2015 (6) TMI 236 - AT - Income Tax

Liability to TDS u/s 194J - payment of service charges to Chhattisgarh State Industrial Development Corporation Ltd - whether the nature of the payment is Professional fee? - CIT(A) deleted tds liability as the service charges paid by treating the same as payment to govt. - Held that - As decided in assessee s own case wherein on similar issue on perusal of the remand report by the AO, find no mention about to whom the lease rentals were paid. It only deals with payment of service charges. Even so far as payment of service charges are concerned, it is the contention of the ld AR that it has been paid to the District Administration as per Rule 10 of the Industrial Policy of Govt. of Chattisgarh. In fact, the CIT (A) has also totally ignored this remand report submitted by the AO. Considering the totality of facts and the circumstances of the case, we deem it just and proper to remit these matters to the file of the AO for verifying the fact to whom the lease rentals and services charges have been paid. Thus respectfully following the decision of the Coordinate Bench, we deem it just and proper to remit these matters to the file of the AO for verifying the fact to whom the lease rentals and services charges have been paid - Decided in favour of revenue for statistical purposes

Summary

Issues:
1. Whether the payment made by the assessee to Chhattisgarh State Industrial Development Corporation Ltd. for lease rentals and service charges should have been subjected to deduction of tax at source under section 194J of the Income Tax Act.
2. Whether the CIT (A) erred in canceling the levy under section 201(1) and 201(1A) of the Income Tax Act.

Analysis:

Issue 1:
The appeal by the Revenue was against the order of the CIT (A)-V Hyderabad regarding the deduction of tax at source for payments made by the assessee to Chhattisgarh State Industrial Development Corporation Ltd. The Assessing Officer held that the payment should have been subjected to TDS under section 194J of the Act as professional fees. The assessee contended that the payments were made to the government of Chhattisgarh and not to CSIDC directly, hence no TDS was required. The CIT (A) found that the amounts were paid for land acquisition, not governed by section 194J, and that CSIDC acted on behalf of the government. The CIT (A) agreed with the assessee's contentions and canceled the levy under section 201(1) & 201(1A) of the Income Tax Act.

Issue 2:
The Revenue raised grounds against the CIT (A)'s decision, arguing that CSIDC is a separate legal entity assessed to tax and not part of the State Government, hence the provisions of section 194J should apply. The Tribunal referred to a similar case where the issue was remitted to the AO for verification of payment recipients. Following the decision of the Coordinate Bench, the Tribunal remitted the matter to the AO for verification of to whom the lease rentals and service charges were paid, setting aside the CIT (A)'s orders. The AO was directed to decide the issue afresh after verifying the payment recipients.

In conclusion, the Tribunal allowed the appeal filed by the Revenue for statistical purposes, remitting the matter to the AO for further verification and decision.