Deputy Commissioner of Income-tax, Bangalore V. Commissioner for Collegiate Education, Bangalore

ITA 2290/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7555 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 22-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S NAMBIRAJAN
• Section: 194C; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, B E NGAL U R U BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO S . 2289 TO 2291 / BANG/20 16 (ASSESSMENT YEAR S : 20 1 1 - 12 TO 2013 - 14 ) DEPUTY COMMISSIONER OF INCOME - TAX , TDS CIRCLE - 16(1), BENGALURU APPELLANT VS. THE COMMISSIONER OF COLLEGIATE EDUCATION, 2 ND FLOOR, TECHNICAL EDUCATION BLDG., OPP.MAHARANI COLLEGE, PALACE ROAD, BENGALURU - 560001. PAN: AAAAT 9383 J ... RESPONDENT APPELLANT BY : SHRI S.NAMBIRAJAN, ADDL.CIT(DR) RESPONDENT BY : SHRI SREEHARI KUTSA, CA DATE OF HEARING : 25/09/2017 DATE OF PRONOUNCEMENT : 2 7 /09/2017 O R D E R PER I NTURI RAMA RAO, AM : TH ESE ARE APPEAL S FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE COMMON ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) - 13 [CIT(A)], BENGALURU , FOR THE ASSESSMENT YEARS 2011 - 12 TO 2013 - 14. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO S . 22 89 TO 2291/ BANG/201 6 PAGE 2 OF 5 3. BRIEFLY , FACTS OF THE CASE ARE THAT THE RESPONDENT - ASSESSEE IS A DEPARTMENT OF GOVERNMENT OF KARNATAKA WHICH IS IN - CHARGE OF ACADEMIC ADMINISTRATION FUNCTIONS OF CONTROLLING GRADUATE EDUCATION IN THE STATE OF KARNATAKA. FOR THE PURPOSE OF CONSTRU CTION OF COLLEGE BUILDING, IT ENTERED INTO AGREEMENT WITH THE KARNATAKA HOUSING BOARD (KHB) AND RAIL INDIA TECHNICAL AND ECONOMIC SERVICES LTD. (RITES). THE ASSESSING OFFICER [HEREINAFTER REFERRED TO AS AO (TDS OFFICER ) ] CONDUCTED INQUIRIES AND FOUND TH AT THE RESPONDENT - ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON THE FOLLOWING PAYMENTS UNDER THE PROVISIONS OF SECTION 194C OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT]: ITA NO S . 22 89 TO 2291/ BANG/201 6 PAGE 3 OF 5 ACCORDINGLY, THE AO (TDS OFFICER ) PASSED ORDER U/S 201( 1) OF THE ACT DATED 03/10/2013 HOLDING THE RESPONDENT - ASSESSEE IN DEFAULT AND DEMANDING TAX ALONG WITH INTEREST US 201(1A) OF THE ACT. 4. BEING AGGRIEVED BY THE ABOVE ORDER, AN APPEAL WAS PREFERRED BEFORE THE CIT(A) WHO, VIDE IMPUGNED ORDER, FOLLOWING THE ORDER OF THE ITAT IN THE CASE OF DIRECTOR, TECHNICAL EDUCATION, IN ITA NOS.1124 TO 1127/BANG/2015 DATED 20/05/2016 HELD THAT THE PAYMENTS ARE NOT IN THE NATURE OF CONTRACT PAYMENTS BUT IN THE NATURE OF FEES FOR PROFESSIONAL AND TECHNICAL SERVICES. AC CORDINGLY, THE MATTER WAS SET ASIDE TO THE AO(TDS) TO RE - COMPUTE THE TAX LIABILITY U/S 194C OF THE ACT. 5. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. DURING THE COURSE OF HEARING, THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE IN THE AP PEALS IS COVERED IN FAVOUR OF THE ASSESSEE BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF DIRECTOR, TECHNICAL EDUCATION (SUPRA) WHEREIN IT WAS HELD AS FOLLOWS: 6. C O M ING TO THE ISSUE AS TO WHETHER THE A MOUNTS PAID TO KHB AND RIT E S F OR EACH OF THE Y EAR U NDER A PPEAL ARE P A Y MEN T S IN THE NATURE OF CONTRACT INC O ME OF THE RECIPIENT P A Y E ES , LIABLE TO DED U CTION OF TAX U/S 194C , IT IS C L EAR F ROM T HE TE R M S OF AGREE M ENT E NTERED B Y T HE APPELL A NT WITH KHB AND RITES TH A T TH E Y AR E N OT CONTRACT O RS F OR THE EX ECUT I O N OF ACTUAL WORK OF CONSTRUCTION OF COLLEGE BUILDINGS F OR THE APPELLANT. ALTHOUGH T HE F ACT TH AT TAX W A S DED U CTED B Y TH E M WH I LE M A K I NG P A Y MENTS TO C O NTRACTO R S WOUL D NO T H E L P T HE A PPELLAN T ' S CASE , IT IS PERTINENT TO EX A M I N E THE TE R M S OF ENGAG E M ENT OF T H E A PPEL L AN T WITH KHB A ND RIT E S, W HICH SH O WS THAT TH E Y ARE N OT CONTRACTORS AS EN V ISA G E D IN SE C T IO N 1 9 4C , B UT RENDERING T ECHNICAL AND M AN A GERIAL SERV I C ES F OR THE APP E LLANT AND A L SO A C T IN G AS AGENTS VIS - A - VIS THE CONTRACTORS A CTUAL L Y E X ECUTING THE CONSTRUCTI O N WOR K OF BU IL DINGS F OR THE APPEL L ANT. TH E Y ARE M O RE OF TECHNICAL CONSULTAN T S AND PROJECT M A N AGERS WHO ARE REQUIRED TO CAR R Y OUR S URV E Y , SOIL T EST I NG, DE S IGN OF BUILD I NG , INVITE TENDE R S TO IDENTI F Y C ONTRACTO R S F OR ITA NO S . 22 89 TO 2291/ BANG/201 6 PAGE 4 OF 5 CONSTRU C TION , SUPERV I SE THE C ONSTRUCT I ON F OR QUALI T Y A ND DE SIGN AND ALSO CERT I F Y THE B ILLS F OR P A Y MENT TO CONTRACTORS EXECU T ING T HE CONST R UCT I ON OF C O L L E G E BU I L D INGS . THE AGRE E M ENT AL S O SPEC I F I ES THE R E M UNER A TION F OR SERVICES REND E RE D B Y K H B AND RI T ES ( 1 0 % OF THE BUILT UP C OS T ) WITH REGARD TO AND A PERCENTAGE OF THE PROJECT COST , AND THE PROV I SION F OR P A Y MENT ON ACTUAL BASIS IN THE N A T URE OF RE - I M B URS E M E NT. I CONCUR W I TH THE ARG U M ENT OF LD. AR T HAT THE I S SUE IS SQUA R E L Y COVERED B Y T HE HON ' BLE ITAT - LUCKN O W BENCH D ECISION IN T H E CASE OF U.P. ST A TE INDUSTRIAL DEVE L O P M E N T CORPN. LTD. V. ITO REPORTED IN 81 ITD 173. THE P A Y EES IN THE PRESENT CASE ARE N OT C O NTRACTORS W ITHIN T HE M E A NING OF SECTION 1 94C OF THE IN C O M E T AX ACT. THE EN T IRE P A Y MENT M A DE B Y T HE APPELLANT TO K HB AND RITES ARE NOT IN THE NATURE OF INCOME OF THE P A Y EES, AND S U CH E NTIRE A M OUN T S COULD NOT BE SAID TO BE LIABLE F OR DEDUCTION OF TAX U/S 194C. IN F ACT, THE P A Y MENT T O THE EXTE N T OF REMUNERATI O N P A Y A B LE TO KHB AND RITES AS PE R CENTAGE O F THE PROJECT COST IS IN T HE NATURE OF INC O M E OF PRO F ESSIONAL/TECHN I CAL AND M AN A GERIAL NATURE LIABLE TO DEDUCTION OF TAX U/S 194J. THE A S SESSING OF F ICER IS THERE F ORE DIRECTED TO C O M P UTE T H E A M O UNTS OUT OF P A YM E NTS M ADE B Y THE APPEL LANT TO KHB AND RITES WHICH ARE R E MUNERATION OR INC O M E IN THE HANDS OF THE PA Y EE S, AND WORK OUT T H E TAX DEDUCTIBLE U/S 194J. THE QU E STION IS ANSWERED ACC O RDING L Y . THE GROUND OF THE APPELLANT ON THE IS S UE I S ART L Y ALL O WED F OR A Y 2011 - 1 2 , 2012 - 13, AND 2013 - 1 4. SINCE THE CIT(A) HAS ONLY FOLLOWED THE TRIBUNAL ORDER IN ASSESSEE S OWN CASE FOR EARLIER YEARS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). 6. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOU NCED IN THE OPEN COURT ON 27 TH SEPTEMBER, 201 7 S D/ - SD/ - (VIJAY PAL RAO) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : B EN GAL URU D A T E D : 27 /0 9 /2017 SRINIVASULU, SPS ITA NO S . 22 89 TO 2291/ BANG/201 6 PAGE 5 OF 5 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) - 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE