Case Law Details
Dish TV India Ltd. Vs CIT (ITAT Delhi)
Conclusion: CIT (A), notwithstanding the fact that in Financial year 2010-11 he had held that the payments were not in the nature of services falling under section 194J, not only ignored his appellate order in Financial Year 2010-11 but also chose to brush aside the explanations and evidences supplied by assessee without examining the same in detail. tI was deemed fit to restore the issue of short deduction of tax at source and interest thereon in the fourth quarter of Financial Year 2011-12 to the file of CIT (A) with a direction to pass a speaking order.
Held: The issue arose for consideration was of short deduction of tax at source and interest thereon for quarter four. AO had computed short deduction of tax at source and interest thereon in respect of Conax Access Systems Pvt. Ltd. and Tata Teleservices in the 4th Quarter. Assessee contended that payments to this company were made under normal contractual obligations and that the services being provided by these two companies were general in nature and did not require any transfer of skill nor did make available any skill to assessee. Assessee had deducted tax at source in terms of section 194C of the Act @ 2% whereas AO had held that the payment would fall within the terms of section 194J attracting the rate of 10%. It was noted that CIT (A), notwithstanding the fact that in Financial year 2010-11 he had held that the payments were not in the nature of services falling under section 194J, not only ignored his appellate order in Financial Year 2010-11 but also chose to brush aside the explanations and evidences supplied by assessee without examining the same in detail. Department’s appeal against the order of the Ld. CIT (A) in Financial Year 2010-11 was pending before the Tribunal. In such circumstances, in the interest of substantial justice, it was deemed fit to restore the issue of short deduction of tax at source and interest thereon in the fourth quarter of Financial Year 2011-12 to the file of CIT (A) with a direction to pass a speaking order after duly considering the evidences and explanations being offered by assessee in this regard after giving proper opportunity to assessee to present its case.
FULL TEXT OF THE ITAT JUDGEMENT
Both these appeals are preferred by the assessee. ITA 227/Del/2017 is against the order dated 11.11.2016 passed by the Learned Commissioner of Income Tax (Appeals)-I, Noida {CIT(A)} for Assessment Year 2012-13 whereas ITA No.228/Del/2017 pertains to Assessment Year 2013-14. Both the appeals involve identical issues. Therefore, these appeals were heard together and they are being disposed of through this common order for the sake of convenience.
2.0 The brief facts of the case are that the assessee is a Public Limited Company engaged in the business of establishing, maintaining and operating Direct-to-home (DTH) platform under the license granted by the Central Government. For Assessment Year 2012-13, a TDS verification letter was issued by the Assessing Officer to verify the compliance to TDS provisions. During the course of verification, it was observed that the assessee had been making payments, which as per the Assessing Officer (AO), attracted deduction of tax at source (TDS). The Assessing Officer also noted that the assessee had deducted tax at source while making payments to Television Channels in India and also abroad and had deducted TDS u/s 194 and 195 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The Assessing Officer also noted that there were some irregularities with respect to some of the deductees vis. M/s Conax Access Systems (Pvt.) Ltd., Tata Tele Services Ltd., Proactive Data Systems (Pvt.) Ltd., Tulip Telecom and Integrated Subscriber Management Services Ltd. The Assessing Officer computed short deduction of tax at Rs.4,30,431/- and computed interest at Rs.53,48,144/- thereby creating a total demand of Rs.57,78,575/- u/s 201(1)/201(1A) of the Act for Assessment Year 2012-13.
2.1 In Assessment Year 2013-14 also a letter was issued by the Assessing Officer to verify the compliance of the TDS provisions and during the course of such verification, the Assessing officer noted that there was irregularities in respect of deduction of tax at source in respect of M/s Conax Access System (Pvt.) Ltd., Tata Tele Services Ltd., Proactive Data Systems (Pvt.) Ltd., Tulip Telecom, Integrated Subscriber Management Services Ltd. and Cyquator Media Services (Pvt.) Ltd. The Assessing Officer proceeded to compute the short deduction of tax at source at Rs.75,183/- and interest at Rs.64,62,048/- thereby creating a total demand of Rs.65,37,231/- u/s 201(1)/201(1A) of the Act.
2.2 The assessee’s appeals for both the years were dismissed by the Ld. CIT (A) and now the assessee is before this Tribunal challenging the dismissal of its appeals. The grounds raised in both the years are as under:
ITA No.227/Del/2017 for Assessment Year 2012-13:
“1. That the Ld. AO had erred in law and also on the facts of the case by passing the impugned order u/s 201 (1)/201 (1A) of I.T. Act by creating a total demand of Rs.57.78.5751- and the Ld. CIT (A) was not at all justified in confirming the action of the Ld. AO because the provisions of Chapter XVIIB of the I.T. Act were not applicable.
2. That without prejudice to Ground No. 1 above, section 194J of the I.T. Act were not applicable to the facts of Appellant’s case and the Appellant had correctly deducted the tax at source as per section 194C of the I.T. Act.
3. That the short deduction of TDS worked out by the Ld. AO and confirmed by the Ld. CIT (A) is contrary to the provisions of the Act and therefore, the orders passed by the authorities below deserve to be annulled/cancelled.
4. That the authorities below had also erred in law and also on the facts of the case by ignoring the documents filed by the Appellant showing that deductees had already filed the returns and paid tax on their respective income thereby ignoring CBDT Circular and Hon’ble Supreme Court judgment in the case of Hindustan Coco Cola Beverages (P) Ltd. which were binding on the authorities below and therefore the orders passed by the authorities below are liable to be cancelled.
5. That without prejudice to the above grounds, the authorities below had erred in law as well as on facts in levying /charging interest on the alleged short deduction of tax considering the payments/credits made to Conax Access System Pvt. Ltd. (“Conax”) to be liable for deduction u/s 194J of I.T. Act as against section 194C and consequently, such interest of Rs.4,85,643/- on the alleged short deduction is liable to be cancelled.
6. That without prejudice to the above, the authorities below had erred in law as well as on facts in holding that payments made to Tata Teleservices (“TTL”) were technical in the nature and will attract provisions of section 194J of the Act for tax deduction at source thereby ignoring the fact that the Appellant had purchased airtime from TTL and the same did not fall within the ambit of tax deduction at source and consequently, the alleged short deduction/non deduction of Rs.4,03,616/- and interest u/s 201(1A) of Rs.1,85,474/- deserves to be deleted.
7. That the authorities below had also erred in holding that various payments made to Cyquator Media Services Private Limited (CMSPL) (formerly known as Essel Business Processes Limited/Integrated Subscriber Management Services Limited (EBPL/ISMSL), subsequently merged with CMSPL) (“CMSPL” or “ISMSL” or “EBPL”) will attract provisions of section 194J and not section 194C for deduction of tax at source and therefore, interest charged of Rs.46,64,641/- u/s 201(1 A) on alleged short deduction of tax and interest deserves to be deleted.
8. That the authorities below have ignored the fact that EBPL has been issued lower deduction certificate under section 197 for payments to be made by the Appellant to EBPL under section 194C and revenue has accepted such certificate for payments by the Appellant liable to tax deduction under section 194C.
9. That without prejudice to above, the Ld. CIT(A) have erred in holding that since service tax has been levied and recovered on the services rendered to the Appellant, the same are liable to the provisions of Chapter XVIIB of the I T. Act, ignoring that service tax is levied under different statute and provisions of Chapter XVIIB are restricted to only such services mentioned in the I.T. Act.
10. That without prejudice to above, the authorities below has ignored the essence of amendment in section 201 (1 )/201 (1 A) of the Act wherein it was brought into the Act that if the payee has discharged its tax liability, payer cannot be held Assessee in default for non/short deduction of tax. Accordingly, no interest could be charged on these alleged short deduction/non deduction and therefore, interest worked out u/s 201(1A) on short deduction deserves to be cancelled.
11. That the Ld. CIT (A) had ignores the fact that these kind of contract fall in the definition of work and attract section 194C and are not liable to tax deduction u/s 194J.
12. That the Appellant reserves its right to add, amend/modify the grounds of appeal.”
ITA No.228/Del/2017 for Assessment Year 2013-14:
“1. That the Ld. AO had erred in law and also on the facts of the case by passing the impugned order u/s 201 (1)/201 (1A) of I.T. Act by creating a total demand of Rs.65,37,231/- and the Ld. CIT (A) was not at all justified in confirming the action of the Ld. AO because the provisions of Chapter XVIIB of the I.T. Act were not applicable.
2. That without prejudice to Ground No. 1 above, section 194J of the I.T. Act were not applicable to the facts of Appellant’s case and the Appellant had correctly deducted the tax at source as per section 194C of the I.T. Act.
3. That the short deduction of TDS worked out by the Ld. AO and confirmed by the Ld. CIT (A) is contrary to the provisions of the Act and therefore, the orders passed by the authorities below deserve to be annulled/cancelled.
4. That the authorities below had also erred in law and also on the facts of the case by ignoring the documents filed by the Appellant showing that deductees had already filed the returns and paid tax on their respective income thereby ignoring CBDT Circular and Hon’ble Supreme Court judgment in the case of Hindustan Coco Cola Beverages (P) Ltd. which were binding on the authorities below and therefore the orders passed by the authorities below are liable to be cancelled.
5. That without prejudice to the above, the authorities below had erred in law as well as on facts in holding that payments made to Tata Teleservices (“TTL”) were technical in the nature and will attract provisions of section 194J of the Act for tax deduction at source thereby ignoring the fact that the Appellant had purchased airtime from TTL and the same did not fall within the ambit of tax deduction at source and consequently, the alleged short deduction/non deduction of Rs.48,363/- and interest u/s 201(1 A) of Rs.13,299/- deserves to be deleted.
6. That the authorities below had also erred in holding that various payments made to Cyquator Media Services Private Limited (CMSPL) (formerly known as Essel Business Processes Limited/Integrated Subscriber Management Services Limited (EBPL/ISMSL), subsequently merged with CMSPL) (“CMSPL” or ”ISMSL” or “EBPL”) will attract provisions of section 194J and not section 194C for deduction of tax at source and therefore, interest charged of Rs.64,39,512/- u/s 201(1A) on alleged short deduction of tax and interest deserves to be deleted.
7. That the authorities below have ignored the fact that in the previous year, EBPL had been issued lower deduction certificate under section 197 for payments to be made by the Appellant to EBPL under section 194C and revenue has accepted such certificate for payments by the Appellant liable to tax deduction under section 194C.
8. That without prejudice to above, the Ld. CIT (A) have erred in holding that since service tax has been levied and recovered on the services rendered to the Appellant, the same are liable to the provisions of Chapter XVIIB of the I.T. Act, ignoring that service tax is levied under different statute and provisions of Chapter XVIIB are restricted to only such services mentioned in the I.T. Act.
9. That without prejudice to above, the authorities below has ignored the essence of amendment in section 201(1)/201(1A) of the Act wherein it was brought into the Act that if the payee has discharged its tax liability, payer cannot be held Assessee in default for non/short deduction of tax. Accordingly, no interest could be charged on these alleged short deduction/non deduction and therefore, interest worked out u/s 201(1A) on short deduction deserves to be cancelled.
10. That the Ld.CIT (A) had ignores the fact that these kind of contract fall in the definition of work and attract section 194C and are not liable to tax deduction u/s 194J.
11. That the Appellant reserves its right to add, amend/modify the grounds of appeal.”
3.0 The Authorized Representative (AR) submitted that the assessee was pleading to raise additional grounds in Assessment Year 2012-13. He drew our attention to the additional grounds which read as under:
“1. That the order as passed u/s 201(1)/201(1A) dated 30/03/2015 for determining non/short deduction of TDS for the first three quarters of FY 2011-12 was illegal and void ab-initio since the same was passed after the expiry of limitation period of two years from the end of the financial year as prescribed under sub-section 3 of section 201 of I.T. Act.
2. That the short deduction of TDS of Rs.4,03,618 as determined vide order u/s 201(1)/201(1A) dated 30/03/2015 on payments to Tata Teleservices Ltd deserves to be deleted as such order was passed beyond the prescribed limitation period which ended on 31/03/2014.”
3.1 The Ld. Authorized Representative pleaded that these additional grounds were purely legal grounds and that they deserved to be admitted and adjudicated upon in view of the judgment of the Hon’ble Apex Court in the case of NTPC Ltd. vs. CIT as reported in 229 ITR 383.
4.0 Per contra, the Ld. Sr. Departmental Representative (DR) opposed the assessee’s prayer for admitting additional grounds.
5.0 Having heard both the parties and after having gone through the additional grounds sought to be raised by the assessee, we are of the considered opinion that these grounds are purely legal grounds going into the very root of the issue and, therefore, in the interest of substantial justice, they are admitted.
6.0 The Ld. Authorized Representative (AR) submitted that in terms of section 201(3) of the Act, which was amended by Finance Act, 2012 with retrospective effect from 01.04.2010 and which was applicable during the Assessment Year 2012-13 (Financial Year 2011-12), the limitation period for passing the order u/s 201(1) of the Act was two years from the end of the Financial Year in which the statement was filed. The Ld. Authorized Representative drew our attention to a chart and submitted that in case of assessee, the order u/s 201(1)/201(1A) for Financial Year 2011-12 was passed on 30.03.2015 which was beyond the limitation period as specified section 201(3)(a) for the first quarter, the second quarter and the third quarter since the statements referred to in Sec.200 for these three quarters were filed on or before the end of Financial Year ending 31st March, 2012. He drew our attention to the chart reflecting these dates as well as copies of the TDS statements along with their acknowledgments. The Ld. Authorized Representative submitted that, therefore, for these three Quarters, the limitation period had expired on 30.03.2014, and, therefore, the impugned order u/s 201(1), 201(1A), passed on 30.03.2015 was beyond the period of limitation and was, therefore, void ab initio. Reliance was placed on the judgment of the Hon’ble Gujarat High Court in the case of Tata Teleservices Limited vs. Union of India reported in 385 ITR 497 (Guj.). Reliance was also placed on the order of ITAT Delhi Bench in the case of HCL Technologies Ltd. vs. ACIT (TDS) in ITA No.1723/Del/2017 vide order dated 20.07.2020.
6.1 With respect to the merits of the case, the Ld. Authorized Representative submitted that ground No.5 challenges the charging of interest of Rs.4,85,643/- u/s 201(1A) on alleged short deduction of tax on payments/credit to M/s Conax Access Systems (Pvt.) Ltd. by holding that tax was to be deducted @ 10% u/s 194J as against the rate of 2% u/s 194C as made by the assessee. It was further submitted that if the assessee’s plea for the quashing of the impugned order for the first three quarters based on the additional grounds of appeal is allowed then the disputed interest will be limited of Rs.1,15,293/- only. The Ld. Authorized Representative submitted that Conax Access Systems (Pvt.) Ltd. was a Contractor providing operations/supports services for the Smart Card/Viewing Card which were used by the assessee for providing the DTH Services to its customers. Our attention was drawn to copies of sample Invoices issued by the Conax Access Systems (Pvt.) Ltd. and it was submitted that from the perusal of such the invoices as well as of the copy of the agreement with the service provider (placed in the Paper Book) it would be evident that the services provider was owning the conditional access system platform and was providing such system based services of activating and maintaining the use of smart cards by the assessee which was standard service in nature and not exclusive. It was also submitted that no technical knowledge was being provided to or being made available to the assessee. The Ld. Authorized Representative submitted that since the services were purely pertaining to maintenance, provisions of Section 194C of the Act were applicable. The Ld. Authorized Representative submitted that the assessee had deducted TDS correctly @ 2%. Our attention was also drawn to CBDT Circular No.715 dated 08.08.1995 wherein it had been clarified that routine, normal maintenance contracts which includes supply of spares will be covered under section 194C of the Act.
6.2 With respect to Ground No. 6, the Ld. Authorized Representative submitted that the authorities below had erred in holding that payments made to Tata Teleservices Limited were technical in nature and would attract the provisions of Section 194J ignoring the fact that the assessee had purchased airtime from Tata Teleservices Ltd and the same did not fall within the purview section 194J of the Act. It was submitted that Tata Teleservices Ltd. provided the platform to the assessee for sending system generated bulk SMS messages requiring no human intervention and, therefore, the purchase of airtime from the telecommunication services provider could not be considered as technical services and, therefore, section 194J was not applicable in the assessee’s cases. It was also submitted that the Assessing Officer has not brought on record any evidence to show that such services as rendered by Tata Teleservices were not standard in nature and were special, exclusive or customized services for the assessee. Reliance was placed on the judgment of the Hon’ble Apex Court in the case of CIT vs. Kotak Securities Ltd. reported in 383 ITR 1 (SC). The Ld. Authorized Representative also submitted that if assessee’s additional grounds were accepted, this ground will became academic in nature.
6.3 With respect to ground Nos. 7 and 8, the Ld. Authorized Representative submitted that these grounds challenged the charging of interest of Rs.46,64,641/- u/s 201(1A) on alleged short deduction of tax on contractual payments/credits made to Cyquator Media Services Pvt. Ltd. by alleging that TDS was to be deducted at the rate of 10% in terms of section 194J as against the rate of 2%, as applied by the assessee u/s 194C of the Act. The Ld. Authorized Representative submitted that this company was providing conditional access services (CAS), subscriber management service (SMS) and call center services (CCS) to the assessee on which tax had been deducted at the rate of 2% in terms of section 194C of the Act. It was further submitted that the Assessing Officer, however, referred to and relied upon his previous order dated 21.03.2014 passed u/s 201(1) and 201(1A) in the assessee’s own case for Assessment Year 2011-12 (Financial Year 2010-11) for holding that the provisions of section 194J were applicable on contractual payments in the case of Conax Access System Pvt. Ltd. It was submitted that the Ld. CIT (A) had upheld the action of the Assessing Officer then but the ITAT had restored the issue to the file of the Ld. CIT (A) vide order dated 31.01.2018 and, thereafter, the Ld. CIT (A) vide his order dated 29.06.2018 had fully allowed the appeal of the assessee. The Ld. Authorized Representative also submitted that if assessee’s additional grounds are accepted then the interest under challenge will be limited only to the last quarter.
6.4 Alternatively, without prejudice, the Ld. Authorized Representative also submitted that the Assessing Officer has not given any reasons for considering the contractual payments to be liable for deduction of tax at source in terms of section 194J as against 194C and further that the Ld. CIT (A) also had made only general observations without bringing on record or pinpointing any adverse material to hold that the vendors were rendering technical services. It was also submitted that the tax liability was fully discharged by the payee Conax Access System Pvt. Ltd. as was evident from the certificate issued by the Chartered Accountant and, therefore, the payer cannot be deemed to be assessee in default for non/short deduction of tax at source as held by Hon’ble Apex Court in the case Hindustan Coco Cola Beverage (Pvt.) Ltd. vs. CIT reported in 293 ITR 296 (SC).
6.5 The Ld. Authorized Representative also submitted that with effect from 01. 04.2020, the rate of tax for the purposes of deduction with respect to fee for technical services had been reduced from 10% to 2% with a view to reduce taxes litigation. It was submitted that, therefore, in the light of this amendment, the beneficial rate should be applied in the case of assessee also.
7.0 With respect to assessee’s appeal bearing ITA No.228/Del/2013, the Ld. Authorized Representative submitted that the grounds were identical and so were the arguments as in the ITA No.227/Del/2017 and, therefore, the same were not being repeated for the sake of brevity.
8.0 Per contra, the Ld. Sr. Departmental Representative (DR) placed reliance on the orders of the Assessing Officer for both the years under consideration. The Ld. Sr. DR submitted that the Assessing Officer had computed the short deduction of tax at source as well as interest thereon in terms of the provisions of Income Tax Act and, therefore, the Ld. CIT (A) had upheld the same. It was submitted that the appeals of the assessee deserved to be dismissed.
9.0 We have heard the rival submissions and have also perused the material on record. We take up ITA No.227/Del/2017 first for adjudication.
9.1 The Assessee has raised additional grounds in Financial Year 2011-12. It is the submission of the Ld. Authorized Representative that the order passed u/s 201(1)/201(1A) dated 30.03.2015 for the first three quarters was illegal since the same was passed after the expiry of the limitation period of 2 years from the end of Financial Year as prescribed under sub-section 3 of Section 201 of the Act. The Ld. Authorized Representative has demonstrated before us through a chart, TDS statements as well as their acknowledgements for the first three quarters of Financial Year 2011-12 that these statements had been filed on or before 31.03.2012. Therefore, the time limit for passing the order u/s 201(3) of the Act would two years from the end of the year in which such TDS statements were filed i.e. 31.03.2014. However, the impugned order was passed on 30.03.2015 i.e., beyond the period of limitation. The Ld. Sr. DR has also not challenged this claim of the assessee. An identical issue has been considered by the Hon’ble Gujarat High Court in Tata Teleservices Vs. Union of India [2016] 385 ITR 497 (Gujarat) wherein it has been held that prior to section 201 was amended by Finance Act No.2 of 2009, no time limit was provided for passing an order u/s 201(1). But w.e.f. 01.04.2010, a time limit has been provided specifying that such order was to be passed within two years from the end of the financial year in which statements of TDS are filed. If no statement is filed, the order could be passed up to four years from the end of the financial year in which the amount is credited or paid. This judgment of the Hon’ble Gujarat High Court has been followed by the Co-ordinate Benches of this Tribunal in Delhi and Mumbai. Therefore, respectfully applying the ratio of the judgment in the case of Tata Teleservices Ltd. (supra) we hold that the order u/s 201 (1)/201 (1A) for the first three quarters for Financial Year 2011-12 was passed beyond the limitation period and, therefore, the same is not a valid order in the eyes of law. Accordingly, the same is quashed.
9.2 The only issue remaining in Financial Year 201112 is the issue of short deduction of tax at source and interest thereon for quarter four. The Assessing Officer has computed short deduction of tax at source and interest thereon in respect of Conax Access Systems Pvt. Ltd. and Tata Teleservices in the 4th Quarter. With respect to both these parties, it is the assessee’s contention that payments to this company were made under normal contractual obligations and that the services being provided by these two companies were general in nature and did not require any transfer of skill nor did make available any skill to the assessee. The assessee had deducted tax at source in terms of section 194C of the Act @ 2% whereas the Assessing Officer has held that the payment would fall within the terms of section 194J of the Act attracting the rate of 10%. The Ld. Authorized Representative has referred to invoices and agreements entered into with both the parties to buttress his arguments that the services rendered were not in the nature of technical services requiring any sharing/transferring of technical skill or knowledge. These evidences and explanations were submitted before the Assessing Officer as well as Ld. CIT (A). However, the Ld. CIT (A), notwithstanding the fact that in Financial year 2010-11 he had held that the payments were not in the nature of services falling under section 194J, not only ignored his appellate order in Financial Year 2010-11 but also chose to brush aside the explanations and evidences supplied by the assessee without examining the same in detail. We are informed that the Department’s appeal against the order of the Ld. CIT (A) in Financial Year 2010-11 is pending before the Tribunal. In such circumstances, in the interest of substantial justice, we deem it fit to restore the issue of short deduction of tax at source and interest thereon in the fourth quarter of Financial Year 2011-12 to the file of the Ld. CIT (A) with a direction to pass a speaking order after duly considering the evidences and explanations being offered by the assessee in this regard after giving proper opportunity to the assessee to present its case.
10.0 In the result, ITA No.227/Del/2017 stands allowed for statistical purposes.
11.0 In ITA No.228/Del/2017, the issues are identical in as much as the Assessing Officer has held the assessee to have made short deduction of tax at source in respect of M/s Conax Access System (Pvt.) Ltd., Tata Tele Services Ltd., Proactive Data Systems (Pvt.) Ltd., Tulip Telecom, Integrated Subscriber Management Services Ltd. and Cyquator Media Services (Pvt.) Ltd. The assessee has also been charged with interest on the alleged short deduction of tax. In all the cases, it is the allegation of the Assessing Officer that the tax should have been deducted @ 10% in terms of Section 194J instead of 2%, as done by the assessee u/s 194C of the Act. It is seen that the assessee had duly submitted copies of agreements, invoices and other related evidences to demonstrate, both before the Assessing Officer as well as the Ld. CIT (A), that the payments in question were liable for deduction of tax at source @ 2% only. However, both the Lower Authorities have ignored the evidences and explanations submitted by the assessee in this regard. Since, we have deemed it appropriate to restore the identical issues in Financial Year 2011-12 to the file of the Ld. CIT (A) for passing a speaking order in light of the evidences and explanations of the assessee in this regard, likewise, on similar reasoning and in the interest of substantial justice, we restore the appeal to the Ld. CIT (A) to be decided afresh after giving due opportunity to the assessee to present its case.
12.0 In the result, ITA No.228/Del/2017 stands allowed for statistical purposes.
13.0 In the final result, both the appeals stand allowed for statistical purposes.
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