Gowtham Academy of General & Technical Education, Secunderabad, Secunderabad V. DCIT, Circle-15(1), Hyd, Hyderabad

ITA 433/HYD/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6156 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-09-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 17-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: TDS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 133A; 194C; 201(1); 201; 43; 194J

Judgement Text

ITA NO 433 OF 2015 GOWTHAM ACADEMY OF GENERAL AND TECHNICAL EDUCATION HYDERABAD PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.433/HYD/2015 (ASSESSMENT YEAR: 2012-13) SRI GOWTHAM ACADEMY OF GENERAL & TECHNICAL EDUCATION, SECUNDERABAD PAN: AADTS 7203 A VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 15(1) HYDERABAD FOR ASSESSEE : SHRI C.S.SUBRAHMANYAM & SHRI V.SIVA KUMAR FOR REVENUE : SHRI K.J. RAO, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2012-13. IN TH IS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE CIT (A) IN HOLDING THAT THE AGREEMENT BETWEEN THE ASSESSEE AND M/S. K12 TECHNO SERVICES PVT. LTD IS A COMPOSITE AGREEMENT A ND THEREFORE ASSESSEE IS REQUIRED TO DEDUCT TAX AT SOURCE U/S 19 4J OF THE ACT FROM ALL THE PAYMENTS MADE TOWARDS VARIOUS SERVICES RENDERED BY M/S K12 TECHNO SERVICES PVT. LTD. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SOCIETY ENGAGED IN THE BUSINESS OF RUNNING EDUCATIONAL INST ITUTIONS IN THE NAME AND STYLE OF M/S SRI GOWTHAM ACADEMY OF GENERA L & DATE OF HEARING : 08.12.2016 DATE OF PRONOUNCEMENT : 03.02.2017 ITA NO 433 OF 2015 GOWTHAM ACADEMY OF GENERAL AND TECHNICAL EDUCATION HYDERABAD PAGE 2 OF 7 TECHNICAL EDUCATION. TO VERIFY THE COMPLIANCE OF TH E TDS PROVISIONS OF THE I.T. ACT BY THE ASSESSEE, A SURVE Y OPERATION U/S 133A WAS CONDUCTED ON 19.10.2011. ON VERIFICATION O F THE DETAILS FURNISHED BY THE ASSESSEE, IT WAS NOTICED THAT THE ASSESSEE HAS MADE TDS U/S 194C OF THE ACT ON SOME PAYMENTS AND U /S 194J OF THE ACT ON SOME OTHER PAYMENTS MADE TO M/S K12 T ECHNO SERVICES PVT. LTD. THE ASSESSEE WAS THEREFORE DIRE CTED TO FURNISH THE COPY OF THE AGREEMENT AND DETAILS OF THE SERVIC ES RENDERED BY M/S. K12 TECHNO SERVICES PVT. LTD. THE ASSESSEE FU RNISHED THE SAME. 3. ON PERUSAL OF THE DETAILS, THE A.O OBSERVED THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH M/S K12 TEC HNO SERVICES PVT. LTD, WEST MARREDAPALLY, SECUNDERABAD, FOR AVAILING VARIOUS SERVICES FROM IT FOR RUNNING OF THE EDUCATI ONAL INSTITUTIONS. ON CLOSE EXAMINATION OF THE SERVICES RENDERED BY M/S K12 TECHNO SERVICES PVT. LTD TO THE ASSESSEE, T HE AO OBSERVED THAT THEY INCLUDE BOTH WORKS CONTRACTS A S WELL AS PROFESSIONAL AND TECHNICAL SERVICES AND THE ASSES SEE HAS AFFECTED THE TDS BY TREATING ITS SERVICES PARTLY AS PROFESSI ONAL U/S 194J AND PARTLY AS WORKS CONTRACTS U/S 194C OF THE ACT. THE AO OBSERVED THAT THE ENTIRE SERVICES ARE RENDERED BY O NE SINGLE ENTITY I.E M/S K12 TECHNO SERVICES PVT. LTD, AND THEREFORE , BY VIRTUE OF SINGLE CONTRACT INVOLVING VARIOUS SERVICES, ACCORDI NG TO HIM, THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS FOR ALL THE SER VICES AT 10% AS REQUIRED U/S 194J OF THE ACT. FOR COMING TO THIS CONCLUSION, THE AO RELIED UPON THE FOLLOWING DECISIONS: ITA NO 433 OF 2015 GOWTHAM ACADEMY OF GENERAL AND TECHNICAL EDUCATION HYDERABAD PAGE 3 OF 7 I) EMC VS. INCOME TAX OFFICER (TDS) WARD-2(3) MUMBA I (2010) 37 SOT 31 (MUM.) II) CBDT VS. OBEROI HOTELS P LTD (1998) 231 ITR 148 III) CBDT CIRCULAR NO.720 DATED 30.8.95 IV) M/S. ASSOCIATED CEMENTS LTD VS. CIT (1993) 201 ITR 435 V) CBDT CIRCULAR NO.715 DATED 8.8.1995 4. THEREAFTER, HE WORKED OUT THE DIFFERENCE BETWEEN THE TDS DEDUCTED AND THE TDS THAT OUGHT TO HAVE BEEN D EDUCTED U/S 194J AND TREATED THE ASSESSEE AS THE ASSESSEE IN DEFAULT U/S 201(1) AND ALSO COMPUTED THE INTEREST THEREON U/S 2 01(1A) AND BROUGHT IT TO TAX. AGGRIEVED, THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE ORDER OF THE A O AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, WHILE REIT ERATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, HAS DRAWN OUR ATTENTION TO VARIOUS CLAUSES OF THE COMPOSITE A GREEMENT BETWEEN THE ASSESSEE AND M/S K12 TECHNO SERVICES PV T. LTD AND ALSO DETAILS OF THE SERVICES RENDERED ALONG WITH TH E RELEVANT BILLS AND VOUCHERS RELATING TO THE SAID SERVICES. THE LEA RNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DECISIONS RELIE D UPON BY THE AO ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE B EFORE US AND THEREFORE, ACCORDING TO HIM, BOTH THE AUTHORITIES B ELOW HAVE ERRED IN HOLDING THAT TDS FOR ALL THE SERVICES OUGHT TO H AVE BEEN MADE @ 10% AS PRESCRIBED U/S 194J OF THE ACT. 6. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AGREEMENT WAS A COMPOSITE AGREEMENT AND THEREFORE, THE TDS PR OVISIONS U/S ITA NO 433 OF 2015 GOWTHAM ACADEMY OF GENERAL AND TECHNICAL EDUCATION HYDERABAD PAGE 4 OF 7 194J OUGHT TO HAVE BEEN APPLIED ON THE AGGREGATE OF THE AMOUNT PAID BY THE ASSESSEE. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT M/S K12 TECHNO SERVICES PVT . LTD, HAS RENDERED VARIOUS SERVICES TO THE ASSESSEE FOR THE E FFICIENT AND EFFECTIVE RUNNING OF THE EDUCATIONAL INSTITUTION. THE COPY OF THE MASTER SERVICES AGREEMENT IS PLACED AT PAGE NO. 1 T O 42 OF THE PAPER BOOK AND THE COPY OF THE SUPPLEMENT AGREEMENT DATED 01- 04-2011 IS PLACED AT PAGES 43 TO 45 OF THE PAPER BO OK. ON PERUSAL OF THE SAME AND ALSO THE ANNEXURE-6 OF THE AGREEMEN T WHICH LISTS OUT THE PAYMENT TERMS, WE FIND THAT THE SERVICE CHA RGES ARE BEING BILLED ON PER TEACHER OR PER STUDENT BASIS AND PERIODICITY OF THE TIME OF BILLING IS ALSO VARYING FROM SERVICE TO SER VICE. AND THUS, IT IS SEEN THAT IT IS NOT A LUMP SUM PAYMENT BY THE AS SESSEE TO M/S. K12 TECHNO SERVICES PVT. LTD. FOR ALL THE SERVICES BEING RENDERED UNDER THE AGREEMENT BUT IT IS A PAYMENT ON THE BASI S OF EACH OF THE SERVICES AND PER PERSON. THE TDS IS TO BE MADE ON THE PAYMENT MADE AND THE TDS RATES ARE FIXED ON THE BAS IS OF NATURE OF THE SERVICES OR CONTRACT AND NOT ON THE BASIS OF THE NUMBER OF RECIPIENTS OF THE PAYMENT. WHEN THE INTENTION OF B OTH THE PARTIES IS CLEAR THAT THE PAYMENTS SHALL BE MADE FOR EACH O F THE SERVICE INDEPENDENTLY, THEN, THE SERVICES ARE CLEARLY ASCER TAINABLE AND DIVISIBLE. THE TDS RATES FOR EACH OF THE SERVICES WOULD THEREFORE VARY. THE TDS MADE BY THE ASSESSEE FOR VARIOUS SER VICES HAS BEEN TABULATED BY THE ASSESSING OFFICER AND THE CIT (A)S IN THEIR ORDERS. FOR THE SAKE OF CONVENIENCE AND READY REFER ENCE, THE DETAILS ARE REPRODUCED HEREUNDER:- ITA NO 433 OF 2015 GOWTHAM ACADEMY OF GENERAL AND TECHNICAL EDUCATION HYDERABAD PAGE 5 OF 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 8. FROM THE PERUSAL OF THE ABOVE, IT IS CLEAR THAT T HE SERVICES RENDERED BY M/S K12 TECHNO SERVICES PVT. L TD. ARE DISTINGUISHABLE FROM EACH OTHER AND THOUGH THE RECI PIENT OF ALL THE PAYMENTS IS A SINGLE PARTY, THE NATURE OF THE S ERVICES ARE DISCERNIBLE AND DIFFERENT. 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 TREATING THE ENTI RE AGREEMENT AS A WORK CONTRACT?. WHEN THE BASKET OF SERVICES IS FILLED WITH DIFFERENT AND DISTINGUISHABLE SERVICES, WE ARE OF T HE OPINION THAT ITA NO 433 OF 2015 GOWTHAM ACADEMY OF GENERAL AND TECHNICAL EDUCATION HYDERABAD PAGE 6 OF 7 THE ASSESSEE WAS CORRECT IN ADOPTING DIFFERENT RATE S 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 BEFO RE US. IN THE CASE OF EMC VS INCOME TAX OFFICER (CITED SUPRA), TH E ISSUE WAS WHETHER THE ASSESSEE THEREIN WAS A CONTRACTOR U/S 1 94C(1) OR A SUBCONTRACTOR U/S 194C(2) OF THE ACT. AND THEREFOR E IT IS NOT RELEVANT TO THE PRESENT CASE. 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 PRO MOTION OF BUSINESS, RECRUITING AND TRAINING STAFF ETC., WHERE AS IN THE CASE BEFORE US, THE ASSESSEE IS RUNNING AN EDUCATIONAL I NSTITUTION AND THE TYPES OF SERVICES ARE TOTALLY DISTINGUISHABLE F ROM THE SERVICES IN THE CASE OF A HOTEL. THEREFORE, THIS CASE IS DIS TINGUISHABLE ON FACTS. IN THE CASE OF ASSOCIATED CEMENTS, THE HON' BLE SUPREME COURT WAS CONSIDERING WHETHER THE TAX DEDUCTOR CAN DECIDE OR ESTIMATE THE INCOME COMPONENT OF THE RECEIPT AND DE DUCT 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 CANNO T BE COVERED UNDER ONE SECTION. THEREFORE, IN OUR OPINION, THE ASSESSING OFFICER AND CIT(A) HAVE ERRED HEARD IN HOLDING THAT THE ASSESSEE OUGHT TO HAVE MADE TDS U/S 19J OF THE ACT ON THE EN TIRE PAYMENT TO M/S K12 TECHNO SERVICES PRIVATE LIMITED. ITA NO 433 OF 2015 GOWTHAM ACADEMY OF GENERAL AND TECHNICAL EDUCATION HYDERABAD PAGE 7 OF 7 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD FEBRUARY, 2017. SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 3 RD FEBRUARY, 2017. VINODAN/SPS COPY TO: 1 SRI GOWTHAM ACADEMY OF GENERAL & TECHNICAL EDUCAT ION, 10-2- 240/250, GVRS LAXMI NIVAS, STREET NO.6, WEST MARED PALLY, SECUNDERABAD 500026 2 DY.CIT, CIRCLE 15(1) I.T.TOWERS, AC GUARDS, HYDER ABAD 3 CIT (A)-8 HYDERABAD 4 CIT (TDS) HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER