Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (8) TMI 507 - RAJASTHAN HIGH COURT

2016 (8) TMI 507 - RAJASTHAN HIGH COURT - [2016] 385 ITR 427 - TDS u/s 194J - non deduction of TDS on technical work payments - Held that:- Both the appellate authorities have taken into consideration the agreement entered by and between the parties/stakeholders and the dominant intention of the parties was to conduct the business of providing specific e-learning courses in the State of Rajasthan and share the revenue generated by way of fees received from the learners. Admittedly, in the revenu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

der or service receiver. The relation between these stakeholders is one of collaborators as per the agreement made and the revenue shared cannot be said to be payments for technical services rendered by ITGKs and VMOU to RKCL as held by the Assessing Officer. - Decided in favour of assessee. - D. B. Income Tax Appeal No. 109 of 2015 - Dated:- 8-1-2016 - Ajay Rastogi And J. K. Ranka, JJ. For the Appellant : R. B. Mathur, Advocate For the Respondent : - JUDGMENT J. K. Ranka, J. 1. Instant Income-t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n University, Jaipur, Maharana Pratap University of Agriculture and Technology, Udaipur, Vardhman Mahaveer Open University, Kota, Rajcomp, Jaipur and Centre for E-governance, Jaipur mainly imparting computer education to Government employees and students and other persons in the State of Rajasthan through its business franchisee network, i.e., District lead centres (DLCs), and I. T. Gyan Kendra (ITGK) through its programme support agency (PSA) and is running technical courses namely ; RS-CIT, a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h itself, sends back ₹ 1450 to I. T. Gyan Kendras as their share. Out of this amount of ₹ 850, the respondent M/s. RKCL pays ₹ 100 per student to programme support agencies and ₹ 75 per student to District lead centres (DLCs (on which the company is deducting tax at source. On verification of the records, it came to the notice of the Assessing Officer (Revenue) that the respondent- RKCL is not deducting tax at source on the amount of ₹ 1,450 paid to IT Gyan Kendras .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ers namely ; IT Gyan Kendras, the respondent-RKCL and VMOU in the ratio of ₹ 1,450, ₹ 750 and ₹ 100 respectively and it was contended that the share of revenue/fee amongst various stakeholders has been adopted just for administrative purpose/convenience to maintain check/control over the aggregate receipt, number of registration, timing of receipt etc., so that all stake holders who are collaborative partners receive their respective share correctly and on time along with the e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ld that the respondent- assessee was liable for deduction of tax at source and demand along with interest at ₹ 23,32,708 was created. 4. The matter was carried in appeal before the Commissioner of Income- tax (Appeals), who after analysing various material on record and provisions of law, accepted the contention of the respondent-assessee. The matter was carried in appeal by the Revenue before the Tribunal and the Tribunal also upheld the finding of the Commissioner of Income-tax (Appeals) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

chnical work payments under different sections of the Income-tax Act, 1961. He further contended that these ITGKs also take their own separate activities of business such as ; computer basic typing work, photostat work, etc., etc., and the assessee-company has also not paid any salary to any members of these centres so, it can be held that these Gyan Kendras are not purely branches of the respondent-RKCL only and the respondent- RKCL has made payment to IT Gyan Kendras per held/person of technic .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d counsel for the Revenue, we have already noticed that the respondent was promoted by the State of Rajasthan to impart computer education program for the benefit of students and their own staff. We have also noticed earlier the amount to be shared by the three entities. It may be appropriate to mention that in so far as payment of ₹ 850 is concerned, tax was being deducted at source and the only dispute raised by the Revenue was on account of ₹ 1,450 which was being paid to ITGKs by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, the entry fees (course fee/exam fee), collected from the learners have been received by the respondent, which in turn redistributed it to be shared with the ITGKs and VMOU as per the agreement. For instance, the aggregate revenue of ₹ 2,300 for RS-CIT course, which is received by the ITGK from the learner, is transferred to the respondent which is shared among the three stakeholders. In our view, the transaction between the ITGK and RKCL and VMOU are not of a service provider or service .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s for professional services, or (b) fees for technical services, or (ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company, or (c) royalty, or (d) any sum referred to in clause (va) of section 28, shall, at the time of credit of such sum 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 an a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

) 'fees for technical services' shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 ;" 8. On perusal of section 194J with facts of instant case, it shows that the amount paid in the instant case is neither in the nature of professional or technical services rendered by the respondent-assessee to the stakeholders/ collaborators or vice versa. It is merely sharing of the fee in the manner agreed to by and between them. Though we do not have .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ic responsibilities of the parties and the modalities of the sharing of revenue by them have been laid out." 9. It would be appropriate to refer to the functional structure of three stakeholders which provides as under : 10. On perusal of the above, in our view, it is nothing more than sharing of the revenue and it cannot be said to fall as fees for professional or technical courses. 11. An identical situation arose in a case decided by the High Court of Delhi in the case of CIT v. NIIT Ltd .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

centre. Under the agreement the franchisees were providing NIIT courses under the licence from the respondent and the respective franchisees were to bring together their resources for the purposes of providing computer education to the students. The franchisees were required to provide the infrastructure facilities like classroom facility, equipment, furniture, fixture, administrative set up, etc., and it was the obligation of the franchisee to operate and manage the education centre on day-to- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ual property rights as also the interest of students were protected. 11.1. Under the model fees collected from the students was deposited in the account of the respondent and then the fees collected was shared with the franchisees in accordance with the terms of the franchisees/licence agreement. To ensure that the franchisees delivered the services in accord ance with the methods and process provided by the respondent, it was essential that the respondent collected the fee and paid to the franc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

act a franchisee agreement and it cannot be said that by the agreement rent in fact was being paid by the respondent-assessee to the licensee. No doubt, the charges have been broken up under two heads, viz., marketing claim and infrastructure claim. However, the agreement is an agreement as a whole and such a composite agreement cannot be broken up as was sought to be done by the Revenue. The share of the revenue with the franchisee is on account of composite services provided by the franchisee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he fees is being shared based on the agreement as noticed ear lier. 12. The High Court of Delhi in the case of CIT v. Career Launcher India Ltd. [2012] 20 taxmann.com 637 (Delhi) ; [2013] 358 ITR 179 (Delhi) had also an occasion to consider a case where though it related to applicability of section 40(a)(ia) of the Act as according to the Revenue in that case provisions of section 194C got attracted as the assessee did not deduct tax at source on the payments made to the various franchisees thro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

purview of carrying out a work in pursuance of a contract and accordingly was liable for deduction of tax at source under section 194C and since the assessee in that case did not deduct tax at source, accordingly by invoking provisions of section 40(a)(ia), disallowed the amount of ₹ 6,38,64,018. The High Court found that the agreement for permitting the payee to utilise the name and copy right of the assessee in the study material and in running coaching centres, were mutual rights, duti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r becoming proficient in competitive entrance examinations, personality development related programmes as per norms and methods developed by it and that the assessee also owns or has access to various copyrighted material, preparatory information and substantial body of technical know- how relating to the location, design and operation of professional learning centres. It further observed that the assessee (licensor) has established a high position regarding quality of services available at the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enter into a business arrangement between themselves for their mutual benefit and the methodology adopted was to exploit the know-how and copyrighted material available with the assessee by running learning centres in different parts of the country and after examining the other clauses of the agreement in extenso, came to the conclusion that the Revenue has not been, able to show clearly as to how the contract between the assessee and the franchisee can be interpreted to be one for carrying out .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version