ACIT (TDS), Chandigarh V. M/s State Bank of India, Chandigarh

ITA 1020/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81081 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-12-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 06-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 1020/CHD/2013 ASSESSMENT YEARS : 2012-13 A.C.I.T. (TDS) CHANDIGARH V M/S STATE BANK OF IND IA SPECIALIZED COMMERCIAL BRANCH, SCO 103-104 SECTOR 17B, CHANDIGARH PTLSI 0156G (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S.K. MITTAL RESPONDENT BY: SHRI VINEET A GGARWAL DATE OF HEARING 10.12.2014 DATE OF PRONOUNCEMENT 12.12 .2014 O R D E R PER T.R. SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER OF LD CIT (A), CHANDIGARH DATED 21.8.2013. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS: THE OBSERVATIONS OF THE LD. CIT(A), CHANDIGARH IS NOT ACCEPTABLE DUE TO THE FOLLOWING FACTS: (1) THAT M/S EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD IS MERELY A CENTRAL GOVERNMENT UNDERTAKING AND NOT ENT ITLED FOR EXEMPTION U/S 196 OF THE IT ACT, 1961. THEREFORE T HE DEDUCTOR BANK WAS STATUTORILY REQUIRED TO DEDUCT TDS ON THE PAYMENT MADE AN ACCOUNT OF ECGC PREMIA, WHICH HE HAS FAILED TO DO. (2) THAT DURING THE RELEVANT PERIOD OF TIME, THE AS SESSEE BANK HAD NO DOCUMENTARY EVIDENCE IN THE FORM OF LOWER DE DUCTION CERTIFICATION U/S 197 ETC. ON THE BASIS OF WHICH TH E BANK CAME TO THE CONCLUSION THAT THERE WAS NO REQUIREMENT OF DED UCTION OF TAX, AS REQUIRED U/S 194J OF IT ACT, 1961. 3 AFTER HEARING BOTH THE PARTIES WE FIND THAT A SUR VEY /TDS INSPECTION WAS CARRIED OUT IN THE PREMISES OF THE A SSESSEE. IT WAS FOUND DURING SURVEY THAT TDS WAS NOT DEDUCTED O N CERTAIN PAYMENTS PARTICULARLY PAYMENTS MADE TO ECGC. IN RESPONSE TO THE SHOW CAUSE NOTICE INFORMATION WAS FILED REGA RDING TDS 2 DEDUCTED. IT WAS ALSO ADMITTED THAT IN SOME CASES TDS WAS NOT DEDUCTED WHICH WAS LATER ON DEDUCTED AND PAID T O THE CREDIT OF GOVERNMENT ALONG WITH INTEREST. 4 IN RESPECT OF PAYMENT OF ECGC IT WAS SUBMITTED T HAT THIS PAYMENT WAS ON ACCOUNT OF INSURANCE PREMIUM FOR SEC URITY OF CREDITS AGAINST THE LOAN GIVEN TO THE EXPORTERS AND REQUIRED NO TDS. A COPY OF LETTER ISSUED BY THE BRANCH HEAD OF ECGC OF INDIA LTD., CHANDIGARH WAS ALSO ENCLOSED. HOWEVER, THE ASSESSI NG OFFICER DID NOT AGREE WITH THESE SUBMISSIONS. HE OBSERVED THAT THERE WAS AN EXEMPTION FOR NON DEDUCTION OF TDS IN RESPECT OF PA YMENTS MADE TO THE CENTRAL GOVERNMENT U/S 196 BUT THE EXEMPTION DI D NOT EXTEND TO THE PUBLIC SECTOR UNDERTAKING. IN THIS BACKGROUND HE INVOKED SECTION 194J AND HELD THAT THE ASSESSEE IS IN DEFAU LT U/S 201(1) FOR NON DEDUCTION OF TAX OF RS. 5,75,805/-. 5 ON APPEAL IT WAS MAINLY STATED THAT THE ASSESSEE IS A SPECIALIZED COMMERCIAL BRANCH WHICH WAS EXTENDING L OAN TO THE EXPORTERS AND HAD NOT DEDUCTED TAX ON PREMIUMS PAID TO THE EXPORTERS CREDIT GUARANTEE CORPORATION I.E. ECGC ON WHICH NO TAX WAS DEDUCTIBLE. 6 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS AGREED WITH THE SAME AND DELETED THE ADDITION. 7 BEFORE US, THE LD. DR FOR THE REVENUE RELIED ON T HE ORDER OF ASSESSING OFFICER. 8 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESS EE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSIN G OFFICER AND THE LD. CIT(A) AND EMPHASIZED THAT INSTANT PREM IUM WOULD NOT FALL UNDER THE DEFINITION OF PROFESSIONAL OR TE CHNICAL SERVICES U/S 194J. THEREFORE NO TAX WAS REQUIRED T O BE DEDUCTED. HE STRONGLY SUPPORTED THE IMPUGNED ORDE R. 3 9 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND T HAT SECTION 194J READS AS UNDER: 194J. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY SUM BY WAY OF (A) FEES FOR PROFESSIONAL SERVICES, OR (B) FEES FOR TECHNICAL SERVICES, [OR] [(BA) ANY REMUNERATION OR FEES OR COMMISSION BY WH ATEVER NAME CALLED, OTHER THAN THOSE ON WHICH TAX IS DEDUCTIBLE UNDER SECTION 192, TO A DIRECTOR OF A COMPANY, OR] [(C) ROYALTY, OR (D) ANY SUM REFERRED TO IN CLAUSE (VA) OF SECTION 2 8,] (A) 'PROFESSIONAL SERVICES' MEANS SERVICES RENDERE D BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERI NG OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOU NTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ADV ERTISING OR SUCH OTHER PROFESSION AS IS NOTIFIED 36 BY THE BOARD FOR THE PURPOSES OF SECTION 44AA OR OF THIS SECTION; (B) 'FEES FOR TECHNICAL SERVICES' SHALL HAVE THE SA ME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9; [(BA) 'ROYALTY' SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9;]. ABOVE CLEARLY SHOW THAT THE PROFESSIONAL SERVICES A ND FEE FOR TECHNICAL SERVICES AS WELL AS ROYALTY HAS ALREADY B EEN DEFINED IN THIS SECTION ITSELF. INSURANCE PREMIUM IS NOT C OVERED BY THE ABOVE DEFINITION. THEREFORE IN OUR OPINION, INSURA NCE PREMIUM IS NOT COVERED BY SECTION 194J. FURTHER THE LD. CI T(A) HAS DECIDED THIS ISSUE VIDE PARA 5 WHICH IS AS UNDER: THE IMPUGNED INSURANCE PREMIA PAID BY THE APPELLAN T, AS PER THE DOCUMENTS FILED IN THE APPELLATE PROCEEDINGS, ARE FOR SECURING ITS FUNDS AGAINST LOANS GIVEN TO THE EXPORTERS AND SO T HESE CANNOT BE SAID TO BE IN THE NATURE OF FEES FOR TECHNICAL SER VICE RENDERED OR PROFESSIONAL CHARGES AND SO THE SAME ARE NOT LIAB LE FOR DEDUCTION OF TAX AT SOURED U/S 194J, SINCE THE TERMS PROFESS IONAL SERVICES AND FEES FOR TECHNICAL SERVICES ARE VERY SPECIALL Y DEFINED IN THE ACT IN EXPLANATIONS (A) & (B) BELOW SECTION 194J OF THE ACT AND THE PAYMENTS NOT COVERED BY EXPLANATIONS (A) & (B) CANN OT BE SUBJECTED TO DEDUCTION OF TAX AT SOURCE U/S 194J. IN VIEW OF THIS DISCUSSION IT IS HELD THAT APPELLANT WAS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE ON THE IMPUGNED PAYMENTS AND ASSESSI NG OFFICER WAS NOT RIGHT IN CREATING DEMAND U/S 201(1(1A) OF T HE ACT. THE DEMAND CREATED U/S 201(1)/(1A) ON ACCOUNT OF NON DE DUCTION OF TAX AT SOURCE ON INSURANCE PREMIA PAID TO ECGC IS ACCOR DINGLY DELETED. GROUNDS OF APPEAL TAKEN BY THE APPELLANT ARE ALLOWED. 4 IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY DECIDE D THE ISSUE BECAUSE INSURANCE PREMIUM WOULD NOT BE COVERED U/S 194J OF IT ACT. 10 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 12.12.2014 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12.12.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR