2019 (1) TMI 39 - HC - Income Tax

Non-deduction of tax u/s 194J - Assessee-University conducts examinations through various colleges affiliated to it - amount so reimbursed by the Assessee- University to the affiliated colleges are in respect services of professional or technical experties - Held that - Tribunal in considering the matter held that no doubt the payment of expenditure incurred by the affiliated colleges/centres is reimbursable but there is no involvement of professional or technical experties. The affiliated colleges/centres do not render any technical services in conducting of the examination. The Tribunal further observed that the revenue in the past and in the subsequent years has never raised such an objection. Thus, in the absence of any material to establish that the affiliated colleges/centres were rendering services of professional or technical nature in the matter of conducting the University s examination, we are of the opinion that the Tribunal has not committed any error of law in holding that the tax was not deductable on such reimbursement under Section 194J(b) - Decided in favour of assessee.

Summary

Issues:
1. Exemption from filing certified copy of the impugned order of the Tribunal.
2. Tax liability on reimbursement of expenses to affiliated colleges.
3. Interpretation of Section 194J of the Income Tax Act, 1961.
4. Jurisdiction of the Tribunal in determining tax deductibility.

Exemption from Filing Certified Copy:
The High Court exempted the filing of the certified copy of the impugned order of the Tribunal as it was already annexed in the Income Tax Appeal. The Exemption Application was allowed, streamlining the process for the Appellant.

Tax Liability on Reimbursement of Expenses:
The case involved an Assessee-University reimbursing expenses to affiliated colleges for conducting examinations. The Assessing Officer created a tax demand under Section 194J of the Income Tax Act, 1961. The Tribunal, however, held that the reimbursement did not involve professional or technical services, leading to the dismissal of the tax liability.

Interpretation of Section 194J:
The Assessing Officer and the Appellate Authority contended that the reimbursement constituted payments for professional or technical services under Section 194J. In contrast, the Tribunal found no evidence of such services being rendered by the affiliated colleges, thus concluding that the tax was not deductible under Section 194J(b) of the Act.

Jurisdiction of the Tribunal:
The Tribunal's decision was based on the absence of proof that the affiliated colleges provided professional or technical services in conducting the examinations. The Tribunal highlighted that the revenue had not objected to this practice in the past, indicating consistency. The High Court concurred with the Tribunal's reasoning, dismissing the appeal for lack of substantial legal questions.

In summary, the High Court upheld the Tribunal's decision, emphasizing the lack of professional or technical services in the reimbursement of expenses to affiliated colleges by the Assessee-University. The judgment clarified the interpretation of Section 194J and affirmed the Tribunal's jurisdiction in determining tax deductibility based on the nature of services provided, ultimately dismissing the appeal for lack of merit.