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2014 (4) TMI 199 - AT - Income TaxTDS u/s 194C - assessee is a wholly owned subsidiary - payment to holding company where holding company was to make available to the appellant staff, infrastructure, administrative support and support services. - Whether, conditions of MOU constituted "work contract" u/s 194C Held that:- As per MOU, the appellant neither had any employee on its roll nor any separate office space/infrastructurewhole agreement Documents reveals that said agreement is essentially an agreement of contract for work and services - There is no mention in the MOU that the assessee will reimburse the actual salary or actual cost of the services to the first party - Company thus falls within definition of service provider i.e. contractor as defined under section 194 C of act - Though technical services have also been agreed to be provided under MOU, but since it is a composite agreement providing all type of services by service provider, hence, provisions of section 194 C are attracted in this case Decided against Assessee. Nature of payments covered u/s. 194C/194J - A.O. held that payment made by appellant company to its holding company were in nature of payments covered u/s. 194C/ 194J of Act Expenditure was Disallowed by A.O. u/s. 40(a)(ia) of Act Held that: - Agreement in question is a composite agreement - Perusal of clauses of agreement reveals that there is no such clause in agreement from which it can be gathered that services provider i.e. first party in the agreement will provide services on actual cost basis or that no profit element is involved as has been alleged by the ld. Authorized Representative - There is specific clause in agreement regarding payment on service charges - Even assessee has claimed that it has deducted the tax in relation to service fee - It may be observed that sum payable or paid to a contractor for the work, as provided under section 194C, refers to entire payment and not profit element only - Such payment u/s 194C refers to the entire payment i.e. cost to contractor for work carried out plus profit element if any Decided against Assessee. Disallowance for non-deduction of TDS u/s 40(a)(ia) - Disallowing expenses from business and profession on ground that TDS has not been deducted, amount should be payable and not which has been paid by end of year Held that:- This question came for consideration before Hon'ble Calcutta High Court in CIT v. Crescent Export Syndicate [2013 (5) TMI 510 - CALCUTTA HIGH COURT] wherein High court held that provisions of section 40(a)(ia) are applicable not only to amount which is shown as payable on date of balance-sheet - But it is applicable to such expenditure, which become payable at any time during the relevant previous year and was actually paid within the previous year - Correct law is that s. 40(a)(ia) covers not only to the amounts which are payable as on 31th March of a particular year but also which are payable at any time during the year - Assessee claimed deduction and payment of TDS regarding service fee - A.O. therefore is directed to verify the said claim and delete disallowance in respect of payments upon which tax was deducted and duly deposited by assessee in accordance with law - Matter restored to AO only on this specific point Decided partly in favour of Assessee.
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