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TMI Blog2016 (5) TMI 1500X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We dismiss the ground no 1 raised by the revenue by upholding the order of FAA on this point. Event management expenses attract the provisions of section 194C or 194J - HELD THAT:- 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. Accordingly we dismiss the ground as raised by the revenue. Applicability o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idated order. Appeal wise adjudication is given in the succeeding paragraphs. 2. Firstly, we shall take up the appeal ITA No.3009/M/2013, which is filed by the department on 18.4.2013 against the order of the CIT (A)-14, Mumbai dated 28.1.2013 for the assessment year 2008-2009. In this appeal, department raised the following grounds which read as under:- 1. Ld CIT (A) has erred in law and on facts of the case is not correctly appreciating the nature of services received by the assessee by incurring data storage expenses which requires certain parameters of technical / marginal skill of highly qualified specialized competency and falls within the purview of section 194J and not u/s 194C of the Act. 2. The Ld CIT (A) has erred in law and on facts of the case in not correctly appreciating the nature of services received by the assessee by incurring event management expenses which requires certain parameters of technical / managerial skill of highly qualified specialized competency and falls within the purview of section 194J and not u/s 194C of the Act. 3. The Ld CIT (A) has erred in law and on facts of the case in deleting the short deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow cause as to why the assessee has not deducted the TDS on the gross amount of insurance commission, which is the requirement of section 194D of the Act. In this regard, after considering the submissions / reply of the assessee, AO passed order u/s 201(1) of the Act holding that there was a short deduction of TDS on payments made for outsourcing expenses; data storage charges; expenses on event management and commission to agents( service tax component reduced from the gross commission). Accordingly, AO computed and determined the non-deduction and short deduction of tax u/s 201(1) of the Act at ₹ 8,33,23,790/- and passed order dated 30.3.2011. Aggrieved by the order of AO, assessee carried the matter in appeal before the first appellate authority. 4. During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) allowed the assessee s appeal on the issues of (i) TDS on outsourcing expenses (paras 5 and its sub-paras of the CIT (A) s order are relevant); (ii) TDS on Data Storage Charges (paras 6 and its sub-paras of the CIT (A) s order are relevant); (iii) Event management expenses (paras 7 and its sub-paras o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee could not be considered as professional services or technical services.......no professional qualification was required for giving such services and hence, there was no liability to deduct tax under section 194J..... . Assessee also relied on the CBDT Circular No.1 of 2008, dated 10.1.2008, wherein it was clarified that since the arrangement between the customers and cold storage owners are basically contractual in nature, the provisions of section 194C will be applicable... . Thus, before the CIT (A), assessee reiterated that the assessee could not be treated as 'assessee in default u/s 201(1) of the Act and it correctly applied the provisions of section 194C of the Act. After considering the above submissions and replies of the assessee filed during the proceedings u/s 201(1), ld CIT (A) allowed the appeal of the assessee on this issue by observing and holding as under: 6.10 I have considered the facts of the case, the written submissions of the appellant as well as the order of the AO on this issue. In this case, the issue for consideration is as to whether the said payments made by the appellant would constitute 'fees for technical services' as de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration and business services which included sorting of inward outward data, storage of records and scanning in a special manner so that data could be retrieved when required etc were purely of technical nature as the same required certain degree of managerial skills to follow the rules and procedures and carrying out the work in some special manner. The ld DR thus argued that that since these services involved special managerial skills to carry out the work in specialised manner, these were liable to TDS under the provisions of section 194J of the act and not u/s 194C as has been done by the assessee. Finally,while relying on the order of AO, Ld DR prayed for setting aside the order of CIT(A) by restoring that of AO. 8. Per Contra ld counsel for the assessee heavily relied on the decision of the CIT (A) and reiterated the submissions as made before the lower authorities. The learned counsel for the assessee submitted that the services outsourced and paid for by the assessee included processing charges, call centre operations, data sorting, document scanning,storage of data and other business services etc for which contracts were entered into with the various parties for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion that these are technical services and were required to be subjected to TDS under the provisions of section194J of the Act and finally treated the assessee in default under the provisions of section 201(1) of the Act and raised the demand accordingly. The ld 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15;fees for technical services and therefore, the provisions of section 194J were not applicable. Regarding the reimbursement of expenses, assessee relied on a number of decisions. Thus, it was contended before the CIT (A) that since, no managerial services were provided by the RTTPL, therefore, the payment made to them was not liable to TDS u/s 194J of the Act and the assessee was wrongly treated as 'an assessee in default u/s 201(1) of the Act. After considering the above submissions of the assessee, CIT (A) granted relief by observing and holing vide paras 7.8 to 7.11 of his order as under:- 7.8 I have considered the facts of the case, the written submissions of the appellant as well as the order of the AO on this issue. It is seen that the appellant had organised conference at Agra and the contract for managing this event was given to Reliance Transport and Travels Pvt. Ltd. (RTTPL). The appellant made payment ₹ 1,69,08,818/- to RTTPL for these services. The appellant has deducted tax at source as per the provisions of section 194C of the Act. It is thus evident that the payment has been made towards the event management services provided by RTTPL. The ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk contracts'. Although, in the above circular, no clarification is given in respect of composite event management services, from the answers to above questions in the said circular, it is evident that event management services cannot be said to involve any high level of managerial or technical skills and these are in the nature of simple 'work contracts'. In the case of the appellant, RTTPL has provided the services of ticketing, booking of hotels, organising of the conference, catering etc to the technical skills. Neither any technical knowledge or training has been provided to the personnel who participated in the conference. Hence, in my opinion, the services rendered by RTTPL are simply in the nature of 'works contract' and I hold accordingly. Since, the appellant has already deducted tax at source under section 194C, the appellant cannot be held to be 'an assessee in default'. 7.11. The demand of ₹ 19,15,759 /- raised by the AO is hereby deleted on merits.‖ 12. Aggrieved with the above decision of the CIT (A), Revenue is in appeal before the Tribunal. The ld DR submitted before us that it is not a case of simple bookin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bursement 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. Accordingly we dismiss the ground as raised by the revenue. 15. Ground nos.3 and 4 relate to applicability of TDS provisions u/s 194D of the Act on Service Tax element in respect of insurance commission . Briefly stated relevant facts in this regard are that the assessee is engaged in the business of life insurance and markets its products through insurance agents as well as its own direct sales force. During the course of survey, AO noticed that while making payment of insurance commission in case of licensed agents, the assessee deducted TDS on the net amount of insurance commission arrived at after excluding service tax component amounting to ₹ 23,54,72,978/- for the present assessment year. AO opined that TDS is required to be deducte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility to discharge the service tax on the commission paid to insurance agents is that of the insurance company and not of insurance agents. Assessee also relied on various Circulars of the Service Tax Authorities in relation to insurance business in support of his above contentions. Assessee also discussed Rule 4A of the Service Tax rules, 1994 and reiterated that an insurance agent is the person, who provides insurance auxiliary services and the life insurance company, who appoints such agents, is liable for paying the service tax and therefore, the amount of service tax is not the 'income in the hands of the insurance agents. Therefore, the provisions of section 194D of the Act do not apply in respect of the amount paid by the assessee to the insurance agents, which is their income. Assessee relied on the decision in the case of MEIL-SEW-MAYTAS-BHEL(JV) VS ITO IT APPEAL NOS 63 TO 76 (HYD.) OF 2012 [ITAT HYDERABAD] wherein it was held that ‗when a particular sum is not income at all for an assessee, there is no requirement to make TDS . Further, assessee discussed the provisions of Chapter XVII-B of the Act, which are applicable in case of payment of income in the ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same are extracted as under:- 8.23 I have considered the facts of the case, the order of the AO, the written submissions and the arguments of the AR on this issue. The appellant is engaged in Life Insurance Business through a network of brokers and agents. The Life Insurance agents do not pay any service tax as it has to be paid by Life Insurance Company under reverse charge mechanism. As per the Service Tax Regulations, the service tax on insurance commission payable to Insurance Agents is required to be paid by the Insurance Company as per section 68(2) of the Service Tax Act read with Rule 2(1)(d)(ii) of Service Tax Rules, 1994. The clause (iii) of Rule 2(1 )(d) of the Service Tax Rules 1994 is under: person liable for paying the service tax means- (iii) in relation to insurance auxiliary service by an Insurance agent, any person carrying on the general insurance business or life insurance business, as the case may be, in India. 8.24 The Government has notified insurance companies to discharge the liability of service tax on commission paid to insurance agents. The same is also clarified in the clarification on the scope of the term for l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee while referring to page no 76 and 77 of the paper book no 1 {circular no 4/2008 dated 28.04.2008 and circular no 1/2014[F.No. 275/59/2012-IT(B)] dated 13.1.2014}, submitted that these circulars have set at rest the controversy of TDS on service tax though brought out with reference to the service tax on rent wherein it has been specifically clarified that the service tax paid by the tenant does not partake the character of ―income ― of the landlord and the landlord is only acting as a collecting agency for the Government of collection of service tax and thus it has been decided that the TDS would be required to be deducted on rent paid/payable without including service tax. 20. We have considered the rival submissions and arguments and also perused the relevant materials on records, orders of authorities below. The AO while referring to the provisions of section 66 came to the conclusion that the TDS is required to be deducted on the gross amount of commission paid including the service tax component which was reversed by the CIT(A).Now the issue before us is whether TDS is required to be deducted on the service tax component on the commission paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similarly in circular no 1/2014[F.No. 275/59/2012-IT(B)] dated 13.1.2014 the CBDT has clarified that TDS is required to be deducted on the amount paid/payable under an agreement/contract between the payer and the payee without including the service tax amount. The relevant extract is reproduced as under:- 2. Attention of CBDT has also been drawn to the judgement of the Hon'ble Rajasthan High Court dated 1- 7-2013, in the case of CIT (TDS) Jaipur v. Rajasthan Urban Infrastructure (Income-tax Appeal No.235, 222, 238 and 239/2011), holding that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service tax component u/s 194J of the Act. 3. The matter has been examined afresh. In exercise of the powers conferred under section 119 of the Act, the Board has decided that wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter X ..... X X X X Extracts X X X X X X X X Extracts X X X X
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