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2015 (9) TMI 1000 - ITAT MUMBAI

2015 (9) TMI 1000 - ITAT MUMBAI - TMI - TDS liability - u/s 192 or 194J - whether the payment made to the Creative Consultants was in the nature of professional fee paid? - as per the Assessing Officer the terms of the employment of the consultant showed that it was a case of employer-employee relationship and, therefore, the payments made by the assessee were liable to be subjected to tax deduction at source in terms of section 192 - Held that:- The restrictive covenants which are sought to be .....

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provident fund, leave encashment, gratuity benefits, etc. In a similar situation, our Coordinate Bench in the case of DCIT vs. Madison Communication Pvt. Ltd (2015 (9) TMI 945 - ITAT MUMBAI) has also upheld the stand of the assessee that such payments are subject to deduction of tax at source under section 194J of the Act and not under section 192 of the Act.

In conclusion, we therefore, uphold the plea of the assessee and set aside the order of CIT(A) and direct the Assessing Officer .....

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2012(A.Y. 2010-11), ITA NO.7381/MUM/2012(A.Y.2011-12), C.O.NO.28/MUM/2014, C.O.NO.29/MUM/2014 - Dated:- 28-8-2015 - SHRI G.S.PANNU AND SHRI AMIT SHUKLA, JJ. For The Revenue : Shri Akhilendra Yadav For The Assessee Ms. Arati Vissanji and Ms. Aastha Shah ORDER PER G.S. PANNU,AM: The captioned sets of three appeals, pertain to assessment years 2010-11 and 2011-12 and involve commons issues. Since the appeals relate to the same assessee and involve common issues, they have been clubbed and heard tog .....

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is a company incorporated under the provisions of Companies Act,1956 and is, interalia, engaged in the business of advertising and marketing communication services. In the impugned proceedings, the Assessing Officer examined the tax deducted at source by the assessee in respect of payment made to Creative Consultants . The assessee had deducted tax at source in terms of the provisions of section 194J of the Act considering that the payment made to the Creative Consultants was in the nature of p .....

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8,00,792/- was raised in terms of section 201(1) of the Act and interest under section 201(1A) of the Act of ₹ 37,81,069/- was also imposed. The aforesaid stand of the Assessing Officer has also been affirmed by CIT(A) and accordingly, assessee is in appeal before us. 4. Before us, the Ld. Representative for the assessee has pointed out that the assessee had availed the services of professionals as retainers/consultants and the payments made have been rightly subjected to deduction of tax .....

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charged by the consultants, which clearly established that it is a case where services have been provided to the assesssee and it is not a case of an employer-employee relationship. In the course of hearing, the Ld. Representative for the assessee has also point-wise assailed the analysis of the terms of employment of the consultants discussed by the Assessing Officer in the assessment order to demonstrate that the issue has been improperly appreciated by the lower authorities. It has also been .....

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ntative has primarily relied upon the discussion made by Assessing Officer in para 9.3 of the assessment order to point out that the peculiar features in the letters of appointment issued to the consultants established that there existed an employer-employee relationship and thus, tax was required to be deducted in terms of section 192 of the Act and not under section 194J of the Act. 6. We have carefully considered the rival submissions. Ostensibly, the terms and conditions of appointment of Cr .....

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ment, etc. So however, the case set up by the Assessing Officer is that the terms of employment involve rendering of services for fixed period; utilizing the infrastructure facilities and consumables provided by the assessee company in rendering services; restriction on the consultants to work out of the premises of the assessee, etc. On this aspect, Ld. Representative for the assessee has explained that having regard to the nature of business of the assessee, it was functionally and otherwise f .....

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rom the competitors. 6.1 In our considered opinion, the restrictive covenants which are sought to be interpreted by the Assessing Officer to mean that it establishes an employer-employee relationship between assessee and the consultants have to be understood in the context of the business realities in which the assessee operates. Such restrictions cannot imbibe an employer-employee relationship to the contract with consultants. It is also quite clear that that the benefits of an employeremployee .....

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nt 10. We have carefully perused the orders of the authorities below. The appointment letter clearly shows that the persons have been appointed as a consultant. Though there is a restrictive clause that during the pendency of agreement with the assessee, the consultants will not take up any other assignment of temporary or permanent nature with any other person. However, in our considered opinion, such restrictive covenants are provided in contract to safeguard the interest of the company and to .....

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y the Revenue authorities. The assessee has correctly deducted the tax. We accordingly set aside the findings of the Ld. CIT(A) and direct the A.O to accept the assessee s contention 6.2 In conclusion, we therefore, uphold the plea of the assessee and set aside the order of CIT(A) and direct the Assessing Officer to treat the payments made to the Creative Consultants as liable for deduction of tax at source under section 194J of the Act and not under section 192 of the Act. As a consequence, the .....

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ious parties. The stand of the Assessing Officer is that the payment of hoarding charges is to be understood as rent and, therefore, was liable for deduction of tax at source under section 194I of the Act, whereas the claim of the assessee has been that such payments are liable for deduction of tax at source in terms of section 194C of the Act. 7.1 On this aspect, it was a common point between the parties that similar issue came up before Delhi Bench of the Tribunal for A.Y 2002- 03 in assessee .....

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194-I of the Act as contended by the Revenue. The following discussion in the order of the Tribunal dated 23/5/2005(supra), is worthy of notice:- 9. We have carefully considered the entire material on record and find that the Ld. CIT(A) very carefully considered the relevant case law and the circular of the Board. He has undertaken a proper analysis and examination of the nature of work done by the assessee. The ld. CIT(A) has also taken into account the aspect that the work of advertisement inc .....

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credit or payment, whichever is earlier. Clause (i) of the Explanation to section 194-I gives the meaning of rent to be a payment under any lease, sub-lease, tenancy or any other building (including factory building), together with furniture, fittings and the land appurtenant thereto, whether or not such building is owned by the payee. Thus rent for the purpose of section 194I, is essentially a payment for the use of any land or building. In other words, the agreement or arrangement which gives .....

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of this basic concept of rent. 9.2. In the case of Japan Airlines (supra), it has been held that the services provided by the airport authority for landing and parking of its aircraft did not amount to lease of the property and, therefore, the payments are not in the nature of rent as envisaged under section 194I of the Act. The Tribunal while dealing with the definition of rent has observed as under: 9.6 In view of this definition, there has to be either lease, sub-lease, tenancy agreement or .....

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usually periodically for the use of any rented property, land, building, equipment etc. 9.3 On going through the question no.2 to 5 of circular no.715 dated 8.8.1995, it is clear that the Board has clarified the issue by giving the following answer to the question: Question5: Whether a contract for putting up a hoarding would be covered under section 194C or 194I of the Act. Answer: The contract for putting up a hoarding is in the nature of advertising contract and provisions of section 194C wou .....

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