NARESH CHAND RANA,SONEPAT vs. ITO, WARD- 2, SONEPAT

Per Dr. B.R.R.Kumar, Accountant Member:

“a. Receipts of an Assessee engaged in data collection services business as professional receipts although such services are not covered in the definition of profession for the purpose of Section 44AA & 194 J of the Income Tax Act 1961 and Rule 6F of the I.T. Rules 1962 and b. Making presumption that Assessee has professional and technical competence whereas Assessee has no professional qualification and he is simply graduate and didn't require any intellectual skills to perform the job of data collection; c. CIT allegation that Assessee is guilty of failing to get the books of accounts audited as Gross receipts of assessee exceeds the limitprescribed u/s 44AB of the I.T. Act in case of professionals for the saidyear thereby confirming the penalty u/s 271 (B) of the Income-tax Act, 1961 is not correct.”

a. The work of data collection performed by the assessee along with his employees consists of data collection through survey conducted in accordance with direction and requirement mentioned in work order issuedby the party. b. Assessing authority could not and did not produce any such notification incorporating the services rendered in the present case being theprofessional services within the meaning of the explanation appended to section 194J of the Act. c. Each party had provided fix format of data collection/ survey report andonly basic details are required to be filed in that format after collectingdata by visiting door to door in specified locations. Detail of some contractsfor data collection executed during the above said year is given as under:

Sr. Party Name Nature of Contract Type of Report No. 1. Consulting Engineering Field work for Jalore Water and Services (India) Pvt. household survey for Sanitation Ltd. Jalore Water & Project Report. Sanitation Project 2. Brindavan Beverages Work order for EDS EDS Format for Pvt. Ltd. Coca Cola 3. Enrich Agro Food Verification of Outlets EDS Format for Products Pvt. Ltd. in Gurgoan Coca Cola 4. Kandhari Beverages EDS in Towns EDS Format for Pvt. Ltd. Coca Cola

“In the statement of facts submitted by the assessee he has himselfstated that he is doing market research. So at this stage, it is necessary toascertain whether the assessee is engaged in activity which is a profession ornot. During the course of appellate proceedings, the assessee was asked tosubmit the details of employees, their qualifications, work assigned to eachemployee, work of data collection being done for which organizations, theprocess and timeline involved in the data collection work, copies of contractsgiven by the clients and terms of contracts, breakup of data collectioncharges, qualifications and experience of assessee and why this work shouldnot be treated as profession considering that TDS has been deducted undersection 194J of the act by the clients.

A list of organizations for whom data collection was done shows that most of them are companies which are selling beverages or food products or are consultants. They are getting the data collection done with a specific format as per the requirement so a market research company the assessee provides solutions and data as per the terms of contract.

It is correct that work executed by the assessee is in accordance withthe directions given by the clients but the fact remains that if it did not require any professional competence or technical expertise then why thiswork was assigned to specific market research company and not to anylayman. The work which is assigned by the assessee to the casual workers for data collection can be termed in the nature of a contract whereby they docertain job and get paid for it. No professional competence or technicalexpertise is required there, however in the work assigned to the assessee,the element of professional competence and technical competency is anessential feature. That is why the assessee, because of his experience in thisfield and expertise built over the years is able to bid and tender for suchprojects. The assessee himself submitted in this reply that the field boys arenon-skilled.

The assessee’s contention that he is engaged in performing work whichrequires physical aspect rather than intellectual aspect and so it is coveredunder section 194C of the Act has no merit because after getting the datacollected, which is the physical aspect of his work, it is the responsibility ofthe assessee as a market research expert to compile the data, edit it andanalyze them into comprehensible reports which can be used by the clients. Even for data collection the field officers surveyors have to be briefed as to what should be the target persons in the field. The workers cannot randomly go for the work of data collection. Complete guidance and briefing is required and the requirement of client is to be kept in mind by the aa before embarking on this work of data collection. If it was ‘anywork' it could have been assigned to anyone and not to a professional, after competitive bidding. The courts are right when they hold that the work ofdata collection per se is not a technical work which is covered in thedefinition of professional and technical consultancy for the purpose ofsections 44AB or 194J of the Act. The work of data collection assigned bythe assessee to the actual data collectors or the team workers who work inthe field has no requirement for any technical or professional expertise. Theexecution of the work does not include any assessment of the area or targetclients or analysis of the data collected. This job is covered under thecategory of 'any work' mentioned in section 194C of the Act. The work beingdone by the field workers comes in the category of physical work but thework of the assessee is of overall supervision, planning guidance to the fieldworkers and analysis of the data collected and is intellectual work and falls in the category of professional and technical consultancy.

Appraisal of one of the contracts given shows that the work assigned to the assessee is very specific. For instance, assessee has been asked tocover potential soft drinks selling outlets, current non-sellers and which would include all groceries, all eating and drinking outlets, pan shops, street shops, bakery and confectionery stores, road side dhabas, lodges, fruit Juice selling outlets, school and college canteens and a total of 20,000outletsare to be covered. This is very specific work where the market researcher will ensure that it is executed properly and as per the requirements of theclients.

In his submissions the assessee has referred to the work of a skilled electrician and census collection work and stated that these activities arenot in the category of professional/ technical consultancy work. This comparison is totally misplaced because the work of data collection by census team is different from the work being done by the assessee, who has been assigned the work of data collection in a particular manner by identifying the target persons/enterprises and further analysis of the datacollected after sanitizing it for the purpose of the clients. So also comparison with an electrician is totally misplaced in view of the different job being doneby the assessee, which requires technical and professional expertise.

The AO has not levied penalty on the basis of deduction of tax by theclients u/s 194J of the Act. He has independently arrived at his satisfactionfor levy of penalty based on the provisions of the Act and facts of the case.The fact that the clients has awarded work to the assessee based on hisprofessional and technical competence and expertise and are thereforededucting TDS as payments made to a professional, only supports the AO'sfinding.”

a. Original Assessment Order dated 26.12.2011 b. Show cause notice u/s 263 dated 17.02.2014 c. Order passed by CIT u/s 263 dated 28.03.2014 d. Fresh Assessment Order dated 10.02.2015 e. Penalty order u/s 271B dated 28.08.2015 f. Order passed by ITAT dated 28.03.2017 against order passed u/s 263