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TMI Blog2023 (1) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... section 44AA or of this section. The services in order to fall within the meaning of professional services for the purpose of triggering the provisions of Section 194J are either to be those which finds a specific mention in the Explanation (a) of the said section; or had been notified by the CBDT either for the purpose of Section 44AA or Section 194J of the Act. Not able to concur with the view taken by the lower authorities that the services rendered by the processing agency requires any professional expertise or skill, much the less those specified in Explanation (a) of Section 194J, AND also is unable to persuade myself to conclude that the services in question could be brought within the meaning of technical consultancy [as forms part of the definition of professional services in Explanation (a) of Section 194J], therefore, the same in my considered view could not have been brought within the meaning of Section 194J - We set-aside the order of the CIT(A) to the extent he had concluded that the assessee was liable to deduct tax at source on the payments made to the processing agency u/s.194J. As concluded that the services rendered by the processing agency, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot applicable under fact and circumstance, which deals with Disallowance under section 40(a)(ia) is not relevant to fact of the case to ascertain default under section 201(1) 201(1A). 5. Without prejudice, the learned CIT(A) is not justified in passing order without following the decision of Calcutta High Court in case of CIT v. S.K. Tekriwal [2014] 361 ITR 432, and merely relying on contradictory decision arrived at without considering president of different High court with regard to section 40(a)(ia). 6. The Appellant is not liable for deduction of any TDS as the assessee has made payment for purchase of products (answer sheets, marks sheet, OMR sheet), as per specification of the assessee, without any Job work. [i.e. contract for supply of material is contract for sale does not contract for technical services]. 7. Without prejudice, the learned Assessing officer is not justified in providing the part of the works (printing) as works contract and liable to TDS under section 194C and the balance part (such as scanning etc.) as professional under section 194J, when the entire work form part of one composite work. [i.e., contract for supply of material service being inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urged at the time of hearing of appeal, the Appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity. 3. Succinctly stated, the assessee which is a self-governing body under the State of Chhattisgarh and conducts examination for recruitment of employees was subjected to a TDS survey u/s.133A(2A) of the Act on 10.10.2017. During the course of survey proceedings certain infirmities were observed by the survey officials, viz. (i). that the assessee had failed to deduct and deposit tax at source on the payments made to caterer; (ii). that the deductor had failed to deduct tax at source on payments made under a confidential head to a processing agency in accordance with section 194J of the Act; and (iii). that the deductor had though deducted and deposited the amount of tax at source, but had failed to reflect the names and PAN s of the payees in its TDS returns for the respective quarters. 4. During the course of the proceedings before the Dy. CIT, TDS, it was admitted by the assessee that there was failure on its part to deduct and deposit tax at source on the payments made towards catering services. Apropos the payments whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2829 179854 881283 701429 448583 1150012 2014-15 9866721 201363 986672 785309 402485 1187794 2015-16 8534522 174463 853453 678990 266037 945027 2016-17 13173278 268843 1317328 1048485 295142 1343627 2017-18 11508185 234863 1150819 915956 143215 1059171 Total 97924331 1998952 9792434 7793484 4523419 12316903 Although the assessee had on a suo-moto basis deducted tax at source u/s.194C of the Act on the payments made to the printing agency, but thereafter it came forth with a novel claim that it was under no obligation to deduct any tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the vendor as per the provisions of Section 194C of the Act. Also, as the assessee had though deducted and deposited tax at source which was verifiable from records, but had failed to submit particulars of the deductee s in its quarterly TDS returns, therefore, the A.O for the said default initiated penalty proceedings u/s. 271H of the Act. 7. Adverting to the payments which were made by the assessee under the head confidential expenses, it was observed by the A.O that the same were payments made to a processing agency for tabulation, checking and preparation of marksheets etc. involving use of computers and online services of net connectivity. Considering the nature of the services, the A.O was of the view that as the processing agency had rendered professional services to the assessee by using its computers and software expertise, therefore, the assessee was obligated to have deducted tax at source on the payments made to the said agency u/s.194J of the Act. On the basis of his aforesaid conviction that the nature of services rendered by the processing agency to the assessee were beyond doubt in the nature of professional services, for the reason that the nature of work exec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: I have considered the grounds of appeal and gone through the written submission made by the ld. Counsel appearing on behalf of the appellant and seen the order of the A.O. In the submissions the appellant had reproduced the provisions of Section 194C along with the explanation thereto which define work , he has also tabulated the description of work entrusted to the processing agency in connection with making of envelopes, admit card, attendance sheets, scanning, general report, printing of data on admit card and other items with respect to the exams conducted for the students. It was further submitted by the appellant that he has complied with the provisions of the Act and made TDS on every payment to those agencies u/s.194C on the pretext that there is a contract for regular supply of material required for examination purposes. The provisions of Section 194J was compared with the provisions of Section 194C whereby the appellant submitted that the TDS was correctly made by him as he is not liable to deduct TDS u/s. 194J. The appellant has been making payments for availing services from the vendors pertaining to designing of admit cards, formatting of attendance sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of payment for different kinds of services and work. Each section under the above Chapter highlights various payments made to different persons and serves as guidelines for the rates of tax to be deducted thereon. TDS must be made in accordance with the specific provisions taking into account the nature of such payments made and wrong application of the provisions will render the deductor liable for default for short deduction of tax. From the agreement between the appellant and the vendor which has been reproduced by the AO in his order it is noticed that the contract between the payer and the payee is a contract for providing technical services and not a contract of technical services. The vendors are professionally competent in carrying out work relating to technical matters on conducting examinations by providing the desired and specific material. On the above issues it is fruitful to refer to judicial pronouncements and observations of the Hon'ble Courts. In the case of CIT-1 Kochi v PVS Memorial Hospital Limited reported in 234 Taxman 46 the Hon'ble Kerala High Court held that the expression tax deductible at source under Chapter-XVII B occurring in section 40(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as payments made to a contractor in respect of inspection and maintenance support agreement and fabrication of chilled water line. It was held that these payments could not be treated as fees for technical services as technology or technical knowledge of persons were not made available to the assessee. As can be seen from the facts of the case that the payments were to a contractor for inspection and maintenance support agreement. The next case relied upon is Jaipur Vidyut Vitran Nigam Ltd. v. Dy. CIT [2009] 123 TTJ (Jp. Trib). In this case the assessee was a electricity distribution company paid charges to transmission company as operation and maintenance of transmission line which according to the court did not result in any technical service mg rendered to the assessee. In ITO vs. Fino Fintech Foundation [2016] 71 taxmann.com 224/159 ITD 743 (Mum. Trib.) it was held that the assessee company was providing banking services in extreme rural areas through its network of agent by use of device called point of transaction machine. It has incurred expenses on annual maintenance charges, enrolment charges, POT user charges which the Tribunal held that since there was no specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 192, to a director of a company, or] [(c) royalty or 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, whichever is earlier, deduct an amount equal to [two per cent of such sum in case of fees for technical services (not being a professional services) or royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic films and ten per cent of such sum in other cases,] as income-tax on income comprised therein : Provided that no deduction shall be made under this section- (A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or (B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed- (i) thirty thousand rupees, in the case of fees for professional services referred to in clause (a), or (ii) thirty thousand rupees, in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alia, saddles a statutory obligation on an assessee to deduct tax at source on any sum paid to a resident towards fees for professional services . In so far the term professional services is concerned, the meaning/definition of the same can be traced in the Explanation (a) to Section 194J of the Act, which reads as under: (a) 'professional services means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section. Considering the services which would fall within the meaning of the professional services , the scope of the said term can be culled out as under: Under explanation (a) to Section 194J, the term professional services' means- (a) Services rendered by a person in the course of carrying on any of the following professions: Legal profession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (m) a dress designer. (iii) Profession of company secretary-For this purpose, a company secretary means a person who is a member of the Institute of company Secretaries of India in practice within the meaning of Section 2(2) of the Company Secretaries Act, 1980. (iv) Profession of Information technology (v) Sports persons (vi) Umpires and Referees (vii) Coaches and Trainers Vide Notification No.2085(E), dated 21-8-2008 (viii) Team Physicians and Physiotherapists (ix) Event Managers (x) Commentators (xi) Anchors (xii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s within the meaning of the services that either finds a specific mention in the meaning of the term professional services as contemplated in the Explanation (a) to Section 194J of the Act; or is in the nature of a profession as is notified by the CBDT either for the purpose of Section 44AA of the Act or Section 194J of the Act. Nothing is either discernible from the orders of the lower authorities, nor has been brought to my notice by the ld. DR which would reveal that the services in question rendered by the processing agency falls within the meaning of the term professional services as contemplated in the Explanation (a) to Section 194J of the Act. On the contrary, as observed by me hereinabove, it has been the claim of assessee before the lower authorities that as the processing agency had not rendered any specified professional services to the assessee, therefore, the same could not have been brought within the meaning of professional services for the purpose of saddling the assessee with the statutory obligation of deducting tax at source u/s 194J on the payments made to the processing agency. 13. Adverting to the scope of the term technical consultancy that ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ephone fixed or mobile, the cable T. V., the internet, the automobile, the railway, the aeroplane, consumption of electrical energy, etc. Such facilities which when used by individuals are not capable of being regarded as technical service cannot become so when used by firms and companies. The facility remains the same whoever the subscriber may be-individual, firm or company. Technical service contemplates rendering of a service to the payer of the fee. Mere collection of a fee for use of a standard facility provided to all those willing to pay for it does not amount to the fee having been received for technical services. On the basis of the aforesaid observation, it was held by the Hon ble High Court that Section 194J will be attracted only in cases where as person engages a technician or technocrat for rendering specified technical services, or engages a specified professional for rendering professional services. 15. On the basis of my aforesaid observations, I am of the considered view that the services rendered by the processing agency to the assessee, i.e., tabulation, checking and preparation of mark sheets and other computer assisted work could not have been br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 194J of the Act. I have even otherwise approached the issue in hand independent of the aforesaid technical intricacies, and is of the considered view that as the very nature of the services rendered by the processing agency, i.e., tabulation, checking and preparation of marksheets and other computer assisted work would not require any specific professional skill or expertise, therefore, it is difficult to comprehend as to how it would find a place within the meaning of professional services as envisaged in the Explanation (a) of Section 194J of the Act. In case, if a view to the contrary is taken, then all the services rendered by any agency by deploying computers/internet services, irrespective of the fact that the same would not require any professional skill or expertise would have to be categorized as professional services . Considering my aforesaid observations, wherein neither I am able to concur with the view taken by the lower authorities that the services rendered by the processing agency requires any professional expertise or skill, much the less those specified in Explanation (a) of Section 194J, AND also is unable to persuade myself to conclude that the serv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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