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TMI Blog2018 (5) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 dated 18.12.2012, 859/Bang/2011 dated 18.12.2012, 1040/Bang/2013 dated 17.12.2013 and 860/Bang/2011 dated 18.12.2012 respectively. 2. Since the substantial questions of law raised in these appeals are identical, the same are heard together and disposed of by this common judgment. 3. The assessee is engaged in the business of manufacture of steel. During the assessment year 2008- 09, 2009-10 and 2010-11 the assessee has made payment to M/s. Hospet Steel Limited ('HSL' for short) towards managerial and technical services rendered by way of operating and maintaining an integrated steel plant. Survey under Section 133A of the Act was conducted. Subsequent to survey, proceedings under Section 201(1) and Section 201(1A) of the Act were initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 194J of the Act are not attracted? ii) Whether the Appellate Authorities failed to take into consideration that, entire payment made to M/s. Hospet Steel Limited was towards rendering of managerial and technical services by way of operating and maintaining an integrated steel plant and the provisions of Section 194J of the Act are attracted, consequently, Section 201 of the Act is attracted? 4. Learned counsel Sri. Y.V.Raviraj appearing for the revenue would contend that, both appellate authorities failed to take into consideration that HSL is carrying on business independently and not as an agent of KSL and ML. The entire staff and manpower required for operating and maintaining the integrated steel plant for rendering services wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed to reimburse HSL the expenditure incurred on behalf of the assessee and ML in course of administering the plant operations on cost to cost basis, i.e., all the expenses for hot metal making and steel rolling activities were allocated to the assessee and the expenses incurred for steel making activities to ML; (iii) all other common expenses and corporate expenses except the provision for gratuity and leave encashment to staff etc., were recovered from SAA constituents in the ratio of 41.38% and 58.62% as agreed upon; It has been subscribed under the caption - C. Payments to JVC in the SAA as under: "The parties agree and undertake to pay the JVC in advance a sum of Rs. 20.00 million in the products sharing ratio or such other sum as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as legal aspects were rightly considered by the appellate authorities while arriving at a decision. Hence, the substantial questions of law raised by the revenue deserves to be answered in favour of the assessee rejecting the appeals. 7. Heard the learned counsel appearing for the parties and perused the material on record. 8. In order to answer the substantial questions of law raised by the revenue, it is apt to refer to Section 194J of the Act, the relevant provision reads thus: 194J- Fees for professional or technical services. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of - (a) xxxxx (b) fees for technical services, (ba) xxxxx (c) xxxxx (d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision makes it clear that deduction at source shall be on such income not otherwise. The primary factor to attract Section 194J is the ingredient of "income comprised therein". If no income is reflected in the balance sheet and P & L account of HSL towards the reimbursement charges paid on cost to cost basis by KSL and ML, it ceases to have the character of income. As such, the assessee cannot be treated as the assessee in default in not deducting tax at source under Section 194J of the Act. The arguments of the revenue that the fees paid by the assessee is towards technical services is imaginary one not established with substantial material. 12. The Assessing Officer proceeded to pass the orders under Sections 201 and 201(1A) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. This Court in Karnataka Power Transmission Corporation Ltd., Vs. Deputy Commissioner of Income-tax (TDS) Circle 16(2), Bangalore reported in (2016) 383 ITR 59 (Kar) while considering the applicability of Section 194A of the Act has observed that, Section 194A of the Act mandates the tax deductor to deduct 'income tax' on any income by way of interest other than income by way of interest on securities. The phrase 'any income' and 'income tax thereon' if read harmoniously, it would indicate that the interest which finally partakes the character of income, alone is liable for deduction of the income tax on that income by way of interest. If the said interest is not finally considered to be an income of the deductee, as per reversal entri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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