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TMI Blog2016 (5) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... case is not correctly appreciating the nature of services received by the assessee by incurring data storage expenses which requires certain parameters of technical / marginal skill of highly qualified specialized competency and falls within the purview of section 194J and not u/s 194C of the Act. 2. The Ld CIT (A) has erred in law and on facts of the case in not correctly appreciating the nature of services received by the assessee by incurring event management expenses which requires certain parameters of technical / managerial skill of highly qualified specialized competency and falls within the purview of section 194J and not u/s 194C of the Act. 3. The Ld CIT (A) has erred in law and on facts of the case in deleting the short deduction u/s 194D by holding that the service tax liability in the hands of the assessee is not income of the agents and no TDS is liable to be deductible on the income without appreciating the facts clearly brought out by the AO in the order u/s 201(1) of the Act. 4. The Ld CIT (A) has erred in law and on facts of the case in not appreciating correctly that the interpretation of Circular No.4/2008 dated 29/4/2008 of CBDT r.w. clarification vide c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the gross commission). Accordingly, AO computed and determined the non-deduction and short deduction of tax u/s 201(1) of the Act at Rs. 8,33,23,790/- and passed order dated 30.3.2011. Aggrieved by the order of AO, assessee carried the matter in appeal before the first appellate authority. 4. During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) allowed the assessee's appeal on the issues of (i) TDS on outsourcing expenses (paras 5 and its sub-paras of the CIT (A)'s order are relevant); (ii) TDS on Data Storage Charges (paras 6 and its sub-paras of the CIT (A)'s order are relevant); (iii) Event management expenses (paras 7 and its sub-paras of the CIT (A)'s order are relevant); (iv) TDS on Service Tax Element in respect of the insurance commission (paras 8 and its sub-paras of the CIT (A)'s order are relevant). Aggrieved with the said decision of the CIT (A), Revenue is in appeal before the Tribunal by raising the above mentioned grounds. 5. Ground no.1 relates to whether the 'data storage charges' attracts the TDS provisions u/s 194C, as applied by the assessee, or the TDS provisions u/s 194J as invoked by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), assessee reiterated that the assessee could not be treated as 'assessee in default u/s 201(1) of the Act and it correctly applied the provisions of section 194C of the Act. After considering the above submissions and replies of the assessee filed during the proceedings u/s 201(1), ld CIT (A) allowed the appeal of the assessee on this issue by observing and holding as under: "6.10 I have considered the facts of the case, the written submissions of the appellant as well as the order of the AO on this issue. In this case, the issue for consideration is as to whether the said payments made by the appellant would constitute 'fees for technical services' as defined in the Explanation 2 to Section 9(1)(vii) of the Act. The AO is of the view that data sorting also requires certain parameters to be followed on the basis of which data sorting is done. These activities require certain technical managerial skills. On the other hand the case of the appellant is that from the scope of various aforesaid works outsourced, it is evident that none of these works fall within the scope of technical services. In this case, the appellant company has entered into contracts with M/s Writer In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 194C as has been done by the assessee. Finally ,while relying on the order of AO, Ld DR prayed for setting aside the order of CIT(A) by restoring that of AO. 8. Per Contra ld counsel for the assessee heavily relied on the decision of the CIT (A) and reiterated the submissions as made before the lower authorities. The learned counsel for the assessee submitted that the services outsourced and paid for by the assessee included processing charges , call centre operations , data sorting, document scanning ,storage of data and other business services etc for which contracts were entered into with the various parties for carrying out and rendering these services which in no way could be termed as technical services and were simply of the nature of work contract. The ld authorised representative ,while referring to the provisions of section 9(1)(vii) of the Act explanation 2 of the Act , submitted that the technical services included managerial , technical and consultancy services and thus the services as rendered to the assessee such as data storage, scanning and sorting could not be termed as technical and managerial services as no specialised qualification or technical skill invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s document storage, documents delivery and collection services and documents management services. The ld CIT(A) examined the contract with Writer Information Management Services and found that very basic services were contracted and rendered by the said party involving no special technical skill or professional qualification. On the basis of the rival arguments and perusal of the various records as placed before us we find that the work assigned to the service provider was not a technical or professional work which required special skills but simple, basic and repetitive nature of work and we are inclined to opine that the order of CIT(A) is correct and deserved to be upheld.In view of the above facts, we dismiss the ground no 1 raised by the revenue by upholding the order of FAA on this point. 10. Ground no.2 relates to whether event management expenses attract the provisions of section 194C or 194J of the Act. Brief facts in this regard are that the assessee made payment of Rs. 1,69,08,818/- to Reliance Transport and Travels Pvt Ltd (RTTPL). During the course of survey, on perusal of the relevant details in this regard, AO observed that event management expenses includes ticketi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the facts of the case, the written submissions of the appellant as well as the order of the AO on this issue. It is seen that the appellant had organised conference at Agra and the contract for managing this event was given to Reliance Transport and Travels Pvt. Ltd. (RTTPL). The appellant made payment Rs. 1,69,08,818/- to RTTPL for these services. The appellant has deducted tax at source as per the provisions of section 194C of the Act. It is thus evident that the payment has been made towards the event management services provided by RTTPL. The services, in essence do not involve any high level of technical or managerial skill. Basically, the work of an event management company/tour operator is to provide facilities of ticketing, hotel booking, catering and providing certain other services respect of organising the event, in this case the conference of the appellant. In the regard, Circular NO.715 dated 08/08/1995 issued by CBOT can be usefully referred to. In question No. 6, the issue regarding ticketing services has been clarified in the following manner: Question 6: Whether payment under a contract for carnage of goods or passengers by any mode of transport would include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered by RTTPL are simply in the nature of 'works contract' and I hold accordingly. Since, the appellant has already deducted tax at source under section 194C, the appellant cannot be held to be 'an assessee in default'. 7.11. The demand of Rs. 19,15,759 /- raised by the AO is hereby deleted on merits." 12. Aggrieved with the above decision of the CIT (A), Revenue is in appeal before the Tribunal. The ld DR submitted before us that it is not a case of simple booking of travelling tickets but hotels were also booked and team leaders were also provided for the event management and therefore the provisions of section 194J of the Act were rightly invoked by the AO as it involved high level o skills and professionalism and prayed that the order of AO be restored by setting aside the order of FAA. 13. Per contra, during the proceedings before us, Ld Counsel for the assessee heavily relied on the order of the CIT (A) and reiterated the submissions as made before the lower authorities. The ld authorised representative of the assessee submitted before us that there services provided consisted of ticketing, hotel booking and team leaders and thus it was simple contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f life insurance and markets its products through insurance agents as well as its own direct sales force. During the course of survey, AO noticed that while making payment of insurance commission in case of licensed agents, the assessee deducted TDS on the net amount of insurance commission arrived at after excluding service tax component amounting to Rs. 23,54,72,978/- for the present assessment year. AO opined that TDS is required to be deducted on the gross insurance commission including service tax component as required by section 194D of the Act. In this regard, after considering the submissions of the assessee, AO came to the conclusion that as per the provisions of 194D any person, responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise for soliciting insurance business, shall at the time of credit of such income to the account of payee shall deduct income tax thereon. Since, the assessee while discharging the liability on behalf of the service agents excluded the service tax component for the purpose of TDS, AO treated the assessee as 'an assessee in default' within the provisions of section 201 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agents, which is their income. Assessee relied on the decision in the case of MEIL-SEW-MAYTAS-BHEL(JV) VS ITO IT APPEAL NOS 63 TO 76 (HYD.) OF 2012 [ITAT - HYDERABAD] wherein it was held that 'when a particular sum is not income at all for an assessee, there is no requirement to make TDS'. Further, assessee discussed the provisions of Chapter XVII-B of the Act, which are applicable in case of payment of income in the hands of the recipient. It was also submitted that section 190 is the charging section for the purpose of invoking Chapter XVII-B of the Act, wherein it was indicated that before deduction of tax at source on the amount to be paid to the recipient, it must be shown that the amount received by the recipient shall falls within the ambit of the charging section as per the provisions of the Act. In this regard, he relied on the judgment of the Apex Court in the case of CWT vs. Ellis Bridge Gymkhana, Etc (229 ITR 1) (SC). Before the CIT (A) it is the case of the assessee that the assessee correctly deducted the tax at source under the provisions of section 194D of the Act on the 'income' paid to or income received by the insurance agents and therefore, it should not be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urance auxiliary service by an Insurance agent, any person carrying on the general insurance business or life insurance business, as the case may be, in India." 8.24 The Government has notified insurance companies to discharge the liability of service tax on commission paid to insurance agents. The same is also clarified in the clarification on the scope of the term for levy of service tax [vide MOF Instruction No. B-11/1/2002-TRU dated' 1/08/2002] that in case of an insurance agent for life insurance, the person liable to pay service tax will be the concerned insurance company who has appointed the agent. Thus, it is evident that the appellant is legally liable to deposit the said service tax with the Government and the Insurance agent has no obligation or liability for the same. There is no dispute that the said service tax amount is not paid to or received by the Insurance agent. 8.25 The Life Insurance Agents also do not issue any invoice mentioning the amount of service tax nor is it their obligation to pay service tax to the Government Treasury. Accordingly, the said service tax amount which is paid directly by the appellant to the Government can neither partake the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 66 came to the conclusion that the TDS is required to be deducted on the gross amount of commission paid including the service tax component which was reversed by the CIT(A).Now the issue before us is whether TDS is required to be deducted on the service tax component on the commission paid to insurance agents u/s 194D of the Act. We shall first refer to the provisions of section 194D & 194I of Act for the purpose of better understanding which are reproduced as under for the sake of convenience :- "Insurance commission. 194D. Any person responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : Similarly the provisions of section 194 I of the Act are also reproduced below for the sake of better understanding of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, the Board has decided that wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component." The Hon'ble High Court of Rajasthan in the case of CIT(TDS) V Rajasthan Urban Infrastructure(2013)37 taxmann.com154(Raj) has held that service tax is not subject to deduction of tax at source and the circular no 1/2014[F.No. 275/59/2012-IT(B)] dated 13.1.2014 has been brought by the CBDT after the above decision of the high court and also referred to in para no 2 of the circular. After considering the facts of the case before us in the light of circulars as referred to above and decision of the Rajasthan High Court and also the relevant provisions of the Finance Act which provides for "Reverse Charge Mechanism" , we are of the opinion that the order of CIT(A) is correct and does not suffer from any infirmities and we ,therefore , uphold the same. In result , the appeal of the revenue is dismissed. ITA No:3010/M/2013 AY 2009-10 & ITA No: 3011/M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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