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2014 (7) TMI 85 - AT - Income TaxNon application of mind by revenue before filing an appeal before ITAT - TDS on expenditure booked towards software development - TDS u/s 194C or u/s 194J - whether in the nature of payments towards technical services/fees - Levy of tax and interest short deducted u/s 201 and 201(1A) of the Act – Held that:- CIT(A) upheld the contention of the AO that the amounts are covered by the provisions of section 194J - assessee also preferred the appeal on the same issue - revenue is contesting on an issue which was decided in its favour, which indicates the non-application of mind not only by the AO but also by the CIT-(TDS), who approved the filing of appeal - This sort of mindless action by the Revenue does attract levy of cost - the Revenue authorities is advised to apply their mind before preferring appeals to ITAT – Decided against Revenue. Categorisation of payment - TDS u/s 194C or 194J – development of system for information management between Head Office and its on-site employees. - Held that:- The packages are to be developed by vendors - payments made to the vendor companies do fall under 194C - Even though assessee is in the software business and services rendered/work undertaken are also on the field of software services, these cannot be considered as per professional services as they have not rendered any personal services to the company - It is a contract between a company and company - Even though the nature of contract differs from activity to activity, assessee’s nature of work do indicate that those companies have not rendered any technical / professional services so as to come within the definition of section 9(1)(vii) - categorization of works contract as agreement for services cannot be accepted. Relying upon Glaxosmithkline Pharmaceuticals Ltd., vs. ITO 2011 (10) TMI 21 - ITAT, PUNE] - payment made for services of security guard provided by contractor cannot be kept in the nature of managerial, technical or consultancy services so as to attract clause 7 to section 9(1) read with section 194J - for treating the payment for technical services to be covered u/s 194J, there should be consideration for acquiring or using technical knowhow simplicitor provided, or made available by human element and there should be direct or live link between payment and receipt/use of technical services information – thus, the payments made are rightly covered u/s 194C and assessee has deducted tax - the demands to the extent of 201(1) and interest u/s 201(1A) cannot be sustained – Decided in favour of Assessee. TDS on expenditure overseas for providing onsite services - TDS u/s 195 - whether payment is taxable in India - Held that:- since the amounts are paid outside India to persons outside Indian territory, who does not have any tax liability as far as I.T. Act, 1961 is concerned, the amounts paid abroad cannot be considered as ‘sums chargeable’ under the provisions of this Act. - No TDS - decided in favor of assessee.
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