TMI Blog2021 (1) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... , the same is not a valid order in the eyes of law. Accordingly, the same is quashed. TDS u/s 194C OR 194J - Short deduction of TDS - payments/credit to M/s Conax Access Systems (Pvt.) - it is the assessee s contention that payments to this company were made under normal contractual obligations and that the services being provided by these two companies were general in nature and did not require any transfer of skill nor did make available any skill to the assessee - HELD THAT:- AR has referred to invoices and agreements entered into with both the parties to buttress his arguments that the services rendered were not in the nature of technical services requiring any sharing/transferring of technical skill or knowledge. These evidences and explanations were submitted before the Assessing Officer as well as Ld. CIT (A). However, the Ld. CIT (A), notwithstanding the fact that in Financial year 2010-11 he had held that the payments were not in the nature of services falling under section 194J, not only ignored his appellate order in Financial Year 2010-11 but also chose to brush aside the explanations and evidences supplied by the assessee without examining the same in detail. We a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 57,78,575/- u/s 201(1)/201(1A) of the Act for Assessment Year 2012-13. 2.1 In Assessment Year 2013-14 also a letter was issued by the Assessing Officer to verify the compliance of the TDS provisions and during the course of such verification, the Assessing officer noted that there was irregularities in respect of deduction of tax at source in respect of M/s Conax Access System (Pvt.) Ltd., Tata Tele Services Ltd., Proactive Data Systems (Pvt.) Ltd., Tulip Telecom, Integrated Subscriber Management Services Ltd. and Cyquator Media Services (Pvt.) Ltd. The Assessing Officer proceeded to compute the short deduction of tax at source at ₹ 75,183/- and interest at ₹ 64,62,048/- thereby creating a total demand of ₹ 65,37,231/- u/s 201(1)/201(1A) of the Act. 2.2 The assessee s appeals for both the years were dismissed by the Ld. CIT (A) and now the assessee is before this Tribunal challenging the dismissal of its appeals. The grounds raised in both the years are as under: ITA No.227/Del/2017 for Assessment Year 2012-13: 1. That the Ld. AO had erred in law and also on the facts of the case by passing the impugned order u/s 201 (1)/201 (1A) of I.T. Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Limited (EBPL/ISMSL), subsequently merged with CMSPL) ( CMSPL or ISMSL or EBPL ) will attract provisions of section 194J and not section 194C for deduction of tax at source and therefore, interest charged of ₹ 46,64,641/- u/s 201(1 A) on alleged short deduction of tax and interest deserves to be deleted. 8. That the authorities below have ignored the fact that EBPL has been issued lower deduction certificate under section 197 for payments to be made by the Appellant to EBPL under section 194C and revenue has accepted such certificate for payments by the Appellant liable to tax deduction under section 194C. 9. That without prejudice to above, the Ld. CIT(A) have erred in holding that since service tax has been levied and recovered on the services rendered to the Appellant, the same are liable to the provisions of Chapter XVIIB of the I T. Act, ignoring that service tax is levied under different statute and provisions of Chapter XVIIB are restricted to only such services mentioned in the I.T. Act. 10. That without prejudice to above, the authorities below has ignored the essence of amendment in section 201 (1 )/201 (1 A) of the Act wherein it was bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hort deduction/non deduction of ₹ 48,363/- and interest u/s 201(1 A) of ₹ 13,299/- deserves to be deleted. 6. That the authorities below had also erred in holding that various payments made to Cyquator Media Services Private Limited (CMSPL) (formerly known as Essel Business Processes Limited/Integrated Subscriber Management Services Limited (EBPL/ISMSL), subsequently merged with CMSPL) ( CMSPL or ISMSL or EBPL ) will attract provisions of section 194J and not section 194C for deduction of tax at source and therefore, interest charged of ₹ 64,39,512/- u/s 201(1A) on alleged short deduction of tax and interest deserves to be deleted. 7. That the authorities below have ignored the fact that in the previous year, EBPL had been issued lower deduction certificate under section 197 for payments to be made by the Appellant to EBPL under section 194C and revenue has accepted such certificate for payments by the Appellant liable to tax deduction under section 194C. 8. That without prejudice to above, the Ld. CIT (A) have erred in holding that since service tax has been levied and recovered on the services rendered to the Appellant, the same are liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal grounds going into the very root of the issue and, therefore, in the interest of substantial justice, they are admitted. 6.0 The Ld. Authorized Representative (AR) submitted that in terms of section 201(3) of the Act, which was amended by Finance Act, 2012 with retrospective effect from 01.04.2010 and which was applicable during the Assessment Year 2012-13 (Financial Year 2011-12), the limitation period for passing the order u/s 201(1) of the Act was two years from the end of the Financial Year in which the statement was filed. The Ld. Authorized Representative drew our attention to a chart and submitted that in case of assessee, the order u/s 201(1)/201(1A) for Financial Year 2011-12 was passed on 30.03.2015 which was beyond the limitation period as specified section 201(3)(a) for the first quarter, the second quarter and the third quarter since the statements referred to in Sec.200 for these three quarters were filed on or before the end of Financial Year ending 31st March, 2012. He drew our attention to the chart reflecting these dates as well as copies of the TDS statements along with their acknowledgments. The Ld. Authorized Representative submitted that, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it had been clarified that routine, normal maintenance contracts which includes supply of spares will be covered under section 194C of the Act. 6.2 With respect to Ground No. 6, the Ld. Authorized Representative submitted that the authorities below had erred in holding that payments made to Tata Teleservices Limited were technical in nature and would attract the provisions of Section 194J ignoring the fact that the assessee had purchased airtime from Tata Teleservices Ltd and the same did not fall within the purview section 194J of the Act. It was submitted that Tata Teleservices Ltd. provided the platform to the assessee for sending system generated bulk SMS messages requiring no human intervention and, therefore, the purchase of airtime from the telecommunication services provider could not be considered as technical services and, therefore, section 194J was not applicable in the assessee s cases. It was also submitted that the Assessing Officer has not brought on record any evidence to show that such services as rendered by Tata Teleservices were not standard in nature and were special, exclusive or customized services for the assessee. Reliance was placed on the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vident from the certificate issued by the Chartered Accountant and, therefore, the payer cannot be deemed to be assessee in default for non/short deduction of tax at source as held by Hon ble Apex Court in the case Hindustan Coco Cola Beverage (Pvt.) Ltd. vs. CIT reported in 293 ITR 296 (SC). 6.5 The Ld. Authorized Representative also submitted that with effect from 01. 04.2020, the rate of tax for the purposes of deduction with respect to fee for technical services had been reduced from 10% to 2% with a view to reduce taxes litigation. It was submitted that, therefore, in the light of this amendment, the beneficial rate should be applied in the case of assessee also. 7.0 With respect to assessee s appeal bearing ITA No.228/Del/2013, the Ld. Authorized Representative submitted that the grounds were identical and so were the arguments as in the ITA No.227/Del/2017 and, therefore, the same were not being repeated for the sake of brevity. 8.0 Per contra, the Ld. Sr. Departmental Representative (DR) placed reliance on the orders of the Assessing Officer for both the years under consideration. The Ld. Sr. DR submitted that the Assessing Officer had computed the short deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of law. Accordingly, the same is quashed. 9.2 The only issue remaining in Financial Year 2011- 12 is the issue of short deduction of tax at source and interest thereon for quarter four. The Assessing Officer has computed short deduction of tax at source and interest thereon in respect of Conax Access Systems Pvt. Ltd. and Tata Teleservices in the 4th Quarter. With respect to both these parties, it is the assessee s contention that payments to this company were made under normal contractual obligations and that the services being provided by these two companies were general in nature and did not require any transfer of skill nor did make available any skill to the assessee. The assessee had deducted tax at source in terms of section 194C of the Act @ 2% whereas the Assessing Officer has held that the payment would fall within the terms of section 194J of the Act attracting the rate of 10%. The Ld. Authorized Representative has referred to invoices and agreements entered into with both the parties to buttress his arguments that the services rendered were not in the nature of technical services requiring any sharing/transferring of technical skill or knowledge. These evide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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