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2012 (11) TMI 222 - AT - Income TaxDisallowance u/s. 40(a)(ia) of the Act for non-deduction of TDS - Held that - Amount paid towards Rent and amenities would not fall in the category of Fee for technical services - in the interest of natural justice, issue of determining the market value of Rent and amenities is set aside to the file of the AO subject to the provisions of sec.194-I, and exclude the same from the purview of sec. 194J of the Act - In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.
Issues:
Assessment of tax liability under section 194J of the Act on payment to holding company; Disallowance under section 40(a)(ia) for non-deduction of tax at source. Analysis: The appeal concerns the liability of the assessee to deduct tax at source under section 194J of the Act on a payment of Rs.12,00,000/- to its holding company, leading to a disallowance under section 40(a)(ia) for non-deduction of tax at source. The assessee argued that the payment was made to compensate the holding company for services provided, not falling under professional or technical services as defined under the Act. The holding company had a "no deduction certificate" under section 194C(2), assuming section 194J did not apply. The dispute revolved around whether the services provided by the holding company constituted technical services under section 194J. The CIT(A) upheld the tax liability, considering the services as technical services, including managerial and consultancy services. However, the payment also included compensation for rent and amenities, not falling under technical services. The issue of determining the fair market value of rent and amenities was remanded to the Assessing Officer for further assessment. Additionally, the applicability of section 40(a)(ia) on the entire payment amount was to be reexamined by the AO based on the decision of the Special Bench in a relevant case. In conclusion, the appeal was treated as allowed for statistical purposes, with directions for further assessment on the tax liability and disallowance issues.
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