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TMI Blog2016 (9) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee cannot be ruled out and Assessing Officer has made disallowance car allowance of car expenses @ 1/5th car expenses after recording a finding that similar disallowance made in Asst. Year: 2005-06 was not contested by assessee. However, we hold that the disallowance equal to 1/10th of total expenses in the case of assessee is a reasonable disallowance as has been held in the case of disallowance of Telephone expenses. - Decided partly in favour of assessee. TDS u/s 194C OR 194J - Disallowance u/s 40(i)(ia) - payment of liaison/professional charges - Held that:- In the present case admittedly payee has not carried out any physical work resulting into tangible work and has only provided services to the assessee which cannot be categorized under the provisions of Sec. 194C for the purpose of deduction of tax at source. Therefore, the provisions of Sec.194C are not applicable to the assessee. Not all kinds of advisory could qualify as technical services. For any consultancy to be treated as technical services, it would be necessary that a technical element is involved in such advisory. Thus, the consultancy should be rendered by someone who has special skills and exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r also made disallowance u/s 40(a)(ia) on payment paid to M/s Freight Link India amounting to ₹ 1,05,779/- which was made by assessee as liaison charges. The Assessing Officer held that this expenses were in the incurred for providing professional services rendered by M/s Freight Link India and were nature of professional fees on which the assessee was required to deduct TDS and since assessee had not deducted TDS on such payment the disallowance u/s 40(a)(ia) was made. Similarly, the Assessing Officer made a disallowance u/s 40(a)(ia) on an amount of ₹ 22,016/- which was paid by assessee to M/s Hira Printers. The Assessing Officer held that since the amount was paid for advertisement charges, therefore, assessee was required to deduct TDS which it had failed to deduct and therefore, he made a disallowance u/s 40(a)(ia). 4. Aggrieved the assessee filed appeal before learned CIT(A) and submitted various submissions. The learned CIT(A) upheld the disallowances made by Assessing Officer. However, in respect of disallowance out of Car expenses he directed the Assessing Officer to allow interest paid on Car Loan. 5. Aggrieved the assessee is in appeal before us. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been given in the explanation below. Sub-section (3) of Section 194J and the nature of service rendered by the above referred party is clearly not covered by Sec. 194J. Reliance in this respect was placed in the case of Siti Multimedia Network vs. ITO. Copy of which was stated to be placed at (PB page 22 to 27). 9. Without prejudice the learned AR submitted that the balance outstanding at the end of the year as on 31.03.2008 was only Rsw.30,319/- therefore, disallowance if any under the provisions of Sec.40(a)(ia) had to be restricted to this amount as the legislature has deliberately used the expression payable and therefore, section will not cover the amounts which have already been paid. Reliance in this respect was placed on the decision of Allahabad High Court in the case of CIT vs. M/s Vector Shipping Services Pvt. Ltd. reported at 85 CCH 201 where it has been held that provisions of section 40(a)(ia) will be applicable only to the amounts outstanding. The learned AR submitted that the SLP filed by Revenue against the order of Allhabad High Court has already dismissed by Hon ble Supreme Court and a copy of such order was placed at (PB page-33). 10. Regarding the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce as has been held in the case of disallowance of Telephone expenses. In view of above, Ground No. 1 to 3 are partly allowed. 14. As regards ground No.2 regarding disallowance u/s 40(a)(ia), we find that the amount of ₹ 1,05,779/- has been paid to M/s Freight Link India as liaisoning charges. The authorities below has held that TDS was required to be deducted from such payment, however, we find that the provisions of Sec.194C relating to payment to Contractors is not applicable to the assessee as the payee had not carried out any work as Contractor as any work as contained in the provisions of Sec.194C necessarily involve carrying out of some physical work. The decision of Hon ble Madras High Court in the case of Madras Bar Association and Ors. vs. Central Board of Direct Taxes and Ors. has specifically held that expression ,any work, in Sec.194C means work involving activities which are predominantly physical resulting into tangible work. In the present case admittedly payee has not carried out any physical work resulting into tangible work and has only provided services to the assessee which cannot be categorized under the provisions of Sec. 194C for the purpose of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of advisory could qualify as technical services. For any consultancy to be treated as technical services, it would be necessary that a technical element is involved in such advisory. Thus, the consultancy should be rendered by someone who has special skills and expertise in rendering such advisory. 17. Now in the present case we find that the liaisoning services are provided by deductee were neither managerial nor consultancy nor technical in nature and therefore, in view of the above, the assessee was not required to deduct TDS on such payment u/s 194J also. In view of the above, we are in agreement with the learned AR that the provisions of Sec. 194C and Sec. 194J were not applicable to the assessee as regards payment of liaisoning charges. 18. As regards the TDS on payment of ₹ 21,016/-, we find that it represents the amount paid to M/s Hira Printers for purchase of catalogue cum brochure and a copy of bill is placed at (PB page 36), therefore, we hold that this transaction is for purchase of an item which is out side the purview of Section 194C. Further, nothing has been placed on record to show that material was proved by the assessee. The Hon ble Punjab Haryan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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