THE ITO (TDS) -1 , BHOPAL vs. MADHYA PRADESH RAJYA AJEEVIKA FORUM, BHOPAL

Feeling aggrieved by appeal-order dated 04.11.2022passed by learned Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre, Delhi [“Ld. CIT(A)”], which in turn arises out of order dated 27.10.2021 passed by learned ITO, TDS-1, Bhopal [“Ld. AO”] u/s 201(1)/(1A) of Income- tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2015-16, the revenue has filed this appeal.

The controversy involved in present appeal is the applicability of section 194C or 194J of the act for deduction of tax at source (TDS) out of a total payment of Rs. 3,38,00,000/- made by assessee to one payee named Page 1 of 7

Ld. AO found that the assessee is a government organization under Panchayat and Rural Development Ministry and registered as society. He further observed that the payment made by assessee to aforesaid ASA under MKSP was towards services which required skilled manpower and specialized knowledge; therefore the payment was in the nature of fee for professional or technical services and henceTDS was attracted u/s 194J @ 10%. The assessee, however, submitted that it had deducted TDS u/s 194C @ 2% in accordance with a specific clarification F.No. 275/30/2012-ITB dated 26.07.2012 issued by CBDT in this regard. However, the AO continued to insist his view that the TDS was required u/s 194J and not u/s 194C.

During first-appeal, Ld. CIT(A) was convinced with submission of assessee. He accepted that ASA is a PIA under MKSP, therefore the assessee has rightly deducted TDS u/s 194C in accordance with the clarification issued by CBDT. Accordingly, the CIT(A) deleted entire demand created by AO. The order of CIT(A) is extracted below:

On perusal of same, it is very much clear that the CBDT has categorically clarified that the payments made to PIAs under MKSP attracts TDS u/s 194C. Notably, the CBDT is an apex income-tax authority in terms of section 116 of Income-tax Act, 1961 and the clarification given by it is binding upon all subordinate income-tax authorities including Ld. AO in ITO (TDS)-1,Bhopal vs. Madhya Pradesh Rajya Ajeevika Forum, Bhopal Assessment year 2015-16 present case. Therefore, the CIT(A) after taking into account the clarification issued by CBDT has rightly held that the assessee was required to deduct TDS u/s 194C and not u/s 194J and thereby deleted the demand created by AO. Ld. DR representing the revenue could not rebut or contradict the applicability of CBDT’s clarification on facts. Being so, we do not find any infirmity in the order of CIT(A). We uphold the same. There is no merit in present appeal of revenue, consequently the same is dismissed.

Before parting we may add here that the Ld. AR has also made an alternative prayer that the present appeal by revenue is not sustainable as the tax effect involved is less than the monetary limit specified by CBDT in Circular No. 17/2019 dated 08.08.2019 for filing/withdrawing of appeals. Ld. DR representing the revenue, however, tried to defend such prayer. Since we have already dismissed this appeal on merit in the foregoing discussion, this alternative prayer of assessee is left open and we are not adjudicating the same at this stage.

Resultantly, this appeal of revenue is dismissed.