M/s. Sayaji Hotels Ltd., Vadodara V. DCIT (TDS), Indore, Vadodara

ITA 594/Ind/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6954 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 18-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V J BORICHA
• Keywords: TDS; Set aside
• Section: 133A; 194C; 194J

Judgement Text

SAYAJI HOTELS ITA NO.594 OF 2018 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.594/IND/2018 ASSESSMENT YEAR: 2009-10 M/S. SAYAJI HOTELS LTD., VADODARA / VS. DCIT(TDS), INDORE (APPELLANT) (REVENUE ) P.A. NO. A ADCS 2086 A APPELLANT BY NONE RESPONDENT BY SHRI V.J. BORICHA, SR. DR DATE OF HEARING: 16.1.2020 DATE OF PRONOUNCEMENT: 05.2.2020 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-1, INDORE DATED 20.3.2018 F OR THE A.Y. 2009-10. SAYAJI HOTELS ITA NO.594 OF 2018 2 2. THE FIRST GROUND RAISED BY THE ASSESSEE IS THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE ASS ESSING OFFICER WHO HAD CONCLUDED THAT THE CO. OUGHT TO HAV E DEDUCTED TAX U/S 194J ON PAYMENT MADE TO M/S. BSNL AND M/S. BHARTI AIRTEL LTD. TOWARDS INTERNET CHARGE S. FACTS GIVING RISE TO GROUND ARE THAT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE MADE THE PAYMENT OF RS.3,13,569/- FOR USING INTERNET AND LEASE LINE SER VICES ON WHICH TDS WAS NOT DEDUCTED AS THE INTERNET SERVI CES CONSTITUTE THE TECHNICAL SERVICES AS PER DEFINITION OF TECHNICAL SERVICES U/S 9(1)(VII) OF THE ACT. HENCE, THE ASSESSING OFFICER RAISED THE DEMAND OF RS.67,271/- ON ACCOUNT OF NON-DEDUCTION OF TDS AND INTEREST THEREO N. BEING AGGRIEVED THE ASSESSEE APPROACHED THE LD. CIT (A) WHO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THUS, THE ASSESSEE IS BEFORE THIS TRIBUNAL. 3. BEFORE US, NOBODY REPRESENTED THE ASSESSEE, THEREFORE, THE ASSESSEE IS PROCEEDED ON THE BASIS O F SAYAJI HOTELS ITA NO.594 OF 2018 3 MATERIAL AVAILABLE ON RECORD. ON THE OTHER HAND, TH E LD. SR. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. THE LD. CIT(A) DECIDED THE ISSUE AS UNDER : FROM THE ABOVE, IT IS CLEAR THAT THE PAYMENT FOR INTERNET CHARGES IS FALLING WITHIN THE DEFINITION O F FEES FOR TECHNICAL SERVICES. THE APPELLANT WAS REQUIRED TO DEDUCT THE TDS FOR THE PAYMENT MADE. THEREFORE, THE DEMAND RAISED BY THE A.O. AMOUNTING TO RS.67,271/- (RS.35,527/- + RS.31,744/-) IS CONFIRMED. THEREFORE, THE APPEAL ON THIS GROUND IS DISMISSED. 5. HOWEVER, WE FIND THAT IN CASE OF M/S. SHRIRAM INSIGHT SHARE BROKERS VS. JCIT, RANGE-59(TDS)KOLKAT A IN I.T.A NO. 433/KOL/2016 (A.Y: 2012-13) VIDE ORDER DATED 09.2.2018, THE SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH OF ITAT, KOLKATA. THE RELEVANT PORTION OF THE ORDER DATED 09.2.2018 (SUPRA) IS REPRODUCED HEREWITH: SAYAJI HOTELS ITA NO.594 OF 2018 4 THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 24, KOLKATA DT. 31-12-2015 FO R THE A.Y 2011-12. 2. THE LD.AR SUBMITS THAT THE GROUNDS OF APPEAL AS RAISED IN THIS APPEAL BY THE ASSESSEE ARE SQUARELY COVERED BY THE ORDER DT. 21-0 6- 2017 IN ITA NO. 4106/MUM/2014 REPORTED IN 2017(8) TMI 714-ITAT MUMB AI IN THE CASE OF DESTIMONEY SECURITIES PVT. LTD VS. ITO (TDS)(OSD)-1 (3), MUMBAI, COPY OF THE SAME IS ON RECORD AND REFERRED TO PARA 11 OF SAID O RDER AND ARGUED THAT NO TDS IS REQUIRED TO BE MADE ON PAYMENTS MADE TOWARDS INTERN ET AND COMMUNICATION CHARGES. 3. ON THE OTHER HAND, THE LD.DR DID NOT CONTROVERT THE SAME BY BRINING ON RECORD CONTRARY TO THE SAID ORDER OF THE ITAT, MUMBAI. HE RELIED ON THE ORDERS OF THE AO AND CIT-A. 4. HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD INCLUDING THE PAPER BOOK DETAILS AND CASE LAWS. WE FIND THAT THE AO ITA NO. 433/KOL/2016 ON GOING THROUGH THE DETAILS AS SUBMITTED BY THE ASSESSEE FO UND THAT THE ASSESSEE MADE PAYMENTS OF RS.69,43,089/- UNDER THE HEAD LEASELINE CHARGES TO VARIOUS PARTIES LIKE BSNL,MTNL, TATA INDICOM, SYSTEM SHYAM TELESERV ICES LTD, BHARTI AIRTEL ETC. THE AO RAISED AN OBJECTION FOR NON DEDUCTION O F TDS ON SUCH PAYMENTS U/S. 194C AND 194J OF THE ACT. THE ASSESSEE CONTENDED TH AT THESE PAYMENTS WERE MADE TOWARDS MONTHLY RENTAL FOR BROADBAND USAGE CHARGES IN DIFFERENT LOCATIONS. SUCH PAYMENTS WERE MADE FOR USE OF STANDARD FACILITIES A ND THE PROVISIONS OF SECTION 194C AND 194J OF THE ACT ARE NOT APPLICABLE AS THER E WAS NO CONTRACT FOR CARRYING OUT ANY WORK AND THE PAYMENT WAS NOT A FEE FOR TECH NICAL SERVICES. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE PLACED ON VARIOUS CAS E LAWS BEFORE THE AO. THE AO FOUND THAT THE SUBMISSIONS OF THE ASSESSEE IS NOT A CCEPTABLE AND FOR NON DEDUCTION OF TDS U/S. 194C AND 194J OF THE ACT ON SUCH PAYMEN TS CHARGED INTEREST @ 1% P.M UPTO 38 MONTHS I.E. AT RS.8,32,040/- AND ADDED THE SAME TO THE TOTAL INCOME OF ASSESSEE BY TREATING THE ASSESSEE IS IN DEFAULT FOR NON DEDUCTION OF TDS BY AN ORDER DT. 31-03-2014 PASSED BY THE AO U/S. 201(1)/2 01(1 A) OF THE ACT . 5. THE CIT-A AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE PARTLY ALLOWED THE CLAIM OF ASSESSEE BY HOLDING NO TDS IS REQUIRED U/S . 194C AND 194J ON BROAD BAND CHARGES AND CONFIRMED THE PAYMENT MADE TO HCL INFINET AND HCL COMNET AND LIABLE TO DEDUCTION OF TDS. 6. WE FURTHER FIND THAT THE CO-ORDINATE BENCH OF IT AT, MUMBAI IN THE CASE OF SUPRA, HELD THAT THERE IS NO REQUIREMENT OF DEDUCTI ON OF TDS ON PAYMENTS MADE TOWARDS INTERNET AND COMMUNICATION CHARGES BY PLACI NG RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD REPORTED IN (2016) 383 ITR 1(SC). WE FIND THAT THE FACTS IN THE CASE OF SUPRA OF THE ITAT MUMBAI ARE SIMILAR WITH THAT OF THE CASE I N HAND. FOR BETTER UNDERSTANDING, ITA NO. 433/KOL/2016 WE MAY REFER TO THE PARA 11 OF THE ORDER DT. 21-06-2017 OF THE ITAT MUMBAI IN THE CASE OF SUPRA, WHICH IS REPRODUCED HEREIN BELOW:- '11. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES F OR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIA L PRODUCED BEFORE US. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE INVOL VED IN THE PRESENT CASE AND FIND SAYAJI HOTELS ITA NO.594 OF 2018 5 SUBSTANTIAL FORCE IN THE CONTENTIONS RAISED BY THE LD. A.R BEFORE US. WE FIND THAT THE INTERNET AND COMMUNICATION CHARGES ARE NOT LIAB LE FOR DEDUCTION OF ANY TAX AT SOURCE, AS THE SAME ARE MERELY IN THE NATURE OF PAY MENTS WHICH CANNOT BE CHARACTERIZED AS HAVING BEEN MADE FOR AVAILING OF A NY SPECIAL, EXCLUSIVE OR CUSTOMIZED SERVICES RENDERED TO THE USER OR CONSUME R WHO MAY APPROACH THE SERVICE PROVIDER FOR SUCH SERVICE. WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS SQUARELY COVERED BY THE JUDGMENT OF THE HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD. (2016) 383 IT R 1) (SC), WHEREIN THE HON'BLE APEX COURT HAD HELD AS UNDER:- '8. A READING OF THE VERY ELABORATE ORDER OF THE AS SESSING OFFICER CONTAINING A LENGTHY DISCOURSE ON THE SERVICES MADE AVAILABLE BY THE STOCK EXCHANGE WOULD GO TO SHOW THAT APART FROM FACILITIES OF A FACELESS SC REEN BASED TRANSACTION, A CONSTANT UPGRADATION OF THE SERVICES MADE P A G E | 11 AVAIL ABLE AND SURVEILLANCE OF THE ESSENTIAL PARAMETERS CONNECTED WITH THE TRADE INCLU DING THOSE OF A PARTICULAR/ SINGLE TRANSACTION THAT WOULD LEAD CREDENCE TO ITS AUTHENTICITY IS PROVIDED FOR BY THE STOCK EXCHANGE.ALL SUCH SERVICES, FULLY AUTOMAT ED, ARE AVAILABLE TO ALL MEMBERS OF THE STOCK EXCHANGE IN RESPECT OF EVERY T RANSACTION THAT IS ENTERED INTO. THERE IS NOTHING SPECIAL, EXCLUSIVE OR CUSTOMISED S ERVICE THAT IS RENDERED BY THE STOCK EXCHANGE. 'TECHNICAL SERVICES' LIKE 'MANAGERI AL AND CONSULTANCY SERVICE' WOULD DENOTE SEEKING OF SERVICES TO CATER TO THE SP ECIAL NEEDS OF THE CONSUMER/USER AS MAY BE FELT NECESSARY AND THE MAKI NG OF THE SAME AVAILABLE BY THE SERVICE PROVIDER. IT IS THE ABOVE FEATURE THAT WOULD DISTINGUISH/IDENTIFY A SERVICE PROVIDED FROM A FACILITY OFFERED. WHILE THE FORMER IS SPECIAL AND EXCLUSIVE TO THE SEEKER OF THE SERVICE, THE LATTER, EVEN IF T ERMED AS A SERVICE, IS AVAILABLE TO ALL AND WOULD THEREFORE STAND OUT IN DISTINCTION TO THE FORMER. THE SERVICE PROVIDED BY THE STOCK EXCHANGE FOR WHICH TRANSACTIO N CHARGES ARE PAID FAILS TO SATISFY THE AFORESAID TEST OF SPECIALIZED, EXCLUSIV E AND INDIVIDUAL REQUIREMENT OF THE USER OR CONSUMER WHO MAY APPROACH THE SERVICE P ROVIDER FOR SUCH ASSISTANCE/SERVICE. IT IS ONLY SERVICE OF THE ABOVE KIND THAT, ACCORDING TO US, SHOULD COME WITHIN THE AMBIT OF THE EXPRESSION 'TECHNICAL SERVICES' APPEARING IN EXPLANATION 2 OF SECTION 9(1)(VII) OF THE ACT. IN T HE ABSENCE OF THE ABOVE DISTINGUISHING FEATURE, SERVICE, THOUGH RENDERED, W OULD BE MERE IN THE NATURE OF A FACILITY OFFERED OR AVAILABLE WHICH WOULD NOT BE CO VERED BY THE AFORESAID PROVISION OF THE ACT. 9. THERE IS YET ANOTHER ASPECT OF THE MATTER WHICH, IN OUR CONSIDERED VIEW, WOULD REQUIRE A SPECIFIC NOTICE. THE SERVICE MADE AVAILAB LE BY THE BOMBAY STOCK EXCHANGE [BSE ONLINE TRADING (BOLT) SYSTEM] FOR WHI CH THE CHARGES IN QUESTION HAD BEEN PAID BY THE APPELLANT - ASSESSEE ARE COMMON SERVICES THAT EVERY MEMBER OF THE STOCK EXCHANGE IS NECESSARILY REQUIRED TO AVAIL OF TO CARRY OUT TRADI NG IN SECURITIES IN THE STOCK EXCHANGE. THE VIEW TAKEN BY THE HIGH COURT THAT A M EMBER OF THE STOCK EXCHANGE HAS AN OPTION OF TRADING THROUGH AN ALTERN ATIVE MODE IS NOT CORRECT. A MEMBER WHO WANTS TO CONDUCT HIS DAILY BUSINESS IN T HE STOCK EXCHANGE HAS NO OPTION BUT TO AVAIL OF SUCH SERVICES. EACH AND EVER Y TRANSACTION BY A MEMBER INVOLVES THE USE OF THE SERVICES PROVIDED BY THE ST OCK EXCHANGE FOR WHICH A MEMBER IS COMPULSORILY REQUIRED TO PAY AN ADDITIONA L CHARGE (BASED ON THE TRANSACTION VALUE) OVER AND ABOVE THE CHARGES FOR T HE MEMBERSHIP IN THE STOCK EXCHANGE. THE ABOVE FEATURES OF THE SERVICES PROVID ED BY THE STOCK EXCHANGE WOULD MAKE THE SAME A KIND OF A FACILITY PROVIDED B Y THE STOCK EXCHANGE FOR TRANSACTING BUSINESS RATHER THAN A TECHNICAL SERVIC E PROVIDED TO ONE OR A SECTION OF THE MEMBERS OF THE STOCK EXCHANGE TO DEAL WITH SPEC IAL SITUATIONS FACED BY SUCH A SAYAJI HOTELS ITA NO.594 OF 2018 6 MEMBER(S) OR THE SPECIAL NEEDS OF SUCH MEMBER(S) IN THE CONDUCT OF BUSINESS IN THE STOCK EXCHANGE. IN OTHER WORDS, THERE IS NO EXC LUSIVITY TO THE SERVICES RENDERED BY THE STOCK EXCHANGE AND EACH AND EVERY M EMBER HAS TO NECESSARILY AVAIL OF SUCH SERVICES IN THE NORMAL COURSE OF TRAD ING IN SECURITIES IN THE STOCK EXCHANGE. SUCH SERVICES, THEREFORE, WOULD UNDOUBTED LY BE APPROPRIATE TO BE TERMED AS FACILITIES PROVIDED BY THE STOCK EXCHANGE ON PAYMENT P A G E | 12 AND DOES NOT AMOUNT TO 'TECHNICAL SERVICES' PROVIDED BY THE STOCK EXCHANGE, NOT BEING SERVICES SPECIFICALLY SOUGHT FOR BY THE USER OR THE CONSUMER. IT IS THE AFORESAID LATTER FEATURE OF A SERVICE RENDERED WHIC H IS THE ESSENTIAL HALLMARK OF THE EXPRESSION 'TECHNICAL SERVICES' AS APPEARING IN EXP LANATION 2 TO SECTION 9(1)(VII) OF THE ACT. 10. FOR THE AFORESAID REASONS, WE HOLD THAT THE VIE W TAKEN BY THE BOMBAY HIGH COURT THAT THE TRANSACTION CHARGES PAID TO THE BOMB AY STOCK EXCHANGE BY ITS MEMBERS ARE FOR 'TECHNICAL SERVICES' RENDERED IS NO T AN APPROPRIATE VIEW. SUCH CHARGES, REALLY, ARE IN THE NATURE OF PAYMENTS MADE FOR FACILITIES PROVIDED BY THE STOCK EXCHANGE. NO TDS ON SUCH PAYMENTS WOULD, THER EFORE, BE DEDUCTIBLE UNDER SECTION 194J OF THE ACT.' ITA NO. 433/KOL/2016 WE THUS IN LIGHT OF THE AFORES AID SETTLED POSITION OF LAW SO LAID DOWN BY THE HON'BLE APEX COURT, THEREFORE SET ASIDE THE ORDER OF THE CIT(A) HOLDING THE ASSESSEE AS BEING IN DEFAULT U/SS. 201( 1)/201(1A) FOR FAILING TO DEDUCT TAX AT SOURCE ON PAYMENTS MADE TOWARDS INTERNET AND COMMUNICATION CHARGES. THE GROUND OF APPEAL NO. 1 RAISED BY THE ASSESSEE BEFOR E US IS ALLOWED. 7. IN VIEW OF THE ABOVE, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT-A. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE IN THE APPEAL ARE ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 6. ON CONSIDERATION OF ABOVE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DEMAND OF RS.67,271/-. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 7. NOW, THE SECOND AND LAST GROUND RAISED BY THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DEMAND OF RS.14,565/- AND RS.12,907/- ON ACCOUNT OF NON-COLLECTION OF TCS AND INTEREST THEREON. FACTS G IVING SAYAJI HOTELS ITA NO.594 OF 2018 7 RISE TO GROUND OF APPEAL ARE THAT A SURVEY U/S 133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSE E AND IT WAS FOUND THAT THE ASSESSEE MADE THE SALE OF SCR AP BUT FAILED TO COLLECT TCS U/S 206(C) OF THE ACT. THUS, THE ASSESSING OFFICER COMPUTED THE DEMAND OF RS. RS.14,565/- AND RS.12,907/- ON ACCOUNT OF NON- COLLECTION OF TCS AND INTEREST THEREON. THE LD. CIT (A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THUS , THE ASSESSEE IS BEFORE THIS TRIBUNAL. 8. BEFORE US, NOBODY REPRESENTED THE ASSESSEE, THEREFORE, THE ASSESSEE IS PROCEEDED ON THE BASIS O F MATERIAL AVAILABLE ON RECORD. ON THE OTHER HAND, TH E LD. SR. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORIT IES. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. THE LD. CIT(A) DECIDED THE ISSUE AS UNDER : THE APPELLANT FAILED TO PROVE HIS CASE THAT, WHY HE WAS NOT LIABLE TO COLLECT THE TCS. THEREFORE, THE DEMAND RAISED BY THE A.O. AMOUNTING TO SAYAJI HOTELS ITA NO.594 OF 2018 8 RS.27,472/- (RS.14,565/- + RS.12,907/-) IS CONFIRMED. THEREFORE, THE APPEAL ON THESE GROUNDS IS DISMISSED. 10. WE FIND THAT IT WAS SUBMITTED BY THE ASSESSEE BEFORE LD. CIT(A) THAT THE ASSESSEE BEING A HOTEL I S NOT CAPABLE OF GENERATING WASTE AND SCRAP FROM THE MANUFACTURER OR MECHANICAL WORKING OF MATERIALS. TH E SCRAPS GENERATED BY THE ASSESSEE ARE PRODUCTS PURCH ASED BY IT AND WHICH ARE NO LONGER USABLE EITHER ON ACCO UNT OF BREAKAGE OR ON ACCOUNT OF BEING OBSOLETE. HOWEVER, SINCE THE ASSESSEE DOES NOT HAVE ANY MANUFACTURING OR MECHANICAL WORKING PROCESSES, THE SCRAP AS DEFINED IN THE SAID SECTION CANNOT BE GENERATED. THEREFORE, TH E ASSESSEE IS NOT COVERED BY SECTION 206C. WE FIND TH AT AHMEDABAD ITAT IN CASE OF NAVINE FLUORINE INTERNATI ONAL LTD. VS. CIT (2011) 45 SOT 86 HAS HELD THAT SECTION 206C WILL APPLY ONLY TO THOSE SELLERS WHO ARE ENGAGED IN THE BUSINESS OF MANUFACTURING OR MECHANICAL WORKING OF MATERIALS. THUS, ON CONSIDERATION OF THESE FACTS, W E SAYAJI HOTELS ITA NO.594 OF 2018 9 DIRECT THE ASSESSING OFFICER TO DELETE THE DEMAND O F 27,472/- MADE ON ACCOUNT OF NON-COLLECTION OF TCS A ND INTEREST THEREON. ACCORDINGLY GROUND NO. 2 IS ALSO ALLOWED. 11. IN RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 05.2.2020 . SD/- SD/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER INDORE; DATED : 05/2/2020 !VYAS! COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSISTANT REGISTRAR, INDORE