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Income Tax Appellate Tribunal, “A”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD, JM &
आदेश / O R D E R PER R.C.SHARMA (A.M):
These are the cross appeals filed by the assessee and Revenue against the order of CIT(A) for the assessment year 2011-12 in the matter of order passed u/s.201(1) & 201(1A) of the IT Act.
We have considered rival contentions and found that in the order passed u/s.201(1) & 201(1A), the AO held that assessee was in default in 2 & 5158/2014 Larsen & Toubro Ltd., respect of amount paid on account of internet charges of Rs.6,40,000/- for non-deduction of tax at source u/s.194J. The AO also held the assessee is in default in respect of payment of bank guarantee charges of Rs.1,95,64,794/- paid without deducting tax at source u/s.194A(3).
3. By the impugned order, CIT(A) confirmed the action of the AO with regard to internet charges, whereas in respect of bank guarantee charges held in favour of assessee.
Against the above order of CIT(A), both revenue and assessee are in further appeal before us.
5. Learned AR placed on the order of the tribunal in assessee’s own case for the assessment year 2009-10 dated 29/04/2016, wherein both the issues were decided in favour of assessee after having the following observation:-
In so far as the Grounds of appeal
No.1 & 2 are concerned, they relate to the stand of the Revenue that tax was required to be deducted at source on payments made for internet charges because of the provisions of section 194J of the Act. As per the Revenue, payments made for internet charges to BSNL amounts to 'fee for technical services' and hence, covered under section 194J of the Act. The aforesaid stand of the Assessing Officer was not approved by the CIT(Appeals) following the ratio of the judgment of the Hon'ble Madras High Court in the case of Skycell Communications Ltd. vs. DCIT, 251 ITR 53(Mad). For the said reason, Revenue is in appeal before us.
4. Before us, the Ld. Representative for the respondent assessee, at the outset, pointed out that in the assessee's own case for the same (Assessment Year : 2009-10) year with another TAN particulars, similar decision of the CIT(Appeals) has been accepted by the Revenue as no appeal was filed before the Tribunal. The Ld. Representative for the assessee also pointed out that such other decision of the CIT(Appeals)-14, Mumbai in Appeal No.CIT(A)-14/TDS Rg.2/IT-97/2012-13 dated 15/10/2013 has been followed by the CIT(Appeals) in the impugned order. Reference was made to the decision of the Mumbai Tribunal in ITA No.
3 & 5158/2014 Larsen & Toubro Ltd., 7630/Mum/2013 dated 04/06/2015, wherein order of the CIT(Appeals)-14 dated 15/10/2013(supra) is assailed, which shows that the Revenue did not agitate the decision of the CIT(Appeals) in relation to the requirement of TDS on payment made for internet charges.
The aforesaid factual matrix has not been disputed by the Ld. Departmental Representative. It is quite evident from record that in the instant case the CIT(Appeals) has followed the decision of the another CIT(Appeals) -14, Mumbai dated 15/10/2013(supra) on a similar issue, which has been accepted by the Revenue inasmuch as no appeal on the point has been preferred before the Tribunal, though on other issues the Department came in appeal before the Tribunal in ITA No.7630/Mum/2013(supra). On this count itself, the Grounds of appeal
No. 1&2 raised by the Revenue are liable to be dismissed. Even otherwise, the ratio of the judgment of the Madras High Court in the case of Skycell Communications Ltd.(supra) supports the stand of the CIT(Appeals) that payments made to obtain internet facility from BSNL would not be covered within the meaning of 'fee for technical services' so as to be liable for deduction of tax at source under section 194J of ITA No. 4884/MUM/2014 (Assessment Year : 2009-10) the Act, as it is a payment for obtaining a standard facility and not for technical services. Thus, on this aspect Revenue has to fail.
6. In Grounds of appeal No.3, the case set up by the Revenue is that the CIT(Appeals) has erred in holding that bank guarantee charges paid to the bank are not liable for deduction of tax at source under section 194H of the Act. 6.1 On this aspect of the controversy, it was a common point between the parties, that the Mumbai Bench of Tribunal in the case of Kotak Securities Ltd. vs. DCIT, 147 TTJ 443(Mum) has held that bank guarantee charges are not liable for deduction of tax under section 194H on the ground that such transactions are on principal to principal basis and the element of agency which is essential to cover it as 'commission' as per Explanation to section 194H is absent. 6.2 At the time of hearing, Ld. Representative for the assessee also referred to other decisions of the Tribunal on this aspect in support of the conclusion of the CIT(Appeals). Be that as it may, in the absence of any contrary decision and the CIT(Appeals) having followed the decision of the jurisdictional Tribunal, we find no reason to interfere in the conclusion drawn by the CIT(Appeals). In this view of the matter Revenue has to fail on this aspect also.
6. We have carefully gone through the orders of the Tribunal and found that in assessee’s own case for the assessment year 2009-10 both the issues have been decided in favour of the assessee. The Tribunal in 4 & 5158/2014 Larsen & Toubro Ltd., assessee’s own case for the assessment year 2011-12 and 2012-13 had decided both the issues in assessee’s favour after observing as under:- 5. We have considered rival contentions and found that while deleting the disallowance the CIT(A) has relied on the decision of ITAT in the case of M/s Kotak Securities Ltd. (supra), wherein it was held that no TDS is required to be deducted in respect of bank guarantee charges paid to bank, accordingly assessee cannot be said to be in default for such non-deduction of TDS on such payment. Facts of the instant appeals are similar, respectfully, following the order of the Tribunal in the case of Kotak Securities (supra), we do not find any infirmity in the order of CIT(A) holding that assessee is not in default for non-deduction of TDS on such payments. Accordingly, appeal of the revenue is dismissed.
6. The assessee in its appeals i.e. ITA No.5974&5973/Mum/14(AY:2011-12 & 2012-13), has taken common grounds, which pertain to deduction of tax at source in respect of expenditure by way of amount paid for maintenance of computer service u/s.194J.
We have considered rival contentions and found that so far as the expenditure on AMC is concerned, the assessee had deducted tax at source as per the provisions of S.194C of the Act and this is also the law laid down by the Tribunal in the case of Facets Polishing Works (P) Ltd. Vs. ITO(TDS) [69 SOT 361(Ahd)], a copy of which is placed on record. However, the AO held that assessee should have deducted tax u/s.194J.
8. The only dispute is as to whether maintenance charges is subject to deduction u/s.194C or 194J. The assessee has deducted tax u/s.194C, whereas the AO held that payment was made for technical services, therefore, liable for deduction of tax u/s.194J.
The issue is also covered by the decision of ITAT in the case of Pacific Internet (India) Pvt. Ltd., 318 ITR (AT) 179 (Mum), wherein it was held that under the provisions of sec. 194J of the Act (i) there should be payment in the nature of fees and (ii) it should be for availing of technical services. The expression technical service has not been defined in section 194J but the meaning given to the expression has been adopted from Explanation 2 to clause (vii) of section 9(1). The assessee had availed of bandwidth services and other infrastructure for providing internet access to its customers. These were standard facilities availed of by the assessee. Therefore, the payment made by assessee company to VSNL, MTNL and other concerns for availing of the services could not 5 & 5158/2014 Larsen & Toubro Ltd., be said to be within the meaning of section 194J read with Explanation 2 to clause (vii) of section 9(1) of the Act.
From the record we also found that in earlier years’ payment on account of maintenance of computer was accepted by the AO, as well as in the subsequent years. Respectfully following the order of the coordinate bench, as discussed above, we do not find any merit in the action of the lower authorities for holding that assessee is liable for deducting tax u/s.194J, in respect of internet charges and computer maintenance charges paid by the assessee.
In the result, both appeals of the assessee are allowed, whereas appeal of the revenue is dismissed.
7. We also found that issue is covered by the decision of Hon’ble Supreme Court in case of Kotak Securities Ltd., 383 ITR 1.
The facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal, we do not find any merit in the order of the AO for holding the assessee in default in respect of payment of internet charges and bank guarantee charges without deduction of tax at source. 9. In the result, appeal of the Revenue is dismissed whereas appeal of the Assessee is allowed. Order pronounced in the open court on this 02/12/2016 Sd/- Sd/- (RAVISH SOOD) (R.C.SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 02/12/2016 Karuna Sr.PS Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. 6. Guard file.