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2021 (12) TMI 18 - HC - Income TaxTDS u/s 194D - Default u/s 201(1) - payment of insurance commission to its agents - assessee deducted TDS on the net amount of insurance commission after excluding the service tax component - AO opined that TDS was required to be deducted on the gross insurance commission including the service tax component as required u/s 194D - HELD THAT - The obligation to deduct is on the person who is paying and the deduction to be made at the time of making such payment. Factually and admittedly no amount has been paid to the agents by respondent as a reimbursement of expenses incurred by agent in the foreign travel. Respondent had made arrangement for foreign travel for all the agents and paid expenses directly to those service providers. Therefore as no amount was paid to the agents by respondent, obligation to deduct income tax thereon at source also would not arise. We disagree with the view expressed by the Assessing Officer and concur with the view expressed by the CIT(A) as well as ITAT (though its reasons are different from our reasons).
Issues:
1. TDS deduction on insurance commission. 2. TDS deduction on technical services expenses. 3. TDS deduction on foreign travel expenses. 4. Appeal against CIT(A) order. 5. ITAT decision and substantial questions of law. Analysis: 1. The case involved a dispute regarding the deduction of Tax Deducted at Source (TDS) on insurance commission paid by the respondent. The Assessing Officer contended that TDS should be deducted on the gross insurance commission, including the service tax component, as per Section 194D of the Income Tax Act. However, the CIT(A) ruled in favor of the respondent, stating that the service tax on insurance commission is the liability of the respondent and not the agents, hence no TDS was required on the service tax component. 2. Another issue arose concerning the deduction of TDS on technical services expenses paid by the respondent. The Assessing Officer believed that these expenses were of a technical nature and should be liable for TDS under Section 194J of the Act. However, the CIT(A) disagreed, stating that the expenses were not in the nature of professional and technical services under Section 194J, and the respondent correctly deducted TDS under Section 194C. 3. The third issue revolved around the deduction of TDS on foreign travel expenses incurred by the respondent for its agents. The Assessing Officer argued that these expenses should be covered under Section 194D of the Act. The CIT(A) upheld this view, stating that TDS should be deducted on foreign travel expenses. However, the CIT(A) also noted that expenses related to the foreign travel of the respondent's own employees should be excluded while computing the default of tax under Section 201(1) of the Act. 4. The respondent appealed against the CIT(A) order before the Income Tax Appellate Tribunal (ITAT). The ITAT dismissed the appeal filed by the Revenue, upholding the CIT(A) order regarding the service tax component of insurance commission and the deduction of TDS on technical services expenses. The ITAT also ruled that foreign travel expenses organized by the respondent were not liable for TDS under Section 194D. 5. The appellant raised substantial questions of law regarding the interpretation of Section 194D, the applicability of Circulars issued by the CBDT, and the nature of payments made for technical services. However, the court concurred with the ITAT's view on these issues. Ultimately, the appeals were deemed devoid of merits and dismissed with no order as to costs.
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