H.P. State Co-operating Bank Ltd. Vs DCIT (ITAT Chandigarh)
Summary: ITAT Chandigarh allowed the appeal of H.P. State Co-operating Bank Ltd. for Assessment Year 2017-18 and deleted the TDS demand of Rs.21.15 lakh raised under Sections 201(1) and 201(1A) of the Income-tax Act. The dispute concerned connectivity charges of Rs.230.55 lakh paid by the assessee to service providers including Airtel and Reliance Communication. The assessee had deducted tax at source at 2% under Section 194C. The Assessing Officer, however, considered the payments to be fees for technical services and held that TDS was required at 10% under Section 194J. The resulting demand was confirmed by the CIT(A), leading to the appeal before the Tribunal.
The Tribunal noted that a similar demand against the same assessee for AY 2018-19 had already been decided by the CIT(A) in the assessee’s favour on 17.03.2023. In that decision, the CIT(A) had followed the Madras High Court decision in Skycell Communications Ltd. (252 ITR 53) and the Delhi High Court decision in Bharti Cellular Ltd. (175 Taxman 573) and concluded that such payments were covered by Section 194C rather than Section 194J because no human element was involved in rendering the services.
Finding the facts for AY 2017-18 to be pari materia with those of AY 2018-19, the Tribunal found no reason to adopt a different view. It observed that the services apparently did not involve any human element. The expression relevant to Section 194J covers managerial, technical or consultancy services, and the precedents relied upon had held that, without the requisite human element, the services would not fall within Section 194J. The Tribunal accordingly accepted the assessee’s treatment of the connectivity charges under Section 194C and deleted the impugned demand. The appeal was allowed.
Cases Discussed
- Skycell Communications Ltd. (252 ITR 53) (Madras High Court) — followed for the principle relevant to technical services and absence of human element.
- Bharti Cellular Ltd. (175 Taxman 573) (Delhi High Court) — followed in holding that services without human element are not covered by Section 194J.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
1. Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 14.11.2022 confirming certain demand as raised by Ld. AO vide an order passed u/s 201(1) / 201(1A) of the Act on 30.10.2018 holding the assessee to be assessee-in-default with respect to certain payments. The registry has noted delay of 7 days in the appeal which stand condoned.
2. Upon perusal of order of Ld. AO, it could be seen that the assessee has paid connectivity charges to service providers viz. Airtel, Reliance Communication & ors. for Rs.230.55 Lacs and deducted TDS u/s 194C @2%. However, Ld. AO opined that higher TDS of 10% was required u/s 194J since the payment was in the nature of fees for technical services. The Ld. AO accordingly raised impugned demand of Rs.21.15 Lacs against the assessee which stood confirmed by Ld. CIT(A). Aggrieved, the assessee is in further appeal before us.
3. We find that similar demand was raised against the assessee for AY 2018-19 which stood adjudicated by Ld. CIT(A) on 17.03.2023 in assessee’s favor. The copy of the same has been placed in the paper-book. Upon perusal of the same, it could be seen that in this decision, Ld. CIT(A) has followed the decisions of Hon’ble High Court of Madras in the case of Skycell Communications Ltd. (252 ITR 53) as well as the decisions of Hon’ble Delhi High Court in the case of Bharti Cellular Ltd. (175 Taxman 573) holding that the said payments would be covered u/s 194C and not u/s 194J since no human element was involved while rendering these services. Since facts are pari-materia the same in this year, we see no reason to take a different view in this year. The services, apparently, do not involve any human element since the expression used is managerial, technical or consultancy services. These decisions have held that without human element, the said services would not be covered u/s 194J. Taking the same view, we delete the impugned demand as raised against the assessee.
4. The appeal stand allowed.
Order pronounced on 15/09/2026
