9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (11) TMI 932 - HC - Income TaxTDS under Section 194H - fee for services rendered - disallowance under Section 40(a)(ia) - Held that - ITAT examined the nature of the MoU between Finian and VEEPL with particular reference to the clauses therein and concluded that Finian was transacting with VEEPL on a principal to principal basis and that it could not be said that the payment to VEEPL was for rendering services. Consequently, it was held that Section 194H of the Act was not at all applicable . The ITAT noted that in terms of Clause 3.2 of the MoU no sum was due to be paid to VEEPL for the services rendered by it till it procured 27 acres of land. The amount paid to VEEPL was duly reflected by Finian in its purchases and the closing stock and no sales had been made during the year in question. The payment of 2% of the sale amount to VEEPL as consideration for transferring VEEPL s rights in the land was in terms of Clause 3.2 of the MoU and it had not been shown that such payment was not a fair compensation. Payment made to VEEPL which was corrected as ₹ 1,24,33,326. It was held that this amount is related to payment of service charge for effecting consolidation of land and is a revenue expense to (be) separately debited to the Profit & Loss account. With the Revenue having accepted the decision of the ITAT in the case of Finian, and with the Revenue being unable to bring out any distinguishing feature as far as the case of PBDPL, the Court sees no reason why it should interfere with the impugned order of the ITAT.
Issues:
1. Whether the ITAT erred in holding that a company was not required to deduct tax at source under Section 194H of the Income Tax Act, 1961 for a payment made to another company. 2. Whether the payment made by a company to another company was allowable under Section 40(a)(ia) of the Act and if tax deduction at source was required under Section 194H of the Act. Issue 1: The first issue revolves around ITA No. 257 of 2015, where the Revenue questioned the ITAT's decision regarding the deduction of tax at source under Section 194H. The dispute arose from a payment made by ZREPL to VEEPL. The Court analyzed the terms of the MoU between the parties and found no basis to deviate from the ITAT's decision in a similar case involving Finian Estates Developers P. Ltd. The Court noted that the arrangement between ZREPL and VEEPL was on a "principal to principal" basis, similar to the case of Finian, and thus upheld the ITAT's decision. Issue 2: The second issue pertains to ITA No. 270 of 2015, where the Revenue contested the payment made by PBDPL to VEEPL under Section 40(a)(ia) of the Act and the necessity of tax deduction at source under Section 194H. The Court examined the submissions made during the assessment proceedings and the CIT (A)'s decision. Despite the Revenue's efforts to distinguish the case of PBDPL from the precedent involving Finian, the Court found no substantial difference in the MoU clauses or payment terms. As the Revenue failed to present any distinguishing features or challenge the ITAT's reliance on the Finian case, the Court dismissed the appeal, concluding that no substantial question of law arose in either case. In essence, the judgment delves into the intricacies of tax deductions and payment allowances under the Income Tax Act, emphasizing the importance of consistency in legal interpretations and the need for substantial distinctions to warrant an appeal. The Court's meticulous analysis of the MoUs, payment structures, and past precedents highlights the significance of legal precedent and factual coherence in tax disputes.
|
