2007 (1) TMI 281 - AT - Income Tax

Summary

Issues Involved:

1. Confirmation of demand u/s 201(1) and levy of interest u/s 201(1A).
2. Ignoring relevant material and relying on erroneous facts.
3. Applicability of section 194C to services provided by Khaitan Services Ltd.
4. Justification of demand and interest under sections 201(1) and 201(1A).
5. Erroneous order on facts and law.

Summary:

Issue 1: Confirmation of Demand u/s 201(1) and Levy of Interest u/s 201(1A)

The assessee appealed against the order confirming the demand u/s 201(1) and the levy of interest u/s 201(1A) of the Income-tax Act, 1961. The Assessing Officer found that the assessee had paid amounts to Khaitan Services Ltd. (KSL) without deducting tax u/s 194C. The CIT (Appeals) upheld this, stating that the services provided by KSL fell within the purview of "any work" under section 194C.

Issue 2: Ignoring Relevant Material and Relying on Erroneous Facts

The assessee argued that the CIT (Appeals) ignored relevant material and relied on erroneous facts. The assessee contended that KSL provided only office and bureau services, which did not involve carrying out any work or supply of labour, and thus did not attract section 194C.

Issue 3: Applicability of Section 194C to Services Provided by Khaitan Services Ltd.

The CIT (Appeals) found that KSL's services, including providing office space, equipment, and other facilities, constituted "carrying out any work" under section 194C. The assessee argued that KSL did not perform any work or supply labour, and the services provided were passive, not active work.

Issue 4: Justification of Demand and Interest under Sections 201(1) and 201(1A)

The assessee contended that the payments to KSL did not attract section 194C, and thus the demand and interest under sections 201(1) and 201(1A) were not justified. The tribunal found that KSL did not deploy manpower or perform any work, and the equipment provided was used by the assessee's personnel.

Issue 5: Erroneous Order on Facts and Law

The tribunal concluded that the CIT (Appeals) erred in holding that the services provided by KSL were covered under section 194C. It was determined that KSL did not carry out any work or supply labour, and the services provided did not fall within the scope of section 194C.

Conclusion:

The tribunal allowed the appeals, concluding that the provisions of section 194C were not applicable to the payments made by the assessee to KSL, and thus the demand and interest under sections 201(1) and 201(1A) were not justified.