2017 (10) TMI 483 - HC - Income Tax

TDS u/s 194J - liability to deduct tax at source for license fees paid to IRCTC - Held that - Under sub-section (1) of Section 194C, any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract between the contractor and the specified person is required at the time of credit of such sum in the account of the contractor or at the time of payment to deduct tax at specified rate. The Tribunal was thus right in observing that section 194C of the Act would apply in case of a payment being made by a contractor to a contractee and not vice-versa. In the present case, the payment of licence fee was made by the contractee to the contractor and therefore section 194C of the Act would not apply. We are broadly in agreement with the view of the Tribunal. In plain terms, section 194C of the Act does not cover the present situation where the assessee was making payment of licence fee to the IRCTC for catering service - Decided in favour of assessee.

Summary

Issues:
Whether the assessee is liable to deduct tax at source for license fees paid to IRCTC?

Analysis:
The case involved tax appeals filed by the Revenue challenging a judgment of the Income Tax Appellate Tribunal regarding the liability of the assessee to deduct tax at source for license fees paid to IRCTC. The Revenue argued that the assessee should have deducted tax at source under section 194J of the Act, failure of which would result in disallowance under section 201. A similar issue was previously considered by the Court in a different context. The Court observed that the requirement for deduction of tax under section 194J does not apply in the present case where the assessee was making payments of license fees to IRCTC for catering services. The Court highlighted that section 194C, which pertains to deductions on payments to contractors, does not cover situations where the payment of license fee is made by the contractee to the contractor. The Court agreed with the Tribunal's view that section 194C does not apply in such circumstances and dismissed the tax appeals.

In summary, the main issue revolved around whether the assessee was obligated to deduct tax at source for license fees paid to IRCTC. The Court analyzed the relevant provisions of the Income Tax Act, specifically sections 194J and 194C, to determine the applicability of tax deduction requirements in the given scenario. The Court clarified that section 194C does not cover situations where the payment of license fee is made by the contractee to the contractor, as in the present case. The Court upheld the Tribunal's decision and dismissed the tax appeals, emphasizing that the requirement to deduct tax at source did not apply in this context.