2016 (5) TMI 1254 - AT - Income Tax

TDS u/s 194J OR 194C - nature of services received by the assessee by incurring data storage expenses - Held that - CIT(A) after having examined and perused agreements with the service providers and after going into the various services provided reached a conclusion that the outsourced services do not require any kind of technical and professional expertise and are just simple and repetitive nature of work such as document storage, documents delivery and collection services and documents management services. The ld CIT(A) examined the contract with Writer Information Management Services and found that very basic services were contracted and rendered by the said party involving no special technical skill or professional qualification. On the basis of the rival arguments and perusal of the various records as placed before us we find that the work assigned to the service provider was not a technical or professional work which required special skills but simple, basic and repetitive nature of work and we are inclined to opine that the order of CIT(A) is correct and deserved to be upheld - Decided against revenue TDS u/s 194J OR 194C - event management expenses - Held that - The assessee has paid ₹ 1,69,08,818/- to M/S Reliance Transport and Travel Pvt Ltd as reimbursement expenses and tour leader expenses. These reimbursements were made by the assessee to the said company for arranging tickets, hotel bookings and providing leaders to see the arrangement at Agra. As is seen from the nature of services availed , we do not find any sort of professional or technical or consultancy but rather routine services which are provided by the travel agents in the normal course of business which were purely of contractual nature. It can be seen from nature of reimbursement for the services availed that these are in the nature of simple contractual case where only the provisions of 194C could be applied to deduct and deposit TDS and not 194J which deals with the deduction and deposit of TDS in case of technical, professional and consultancy services. Looking to the facts in the light of provisions of section 194C vis a vis 194J we find that the order of FAA is correct and needs to be upheld. - Decided against revenue Applicability of TDS provisions u/s 194D of the Act on Service Tax element in respect of insurance commission - Held that - TDS is required to be deducted and paid to the Govt Treasury on the income payable only which means that certainly the service tax component on the commission is not liable to TDS as the same is not an income of the assessee. The provisions of section 194D and 194I have to be seen in the light of the two circulars no 4/2008 dated 28.04.2008 and circular no 1/2014 F.No. 275/59/2012-IT(B) dated 13.1.2014. In circulars no. 4/2008 dated 28.04.2008 CBDT has clarified that TDS is not required to be deducted on service tax on rent u/s 194I.- Decided against revenue

Summary

Issues Involved:
1. Applicability of TDS provisions under section 194C vs. section 194J for data storage charges.
2. Applicability of TDS provisions under section 194C vs. section 194J for event management expenses.
3. Applicability of TDS provisions under section 194D on the service tax component of insurance commissions.

Detailed Analysis:

1. Applicability of TDS provisions under section 194C vs. section 194J for data storage charges:

The primary issue was whether the 'data storage charges' attract TDS provisions under section 194C, as applied by the assessee, or section 194J, as invoked by the Assessing Officer (AO). The AO observed that the assessee deducted TDS under section 194C for data storage charges, which the AO believed required technical/management skills and should thus fall under section 194J. The CIT (A), after examining the agreements and nature of services, concluded that the services involved were repetitive and did not require high-level technical or professional qualifications. Therefore, the CIT (A) held that the services fell under section 194C. The Tribunal upheld this decision, agreeing that the outsourced services were basic and repetitive in nature, not requiring technical or professional expertise, and thus correctly subjected to TDS under section 194C.

2. Applicability of TDS provisions under section 194C vs. section 194J for event management expenses:

The issue was whether the event management expenses paid to Reliance Transport and Travels Pvt Ltd (RTTPL) should attract TDS under section 194C or section 194J. The AO argued that the services provided by RTTPL were managerial and thus fell under section 194J. The CIT (A) found that the services provided, such as ticketing, hotel booking, and arranging conferences, did not involve high-level managerial or technical skills and were thus simple work contracts under section 194C. The Tribunal agreed with the CIT (A), noting that the services were routine and contractual, not involving technical or professional skills, and upheld the CIT (A)'s decision that TDS was correctly deducted under section 194C.

3. Applicability of TDS provisions under section 194D on the service tax component of insurance commissions:

The issue was whether TDS under section 194D should be deducted on the gross insurance commission, including the service tax component. The AO held that TDS should be deducted on the gross amount, including service tax. The CIT (A) disagreed, noting that the service tax on commission paid to insurance agents was the liability of the insurance company under the reverse charge mechanism, not the agents. Therefore, the service tax component did not constitute income for the agents and was not subject to TDS under section 194D. The Tribunal upheld the CIT (A)'s decision, referencing CBDT Circulars and relevant case law, which clarified that TDS should be deducted on the income component only, excluding service tax.

Consolidated Order:

For the assessment years 2008-09 to 2010-11, the Tribunal upheld the CIT (A)’s decisions on all issues. The data storage charges and event management expenses were correctly subjected to TDS under section 194C, not 194J, and the service tax component of insurance commissions was not subject to TDS under section 194D. Thus, the appeals filed by the department were dismissed.