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TMI Blog2016 (5) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (A) has erred in law and on facts of the case in deleting the short deduction u/s 194D by holding that the service tax liability in the hands of the assessee is not income of the agents and no TDS is liable to be deductible on the income without appreciating the facts clearly brought out by the AO in the order u/s 201(1) of the Act. 4. The Ld CIT (A) has erred in law and on facts of the case in not appreciating correctly that the interpretation of Circular No.4/2008 dated 29/4/2008 of CBDT r.w. clarification vide circular no.275/73/2007 IT(B) dated 30/6/2008 wherein it is emphasized that the circular no. 4/2008 clearly speaks of section 194I only and this circular is not applicable to section 194J and the same analogy is applicable to other sections of TDS which also include the provisions of section 194D of the Act. 5. The Ld CIT (A) has erred in law and on facts of the case in deleting the tax by way of short deduction without properly appreciating the factual and legal matrix of the case as clearly brought out by the AO in order u/s 201(1) of the Act. 3. The facts in brief are that the assessee is engaged in the business of Life Insurance . A survey action u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt); (iii) Event management expenses (paras 7 and its sub-paras of the CIT (A) s order are relevant); (iv) TDS on Service Tax Element in respect of the insurance commission (paras 8 and its sub-paras of the CIT (A) s order are relevant). Aggrieved with the said decision of the CIT (A), Revenue is in appeal before the Tribunal by raising the above mentioned grounds. 5. Ground no.1 relates to whether the data storage charges attracts the TDS provisions u/s 194C, as applied by the assessee, or the TDS provisions u/s 194J as invoked by the AO. During the course of survey, AO observed that the assessee deducted and deposited TDS of ₹ 1,36,561/- on data storage charges u/s 194C of the Act on payment of ₹ 60,39,563/-. In this regard, after considering the submissions of the assessee, various documents including chart of services outsourced including agreements with all the parties , sample copies of bills, the AO came to a conclusion that the payment made by the assessee included the payment for data sorting; data storage, which may include scanning and storing of data in a special manner and the same required technical / management skills. Therefore, AO concluded that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for technical services' as defined in the Explanation 2 to Section 9(1)(vii) of the Act. The AO is of the view that data sorting also requires certain parameters to be followed on the basis of which data sorting is done. These activities require certain technical managerial skills. On the other hand the case of the appellant is that from the scope of various aforesaid works outsourced, it is evident that none of these works fall within the scope of technical services. In this case, the appellant company has entered into contracts with M/s Writer Information Management Services. I have gone through the details of data storage charges of ₹ 60,39,563/- and also the agreements with M/s Writer Information Management Services as well as the sample invoices in respect of the aforesaid expenses. The description of the services provided by M/s Writer Information Management Services as per the contract is: Document management services Document delivery and collection services Document storage 6.11 The above activities mainly involve document management services, document delivery and collection services and document storage etc in respect of the life insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties for carrying out and rendering these services which in no way could be termed as technical services and were simply of the nature of work contract. The ld authorised representative ,while referring to the provisions of section 9(1)(vii) of the Act explanation 2 of the Act , submitted that the technical services included managerial , technical and consultancy services and thus the services as rendered to the assessee such as data storage, scanning and sorting could not be termed as technical and managerial services as no specialised qualification or technical skill involved. Finally the ld counsel argued that the services availed by the assessee were involving machines and materials with some staff requiring no technical or professional qualification. These were simply in the nature of work contract and the assessee rightly applied deducted the TDS as per the provisions of section 194C of the Act and since the order passed by the CIT(A) did not suffer from any infirmity legal or otherwise and therefore be upheld. 9. We have heard both the parties and perused the orders of the Revenue Authorities as well as the relevant material placed before us. From the orders of authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o opine that the order of CIT(A) is correct and deserved to be upheld.In view of the above facts, we dismiss the ground no 1 raised by the revenue by upholding the order of FAA on this point. 10. Ground no.2 relates to whether event management expenses attract the provisions of section 194C or 194J of the Act. Brief facts in this regard are that the assessee made payment of ₹ 1,69,08,818/- to Reliance Transport and Travels Pvt Ltd (RTTPL). During the course of survey, on perusal of the relevant details in this regard, AO observed that event management expenses includes ticketing , hotel accommodation and tour leader professionals etc. Accordingly assessee was asked to show-cause as to why it should not be held as assessee in default since, the assessee deducted TDS u/s 194C of the Act in respect of event management expenses instead of section 194J of the Act. In this regard, after considering the submissions of the assessee, AO concluded that event management service was not only booking of ticket and hotels and includes management of entire event from beginning to end through its tour leaders and event management professionals. Therefore, the services provided by RTTPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lve any high level of technical or managerial skill. Basically, the work of an event management company/tour operator is to provide facilities of ticketing, hotel booking, catering and providing certain other services respect of organising the event, in this case the conference of the appellant. In the regard, Circular NO.715 dated 08/08/1995 issued by CBOT can be usefully referred to. In question No. 6, the issue regarding ticketing services has been clarified in the following manner: Question 6: Whether payment under a contract for carnage of goods or passengers by any mode of transport would include payment made to a travel agent for purchase of a ticket or payment made to a clearing and forwarding agent for carriage of goods? Answer: The payments made to a travel agent or an airline for purchase of a ticket for travel would not be subjected to tax deduction at source as the / privy of the contract is between the individual passenger and the airline/travel agent, notwithstanding the fact that the payment is made by an entity mentioned in section 194C(1). The provision of section 194C shall, however, apply when a plane or a bus or any other mode of transport is chartere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were also provided for the event management and therefore the provisions of section 194J of the Act were rightly invoked by the AO as it involved high level o skills and professionalism and prayed that the order of AO be restored by setting aside the order of FAA. 13. Per contra, during the proceedings before us, Ld Counsel for the assessee heavily relied on the order of the CIT (A) and reiterated the submissions as made before the lower authorities. The ld authorised representative of the assessee submitted before us that there services provided consisted of ticketing, hotel booking and team leaders and thus it was simple contractual services involving no technical or professional skills. The ld counsel for the assessee that the total payment to RTTPL included ₹ 90,23,695/- for domestic ticketing, ₹ 77,65,123/- for hotel re-imbursement and ₹ 1,20,000/- for tour leaders expenses which in no manner or by any stretch of reasoning can be termed as consultancy or technical or professional services and the provisions of section 194J were wrongly applied by the AO by treating the assessee in default u/s 201 but did not raise any demand on this issue. To support his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 194D of the Act. In this regard, after considering the submissions of the assessee, AO came to the conclusion that as per the provisions of 194D any person, responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise for soliciting insurance business, shall at the time of credit of such income to the account of payee shall deduct income tax thereon. Since, the assessee while discharging the liability on behalf of the service agents excluded the service tax component for the purpose of TDS, AO treated the assessee as an assessee in default within the provisions of section 201 of the Act and AO worked out the TDS default on this account at ₹ 5,33,58,178/-. Aggrieved, assessee carried the matter in appeal before the first appellate authority. 16. During the proceedings before the first appellate authority, assessee submitted that considering the nature of business of the assessee i.e life insurance business, assessee sells its products / policies through a wide network of agents and brokers. Assessee makes payments to the said agents / brokers for rendering their services. It is the submission of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking Chapter XVII-B of the Act, wherein it was indicated that before deduction of tax at source on the amount to be paid to the recipient, it must be shown that the amount received by the recipient shall falls within the ambit of the charging section as per the provisions of the Act. In this regard, he relied on the judgment of the Apex Court in the case of CWT vs. Ellis Bridge Gymkhana, Etc (229 ITR 1) (SC). Before the CIT (A) it is the case of the assessee that the assessee correctly deducted the tax at source under the provisions of section 194D of the Act on the income paid to or income received by the insurance agents and therefore, it should not be considered to be an assessee in default under section 201 of the Act. It was reiterated before the CIT (A) that the income as stated in section 194D and 194-I of the Act refers to the amount paid as income to the payee. Income paid by the assessee to its insurance agents was the amount of commission and not the amount of service tax, which is paid by Reliance Life direct to the Government. It is further submitted that when the language of the provision is clear, tax liability cannot be fastened on the person unless the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person liable to pay service tax will be the concerned insurance company who has appointed the agent. Thus, it is evident that the appellant is legally liable to deposit the said service tax with the Government and the Insurance agent has no obligation or liability for the same. There is no dispute that the said service tax amount is not paid to or received by the Insurance agent. 8.25 The Life Insurance Agents also do not issue any invoice mentioning the amount of service tax nor is it their obligation to pay service tax to the Government Treasury. Accordingly, the said service tax amount which is paid directly by the appellant to the Government can neither partake the character of income in the hands of life insurance agent nor it is his liability. I concur with the Appellant's arguments on the said aspect. 18. The ld DR submitted before us that the service tax is part of the insurance commission paid to the agents and therefore liable for deduction of TDS u/s 194D of the Act whereas the assessee while deducting the TDS excluded the service tax component commission paid to agents which has resulted in short deduction. He therefore strongly relied on the order of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f convenience :- Insurance commission. 194D. Any person responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : Similarly the provisions of section 194 I of the Act are also reproduced below for the sake of better understanding of the issue in hand:- 194I. Rent.- Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of- 22. A careful perusal of the above provisions reveal that the TDS is required to be deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax is not subject to deduction of tax at source and the circular no 1/2014[F.No. 275/59/2012-IT(B)] dated 13.1.2014 has been brought by the CBDT after the above decision of the high court and also referred to in para no 2 of the circular. After considering the facts of the case before us in the light of circulars as referred to above and decision of the Rajasthan High Court and also the relevant provisions of the Finance Act which provides for Reverse Charge Mechanism , we are of the opinion that the order of CIT(A) is correct and does not suffer from any infirmities and we ,therefore , uphold the same. In result , the appeal of the revenue is dismissed. ITA No:3010/M/2013 AY 2009-10 ITA No: 3011/M/2013 AY 2010-11 The issues involved in these two appeals are identical to the issues decided by us in ITA No:3009/M/2013 AY 2008-09 and therefore our findings on the various grounds of appeals in ITA No 3009/M/2013 would , mutatis mutandis, apply to these appeals as well. Our findings on ground no 1 in ITA No 3009/M/2013 would apply to ground no . 1 2 in ITA 3010/M/2013 3011/M/2013. In result both the appeals of the revenue are dismissed. Order pronounced in the open ..... X X X X Extracts X X X X X X X X Extracts X X X X
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