Appeal Details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 2449 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 1 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-10-2017
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
21-06-2017
Assessment Year
2015-2016
Appeal Filed On
01-09-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 1152/HYD/16 2012-13 ASST. COMMISSIONER OF INCOME TAX (TDS), TDS CIRCLE-2(1), HYDERABAD M/S. NEXGEN EDUCATIONAL TRUST, HYDERABAD [TAN: HYDN04161D] [PAN: AABTN3182H] 1153/HYD/16 2013-14 1154/HYD/16 2014-15 1155/HYD/16 2015-16 FOR REVENUE : DR. SIBENDU MOHARANA, CIT-DR & SHRI M. SITARAM, DR FOR ASSESSEE : SHRI K. GOPAL, AR DATE OF HEARING : 10-10-2017 DATE OF PRONOUNCEMENT : 31-10-2017 O R D E R PER BENCH : THESE FOUR APPEALS ARE BY REVENUE AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-8, HYDERABAD, DATED 06-06-2016 ISSUED SEPARATELY BUT COMMONLY FOR THE IMP UGNED ASSESSMENT YEARS. THE ISSUE IS WHETHER ASSESSEE IS L IABLE TO PAY INTEREST U/S. 201(1A) FOR ALL THE IMPUGNED ASSESSMENT Y EARS AND ALSO U/S. 201(1) FOR AYS. 2013-14 AND 2015-16 IN WH ICH YEARS, ASSESSING OFFICER (AO) RAISED THE DEMANDS UNDER THAT S ECTION ALSO. I.T.A. NOS. 1152 TO 1155/HYD/2016 :- 2 - : 2. BRIEFLY STATED, ASSESSEE IS A TRUST RUNNING EDUCATION AL INSTITUTIONS IN THE NAME OF SRI CHAITANYA TECHNO SCHOO LS AND SRI CHAITANYA JUNIOR COLLEGES. THE TRUST ENTERED INTO SERVIC E AGREEMENT WITH M/S. K12 EDUCATIONAL MANAGEMENT PVT. LTD. , (HEREAFTER REFERRED TO AS K12) AND M/S. VARSITY EDUC ATIONAL MANAGEMENT P. LTD., (HEREAFTER REFERRED TO AS VARSITY ) FOR RENDERING VARIOUS SERVICES AS MAY BE REQUIRED IN RE LATION TO ADMINISTRATIVE, MANAGEMENT AND OPERATION OF EDUCATIONAL INSTITUTIONS. FOR VARIOUS SERVICES RENDERED BY K12 A ND VARSITY, ASSESSEE WAS MAKING PAYMENTS AS PER THE AGREEMENTS AN D HAS DEDUCTED TAX ON THE PAYMENTS MADE U/S. 194C OF THE INC OME TAX ACT [ACT] CONSIDERING THE AGREEMENTS AS WORKS CONTRAC T. A SURVEY ACTION U/S. 133A WAS CONDUCTED ON 12-03-2015 IN THE P REMISES OF ASSESSEE-TRUST AT HYDERABAD. AFTER ANALYZING THE VAR IOUS AGREEMENTS, AO WAS OF THE OPINION THAT THE SERVICES PR OVIDED TO ASSESSEE ARE IN THE NATURE OF TECHNICAL SERVICES AND ACCORDINGLY, TAX WAS REQUIRED TO BE DEDUCTED AT 10% U/S. 194-J. AO WAS OF THE OPINION THAT THERE WAS A SHORT DEDUCTION MADE BY ASSE SSEE AND RAISED DEMANDS MAINLY U/S. 201(1A) TOWARDS INTEREST FOR THE DEFERRED PAYMENTS. THE DEMAND WAS ALSO RAISED ON CER TAIN PAYMENTS TO VARSITY IN AY. 2013-14 U/S. 201 AND IN AY . 2015-16 ON ENTIRE PAYMENTS ON THE REASON THAT THE ASSESSEE IS FAILED TO FURNISH NECESSARY DETAILS OF REMITTANCE OF TAX BY THE D EDUCTEES IN THOSE YEARS. 3. LD.CIT(A) ON APPEALS BY ASSESSEE IN HIS DETAILED ORDERS, EXTRACTED THE ORDER OF THE AO FROM PAGES 3 TO 27, EXTRA CTED WRITTEN SUBMISSIONS FROM 27 TO 59 AND DETAILED SUBMISSIONS OF AO FROM 59 TO 79 AND THEREAFTER CONSIDERED THE ISSUE MOSTLY ON LE GAL PRINCIPLES I.T.A. NOS. 1152 TO 1155/HYD/2016 :- 3 - : FROM PAGES 79 ONWARDS TO 96. HIS CONCLUSIONS ARE THA T ASSESSEE HAS CORRECTLY DEDUCTED TAX HOLDING THAT THE AGREEMENTS ARE FOR WORKS CONTRACT AND SO THERE IS NO VIOLATION UNDER TH E TDS PROVISIONS. ACCORDINGLY, HE HAS CANCELLED BOTH LEVY OF TAX U/S. 201(1) AND LEVY OF INTEREST U/S. 201(1A). HIS CONCLU SIONS IN PARA 11 & 12 (AY. 2015-16) ARE AS UNDER: 11. IN THE LIGHT OF THE FOREGOING DISCUSSION, BOTH ON FACT AND LAW, FOLLOWING ARE THE FINDINGS: THAT THE NATURE OF WORK PERFORMED BY THE COMPANIE S FALLS UNDER THE AMBIT OF SECTION 194C. THE APPELLANT HAS APPROPRIAT ELY DEDUCTED TAX TO SOURCE AT THE RATE OF 2% AND DEPOSITED THE SAME TO THE CREDIT OF CENTRAL GOVERNMENT. THE NATURE OF WORK PERFORMED CANNOT BE EQUATED WI TH A TECHNICAL SERVICE PROVIDED BY THESE COMPANIES AND PAYMENTS CANNOT BE TREATED AS 'FEES FOR TECHNICAL SERVICES' ATTRACTING DEDUCTION OF TAX AT HIGHER RATE UNDER SECTION 194J AS CONTENDED BY THE ASSESSING OFFICER. IN VIEW OF THE FINDINGS THAT THE NATURE OF WORK C ARRIED OUT BY THE SERVICE PROVIDER-COMPANIES FALL UNDER SECTION 194C, THERE I S NO LIABILITY TO DEDUCT TAX AT A HIGHER RATE FALLING UNDER SECTION 194J. TH E APPELLANT HAS DEDUCTED TAX AT CORRECT RATE AND AID THE SAME TO TH E CREDIT OF GOVERNMENT. THE APPELLANT CANNOT BE TREATED AS AN ASSESSEE IN D EFAULT UNDER SECTION 201(1) OF IT ACT. CONSEQUENTLY, THE QUESTION OF LEV Y OF INTEREST UNDER SECTION 201(1A) WOULD NOT ARISE. ACCORDINGLY, THE D EMAND RAISED U/S. 201(1) AND 201(1A) FOR THE AY 2015-16 AMOUNTING TO RS.12,15,69,252/- AND RS. 1,43,40,069/- RESPECTIVELY ARE DELETED. HE NCE, THE GROUND NOS. 2, 3 & 4 ARE ALLOWED. 12. GROUND NOS. 5 RELATES TO ALTERNATE PLEA FOR THE PURPOSE OF SECTION 201(1). THE APPELLANT HAS ALSO TAKEN THE ALTERNATIV E PLEA THAT SINCE THE RECIPIENT OF INCOME HAS PAID TAXES ON THE ENTIRE IN COME AND AS THERE IS NO LOSS TO REVENUE, THE APPELLANT CANNOT BE DEEMED TO BE ASSESSEE IN DEFAULT FOR THE PURPOSE OF SECTION 201(1). DURING THE COURS E OF THE HEARING, THE AUTHORISED REPRESENTATIVES SUBMITTED THAT A CONFIRM ATION ON THE LETTER HEADS OF K-12 AND VARSITY HAS BEEN FILED BEFORE THE ASSESSING OFFICER AND THE SAME HAS NOT BEEN CONSIDERED. IT WAS ALSO SUBMI TTED THAT FORM NO.26A COULD NOT BE FILED SINCE DUE DATE FOR FILING RETURNS OF THE INCOME BY THE CORPORATE WAS FOR OFF BY THE DATE ASSESSMENT WA S COMPLETED. IN THE REPORT SUBMITTED BY THE ASSESSING OFFICER IT WAS ME NTIONED THAT SINCE FORM NO.26A WAS NOT SUBMITTED, THE DEMAND U/S.201(1) WAS RAISED. DURING I.T.A. NOS. 1152 TO 1155/HYD/2016 :- 4 - : THE COURSE OF APPELLATE PROCEEDINGS, CONFIRMATION A S REQUIRED IN FORM NO. 26A DULY CERTIFIED BY A CHARTERED ACCOUNTANT CONFIR MING THE FACT THAT THE PAYMENTS MADE BY THE APPELLANT WERE SHOWN AS INCOME 'IN THE HANDS OF K-12 AND VARSITY WERE FILED. THEREFORE, AS THE DEDU CTEE ACCEPTED THE PAYMENTS MADE BY THE APPELLANT AS ITS INCOME, THE A PPELLANT CANNOT BE DEEMED TO BE 'ASSESSEE IN DEFAULT' FOR THE PURPOSE OF SECTION 201(1). THIS ARGUMENT HAS MERIT. BUT SINCE SPECIFIC FINDINGS ON MERIT THAT THE ASSESSEE IS NOT REQUIRED TO DEDUCT TAX UNDER SECTION 194J AN D THEREFORE, CANNOT BE TREATED AS ASSESSEE IN DEFAULT FOR THE PURPOSE OF S ECTION 201(1), GROUND NO.5 BECOMES ACADEMIC FOR THE PURPOSE OF THIS ORDER . HENCE, THE GROUND NO.5 IS DISMISSED. 4. REVENUE IS AGGRIEVED IN ALL THE YEARS AND RAISED THE GROUNDS ACCORDINGLY. FOR THE SAKE OF RECORD, THE GROUNDS RAI SED IN AY. 2015-16 ARE EXTRACTED HEREUNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES, OF THE CASE, THE LD.CIT(A) DID NOT ERR IN DELETING THE DEMAND AMOUNT OF RS,12,15,69,252/- RAISED UNDER SECTION 201(1) OF THE INCOME TAX ACT)? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) DID NOT ERR IN DELETING THE INTEREST AMOUNT OF RS. 1,43,40,069/- CHARGED UNDER SECTION 201(1A) OF THE INCOME TAX ACT? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) DID NOT ERR IN DELETING THE INTEREST CHARGED UNDER SECTION 201(1A) OF THE INCOME TAX ACT BY HOLDING THAT THE ASSESSEE CANNOT BE TREATED AS THE ASSESSEE IN DEFAULT UNDER SECTION 201(1) OF THE ACT ? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) DID NOT ERR IN DELETING THE DEMAND RAISED UNDER SEC TION 201(1) AND INTEREST CHARGED UNDER SECTION 201(1A) OF THE INCOM E TAX ACT BY HOLDING THAT THE SERVICES RENDERED BY M/S K12 EDUCATIONAL M ANAGEMENT PVT. LTD. AND M/S JUNIOR VARSITY EDUCATIONAL MANAGEMENT PVT. LTD. WERE NOT IN THE NATURE OF TECHNICAL SERVICES AND THE PROVISIONS OF SECTION 194J OF THE ACT ARE NOT APPLICABLE ON THE PAYMENTS MADE BY THE ASSE SSEE TO THE SAID COMPANIES? 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) DID NOT ERR IN DELETING THE DEMAND RAISED UNDER SEC TION 20L(1) AND THE INTEREST CHARGED UNDER SECTION 201(1A) OF THE INCOM E TAX ACT BY HOLDING THAT THE PROVISIONS OF SECTION 194J OF THE ACT ARE NOT APPLICABLE ON THE PAYMENTS MADE TO THE SAID COMPANIES EVEN THOUGH THE 'SERVICE AGREEMENT' BETWEEN THE ASSESSEE AND THE SAID COMPAN IES CLEARLY I.T.A. NOS. 1152 TO 1155/HYD/2016 :- 5 - : INDICATED THAT THE SERVICES RENDERED WERE IN THE NA TURE OF 'TECHNICAL SERVICES'? GROUND NO. 6 IS GENERAL IN NATURE. THE GROUNDS ARE S IMILAR IN OTHER YEARS EXCEPT THE AMOUNT OF DEMANDS RAISED U/S. 201(1) IN AY. 2013-14 WHICH STANDS AT RS. 35,95,200/-. THERE WAS NO DEMAND U/S. 201(1) IN AY. 2012-13 AND 2014-15. SO THE GROU NDS 2 TO 6 ARE RAISED IN OTHER YEARS WITH VARYING AMOUNTS INVOLV ED. 5. IT WAS THE SUBMISSION OF LD.DR THAT CIT(A) IS NOT C ORRECT IN GIVING FINDINGS THAT THERE ARE NO TECHNICAL SERVICES I NVOLVED WHERE AS AO HAS GIVEN DETAILED REASONS WHILE CONSIDERING T HE TECHNICAL SERVICES. HE ALSO RELIED ON THE CO-ORDINATE BENCH DE CISION IN THE CASE OF SRI GOWTHAM ACADEMY OF GENERAL & TECHNICAL E DUCATION VS. DY. COMMISSIONER OF INCOME TAX, IN ITA NO. 433/ HYD/2015 (AY. 2012-13) DT. 03-02-2017, PARTICULARLY IN PARA 7 OF THAT ORDER, WHEREIN THAT ASSESSEE ON SIMILAR SERVICES BEING PROVI DED BY THE DEDUCTEE- K12 HAS DEDUCTED TAXES AT DIFFERENT RATES. HE REFERRED THAT ORDER TO SUBMIT THAT THE AGREEMENTS ARE NOT COMPOSITE AGREEMENTS AND PAYMENTS ARE MADE FOR INDIVIDUAL SERVI CES ON A DIFFERENT CATEGORIZATION. THEREFORE, THE ORDER OF CIT (A) THAT THE AGREEMENTS ARE OF WORKS CONTRACTS CANNOT BE UPHELD. HE HAS NO OBJECTION IF THE ISSUES ARE RESTORED TO THE FILE OF AO F OR FRESH CONSIDERATION. 6. LD.AR IN REPLY, HOWEVER, SUBMITTED THAT ASSESSEE WA S DEDUCTED TAX TREATING IT AS WORKS CONTRACT AND THERE IS NO FAILURE ON THE PART OF ASSESSEE. REGARDING RAISING OF THE DE MAND IN AY. 2013-14 AND 2015-16, IT WAS SUBMITTED THAT ASSESSEE COUL D NOT FURNISH THE NECESSARY TAX PAYMENT DETAILS OF THE DEDUC TEES IN TIME I.T.A. NOS. 1152 TO 1155/HYD/2016 :- 6 - : SO THAT THE DEMAND HAS BEEN RAISED, BUT PROVISO TO S ECTION 201(1) IS APPLICABLE AS THE DEDUCTEES REMITTED TAXES. IT WAS FOR THIS REASON THAT LD.CIT(A) DELETED THE DEMANDS U/S. 201(1). IT WAS FURTHER SUBMITTED THAT LD.CIT(A) ALSO CONSIDERED THE ALTERNATE S UBMISSIONS IN PARA 12 OF THE ORDER. THEREFORE, THE GROUNDS PERTA INING TO SECTION 201(1) SHOULD NOT SURVIVE. 6.1. AS FAR AS INTEREST U/S. 201(1A), IT WAS SUBMITTED TH AT EVEN IN CASE WHERE TAX WAS TO BE DEDUCTED U/S. 194J, SINCE THE DEDUCTEES HAVE ALREADY FILED RETURNS BY PAYMENT OF ADVANCE TAX I TSELF, THE PERIOD OF INTEREST LEVIABLE WILL BECOME ZERO AND THE REFORE, THERE CAN BE NO LEVY OF INTEREST U/S. 201(1A), FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT (TDS) VS. BHARAT HOTELS LTD., [384 ITR 77] (KARN). IT WAS TH E SUBMISSION THAT EVEN IF THE ISSUE IS REMITTED ON THE NATURE OF SERVI CES BEING RENDERED, THE INTEREST U/S. 201(1A) MAY NOT ARISE AS THO SE ASSESSEES HAVE PAID ADVANCE TAX IN RESPECTIVE YEARS AND PLACED ON RECORD A CHART CONTAINING INCOME DECLARED, ADVANCE TA X PAID TO SUBMIT THAT NO INTEREST WAS LEVIABLE. HENCE, THE ORDERS OF THE CIT(A) CAN BE UPHELD. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS ON RECORD. AS FAR AS THE TAX U/S. 201(1) IS CONCERNED, THE ISSUE MAY RELATE TO SHORT DEDUCTION OF TAX DUE TO DIFFER ENCE OF OPINION WHETHER THE AGREEMENTS ARE TO BE CONSIDERED U/ S. 194C OR U/S. 194J. IN CASE OF SRI GOWTHAM ACADEMY OF GENERAL & TECHNICAL EDUCATION VS. DY. COMMISSIONER OF INCOME TAX, IN ITA NO. 433/HYD/2015 (AY. 2012-13) DT. 03-02-2017, WHEREIN SIMILAR ISSUE WAS RAISED, BUT THE ITAT DID NOT UPHOLD THE ORDE R OF THE AO I.T.A. NOS. 1152 TO 1155/HYD/2016 :- 7 - : AND CIT(A), AS THE FACTS INVOLVED INDICATE THAT THE SAID ASSESSEE HAS DEDUCTED TAX AT DIFFERENT RATES U/S. 194C AS WELL A S 194J AS UNDER: PARA 7. EXPENDITURE TDS SECTION GROSS RATE OF TDS TDS AMOUNT PROGRAMS % FUNCTIONS 194C 19,86,180.00 2% 39,723.00 ELECTRONIC MEDIA, OTHER PUBLICITY & MARKETING SERVICES 194C 3,42,01,453.00 2% 6,84,029.00 PRINT MEDIA 194C 83,58,616,.00 2% 1,67,172.32 GENERAL MAINTENANCE SERVICES 194C 2,45,13,898.00 2% 4,90,277.96 PROVISION OF EDUCATION SERVICES AV LAB, COMPUTER LAB, MULTIMEDIA 194C 4,09,46,320.00 2% 8,18,926.40 EXPENDITURE TDS SECTION GROSS RATE OF TDS TDS AMOUNT TEACHER TRAINING SERVICE 194J 11,48,749.00 10% 1,14,874.90 STAFF HIRING SERVICES 194J 36,96,665.00 10% 3,69,666.50 PERFORMANCE REVIEW & BENEFIT ANALYSIS 194J 28,27,377.00 10% 2,82,737.70 AUDIT & QUALITY MANAGEMENT SERVICE 194J 22,71,137.00 10% 2,27,113.70 PROVISION OF SPACE 194I 10,19,00,343.00 10% 1,01,90,034.30 EXAMINATION & ASSESSMENTS 194J 1,22,49,404.00 10% 12,24,940.00 ACCOUNTS & RECORDS 194J 37,43,521.00 10% 3,74,352.10 CONTENT DEV. & CURRICULUM IMPROVEMENT SERVICES 194J 1,22,58,852.00 10% 12,25,885.20 BRAND ROYALTY FEE 194J 51,88,500.00 10% 5,18,850.00 MORE OR LESS, SIMILAR SERVICES ARE BEING PROVIDED B Y K12 AND VARSITY TO THE ASSESSEE. WE WERE INFORMED THAT CONSEQ UENT TO THE SURVEY OPERATIONS, THE ASSESSEE HAS CHANGED ITS OPINIO N AND TAXES ARE BEING DEDUCTED U/S. 194C AND 194J, AS DIRECTED B Y THE AO. HOWEVER, WE ARE NOT INFORMED WHICH OF THE SERVICES RE NDERED WERE CONSIDERED FOR SECTION 194J. AS FAR AS THE IMPUGNED Y EARS ARE I.T.A. NOS. 1152 TO 1155/HYD/2016 :- 8 - : CONCERNED, BY VIRTUE OF AMENDMENT TO SECTION 201(1), WH EREIN THE PROVISO WAS INSERTED, LD.CIT(A) HAS GIVEN RELIEF AS NO DEMAND U/S. 201(1) CAN BE RAISED AS THE DEDUCTEES HAVE OFFERED I NCOMES AND PAID TAXES AFTER CLAIMING TDS. FOLLOWING THE PRINCIP LES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P.) LTD. VS. CIT [163 TAXMAN 355 (SC)/ [20 07] 293 ITR 226 (SC)], DEMAND U/S. 201(1) CANNOT BE RAISED AND C ERTAINLY THE PROVISO TO SECTION 201(1) AS AMENDED IS APPLICABLE. IN VIEW OF THAT WHETHER THE TAX IS TO BE DEDUCTED U/S. 194C OR 194J, IT D OES NOT MATTER, SO LONG AS THE DEMAND U/S. 201(1) CANNOT BE RA ISED AS PER THE PROVISIONS OF THE ACT, ON THE FACT THAT DEDUCTEES HAVE PAID TAXES THEREON ON THE INCOMES. CIT(A) HAS CONSIDERED THAT ASSESSEE HAS CORRECTLY DEDUCTED TAX U/S. 194C AND THE ISSUE OF D EMAND U/S. 201(1) WAS CONSIDERED AS AN ALTERNATIVE PLEA. H OWEVER, WE NOTICED THAT CERTAIN AMOUNTS ARE TO BE CONSIDERED U/S. 194J. THEREFORE, THIS ISSUE OF CONSIDERING THE AMOUNTS U/S. 194C OR 194J OF VARIOUS SERVICES RENDERED IS TO BE RESTORED TO THE FILE OF AO FOR VERIFICATION AFRESH KEEPING IN MIND THE SERVICES RENDERED, THE PRINCIPLES OF LAW INVOLVED AND THE FACTS OF THE CASE. IN CASE ASSESSEE SATISFIES THAT THE DEDUCTEES HAVE PAID TAXES, THE PROVISO TO SECTION 201(1) MAY APPLY AND NO FURTHER DEMAND U/S. 201(1) CAN BE RAISED. THE SO CALLED CHARTERED ACCOUNTANTS CERTIFICATE, FILED BEFORE THE CIT(A) CAN ALSO BE EXAMINED, KEEPIN G IN MIND THE OBSERVATIONS OF THE CIT(A) IN THE ALTERNATE, PLEA DIS CUSSED IN PARA 12 OF THE ORDER OF THE CIT(A). THEREFORE, AO IS DIR ECTED TO EXAMINE ABOUT THE NATURE OF SERVICES AND WHICH OF THE SERVICES ARE COMING U/S. 194J, THEN EXAMINE WHETHER A DEMAND U/S. 201(1) CAN BE RAISED IN AYS. 2013-14 AND 2015-16. IF ASSESSEE SA TISFIES THAT THE DEDUCTEES HAVE PAID TAXES THEREON ON THE INCOMES, NO DEMAND I.T.A. NOS. 1152 TO 1155/HYD/2016 :- 9 - : U/S. 201(1) CAN BE RAISED FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA C OLA BEVERAGE (P.) LTD. VS. CIT (SUPRA) AND AMENDMENT TO SE CTION 201(1) W.E.F. 01-07-2012. 7.1. COMING TO THE ISSUE OF LEVY OF INTEREST U/S. 201 (1A), INTEREST IS TO BE LEVIED U/S. 201(1A), IF THERE IS A SHORT DE DUCTION OF TAX. THEREFORE CATOGORISATION OF SERVICES IS REQUIRED TO BE CONSIDERED FOR THE SHORT DEDUCTION. WE ARE OF THE OPINION THAT AO IS NO T CORRECT TO TREAT ALL THE SERVICES AS TECHNICAL SERVICE IN NA TURE AND IT IS ALSO NOT CORRECT ON THE PART OF THE CIT(A) TO GIVE A FINDING THAT THERE IS NO HUMAN ELEMENT IN RENDERING THE SERVICES WHICH ATTRA CTS SECTION 194J. AS RIGHTLY HELD BY THE CO-ORDINATE BENCH IN THE CASE OF SRI GOWTHAM ACADEMY OF GENERAL & TECHNICAL EDUCATION VS. DY. COMMISSIONER OF INCOME TAX, IN ITA NO. 433/HYD/2015 (AY. 2012- 13) DT. 03-02-2017, CERTAIN SERVICES ARE COVERED U/S. 194C WHERE AS CERTAIN CERTAIN OTHER SERVICES ARE COVERED U/S. 194 J. THE ORDER OF THE CO-ORDINATE BENCH IN PARAS 8, 9 AND 10 IS AS U NDER: 8. FROM THE PERUSAL OF THE ABOVE, IT IS CLEAR THAT THE SERVICES RENDERED BY M/S K12 TECHNO SERVICES PVT. LTD. ARE D ISTINGUISHABLE FROM EACH OTHER AND THOUGH THE RECIPIENT OF ALL THE PAYM ENTS IS A SINGLE PARTY, THE NATURE OF THE SERVICES ARE DISCERNIBLE AND DIFF ERENT. IF THE CONTENTION OF THE REVENUE WAS TO BE ACCEPTED, THEN WHY SHOULD THE TDS BE DEDUCTED U/S 194J AND NOT U/S 194C FOR ALL THE PAYMENTS TREA TING THE ENTIRE AGREEMENT AS A WORK CONTRACT?. WHEN THE BASKET OF S ERVICES IS FILLED WITH DIFFERENT AND DISTINGUISHABLE SERVICES, WE ARE OF T HE OPINION THAT THE ASSESSEE WAS CORRECT IN ADOPTING DIFFERENT RATES OF TDS FOR DIFFERENT TYPES OF PAYMENTS. 9. THE DECISIONS RELIED UPON BY THE LD. AO AND THE CIT(A) ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE BEFORE U S. IN THE CASE OF EMC VS INCOME TAX OFFICER (CITED SUPRA), THE ISSUE WAS WHETHER THE ASSESSEE THEREIN WAS A CONTRACTOR U/S 194C(1) OR A SUBCONTRA CTOR U/S 194C(2) OF THE ACT. AND THEREFORE IT IS NOT RELEVANT TO THE P RESENT CASE. I.T.A. NOS. 1152 TO 1155/HYD/2016 :- 10 -: 10. IN THE CASE OF OBEROI HOTELS INDIA PVT LTD, THE HON'BLE SUPREME COURT WAS DEALING WITH THE CASE OF AN ASSES SEE WHO WAS RUNNING HOTELS AND THE ISSUE THEREIN WAS THE NATURE OF SERVICES RENDERED FOR MANAGING A MODERN HOTEL, INCLUDING PROMOTION OF BUSINESS, RECRUITING AND TRAINING STAFF ETC., WHEREAS IN THE CASE BEFORE US, THE ASSESSEE IS RUNNING AN EDUCATIONAL INSTITUTION AND THE TYPES OF SERVICES ARE TOTALLY DISTINGUISHABLE FROM THE SERVICES IN THE CASE OF A HOTEL. THEREFORE, THIS CASE IS DISTINGUISHABLE ON FACTS. IN THE CASE OF A SSOCIATED CEMENTS, THE HON'BLE SUPREME COURT WAS CONSIDERING WHETHER THE T AX DEDUCTOR CAN DECIDE OR ESTIMATE THE INCOME COMPONENT OF THE RECE IPT AND DEDUCT TAX THEREON ONLY AND RESTRICT THE TDS TO SUCH INCOME AL ONE BUT SUCH IS NOT THE CASE BEFORE US. EVEN THE CBDT CIRCULAR RELIED UPON BY THE LD. DR PROVIDED THAT THE ALL THE PAYMENTS CANNOT BE COVERE D UNDER ONE SECTION. THEREFORE, IN OUR OPINION, THE ASSESSING OFFICER AN D CIT(A) HAVE ERRED HEARD IN HOLDING THAT THE ASSESSEE OUGHT TO HAVE MA DE TDS U/S 19J OF THE ACT ON THE ENTIRE PAYMENT TO M/S K12 TECHNO SER VICES PRIVATE LIMITED. 7.2. AS CAN BE SEEN FROM THE ABOVE ORDER SINCE THAT AS SESSEE HAS DEDUCTED TAX U/S. 194C AS WELL AS 194J, THE ISSUE WAS ACCEPTED AS SUCH AND TREATING THE AGREEMENT AS COMPOSITE AGREEMENT FO R ALL SERVICES U/S. 194J WAS NOT ACCEPTED. HOWEVER, IN THIS CASE, ASSESSEE HAS TREATED THE SERVICES ENTIRELY U/S. 194C. THEREFORE, THE ISSUE OF SERVICES WHICH REQUIRE HUMAN ELEMENT AND ARE OF TECHNICAL NATURE REQUIRED TO BE EXAMINED, IN THE LIGHT OF THE SERVICES RENDERED. THE PRINCIPLES LAID DOWN BY THE H ON'BLE SUPREME COURT IN THE CASE OF CIT VS. KOTAK SECURITIES L TD., [383 ITR 1] (SC) IS REQUIRED TO BE KEPT IN MIND. ACC ORDINGLY, WE ARE OF THE OPINION THAT TO THE EXTENT OF LEVY OF INTEREST U/S. 201(1A) IS CONCERNED, THE ISSUE IS TO BE EXAMINED WHETHER ANY OF THESE SERVICES ARE REQUIRED TO BE CONSIDERED U/S. 194J. I N CASE ANY OF THE SERVICES ARE CONSIDERED TO BE COVERED U/S. 194J, THEN AO IS STATUTORILY REQUIRED TO LEVY INTEREST U/S. 201(1A) EVEN THOUGH NO DEMAND IS RAISED U/S. 201(1). THIS REQUIRES A SEPAR ATE CONSIDERATION BY THE AO. I.T.A. NOS. 1152 TO 1155/HYD/2016 :- 11 -: 7.3. WHILE CONSIDERING THE LEVY OF INTEREST U/S. 201( 1A), WE NOTICE THAT THERE IS A MERIT IN ASSESSEES CONTENTION THAT THOSE DEDUCTEES HAVE PAID TAXES AND THEREFORE, FOLLOWING THE PRINCIPL ES LAID DOWN BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT ( TDS) VS. BHARAT HOTELS LTD., [384 ITR 77] (KARN), THERE CANNOT BE ANY INTEREST U/S. 201(1A). ASSESSEE FILED A STATEMENT THAT T HOSE DEDUCTEES HAVE PAID ADVANCE TAXES ALSO. HOWEVER, THES E ARE REQUIRED TO BE EXAMINED BY THE AO, IN THE LIGHT OF THE TA XES PAID AND RETURNS FILED. THE HON'BLE KERALA HIGH COURT IN THE CASE OF US TECHNOLOGIES INTERNATIONAL P. LTD., VS. CIT [195 TAXM ANN 323] (KER) HAS HELD THAT THE PROVISIONS OF SECTION 271C ARE APPLICABLE NOT ONLY FOR FAILURE TO DEDUCT TAX BUT ALSO FAILURE TO RE MIT THE TAX DEDUCTED INTO GOVT. ACCOUNT. UNDER THOSE FACTS, THE HON' BLE HIGH COURT OF KERALA HAS CONSIDERED THAT CORRESPONDING INTE REST U/S. 201(1A) IS REQUIRED TO BE PAID. THEREFORE, THE ISSUE OF LEVY OF INTEREST U/S. 201(1A) FOR THE DURATION OF INTERREGNUM PE RIOD I.E., FROM THE DATE OF PAYMENT ON WHICH TDS WAS TO BE MADE A ND TO THE DATES PAYMENT OF TAX BY THE DEDUCTEES IS REQUIRED TO BE LEVIED AFTER DUE EXAMINATION OF THE FACTS. AO IS DIRECTED TO EXAMIN E THE FACTS AND CONSIDER THE PRINCIPLES OF LAW BEFORE LEVYING IN TEREST U/S. 201(1A). ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY B EFORE DECIDING THE ISSUE. ASSESSEE IS ALSO DIRECTED TO FURNISH NEC ESSARY DETAILS TO EXAMINE THE SERVICES WHICH MAY BE COVERED U/S. 194C/ 194J. WITH THESE OBSERVATIONS, THE ISSUES IN THESE APPEALS ARE RE STORED TO THE FILE OF AO, FOR WHICH PURPOSE THE ORDERS OF THE CIT(A ) AND AO WHICH WERE ORIGINALLY PASSED ARE HEREBY SET ASIDE WITH A DIRECTION TO RE- EXAMINE THE ISSUE AS STATED ABOVE. I.T.A. NOS. 1152 TO 1155/HYD/2016 :- 12 -: 8. WITH THESE OBSERVATIONS AND DIRECTIONS, ALL THE APPE ALS OF REVENUE ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOS ES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2017 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 31 ST OCTOBER, 2017 TNMM I.T.A. NOS. 1152 TO 1155/HYD/2016 :- 13 -: COPY TO : 1. THE ASST. COMMISSIONER OF INCOME TAX(TDS), TDS C IRCLE- 2(1), HYDERABAD. 2. M/S. NEXGEN EDUCATIONAL TRUST, PLOT NO. 80, SHRI SAI PLAZA, III FLOOR, AYYAPPA SOCIETY, MADHAPUR, HYDERA BAD. 3. CIT (APPEALS)-8, HYDERABAD. 4. CIT-TDS, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.
