No TDS default if recipient paid tax on income

ACIT Vs Chaitanya Educational Trust (ITAT Hyderabad)

Since the assessee has filed the certificates of the recipients with proof that the recipients have offered the income to tax in their hands, the assessee shall not be treated as an assessee in default u/s 201(1) of the Act.

FULL TEXT OF THE ITAT JUDGMENT

All are Revenue’s appeals for the A.Ys 2012-13 to 2015-16 against the order of the CIT (A)-8, Hyderabad dated 10.06.2016 deleting the penalty levied by the AO u/s 271C of the I.T. Act.

2. Brief facts of the case are that the assessee Trust, which is in the business of running educational institutions under the name of Sri Chaitanya Techno Schools and Sri Chaitanya Jr. Colleges, entered into a service agreement with M/s. K-12 Educational Management Pvt Ltd and M/s. Varsity Educational Management Pvt. Ltd for rendering of support services as may be required in relation to the administration, management and operation of educational institutions. For the services rendered by the above companies, the assessee was making payment as per the agreement and deducted TDS @ 2% u/s 194C of the Act. A survey action u/s 133A was conducted on 12.3.2015 in the business premises of the assessee at Hyderabad, during the course of which, it was observed that the services under the agreement are in the nature of technical services and therefore, the assessee was required to deduct TDS @ 10% u/s 194J of the Act. Accordingly, the AO proposed to pass order u/s 201(1) and 201(1A) of the I.T. Act in respect of short deductions made by the assessee. The AO also initiated penalty proceedings u/s 271C of the Act for short deduction of tax u/s 194J of the Act.

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