ITO OSD TDS 1(2), MUMBAI V. EDELWEISS CAPITAL LTD, MUMBAI

ITA 1145/MUM/2011

• Counselvise Citation: 114519914 RSA 2011
• Duration Of Justice: 2 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 23-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 08-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Non-deduction of tax; Tax effect

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI .. , ; BEFORE SHRI P.M. JAGTAP, AM AND SHRI VIVEK VARMA, J M ./ I.T.A. NO.1145 /MUM/2011 ( / ASSESSMENT YEAR : 2007-08 ITO TDS (OSD) - 1(1), ROOM NO. 812, K.G. MITTAL HOSPITAL BLDG., CHARNI ROAD, MUMBAI 400 021. / VS. M/S EDELWEISS CAPITAL LIMITED, 14 TH FLOOR, EXPRESS TOWER, NARIMAN POINT, MUMBAI 400 021. . / PAN : AAACE1461E ( # / APPELLANT ) .. ( $%# / RESPONDENT ) APPELLANT BY SHRI NEERJA PRADHAN RESPONDENT B Y : SHRI JITENDRA JAIN & SHRI RAVIKANT S. PATHAK ) * / DATE OF HEARING : 23-1-2014 ) * / DATE OF PRONOUNCEMENT : 07-02-2014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) - 14, MUMBAI DATED 15-11-2010 WHEREBY HE CAN CELLED THE DEMAND OF RS. 2,46,982/-RAISED BY THE A.O. AGAINST THE ASSESS EE BY AN ORDER PASSED U/S 201(1)/201(1A) OF THE INCOME TAX ACT, 1961 TREATING THE ASSESSEE AS IN DEFAULT FOR ITS ALLEGED FAILURE TO DEDUCT TAX AT HI GHER RATE OF 11.33% U/S 194-J OF THE ACT INSTEAD OF 2.60% U/S 194-C OF THE ACT FR OM THE PAYMENTS MADE FOR AVAILING INTERNET SERVICES. ITA 1145/M/11 2 2. THE ASSESSEE IN THE PRESENT CASE IS A PUBLIC LIM ITED COMPANY WHICH IS ENGAGED IN THE BUSINESS OF TRADING OF SHARES, BONDS , STOCKS, DEBENTURES AND GOVERNMENT SECURITIES. A SURVEY U/S 133-A OF THE AC T WAS CARRIED OUT IN ITS CASE ON 27-2-2008. PURSUANT TO THE SURVEY, THE ASSE SSEE DEDUCTED TAX @ 2.60% FROM THE PAYMENT MADE TOWARDS INTERNET CHARGE S AS PER SECTION 194-C OF THE ACT AND PAID THE SAME TO THE CREDIT OF THE G OVERNMENT. ACCORDING TO THE A.O., THE INTERNET SERVICES AVAILED BY THE ASSE SSEE BEING IN THE NATURE OF TECHNICAL SERVICES, DEDUCTION OF TAX AT SOURCE WAS REQUIRED TO BE MADE BY THE ASSESSEE AT A HIGHER RATE OF 11.33% U/S 194-J OF TH E ACT INSTEAD OF 2.60% U/S 194-C OF THE ACT. HE, THEREFORE, PASSED AN ORDER U/ S 201/201(1A) OF THE ACT TREATING THE ASSESSEE AS IN DEFAULT FOR SHORT DEDUC TION OF TAX AT SOURCE AMOUNTING TO RS. 2,46,982/- AND RAISED A DEMAND TO THAT EXTENT. ON APPEAL, THE LD. CIT(A) DELETED THE SAID DEMAND MADE BY THE A.O. HOLDING THAT THE INTERNET SERVICES AVAILED BY THE ASSESSEE WERE STAN DARD SERVICES SUCH AS TELEPHONE, ELECTRICITY ETC. AND AS HELD IN THE VARI OUS JUDICIAL PRONOUNCEMENTS, THE SAID SERVICES NOT BEING IN THE NATURE OF TECHNI CAL SERVICES, THE PROVISIONS OF SECTION 194-J OF THE ACT WERE NOT APPLICABLE. A GGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL B EFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE ISSUE INVOLVED IN THE APPEAL OF THE REVENUE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THE DECIS ION OF BANGALORE BENCH OF THIS TRIBUNAL IN THE CASE OF INFOSYS TECHNOLOGIES L TD. VS. DCIT REPORTED IN (2011) 45 SOT 157 WHEREIN IT WAS HELD THAT INTERNET SERVICES SUCH AS BANDWIDTH SERVICES NOT BEING IN THE NATURE OF MANAG ERIAL OR TECHNICAL SERVICES, THE PROVISIONS OF SECTION 194-J OF THE AC T ARE NOT APPLICABLE AND THE PAYMENT FOR SUCH SERVICES CANNOT BE DISALLOWED U/S 40(A)(I) OF THE ACT FOR THE FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. TO THE SIMILAR EFFECT IS THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN THE CA SE OF PACIFIC INTERNET ITA 1145/M/11 3 (INDIA) (P) LTD. VS. ITO REPORTED IN (2009) 27 SOT 523 WHEREIN IT WAS HELD THAT THE INTERNET FACILITIES SUCH AS BANDWIDTH AND NETWO RK OPERATING FACILITIES AVAILED BY TH4E ASSESSEE FROM TELECOMMUNICATION CON CERNS BEING STANDARD FACILITIES ARE NOT INCLUDIBLE IN TECHNICAL SERVICES WITHIN THE MEANING OF SECTION 194-J OF THE ACT AND THE ASSESSEE IS NOT REQUIRED T O DEDUCT TAX AT SOURCE U/S 194-J OF THE ACT FROM THE PAYMENT MADE OF SUCH FACI LITY. RESPECTFULLY FOLLOWING THESE DECISIONS OF THE CO-ORDINATE BENCHE S OF THIS TRIBUNAL, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) DELETIN G THE DEMAND RAISED BY THE A.O. TREATING THE ASSESSEE AS IN DEFAULT FOR IT S FAILURE TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE FOR INTERNET SERVICES U/S 194-J OF THE ACT AND DISMISS THIS APPEAL OF THE REVENUE. WE MAY ALSO ME NTION HERE THAT THE TAX EFFECT INVOLVED IN THIS APPEAL OF THE REVENUE IS LE SS THAN RS. 3 LACS AND THE SAME IS, THEREFORE, LIABLE TO BE DISMISSED ON THE G ROUND OF LOW TAX EFFECT ALSO. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH FEBRUARY, 2014 . . ) 0 1 07-02-2014 ) SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 1 DATED 07-02-2014 [ .../ RK , SR. PS ITA 1145/M/11 4 ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. 4 () / THE CIT(A)14, MUMBAI. 4. 4 / CIT (TDS), MUMBAI 5. $8 , * 8 , / DR, ITAT, MUMBAI H BENCH 6. / GUARD FILE. / BY ORDER, % $ //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI