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TMI Blog2016 (8) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue shared cannot be said to be payments for technical services rendered by ITGKs and VMOU to RKCL as held by the Assessing Officer. - Decided in favour of assessee. - D. B. Income Tax Appeal No. 109 of 2015 - - - Dated:- 8-1-2016 - Ajay Rastogi And J. K. Ranka, JJ. For the Appellant : R. B. Mathur, Advocate For the Respondent : -- JUDGMENT J. K. Ranka, J. 1. Instant Income-tax appeal under section 260A of the Income-tax Act, 1961 (for short Act ), is directed against the order dated February 13, 2015, passed by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (for short, Tribunal ), and is relevant for the assessment year 2009-10. 2. Brief facts relevant for disposal of the appeal are that the respondent is a private limited company promoted by the Government of Rajasthan, Maharashtra Knowledge Corporation Limited (MKCL), Pune, Rajasthan University, Jaipur, Maharana Pratap University of Agriculture and Technology, Udaipur, Vardhman Mahaveer Open University, Kota, Rajcomp, Jaipur and Centre for E-governance, Jaipur mainly imparting computer education to Government employees and students and other persons in the State of Rajasthan throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondent-assessee that wherever tax was liable to be deducted, it was deducted. However, the Assessing Officer was not satisfied with the explanation so offered and held that the respondent-company was under statutory obligation to deduct tax at source on fee payments and thus held that the respondent- assessee was liable for deduction of tax at source and demand along with interest at ₹ 23,32,708 was created. 4. The matter was carried in appeal before the Commissioner of Income- tax (Appeals), who after analysing various material on record and provisions of law, accepted the contention of the respondent-assessee. The matter was carried in appeal by the Revenue before the Tribunal and the Tribunal also upheld the finding of the Commissioner of Income-tax (Appeals) and thus dismissed the appeal of the Revenue. 5. Learned counsel for the appellant-Revenue contended that provisions of section 194J is quite clear and on perusal of the provisions of section 194J, it is abundantly clear that whatever amount was paid by the respondent to the recipients was liable for deduction of tax at source and contended that these agencies and centres are being paid for their serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learner, is transferred to the respondent which is shared among the three stakeholders. In our view, the transaction between the ITGK and RKCL and VMOU are not of a service provider or service receiver. The relation between these stakeholders is one of collaborators as per the agreement made and the revenue shared cannot be said to be payments for technical services rendered by ITGKs and VMOU to RKCL as held by the Assessing Officer. 7. Section 194J of the Income-tax Act provides as under : 194J. Fees for professional or technical services.-(1) Any person, not being an individual or a Hindu undivided family, who is respon sible for paying to a resident any sum by way of- (a) fees for professional services, or (b) fees for technical services, or (ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company, or (c) royalty, or (d) any sum referred to in clause (va) of section 28, shall, at the time of credit of such sum 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, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing NIIT courses under licence from respondent. One of the models being adopted by the respondent to run its business mainly in big cities was metro centre. Under the agreement the franchisees were providing NIIT courses under the licence from the respondent and the respective franchisees were to bring together their resources for the purposes of providing computer education to the students. The franchisees were required to provide the infrastructure facilities like classroom facility, equipment, furniture, fixture, administrative set up, etc., and it was the obligation of the franchisee to operate and manage the education centre on day-to-day basis. The respondent as the owner of the technical information was to provide the relevant course were for providing education to the students. Since the education centre was to run under the brand name of the respondent and the respondent was providing its valuable technical know-how and other intellectual rights to the franchisees, it was necessary on the part of the respondent to put in place certain restrictions on the running of the education centre in its name, brand, value, intellectual property rights as also the interest of st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source on the payments made to the various franchisees throughout the country of an amount having been debited to the extent of ₹ 6,38,64,018. The facts found were that the respondent-assessee in that case was a limited company engaged in providing education and training for various preparatory examinations like IIM, IIT, fashion designing courses, etc., and these services were provided across the country through various education centres run by the assessee itself owned by its franchisees and according to the Revenue, such payment came within the purview of carrying out a work in pursuance of a contract and accordingly was liable for deduction of tax at source under section 194C and since the assessee in that case did not deduct tax at source, accordingly by invoking provisions of section 40(a)(ia), disallowed the amount of ₹ 6,38,64,018. The High Court found that the agreement for permitting the payee to utilise the name and copy right of the assessee in the study material and in running coaching centres, were mutual rights, duties and obligations envisaged by the agreement, that a holistic appraisal of the agreement would show that it is a business arrangement and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s including the instant matter, the dominant purpose is to share the fee based on the agreements between the parties. 13. The hon'ble apex court in the case of CGT v. N. S. Getti Chettiar [1971] 82 ITR 599 (SC) elucidated the function of an inclusive definition in the following words (page 605) : As observed in Craies on Statute Law (sixth edition, page 213), an interpretation clause which extends the meaning of a word does not take away its ordinary meaning. An interpretation clause is not meant to prevent the word receiving its ordinary, popular and natural sense whenever that would be properly applicable, but to enable the word as used in the Act, when there is nothing in the context or the subject matter to the contrary, to be applied to some things to which it would not ordinarily be applicable. 14. The Commissioner of Income-tax (Appeals) as well as the Tribunal have also alternatively relied upon the judgment rendered by the hon'ble apex court in the case of Hindustan Coca Cola Beverage P. Ltd. v. CIT [2007] 293 ITR 226 (SC) to contend that where the deductee, recipient of income has already paid taxes on amount received from the deductor, the Revenue o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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