2014 (9) TMI 1275 - AT - Income Tax

TDS u/s 194J - disallowance made u/s. 40(a)(ia) on account of payments made for services of market survey - HELD THAT - Fee for professional services-FPS is defined in the Explanation to section 194J and it is exhaustive definition and of course, with the power to notify the professions. Therefore, the definition is exhaustive in form in view of the use of expression means and inclusive in substance as the Board has power to extend the list of professional services. As per the said Explanation qua fee for professional services, the services rendered by a person in the course of carrying on listed professions and other notified professions constitutes fee for professional services and thus the payments in connection with such services attracts the provisions of section 194J - The payer is legally bound to make TDS at the rate of 10 per cent of such payment. We have also examined the notification issued by the Board for the purpose of Explanation (a) to section 194J vide Notification No. S.O. 2085(E), dated August 21, 2008 and find the Board notified the services rendered by following persons in relation to the sports activities as professional services for the purpose of the said section, namely, sports persons, umpires and referees, coaches and trainers, team physicians and physiotherapists, event managers, commentators, anchors and sports columnists. As decided in VYSYA BANK LIMITED. 2005 (9) TMI 55 - KARNATAKA HIGH COURT when the definition of a word begins with means it is indicative of the fact that the meaning of the word has been restricted; that is to say, it would not mean anything else but what has been indicated in the definition itself. We find that no material was brought before us to show that market survey has also been notified as professional service within the meaning of section 194J - In absence of any such material brought before us, in our considered view, market survey is not covered by the provisions of section 194J - Consequently, the orders of the lower authorities in disallowing the expense are not sustainable. We, therefore, delete the disallowance and allow the ground of appeal of the assessee.

Summary

Issues involved: Disallowance under section 40(a)(ia) for payments made to individuals for market survey services.

Analysis:
1. The primary issue in this appeal was the disallowance made under section 40(a)(ia) of the Income Tax Act for payments made to individuals for market survey services. The Assessing Officer disallowed a sum of Rs 1,80,000 for payments made to two individuals for market survey services, citing non-deduction of TDS under section 194J. The contention of the assessee was that the market survey payments were not covered under section 194J, thus challenging the disallowance.

2. The Commissioner of Income Tax (Appeals) upheld the disallowance, stating that the payments made for market survey services were for professional work and hence were liable for TDS under section 194J. The crucial question for adjudication was whether the market survey fee paid by the assessee qualified as a professional service within the ambit of section 194J.

3. Section 194J of the Income Tax Act defines fees for professional services as services rendered by individuals in specified professions, including legal, medical, engineering, architectural, and other professions notified by the Board. The definition is exhaustive and includes services in professions like accountancy, technical consultancy, interior decoration, and advertising. The payer is obligated to deduct TDS at a rate of 10% for payments related to such services.

4. The ITAT Ahmedabad, after examining the relevant provisions and notifications, concluded that market survey services were not notified as professional services under section 194J. Citing the absence of material indicating market survey as a notified professional service, the tribunal held that the disallowance of Rs 1,80,000 was unwarranted. Consequently, the ITAT allowed the appeal of the assessee and deleted the disallowance amount.

5. The decision highlighted the importance of the exhaustive definition of professional services under section 194J and emphasized that services not specifically notified do not fall within the purview of TDS obligations. The judgment underlined the necessity for services to be explicitly mentioned or notified to attract TDS provisions, ensuring clarity and adherence to the statutory requirements.

6. Ultimately, the ITAT's ruling in favor of the assessee underscored the significance of precise legal definitions and notifications in determining the applicability of TDS provisions, providing a clear interpretation of the law to resolve the dispute regarding the disallowance of payments for market survey services.