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2016 (5) TMI 1500 - AT - Income TaxTDS u/s 194C OR 194J - payment made by the assessee on account of data storage charges, processing charges, call centre operation and business services - default u/s 201(1) - DR argued that that since these services involved special managerial skills to carry out the work in specialised manner - HELD THAT - CIT(A) after having examined and perused agreements with the service providers and after going into the various services provided reached a conclusion that the outsourced services do not require any kind of technical and professional expertise and are just simple and repetitive nature of work such as document storage, documents delivery and collection services and documents management services. CIT(A) examined the contract with Writer Information Management Services and found that very basic services were contracted and rendered by the said party involving no special technical skill or professional qualification. On the basis of the rival arguments and perusal of the various records as placed before us we find that the work assigned to the service provider was not a technical or professional work which required special skills but simple, basic and repetitive nature of work and we are inclined to opine that the order of CIT(A) is correct and deserved to be upheld. We dismiss the ground no 1 raised by the revenue by upholding the order of FAA on this point. Event management expenses attract the provisions of section 194C or 194J - HELD THAT - As is seen from the nature of services availed, we do not find any sort of professional or technical or consultancy but rather routine services which are provided by the travel agents in the normal course of business which were purely of contractual nature. It can be seen from nature of reimbursement for the services availed that these are in the nature of simple contractual case where only the provisions of 194C could be applied to deduct and deposit TDS and not 194J which deals with the deduction and deposit of TDS in case of technical, professional and consultancy services. Looking to the facts in the light of provisions of section 194C vis a vis 194J we find that the order of FAA is correct and needs to be upheld. Accordingly we dismiss the ground as raised by the revenue. Applicability of TDS provisions u/s 194D on Service Tax element in respect of insurance commission' - HELD THAT - TDS is required to be deducted and paid to the Govt Treasury on the income payable only which means that certainly the service tax component on the commission is not liable to TDS as the same is not an income of the assessee. The provisions of section 194D and 194I have to be seen in the light of the two circulars no 4/2008 dated 28.04.2008 and circular no 1/2014 F.No. 275/59/2012-IT(B) dated 13.1.2014. In circulars no. 4/2008 dated 28.04.2008 CBDT has clarified that TDS is not required to be deducted on service tax on rent u/s 194I. Similarly in circular no 1/2014 F.No. 275/59/2012-IT(B) dated 13.1.2014 the CBDT has clarified that TDS is required to be deducted on the amount paid/payable under an agreement/contract between the payer and the payee without including the service tax amount. In the case of CIT(TDS) V Rajasthan Urban Infrastructure 2013 (8) TMI 12 - RAJASTHAN HIGH COURT has held that service tax is not subject to deduction of tax at source and the circular no 1/2014 F.No. 275/59/2012-IT(B) dated 13.1.2014 has been brought by the CBDT after the above decision of the high court and also referred to in para no 2 of the circular. After considering the facts of the case before us in the light of circulars as referred to above and decision of the Rajasthan High Court and also the relevant provisions of the Finance Act which provides for ―Reverse Charge Mechanism‖, we are of the opinion that the order of CIT(A) is correct and does not suffer from any infirmities and we,therefore, uphold the same. In result, the appeal of the revenue is dismissed.
Issues Involved:
1. Applicability of TDS provisions under section 194J vs. 194C for data storage charges. 2. Applicability of TDS provisions under section 194J vs. 194C for event management expenses. 3. Applicability of TDS provisions under section 194D on the service tax element in respect of insurance commission. Issue-wise Detailed Analysis: 1. Applicability of TDS Provisions under Section 194J vs. 194C for Data Storage Charges: The department argued that data storage charges required technical/managerial skills and thus should attract TDS under section 194J. The assessee, however, contended that these services were part of a work contract and did not involve technical skills, thus falling under section 194C. The CIT (A) ruled in favor of the assessee, stating that the services provided, such as document management, delivery, and storage, did not involve high-level technical or professional qualifications and were repetitive in nature. The Tribunal upheld this decision, agreeing that the outsourced services were basic and did not require special skills, thus correctly applying section 194C. 2. Applicability of TDS Provisions under Section 194J vs. 194C for Event Management Expenses: The department contended that event management services, including ticketing, hotel accommodation, and tour leader services, required managerial skills and should be subjected to TDS under section 194J. The assessee argued that these were simple contractual services involving no technical or professional skills, thus falling under section 194C. The CIT (A) agreed with the assessee, highlighting that the services provided by the event management company were routine and did not involve high-level managerial or technical skills. The Tribunal upheld this decision, noting that the services availed were of a contractual nature and did not involve technical or professional expertise, thus correctly applying section 194C. 3. Applicability of TDS Provisions under Section 194D on Service Tax Element in Respect of Insurance Commission: The department argued that TDS should be deducted on the gross amount of insurance commission, including the service tax component, as per section 194D. The assessee contended that service tax was not part of the income of the insurance agents and thus should not be subjected to TDS. The CIT (A) ruled in favor of the assessee, stating that the service tax component paid directly by the insurance company to the government did not constitute income for the agents. The Tribunal upheld this decision, referencing CBDT Circulars and judicial precedents that clarified TDS should be deducted on the amount paid excluding the service tax component, as it did not partake the nature of income. Consolidated Judgment for Appeals ITA No:3010/M/2013 and ITA No:3011/M/2013: The issues in these appeals were identical to those in ITA No:3009/M/2013. The Tribunal's findings and conclusions for ITA No:3009/M/2013 were applied mutatis mutandis to these appeals, resulting in the dismissal of both appeals by the revenue. Order Pronounced: The order was pronounced in the open court on 25th May 2016.
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