DCIT, New Delhi V. M/s. CL Educate Limited, New Delhi

ITA 1283/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7461 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Assessee Lawyers: RAKESH KUMAR SEHGAL
• Section: 194C; 201(1)

Judgement Text

1 ITA NO. 1283/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEM BER AND SMT SUCHITRA KAMBLE, JUD ICIAL MEMBER I.T.A .N O.-1283/DEL/2014 (ASSES SMENT YEAR 2010-11) DCIT CIRCLE-49(1) NEW DELHI (APPELLANT) VS C L EDUCATE LTD. R-90 GREATER KAILASH, PARR-1 NEW DELHI AAACC3885C (RESPONDENT) APPELLANT BY SH. ROBIN RAWAL, SR. DR RESPONDENT BY SH. RAKESH KUMAR SEHGAL, CA ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 19/12/2013 PASSED BY CIT (A) XXX, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW, THE CIT(A) HAS ERRED IN HOLDING THAT THE PAYME NT MADE TO DATE OF HEARING 27.04.2016 DATE OF PRONOUNCEMENT 10.06.2016 2 ITA NO. 1283/DEL/2014 FRANCHISEES IS COVERED U/S 194C AND NOT U/S 194J OF THE I.T ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE CIT(A) HAS ERRED IN NOT CONSIDERING THE RE ASONS MENTIONED ON THE ORDER PASSED U/S 201(1) 201(1A) OF THE I.T ACT WHILE DECIDING THE APPEAL ON THE ISSUE OF SHORT DED UCTION OF TDS ON PAYMENT OF RETAINER SHIP FEE. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNI NG AN ACADEMIC INSTITUTION/COACHING INSTITUTE. THE ASSESSEE MADE TOTAL PAYMENTS OF RS.29,07,86,256/- TO ITS FRANCHISEES ON WHICH TAX H AS BEEN DEDUCTED AT SOURCE AS PER THE PROVISIONS OF SECTION 194C OF THE ACT. THE ASSESSING OFFICER HELD THAT THE ASSESSEE IS IN DEFA ULT AND THE PAYMENT TO FRANCHISEE WAS SUBJECT TO TAX DEDUCTION U/S 194J OF THE ACT. THE ASSESSING OFFICER FURTHER DETERMINE TDS LIABILITY O F THE ASSESSEE U/S 201(1A) OF THE ACT. AGGRIEVED BY THE SAID ORDER, TH E ASSESSEE FILED AN APPEAL BEFORE CIT(A). THE CIT(A) ALLOWED THE APPEA L OF THE ASSESSEE. THE DEPARTMENT HAS FILED THIS APPEAL ON TWO GROUNDS STATED HEREINABOVE. 4. THE LD. AR SUBMITTED THAT THE ISSUE RAISED IN TH IS APPEAL HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN T HE ASSESSEES OWN CASE BY ITAT, NEW DELHI BENCH IN ITA NO. 5820 TO 58 27/DEL/2013 A.Y 2003 -04 TO 2010-11) DATED 17 TH MARCH, 2016 (A.Y. 2003-2004 TO 2010-2011). 3 ITA NO. 1283/DEL/2014 5. THE LD. DR WAS NOT ABLE TO DISTINGUISH THE SAID ORDER OF THE ITAT. 6. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH T HE PARTIES. THE ISSUES THAT ARISES IN THE PRESENT CASE IS CLEA RLY COVERED BY THE ASSESSEES OWN CASE IN ITA NO. 5820 TO 5827/DEL/201 3 A.Y 2003 -04 TO 2010-11) DATED 17 TH MARCH, 2016. THE RELEVANT PARA OF THE SAID JUDGMENT ARE AS FOLLO WS:- PARA 47. ON READING OF PARA NO. 29 TO 35 OF TH E DECISION OF THE HIGH COURT IT IS APPARENT THAT IN THIS CASE THE PAYMENTS ARE NOT TO BE MADE BY THE ASSESSEE, BUT IT WAS TO BE RE CEIVED BY THE ASSESSEE FROM THE FRANCHISEES. THE SERVICES ARE BE ING PROVIDED BY THE ASSESSEE TO THE FRANCHISEES BY ALLOWING THEM TO EXPLOIT THE TECHNICAL KNOW-HOW AND THE TRADEMARK THAT IS AVAILA BLE WITH THE ASSESSEE. THE DOMINANT OBJECT OF THE AGREEMENT IS THAT THE ASSESSEES TRADEMARK SHOULD BE EXPLOITED FOR THE MU TUAL BENEFIT OF THE PARTIES AND THE TECHNICAL KNOW-HOW THAT IS B EING OWNED BY THE ASSESSEE. THE LICENSEE IS USING IT FOR THEIR O WN BENEFIT. REGARDING THE CONSIDERATION ALSO, IT IS FLOWING FRO M FRANCHISEE TO THE ASSESSING AND NOT FROM ASSESSEE TO THE FRANCHIS EE. THEREFORE, HERE. THE PROVISIONS OF THE SERVICES ARE DOMINANTL Y PROVIDED BY THE ASSESSEE TO THE FRANCHISEE AND FOR WHICH THE CO NSIDERATION IS RECEIVED. THE PROVISIONS OF SECTION 194J ARE APPLI CABLE IN CASE, WHERE THE ASSESSEE MAKES ANY PAYMENT TO A RESIDENT ASSESSEE 4 ITA NO. 1283/DEL/2014 FOR THE SPECIFIED SERVICES. HERE, IN THIS CASE THE PAYMENT IS RECEIVED BY THE ASSESSEE FROM FRANCHISEE OWNERS. I T IS ONLY IN THE MODUS OPERANDI OF THE COLLECTION OF THE FEES WHEREI N ASSESSEE TRANSFERS THE MONEY TO THE FRANCHISEE. THE MODUS O PERANDI FOR COLLECTION OF THE FEES AS WELL AS OF THE REVENUE SH ARING CANNOT DETERMINE WHETHER THE AMOUNT REMITTED BY THE ASSESS EE TO THE FRANCHISEE IS SUBJECT TO TAX DEDUCTION AT SOURCE U/ S 194J OF THE ACT. LOOKING TO THE FACTS OF THE CASE WE AR E OF THE VIEW THAT IN FACTS ASSESSEE IS PROVIDING SERVICES T O THE FRANCHISEE BY ALLOWING USE OF INTANGIBLE ASSETS. EVEN OTHERWI SE ASSESSE IS NOT PAYING ANY FEES FOR PROFESSIONAL SERVICES AS TH E FRANCHISEE DO NOT FALL IN TO THE SPECIFIED PROFESSION. IT IS ALS O NOT PAYING ANY FEES FOR TECHNICAL SERVICES TO THE FRANCHISEE AS IT DOES NOT RENDER ANY SERVICES TO THE ASSESSEE. HENCE, WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF 1 ST APPELLATE AUTHORITY AND NONE HAS BEEN POINTED OUT BY THE LD. DR. IN VIEW OF THIS, WE CONFIRM THE FINDING OF 1 ST APPELLATE AUTHORITY HOLDING THAT PROVISIONS OF SECT ION 194J. PARA 48. GROUND NO. 2 OF THESE APPEALS IS AGAINST THE APPLICABILITY OF PROVISION OF SECTION 1 94J OF THE ACT ON PAYMENTS MADE TO RETAINERS. WE HAVE ALREADY DECIDE D THIS ISSUE IN THAT APPEAL NO. 5820/DEL/2013 FOR ASSESSMENT YEA R 2003-04 WHEREIN WE HAVE HELD THAT ON THE PAYMENTS OF RETAIN ER SHIP FEES THE PROVISION OF SECTION 194J APPLIES AND NOT SECTI ON 192 OF THE ACT AS HELD BY A.O. 5 ITA NO. 1283/DEL/2014 THE CIT(A) ALSO RIGHTLY HELD THAT TDS PROVISIONS P ROVIDED UNDER SECTION 194J OF THE ACT ARE NOT APPLICABLE IN THE P RESENT CASE. IN LIGHT OF THIS, THE APPEAL OF THE REVENUE DOES NOT SURVIVE . 7. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10TH OF JUNE, 2016. SD/- SD/- (J. SUDHAKAR REDDY) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 10/06/2016 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 27/04/2016 PS 2. DRAFT PLACED BEFORE AUTHOR 27/04/2016 PS 6 ITA NO. 1283/DEL/2014 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 10.06.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 1 0 .06.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.