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Dy. Commissioner of Income Tax, (TDS) – 2, Pune Versus Kirloskar Oil Engine Ltd.

2016 (4) TMI 247 - ITAT PUNE

TDS liability u/s 194J - payment made to the non-executive Directors of the assessee company - sitting fee payment - Held that:- As per the explanation to provisions of section 194J professional service means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board. We, therefore, find force .....

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lary. We find the provisions of section 194J(1)(ba) speaks of any remuneration or fees or commission by whatever name called other than those on which tax is deductible u/s.192 to a director of a company on which tax has to be deducted at the applicable rate and the above provision has been inserted by the Finance Act, 2012 w.e.f., 01- 07-2012. We, therefore, find force in the submission of the learned counsel for the assessee that no tax is required to be deducted u/s.194J out of such director’ .....

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d 23-12-2013 common for assessment years 2007-08 and 2008-09 and separate order of even date for assessment year 2010-11, order of Commissioner of Income Tax (Appeals)-V, Pune dated 23-01-2014 for assessment year 2009-10. The Revenue has assailed the findings of Commissioner of Income Tax (Appeals) in holding that no tax is to be deducted at source on the payments made to the non-executive Directors of the assessee company in the impugned assessment years. 2. The brief facts of the case as emana .....

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rectors in the impugned assessment years. The Assessing Officer vide order passed u/s. 201(1) and 201(1A) held that the payments made to the nonexecutive Directors fall within the definition of commission or brokerage as defined in Explanation (i) to section 194H. The assessee should have deducted tax at source u/s. 194H on the payments made to non-executive Directors. The Assessing Officer further levied interest for non-deduction of tax at source u/s. 201(1A) of the Act. Aggrieved by the order .....

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. Against the order of Commissioner of Income Tax (Appeals), the Revenue is in appeal before the Tribunal. 3. Shri Hitendra Ninave representing the Department vehemently supported the findings of the Assessing Officer in holding that the assessee is in default for non-deduction of tax at source on the payments made to non-executive Directors. The ld. DR submitted that the payments made to the non-executive Directors are in the nature of commission. The assessee was liable to deduct tax on such p .....

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ra). In the said case the Tribunal decided this issue in the light of provisions of section 194J of the Act. The ld. AR submitted that a perusal of the term commission as defined in Explanation (i) to section 194H would clearly indicate that the payments made to the nonexecutive Directors do not fall within the ambit of the term commission . 5. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. The Department has assaile .....

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ection 194H while passing order U/s 201(1) of the I T Act. 3) The Learned Commissioner of Income tax (Appeals) erred in treating the payment under consideration as remuneration to directors, whereas the company itself classified the payments as commission. 4) The appellant craves leave to add, alter or amend any or all the grounds of appeal. Similar grounds have been raised by the Department in all the four impugned assessment years. 6. Before we proceed with the issue it would be relevant to re .....

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ies; 7. Under the provisions of section 194H tax is to be deducted at source on the payments made to a resident by way of commission (not being insurance commission referred to in section 194D) or brokerage. A bare perusal of the definition would show that it is an inclusive definition which includes payments made directly or indirectly for services rendered in the course of buying or selling goods or in relation to any transaction relating to any asset, valuable article or thing, not being secu .....

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ments made to the non-executive Director fall within the ambit of term commission or brokerage as defined u/s. 194H of the Act. 8. The provisions relating to deduction of tax at source on payment of fee for professional or technical services are contained in section 194J. The provisions of section 194J have been amended by the Finance Act, 2012 w.e.f. 01-07-2012 vide which Clause (ba) has been inserted in sub-section (1) of section 194J. The new clause inserted by the Finance Act, 2012 reads as .....

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ver, there is no specific provision for deduction of tax on the remuneration paid to a director which is not in the nature of salary. It is proposed to amend section 194J to provide that tax is required to be deducted on the remuneration paid to a director, which is not in the nature of salary, at the rate of 10% of such remuneration. This amendment will take effect from Ist July, 2012. The provisions of newly inserted clauses are enforceable w.e.f. 01-07-2012, therefore, it will have no applica .....

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the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions relied on by the learned counsel for the assessee. The only dispute in this ground is regarding deduction of tax at source from the sitting fees paid to the directors. According to the learned counsel for the assessee the provisions of section 194J is not applicable from such sitting fees since fees does not fall in any of the ca .....

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a manger under the provisions of the Companies Act and therefore a technical personnel and therefore the company is liable to deduct tax at source under the provisions of section 194J. 8.1 As per the explanation to provisions of section 194J professional service means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profe .....

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