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TMI Blog2019 (11) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... tes to Rs. 94 crores. (approximately) 3. The identical/ common basis of the three impugned orders adverse to the petitioner is (two fold) as under:- (a) the petitioner did not deduct the tax at source under the appropriate head of technical services under Section 194J of the Act (having made the deduction under Section 194C of the Act) on payment made to digital platforms such as M/s. Google India Pvt. Ltd. and others. This for advertisement placed by the petitioner for its clients on their platforms; and; (b) the petitioner did not deduct tax from provision made for payments to the various domestic suppliers. This resulted in dis-allowance of expenses under Section 40(a)(ia) of the Act on account of not having suffered tax deduction at source under Section 194J of the Act. Thus on the above two heads, the petitioner has been declared as "assessee in default" and demand of tax has been made by the respondent no.1 - Income Tax Officer. 4. The basis of the challenge to three impugned orders dated 9th September, 2019 is that they have been passed in the breach of principles of natural justice. This in as much as the petitioner's submission of not being liable to deduct tax unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in passing the three impugned orders viz: non-speaking order and improper exercise of jurisdiction to achieve collateral purposes. Therefore, if on examination of the case on the above touchstone alone, if we find merits in the Petitioner's submission on even one of two, will we exercise jurisdiction, else will dismiss the petition on ground of alternate remedy. 7. The brief facts leading to this petition are as under. (a) The petitioner is an advertising agency, which enables its clients to place/ display their advertisement on various media viz: print, T. V. etc. The Petitioner recover amount from its clients and makes payment to media owners for the advertisement of its clients, on its media. At the time of making payment, the Petitioner's clients deduct tax at source under Section 194C of the Act and the petitioner again deducts tax at source under Section 194C of the Act while making payment to the media owners. (b) However, on 24th May, 2019 show-cause notices for the Assessment Year 2017-18, 2018-19 and 2019-20 were issued by the respondent no.1 to the petitioner. The above notices called upon the petitioner to show-cause as to why it should not be treated as an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application for nil tax deduction at source to be done by its customers being rejected and instead directing the deduction at the rate of 1% in case of payments being made to the petitioner under Section 194H and 194C of the Act and 1.5% in respect of 194(IB) and 194J of the Act. The aforesaid decision was primarily arrived at by the respondent no.2 placing reliance on the tax orders dated 31st May, 2019 passed under Section 201(1) and 201A of the Act relating to Assessment Years 2017-18, 2018-19 and 2019-20 by Respondent No.1 - Income Tax Officer. This Court by an order dated 29th July, 2019 in Writ Petition No.l719 of 2019 set aside the order dated 4th June, 2019 as it found that the same was influenced by the order dated 31st May, 2019 of respondent no.1 under Sections 201(1) and 201A of the Act to deny Nil rate of tax deduction on amounts receivable by the petitioner from its customers. However, as the order dated 31st May, 2019 had been set aside in Writ Petition No.1788 of 2019, the respondent no.2 - Deputy Commissioner of Income Tax was directed to undertake a fresh exercise on the petitioner's application under Section 197 of the Act. Further, the above order i.e. on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , according to the petitioner it is not an assessee in default. In the said representation, it was the petitioner's contention that the payments made by it to TV, print, electronic and other medias for displaying of advertisement of the petitioner's clients were not in the nature of fees for technical services. Therefore, the payments made by the petitioner to the media owners cannot be subjected to deduction of tax at source under section 194J of the Act. In particular, the principal submissions of the petitioner that it was not a assessee in default were as under:(i) In view of CBDT Circular No. 715/1995 dated 8th August, 1995, which inter alia provides that the requirement of tax deduction at source would apply only when a client makes a payment to advertising agency. It would not apply when the advertising agency in turn makes payment to the media owner i.e. print and electronic media. Thus, no requirement to deduct tax at source. (ii) Without prejudice to the above, as a matter of abundant caution, the petitioner had deducted tax at source under Section 194C of the Act while making payment to the media owners. This as the payments made for advertising was for carrying out an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amination of identical services of online advertisement on a search engine is a service and not requiring human intervention. Therefore, is not in the nature of technical services. It is pertinent to note that the Petitioner pointed out that in the earlier order dated 31st May, 1999, (which was set aside by this Court's order dated 29th July, 2019), this decision was disregarded on the ground that payment was made to non-resident, failing to appreciate that it had in terms, dealt with the issue of technical services and on identical facts found that services are not in the nature of technical services. (vi) The Petitioner placed reliance upon the certificate provided M/s. Google India Pvt. Ltd., (which forms the bulk of the payment) that it had, in fact, paid the taxes on the payment received by them, thus in terms of proviso to section 201(1) of the Act, the petitioner could not be considered an assessee in default. In support, reliance is also placed upon the decision of the Supreme Court in Hindustan Coca Cola Beverage (P) Ltde., v/s. CIT 293 ITR 226 and of the Tribunal in the case of Vodafone Essar Ltd.v/s. ACIT 2011 (9) ITR 182, wherein it has been held that where the approp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, it is Section 194C of the Act, which is more specific and the same would apply. (iii) The decision of the Tribunal in the case of Right Florists Pvt. Ltd. (supra), that it dealt with on identical fact situation in the context of examining the nature of services rendered - not being technical was ignored. This on the ground that the service provider was with Non-Resident. However, failing to deal with the specific submission made that the above decision on examining an identical situation had held that the service is not a technical service. Thus, on the face of it, the impugned orders are in breach of natural justice being non-speaking orders and would warrant interference in writ jurisdiction. It is a clear case of a flaw in the decision making process. 9. It is clear from the impugned orders that the aforesaid submissions of the petitioner were not considered by the respondent no.1 - Income Tax Officer while passing the three impugned orders. Mr. Chhotaray seeks to rely upon the affidavit-in-reply filed by the respondent no.1 to support the impugned orders by seeking to meet the petitioner's objections. This certainly cannot be permitted. As held by the Supreme Court in Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed its reply as directed by the Court on 9th September, 2019 being the last date to file a representation. The respondent disposed of the same on 9th September, 2019. This in the absence of any statutory obligation or judicial directions to dispose of the show-cause notice by 9th September, 2019 itself. The Authority could take time, consider the submissions and call the party for further hearing before passing the impugned order. 11. It appears that the undue haste in passing the impugned orders dated 9th September, 2019 on the part of the respondent no.1 was only with the objective of using these orders declaring the Petitioner is an assessee in default, for the purposes of depriving the petitioner of its right to obtain certificates under Section 197 of the Act at Nil rate of tax deduction to be made by its customers. This is evident from the fact that on 29th July, 2019 when the Court set aside the earlier three orders dated 31st May, 2019 issued under Section 201(1) and 201(1A) of the Act in Writ Petition No.1788 of 2018, the Court had directed the petitioner to make a representation along with supportive material before the respondent no.1 - Income Tax Officer (TDS) with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only on determination of the petitioner's tax liability for the Assessment Years 2017-18, 2018-19 and 2019-20, could the respondent reduce the amount of tax to be deducted by the petitioner's customers while making payment to them. Thus, it seems likely that the entire exercise of passing the three impugned orders under Section 201 and 201(1A) of the Act was either a colourable exercise of power only with a view to ensure that no nil tax deduction certificate is issued under Section 197 of the Act or it could be on the basis of genuine misunderstanding of the respondent no.1 that he is required to pass an order before the certificate is issued under Section 197 of the Act. It was this undue haste that resulted in the Respondent No.1- the Income Tax Officer not dealing with the Petitioner's submissions in its entirety. Even otherwise, we are also unable to comprehend why the undue haste on the part of the respondent No.1 in passing the order under Section 201 and 201(1A) of the Act. This for the reason that even if the tax deduction certificates were issued under Section 197 of the Act before an order was passed under Section 201(1) and 201(1A) of the Act, it was always open to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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