M/S GCS COMPUTER TECHNOLOGY PRIVATE LIMITED,CHANDIGARH vs. JCIT, PATIALA

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against

the order dated 14.03.2016 of the Commissioner of Income Tax

[hereinafter referred to as CIT(A)] Meerut (Camp at Patiala).

of Rs. 13,35,567/- made under the provisions of section 40(a) (ia) of

the Income-tax Act, 1961 (in short 'the Act') on account of non-

deduction of TDS.

attention to the impugned order of the Assessing officer, wherein, the

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assessee had pleaded before the Assessing officer that in fact the

aforesaid payment was made by the assessee on account of

reimbursement of expenditure incurred by All India PTU DEP

Associates. It was submitted that the All India PTU DEP Associates

(hereby referred as ‘Association’) was an Organization formed by all

the regional centers of Punjab Technical University, Jalandhar. That

these centers to promote their business and for generating awareness

about distance learning course among the students, had to advertise

about the services offered by them. That the said Association worked

on behalf of all the centers collectively and did the advertisement

and business promotion activities and incurred expenditure for the

said purpose. However, the actual expenditure incurred was

recovered on proportionate basis from the respective institutes. The

Assessing officer, however, did not agree with the above contention

of the assessee and held that the Association was a separate entity.

That the assessee had made the payment to the Association for

advertisement purposes and, hence, the assessee was liable to deduct

TDS as per the provisions of section 194C and 194J of the act for

non-compliance and, thus, disallowance of expenditure was attracted

under the provisions of section 40(a)(ia) of the Act. He accordingly

disallowed the aforesaid payment expenditure made by the assessee

to the Association.

The Ld. CIT(A) also confirmed the disallowance so made by

the Assessing officer.

ITA No.621/Chd/2016- M/s GCS Computer Technology P Ltd, Chandigarh 3

submissions made before the lower authorities. The Ld. DR, on the

other hand, has relied on the certain clarifications issued by the

CBDT wherein it has been mentioned that the provisions of section

194C and 194J of the Act refer to all the sums paid / incurred

including re-imbursement etc. The Ld. DR has also placed reliance

on the decision of the Hon'ble Supreme Court in the case of

Associated Cement Co Ltd Vs. (1993) 67 taxman 346 (SC) .

case has pleaded that the payment in question was made to the

Association towards its share of expenses incurred on advertisements

on behalf on behalf of the institutes / regional centers. There is no

denial or rebuttal to this fact by the Revenue. The only contention of

the Revenue is that the assessee was a separate person and the

assessee had made the payments for advertisements and, hence, the

assessee was liable to deduct tax at source on the aforesaid payments.

We are not in agreement with the above contention of the Revenue.

As explained by the Ld. Counsel for the assessee, the institutes /

regional centers instead of individually incurring expenditure on

advertisements had opted to form an Association who would give the

advertisements on behalf of the institutions. The Association, itself,

was not engaged in the business or profession of advertisements

rather it imparted work / contract to the advertisers on behalf of

regional centers including of the association. In our view, the

Association did not fall within the definition of contractor so as to

attract the provisions of section 194C or 194J of the Act.

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6 So far as the reliance of the Ld. DR on the judgement of

Hon'ble Supreme court (supra) is concerned, a perusal of the same

reveals that the question before the Hon'ble Supreme Court was as to

whether the TDS has to be deducted by the assessee on the entire

payment made to the contractor or on the income element only,

However, neither this is the question involved in this case nor the

findings arrived at by the Hon'ble Supreme Court are otherwise

applicable to the facts and circumstances of this case in hand. In the

case in hand, in our view, the Association is not a contractor rather it

is just a mediator between the assessee and the advertisers. The

Association has been created by the assessee and other regional

institutes just to facilitate the work of advertisement for all though

common platform. The payment was made by the association to the

advertisers on behalf of the assessee. It is plea of the assessee that

while making payment to the advertisers, the association had

deducted TDS thereupon. The Ld. Counsel in this respect has relied

upon a Certificate issue by the Association, wherein, it has been

certified that the association was giving advertisements on behalf of

the regional centers / institutes and that the share of cost of the

advertisement was recovered from respective regional centers. In

view of this, since the Association did not fall under the definition of

Contractor, hence, the provisions of section 194C and 194J, in our

view, would not attract in this case. However, there needs a

verification at the level of the Assessing officer whether the

Association had actually deducted the TDS while making payments to

the advertisers on behalf of the assessee and other regional centres,

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hence, we remand this case to the file of the Assessing officer for the limited purpose to verify whether the Association had deducted TDS on behalf of the assessee while making the further payments to the advertisers. If the above contention is found true, then, no disallowance should be made in this respect. In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the Open Court

Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 18.04.2018 Rkk Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR