short deduction.

3. Assessee’s Liability as an Assessee in Default for Non-Deduction of Tax at Source:
The Tribunal examined whether the assessee could be treated as an assessee in default for non-deduction of tax at source. It was noted that payments made to TAM Media Research Pvt. Ltd. were offered as income by the payee and tax was paid. Following the Supreme Court's decision in Hindustan Coca-Cola Beverage (P.) Ltd. v. CIT and the proviso to Section 201(1) (inserted by Finance Act, 2012), the Tribunal held that the assessee could not be treated as an assessee in default if the payee had included the payment in its income and paid the tax. This applied retrospectively, and thus the assessee was not in default for such payments.

4. Interest Chargeable under Section 201(1A) of the Act:
The Tribunal addressed the issue of interest chargeable under Section 201(1A). It was argued that interest should be restricted to the dates of payment of taxes by the payees. The Tribunal acknowledged that the assessee had deducted tax at source under Section 194C and paid it to the government. Therefore, interest should not be charged beyond the dates on which the payees paid their taxes.

5. Verification of the Actual Amounts Paid and the Corresponding TDS Deductions:
The Tribunal identified discrepancies in the figures considered by the Assessing Officer. The actual payment for media monitoring services during the relevant year was Rs. 18,52,135, not Rs. 35 lakh as considered by the Assessing Officer. The Tribunal noted that the assessee had filed an application for rectification of these mistakes, which remained pending. The Tribunal directed the Assessing Officer to re-examine the details of payments and TDS deductions, including provisions reversed during the statutory audit and payments below the threshold limits.

Conclusion:
The Tribunal partly allowed the assessee's appeal, directing the Assessing Officer to re-examine the issues in light of the Tribunal's observations. The Assessing Officer was instructed to afford a reasonable opportunity of being heard to the assessee and to verify the claims regarding payments, TDS deductions, and the applicability of Sections 194C and 194J. The Tribunal emphasized the need for a detailed and accurate assessment to ensure compliance with the relevant provisions of the Income Tax Act.