2016 (5) TMI 540 - AT - Income Tax

Revision u/s 263 - non deduction of tds on reimbursement of expenses - Held that - We find that bank guarantee charges paid by assessee to NCL was neither payment for carrying out any work nor it is made towards broadcasting and telecasting services. From the agreement entered into by the assessee with NCL it is clear that bank guarantee is to be provided to BCCI as joint and several liability of both the parties and therefore reimbursement of bank guarantee commission to NCL is with respect to the guarantee provided by the bank to BCCI for which payment is made by NCL and subsequently 80% is reimbursed by the assessee. We find that NCL has not carried out any work for assessee and since the payment is towards reimbursement of actual expenditure and hence the same cannot be presumed to be covered under section 194C of the Act. In view of the facts and the Board Circular No. 715 and payment made by the assessee to NCL by way of reimbursement of actual expenditure incurred by NCL on payment of bank guarantee commission is merely a reimbursement. In the light of the above we are of the view that tax is not required to be deducted from bank guarantee commission in the absence of agent/principal relation. Consequently tax is not required to be deducted from reimbursement of actual expenses by assessee as incurred by NCL under any of the provisions of the Act. - Decided in favour of assessee Short deduction of TDS on the payment made to Noida Software Technology Park Ltd. for technical and professional services - assessee has deducted tax @2% instead of @ 10% to be deducted under section 194J - Held that - We find that the payment made to Noida Software Technology Park Ltd. is as per the agreement entered into between the assessee and the said party the assessee has obtained services only for uplinking of two channels owned by assessee on satellite involving no technical services and hence the same is covered under section 194C of the Act and there is no shortfall in tax to be deducted. In this regard the issue of the assessee is very clear on merits also that assessee has rightly deducted tax @ 2% u/s. 194C of the Act on payments made to Noida Software Technology Park Ltd. Even otherwise in view of the decision of the Hon ble Calcutta High Court in the case of S.K. Tekriwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT wherein it has been held that if there is any shortfall due to any difference of opinion as to taxability of an item or nature of payment falling under various provisions of TDS the only solution left with this is that the assessee can be declared as assessee in default under the provisions of section 201 of the Act but no disallowance can be made by invoking provisions of section 40(a)(ia) of the Act. This clearly shows that it is a highly debatable issue. Once it is a debatable issue provisions of section 263 of the Act i.e. revision proceedings cannot be initiated. - Decided in favour of assessee

Summary

Issues Involved:
Appeal against revision order of Principal CIT under section 263 of the Income-tax Act, 1961 for AY 2010-11 regarding TDS deduction on reimbursement of bank guarantee charges and shortfall in TDS deduction on payment made for technical and professional services.

Analysis:

Issue 1: Reimbursement of Bank Guarantee Charges
The CIT found the assessment erroneous due to non-deduction of TDS on reimbursement of bank guarantee charges paid to Nimbus Communication Ltd. (NCL). The assessee argued that the payment was reimbursement, not covered under section 194C, as it was not for work or services. The Tribunal agreed, citing a circular that reimbursement should not be deducted for TDS. The Tribunal held that the payment was not liable for TDS under any provision and referred to a previous case where a similar issue was decided in favor of the assessee.

Issue 2: Shortfall in TDS Deduction
The CIT also noted a shortfall in TDS deduction on payment made to Noida Software Technology Park Ltd. for technical services. The assessee contended that the payment fell under section 194C, not 194J, and the deduction was correct at 2%. Referring to a High Court decision, the Tribunal held that the issue was debatable, and being a matter of interpretation, did not warrant revision under section 263. The Tribunal concluded that the AO had considered the expenses in detail during the assessment and had taken a possible view, hence the assessment was not erroneous or prejudicial to revenue. Consequently, the revision proceeding was quashed, and the appeal by the assessee was allowed.

This detailed analysis of the judgment highlights the arguments presented by both parties, the legal interpretations applied by the Tribunal, and the final decision reached on each issue, providing a comprehensive understanding of the case.