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Issues involved: Interpretation of provisions u/s 194J and 201(1A) of the Income Tax Act, 1961 regarding tax deduction on payments made to Himachal Pradesh Road Transport Co. Ltd. (HRTC) by the assessee authority.
Summary: The appeals were filed against the order of the CIT(A), Shimla, where the assessee challenged the application of section 194J and the interest u/s 201(1A) of the Income Tax Act. The main contention was that payments made to HRTC were reimbursement of expenses and not subject to TDS. An additional ground was raised, citing legal precedents to support the argument. The ITAT Chandigarh admitted the additional ground, considering it a legal issue with relevant facts on record. The case involved a survey revealing payments made by the assessee to HRTC without tax deduction. The Assessing Officer deemed these payments as service charges, requiring tax deduction u/s 194J. The CIT(A) upheld this decision, leading to the appeal. During the hearing, the assessee's counsel argued that the payments were reimbursement for services provided by HRTC, not subject to TDS. They also contended that HRTC had already paid taxes on these receipts, relieving the assessee from tax liability. The revenue's representative supported the Assessing Officer's order. After reviewing the submissions, the ITAT found that the assessee authority reimbursed HRTC for services provided due to a lack of infrastructure. The payments were based on predetermined rates for staff and facilities, not lump sum service charges. Citing various tribunal decisions, the ITAT concluded that no tax deduction was required u/s 194J. The order of the CIT(A) was set aside, and it was held that no tax was deductible by the assessee authority. In conclusion, the appeal of the assessee was allowed, and the order was pronounced on 31/12/2013.
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