C I T JAIPUR vs. M/S RAJ URBAN INFRASTRUCTURE DEV PRO

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ITA/222/2011HC RajasthanRJHC02039034201001 July 2013Author: MEENA V. GOMBER,NARENDRA KUMAR JAIN7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial questions of law were involved in the appeals. While the Revenue argued that Circular dated 28.04.2008 was not applicable as it related to Section 194-I and not Section 194J, the Court examined Section 194J in light of both Circulars dated 28.04.2008 and 30.06.2008. The Court found that the terms 'any sum paid' in Section 194J relate to fees for professional or technical services. Crucially, as per the terms of the agreements, the service tax was to be paid separately and was not included in the fees for professional or technical services. The Court noted that whether service tax was to be paid separately was a question of fact, and both the Appellate Authority and the ITAT had recorded findings of fact to this effect. Therefore, even if the Circular dated 28.04.2008 was considered not applicable, the orders passed by both the authorities below were found to be in accordance with the provisions of Section 194J of the Income Tax Act, considering the facts and circumstances. Since no substantial questions of law were involved, the appeals were dismissed.

What were the facts?

The Revenue (Commissioner of Income Tax (TDS), Jaipur) is in appeal against the orders of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT), which had set aside a demand of Rs. 1,70,881/- plus interest of Rs. 44,776/- raised by the Assessing Officer against M/s. Rajasthan Urban Infrastructure Development Project (RUIDP). The dispute pertains to the Financial Year 2005-06 and concerns the deduction of Tax Deducted at Source (TDS) on service tax paid by RUIDP to its consultants. RUIDP, a project of the Government of Rajasthan, appointed consultants through open tender and paid them fees along with service tax. RUIDP did not deduct TDS on the service tax component, considering it to be outside the contractual fee. The Assessing Officer raised a demand, which was deleted by the Appellate Authority and confirmed by the ITAT.

What were the issues?

1. Whether the Appellate Authority and the ITAT erred in relying on Circular dated 28.04.2008, which pertained to Section 194-I of the Income Tax Act, when the dispute involved TDS under Section 194J of the Act? 2. Whether the subsequent Circular dated 30.06.2008, clarifying the earlier circular, was wrongly held inapplicable or contrary to law by the lower authorities? Assessee's arguments: The judgment does not record any specific arguments made by the assessee (RUIDP) before the High Court. The findings of the lower authorities, which were in favor of the assessee, are discussed. Revenue's arguments: The Revenue contended that both the Appellate Authority and the ITAT committed an illegality by relying on Circular dated 28.04.2008, which was specifically for Section 194-I (rent) and not applicable to the present case concerning Section 194J (fees for professional or technical services). The Revenue further argued that the subsequent Circular dated 30.06.2008, which clarified the applicability, was wrongly disregarded by the lower authorities. Therefore, the orders of the Appellate Authority and ITAT were illegal and liable to be set aside.

Which sections of the Income-tax Act were involved?

Section 194-I,Section 194J

AI-generated summary — verify with the full judgment below

{1} DB INCOME TAX APPEAL NO.235/2011 & IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR JUDGMENT (1) D.B. INCOME TAX APPEAL NO.235/2011 COMMISSIONER OF INCOME TAX(TDS), JAIPUR Vs. M/s. RAJASTHAN URBAN INFRASTRUCTURE WITH (2) D.B. INCOME TAX APPEAL NO.222/2011 COMMISSIONER OF INCOME TAX(TDS), JAIPUR Vs. M/s. RAJASTHAN URBAN INFRASTRUCTURE WITH (3) D.B. INCOME TAX APPEAL NO.238/2011 COMMISSIONER OF INCOME TAX(TDS), JAIPUR Vs. M/s. RAJASTHAN URBAN INFRASTRUCTURE & (4) D.B. INCOME TAX APPEAL NO.239/2011 COMMISSIONER OF INCOME TAX(TDS), JAIPUR Vs. M/s. RAJASTHAN URBAN INFRASTRUCTURE DATE:01.07.2013 HON'BLE MR. JUSTICE NARENDRA KUMAR JAIN HON'BLE DR. JUSTICE SMT. MEENA V. GOMBER Ms. Parinitoo Jain, for the appellant. **** Heard the learned counsel for appellant.

2.

Since common facts and law are involved in these appeals, therefore, they were heard together and are being disposed of by this common order.

3.

For convenience, the facts of D.B. Income Tax Appeal No.235/2011 are being taken as leading facts. The Assessing Officer, vide its order dated 30.01.2009, raised a demand of Rs.1,70,881/- along

{2} DB INCOME TAX APPEAL NO.235/2011 & with interest thereon amounting to Rs.44,776/-, on account of TDS on the amount paid as service tax. The matter relates to the Financial Year 2005-06. The assessee preferred an appeal, which was allowed by the Commissioner of Income Tax(Appeals)-III, Jaipur (for short 'the Appellate Authority'), setting aside the aforesaid demand. Being aggrieved with the same, the Revenue preferred an appeal before the Income Tax Appellate Tribunal, Jaipur Bench 'A', Jaipur, but the same was dismissed. Hence, the Revenue has preferred this appeal.

4.

Submission of the learned counsel for appellant is that Appellate Authority and Income Tax Appellate Tribunal, both, have committed an illegality in relying upon the Circular dated 28.04.2008, which was in respect of Section 194-I of the Income Tax Act (hereinafter referred to as 'the Act), whereas dispute in the present case was in respect of TDS, to be deducted under Section 194J of the Act. It was further argued that the Circular dated 28.04.2008 was clarified by a subsequent Circular dated 30.06.2008, which was wrongly held to be inapplicable or contrary to law by the Appellate Authority as well as Appellate Tribunal. She, therefore, submitted that orders passed by the Appellate Authority as well as Appellate Tribunal, are illegal and same are liable to be set aside.

{3} DB INCOME TAX APPEAL NO.235/2011 &

5.

We have considered the submissions of the learned counsel for appellant and examined the Circulars dated 28.04.2008 and 30.06.2008 and also the provisions of Sections 194-I and 194J and other provisions of the Income Tax Act.

6.

The assessee, Rajasthan Urban Infrastructure Development Project(in short 'RUIDP'), is a project of Government of Rajasthan for the Infrastructure Development and Civic Amenities in the specified areas/cities in the State of Rajasthan. The project is financially assisted by the Loan from the Asian Development Bank through the Government of India. The project is working under the Urban Development Department of the Government of Rajasthan. The accounts are maintained on cash basis of accounting and also audited by the Chartered Accountant as per the requirement of the Asian Development Bank and also audited by the Department of Accountant General of Rajasthan. The RUIDP appoint the technical and project consultants on open tender basis and the limited companies as well as corporate consulting firms of repute are selected and appointed as per the laid down procedure. The assessee deduct the income- tax at source from the payments made by it and deposit the same as per the relevant provisions of the Income Tax Act and the return for the same is filed in due time. It appears that main consultants are charging the service tax at the prevailing rates

{4} DB INCOME TAX APPEAL NO.235/2011 & on the amount of fee payable as per the agreement and the same is paid by the assessee/RUIDP. The tax is deducted on fees and other payments of expenses as being part of contract, however, no TDS has been deduced on service tax in view of the term of contract.

7.

The dispute relates to a point as to whether TDS is to be deducted on the amount payable on account of service tax or not? The Tribunal has considered the agreement and recorded a finding that as per the term of contract, the amount of service tax was to be paid separately, therefore, the same was not subject to TDS. The Appellate Authority decided the appeal on the basis of reasoned order dated 31.03.2009 passed in Appeal No.413/Jaipur/ 2008-09 of the same assessee, which is the subject matter of D.B. Income Tax Appeal No.239/2011. The relevant para 02.3 of the above referred order dated 31.03.2009, passed by the Appellate Authority, is reproduced as under:- "02.3 मɇने दोनɉ पािटर्यɉ के तकɟ का अवलोकन िकया एवं पाया िक माननीय सीबीडीटी के èपƴीकरण एफ नंबर 275/73/2007-आईटी(बी) िदनांक 30.06.2008 के अनुसार तकनीकी एवं åयावसाियक गितिविधयɉ के बदले िकए जाने वाले कुल भुगतान पर िजसमɅ सिवर्स टेक्स भी शािमल है, टीडीएस की कटौती धारा 194 जे के तहत करनी चािहए। परÛतु यिद सेवा प्रदाता एवं सेवा ग्रिहता िनधार्िरितयɉ के बीच अनुबंध मɅ सेवा के बदले भुगतान की रािश का ही अनुबंध होता है तथा उस रािश पर िनयमानुसार सिवर्स टेक्स देय होना माना जाता है, परÛतु सिवर्स टेक्स की रािश अनुबंध की रािश के अितिरक्त हो, तो उस िèथित मɅ सिवर्स टेक्स को टीडीएस की कटौती योग्य नहीं माना जा सकता । परÛतु यिद अनुबंध की कुल रािश मɅ सिवर्स टेक्स

{5} DB INCOME TAX APPEAL NO.235/2011 & भी शािमल है, तो उस िèथित मɅ सिवर्स टेक्स को भी शािमल करते हुए टीडीएस कटौती की जाने योग्य है । अपील की सुनवाई के दौरान िव.अ. ने िविभÛन पािटर्यɉ से िकए गए अनुबंधɉ की प्रितयां पेश की, िजनके अवलोकन पर पाया िक सिवर्स टेक्स अनुबंध की रािश मɅ शािमल नहीं है, बिãक अनुबंध की रािश के अितिरक्त सिवर्स टेक्स देय है । इसिलए सिवर्स टेक्स, टीडीएस की कटौती के योग्य नहीं है, बिãक अनुबंध की रािश टीडीएस का दािय×व अपीलाथीर् का है । अत: िन.अ. के इस िनणर्य को उिचत नहीं माना जाता हटाया जाता है । अपीलाथीर् की अपील इस मुƧे पर èवीकार की जाती है ।"

8.

The aforesaid finding was discussed and considered, in detail, by the Income Tax Appellate Tribunal and vide order dated 30.10.2009, the Tribunal dismissed the appeal of the Department. The said order is also under challenge in D.B. Income Tax Appeal No.239/2011, preferred on behalf of the Revenue.

9.

So far as submission of the learned counsel for appellant, that the Circular dated 28.04.2008 was not applicable as it was in respect of Section 194-I of the Act relating to rent and not technical fees, therefore, it was wrongly relied upon is concerned,

we have considered the provisions of Section 194J of the Income Tax Act, in the light of Circulars dated 28.04.2008 and 30.06.2008. The words, “any sum paid”, used in Section 194J of the Act, relate to fees for professional services, or fees for technical services. As per the terms of agreement, the amount of service tax was to be paid separately and was not included in the fees for professional services or fees for technical services. In these circumstances,

{6} DB INCOME TAX APPEAL NO.235/2011 & we are satisfied that the orders passed by the Appellate Authority as well as the Appellate Tribunal, are in accordance with the provisions of Section 194J of the Income Tax Act. The service tax was to be paid separately or not, is purely a question of fact and as per the agreement entered in the present case, it was to be paid separately and there is a finding of fact in this regard, recorded by the Appellate Authority as well as the Appellate Tribunal also. Even if the Circular dated 28.04.2008, is held to be not applicable in the present case, we find that the orders passed by both the authorities below, are in accordance with the provisions of Section 194J of the Income Tax Act, looking to the facts and circumstances of the present case.

10.

In view of above discussion, we find that no substantial questions of law are involved in all these appeals. It is a settled law that Income Tax Appeal before the High Court is maintainable only on the substantial questions of law, which are not involved in the present appeals.

11.

In these circumstances, we find no force in any of the appeals and the same are, accordingly, dismissed.

12.

Registry is directed to place a copy of this order on record in each connected file. (DR.MEENA V. GOMBER),J. (NARENDRA KUMAR JAIN),J.

/KKC/

{7} DB INCOME TAX APPEAL NO.235/2011 & Certificate: All corrections made in the judgment/order have been incorporated in the judgment/order being emailed. KAMLESH KUMAR P.A.

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