TMI Blog2011 (9) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... ract' and upheld the deduction of tax @ 2%. - ITA NOS. 296 AND 1331 TO 1335 (MDS.) OF 2009 - - - Dated:- 8-9-2011 - SHRI DR. O. K. NARAYANAN, AND SHRI HARI OM MARATHA, JJ. Represented By: Shri Anirudh Rai for the Appellant. Shri V.D. Gopal for the Respondent. Hari Om Maratha, Judicial Member All the above captioned appeals have been filed by the Revenue in which almost identical issues are involved. Therefore, for the sake of convenience and brevity, we proceed to decide them by a common order. 2. To be brief and specific, we would like to narrate the facts for assessment year 2005-06 in I.T.A. No. 296/Mds./2009. This appeal is directed against the order of the ld. CIT(A), dated 12.11.2008 which further emanates from the order dated 26.12.2007 passed by the ACIT, Company Circle I(1) (Assessing Officer) u/s 143(3) of the Act. 3. The assessee is a limited company and for assessment year 2005-06, it filed its return of income declaring total income of Rs. 1,38,90,581 as against which the Assessing Officer has computed its income at Rs. 7,47,62,466/- by making the following two additions: (i) Data Access Fees of Rs. 2,21,50,200/- paid to three companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue stands covered by the Tribunal order dated 26.6.2009 rendered for assessment year 2004-05, and has not been overruled. The judicial propriety demands that the Tribunal order in assessee's own case has to be respectfully followed. Hence, we see no reason to interfere in this finding of the ld. CIT(A). The assessee-company has utilized infrastructure facility and manpower of three companies viz. Shriram Transport Finance Co. Ltd., Shriram Investments Ltd., and Shriram City Union Finance Ltd. for providing support services in relation to its insurance by entering into outsourcing agreements and paying BPO charges for the work done by them. The Assessing Officer disallowed this claim on similar set of facts in assessment year 2004-05, therefore, he has disallowed in this year as well. This issue has been decided by the Tribunal in assessee's own case vide order dated 26.6.2009, for assessment year 2004-05, in I.T.A.No. 736/Mds./2008. For ready reference, we extract relevant paragraphs 23 to 28 of the Tribunal order: "23. We have considered the rival submissions carefully in the light of material on record. We find that assessee had filed the copies of agreement entered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as under: Use of office space and infrastructure available at the specified Branch offices of the HP companies (around 200 locations) such as furniture, fixture and fittings consisting of tables, chairs, cupboards, fans, air-conditioners etc. This saves the company from incurring of any capital expenditure and Rent and other regular repair maintenance expenditure on account of truck insurance business. Use of telephone lines and computers, Computer networking, software etc provided for the purpose of truck insurance business at all the locations saving Armour from the Telephone and software development expenses relating to the truck insurance business. Use and access of wide range of facilities like typing, mail handling, messenger service and other administrative services [viz. Printing Stationery, Postage, Travelling conveyance expenses relating to truck insurance business]. Use of BPO entity's manpower saving Armour from incurring salary, PF and other employee benefits, staff welfare expenses, Travelling and conveyance expenses etc. For providing client support services including inspection of Armour customers (truck owners), collection and payment of premiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sriram City Union Finance Ltd [at pages 158 to 160 of the paper book] clearly show that regular payments have been made by the assessee company to these companies from whom BPO services were obtained. 28. As far as observation that such expenses were not reflected in the results filed with IRDA is concerned, we are satisfied with the explanation of the ld. Counsel for the assessee that it was the first year of operation and all these BPO charges were duly reflected in the second half of the year in the returns filed with IRDA. Under these circumstances, we find nothing wrong in the order of the ld. CIT(A) which we confirm." 6. Respectfully following the Tribunal order (supra), we have to allow the expenses relating to BPO charges. Accordingly, we dismiss Ground No.2.1 and 2.2 of the appeal. 7. The next issue taken vide Ground No.3.1 to 3.4 is in relation to disallowance of Rs. 2,21,50,200/- claimed towards data access fee. The assessee-company is in the business of insurance broking and is registered with the Insurance Regulatory and Development Authority as an insurance broker. In order to get fresh customers, with whom insurance business can be canvassed, the assessee-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that since the Finance Companies do not have any ownership rights over the information passed on to the assessee-company and consequent to contract, there is no transfer of ownership in the property transferred, this transaction will not amount to a contract for sale or purchase. As per Assessing Officer, section 194C include within its ambit all contracts of work including supply of labour, therefore, supply of information/data has been equated by the Assessing Officer with supply of labour. He has also relied on CBDT Circular No.681 clarifying the payments covered by section 194C which provides for applicability of section 194C to all types of contracts including transport contracts, labour contracts, service contracts etc. Therefore, the Assessing Officer has disallowed this entire amount u/s 40(a)(ia) of the Act and has added back to assessee's income. On the contrary, the ld. CIT(A) has deleted the entire amount holding that the impugned payment is not attracted under section 194C of the Act mainly on the reasoning that giving access to database does not involve any work and hence, no contract for work can be inferred. Now the Revenue is aggrieved. 8. It was argued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court. In the case of East India Hotels Ltd. (supra), CBDT Circular No.681 dated 8.3.1994, has been quashed as under: " All service contracts' are outside the purview of section 194C of the Income-tax Act, 1961. However, Circular No. 681 dated March 8, 1994, stated that section 194C would apply to all types of contracts including transport contracts, service contracts, advertisement contracts, broadcasting contracts, telecasting contracts, labour contracts, material contracts and work contracts. By inserting Explanation III to section 194C the word "work" in section 194C has been expanded so as to include four types of service contracts within the purview of section 194C. The words "carrying out any work" in section 194C are limited to any work which on being carried out culminates in a product or result. The word "work" in section 194C has to be understood in a limited sense and would extend only to the service contracts specifically included in section 194C by way of Explanation III to Section 194C would apply to payments for carrying out the work such as constructing buildings or dams or laying of roads and airfields or railway-lines or erection or installation of plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other information or do not do some or any other work for the assessee-company. They make the database for their own use and they do not provide any other information or do any other work for the assessee. They do not make the database tailor-made to the specifications or requirements of the assessee-company and payee companies' staff is also not utilized even for collecting the requisite information. The Finance Companies are basically engaged in hire-purchase and financing of old or new lorries. They maintain the list of their customers who purchase new or old lorries under lease or hire-purchase agreement through these three companies. They also maintain the record of their depositors, debenture holders and persons who have obtained finance from them. The assessee is engaged in the business of arranging insurance for lorries to be purchased by the customers of these three payee companies. The depositors, etc. may also go for some type of insurance either medi claim or for household goods etc. In connection with its insurance work the assessee needs details such as name and address of the buyer and seller and asset details etc. to arrange the insurance for them and for access t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case. 15. In fact, these appeals are in relation to orders passed u/s 201(1) and 201(1A) of the Act vide orders dated 14.5.2008 by the ACIT, TDS Circle I, Chennai. The assessee-company failed to deduct TDS to the tune of Rs. 2,21,50,200/- and Rs. 1,59,79,000/- for financial years 2004-05 and 2005-06 respectively on the payments made to three concerns of Sriram Group viz. Shriram Transport Finance Co. Ltd., Shriram Overseas Finance Ltd. and Shriram Investments Ltd. The assessee had entered into an agreement with the above three concerns for providing access to their customer database by means of a contract/agreement dated 1.4.2004. As per this agreement, the assessee-company had access to the database of the above mentioned finance companies which contains details of their depositors and debenture holders and persons who have obtained finance as we have discussed in the former part of this order. As we have already held such payments could not fall under any other provisions of Income-tax Act, including 194C and 40(a)(ia), therefore, these issues stand decided in favour of the assessee and the grounds raised in this regard in the appeals of the Revenue stand dismissed. 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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