TMI Blog2018 (12) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... technical/managerial skill and falls within the purview of section 194J or 194C - Held that:- As following the decision of coordinate bench on the similar facts we do not find any infirmity in the order of Ld. CIT(A) holding that annual maintenance charges paid by assessee was liable for deduction of tax at source under section 194C and not under section 194J TDS on payments of annual maintenance contract/routine repair - tds u/s 194J or 194C - Held that:- Assessing Officer while framing the order under section 201(1) of the Act held that the assessee is liable to deduct tax at source on payments of annual maintenance contract/routine repair under section 194J as the same was in the nature of technical services and thus, assessee wrongly deducted tax at source under section 194C whereas the learned CIT(A) followed the order of the Tribunal and also the decision in the case of RELIANCE LIFE INSURANCE CO. LTD. [2016 (5) TMI 1254 - ITAT MUMBAI]as deliberated upon by the Tribunal. No contrary decision was brought to our notice. Thus, following the decision of the co-ordinate Bench, we affirm the stand of the learned CIT(A), resulting into the dismissal of the appeal of the Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x as it has to be paid by Life Insurance Company under reverse charge mechanism. As per the Service Tax Regulations, the service tax on insurance commission payable to Insurance Agents is required to be paid by the Insurance Company as per section 68(2) of the Service Tax Act read with Rule 2(1)(d)(ii) of Service Tax Rules, 1994. The clause (iii) of Rule 2(1)(d) of the Service Tax Rules 1994 is as person liable for paying the service tax means- (iii) in relation to insurance 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. 4.27 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 F.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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant. In case of any default in this payment of Service Tax, it will be the Insurance Company which will be liable to penal consequences under the Service Tax Act and Regulations. The Insurance Agents do not face any consequences of non-payment or default in payment of the said ServiceTax. Thus the appellant has rightly deducted the tax at source on the actual amount payable to or receivable by the Insurance Agent at the applicable rates under section 1940 of the Act. Various case laws cited by the appellant in this regard on this issue, also support the argument and submissions of the appellant. 4.31 In view of the above discussion therefore, I hold that the amount of service tax on the insurance commission to life insurance agents is the liability of the appellant and the same cannot be considered as income in the hands of the agents. Hence, no tax is required to be deducted at source under Section 1940 of the Act, on the service tax component. Accordingly, the demand of tax of ₹ 6,45,82,054/- (as rectified by the AO) u/s 201 (1) of the Act on account of non-deduction of tax at source u/s 1940 of the Act on service tax component of the Insurance commission paid t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onent on the commission is not liable to TDS as the same is not an income of the assessee. The provisions of section 194D and 194I have to be seen in the light of the two circulars no 4/2008 dated 28.04.2008 and circular no 1/2014[F.No. 275/59/2012-IT(B)] dated 13.1.2014.In circularsno.4/2008 dated 28.04.2008 CBDT has clarified that TDS is not required to be deducted on service tax on rent u/s 194I.The relevant para 3 of the circular is re-produced as under:- 3. Service tax paid by the tenant doesn t partake the nature of income of the landlord. The landlord only acts as a collecting agency or Government for collection of service tax. Therefore it has been decided that tax deduction at source (TDS) under sections 194-I of Income-tax Act would be required to be made on the amount of rent paid/payable without including the service tax. Similarly in circular no 1/2014[F.No. 275/59/2012- IT(B)] dated 13.1.2014 the CBDT has clarified that TDS is required to be deducted on the amount paid/payable under an agreement/contract between the payer and the payee without including the servicetax amount. The relevant extract is reproduced as under:- 2. Attention of CBDT has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Insurance Company Ltd. (ITA No. 3009 to 3011/Mum/2013 order dated 25.05.2016). Thus, following the decision of the co-ordinate Bench, we find no infirmity in the conclusion drawn by the learned CIT(A), therefore, this ground of the Revenue is dismissed. 4. The next ground raised by the Revenue pertains to in not correctly appreciating the nature of services received by the assessee by incurring outsourcing fee operation and record storage expenses as data sorting, scanning, retrieving of records, which requires certain parameters of technical/managerial skill and falls within the purview of section 194J and not under section 194C of the Act. During hearing the learned counsel for the assessee pointed out that this issue is also covered by the order of the Tribunal. The learned DR did not controvert this factual matrix except defending the addition made by the learned Assessing Officer. We find that the Tribunal vide aforesaid order dated 18.11.2016, while deliberating the issue in hand that too in the case of assessee itself observed/held as under: 16. By the impugned order CIT(A) held that assessee has correctly deducted tax at source under section 194C, after observing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fing, policy serving process, call inbound and outbound , tele-calling for answering customer queries about product , follow and maintaining dealers network etc. As is clear from the said outsourced services, these are a sort of clerical and basic administrative work. The assessee made the payment for these services after deducting TDS under the provisions of section 194C of the Act believing these are basic type of services involving no technical or professional qualification whereas the AO came to the conclusion that these are technical services and were required to be subjected to TDS under the provisions of section194J of the Act and finally treated the assessee in default under the provisions of section 201(1) of the Act and raised the demand accordingly. The ld CIT(A) after having examined and perused agreements with the service providers and after going into the various services provided reached a conclusion that the outsourced services do not require any kind of technical and professional expertise and are just simple and repetitive nature of work such as document storage, documents delivery and collection services and documents management services. The ld CIT(A) examined t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintenance contract / routine repair is not free from technical services under section 194J and holding that assessee has correctly deducted tax at source under section 194C of the Income Tax Act. 15. Rival contention have been heard and record perused, in the order passed under section 201(1), the AO held that assessee was liable to deduct tax at source on payment of annual maintenance contract / routine repair under section 194J, in so far as the same was in the nature of technical services. The AO held that assessee has wrongly deducted tax at source under section 194C. 16. By the impugned order CIT(A) held that assessee has correctly deducted tax at source under section 194C, after observing as under: 6.16 The above activities mainly involve activities with reference to insurance policy documents, Inward/Outward sorting, documents scanning, putting documents in envelopes, record storage etc in respect of the life insurance business of the appellant. The charges per proposal for segregation of documents, preparation and dispatch etc are not very high. These parties have carried out the work in the normal course of their business and it is evident that the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation whereas the AO came to the conclusion that these are technical services and were required to be subjected to TDS under the provisions of section194J of the Act and finally treated the assessee in default under the provisions of section 201(1) of the Act and raised the demand accordingly. The ld CIT(A) after having examined and perused agreements with the service providers and after going into the various services provided reached a conclusion that the outsourced services do not require any kind of technical and professional expertise and are just simple and repetitive nature of work such as 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 atechnical or professional work which required special skills but simple, basic and repetitive nature of workand we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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