CG Professional Exam Board Vs DCIT (ITAT Raipur)
ITAT Raipur held that service of tabulation, checking and preparation of marksheets and other computer assisted work doesn’t require any specific professional skill or expertise. Therefore, provisions of section 194J of the Income Tax Act are not attracted.
Facts- The assessee which is a self-governing body under the State of Chhattisgarh and conducts examination for recruitment of employees was subjected to a TDS survey u/s.133A(2A) of the Act on 10.10.2017. During the course of survey proceedings, the department found that the assessee had failed to deduct tax at source on payments made under a confidential head to a processing agency in accordance with section 194J of the Act.
AO observed that the assessee had wrongly deducted tax at source on the payments made to the processing agency u/s. 194C of the Act, as against that which ought to have been made u/s. 194J.
Conclusion- Held that rendering of the aforesaid services would not require any professional skill or expertise, much the less any professional degree on the part of the service provider, therefore, the same clearly takes the same beyond the scope and gamut of the definition/meaning of the term “professional services” as envisaged in Section 194J of the Act.
I have even otherwise approached the issue in hand independent of the aforesaid technical intricacies, and is of the considered view that as the very nature of the services rendered by the processing agency, i.e., tabulation, checking and preparation of marksheets and other computer assisted work would not require any specific professional skill or expertise, therefore, it is difficult to comprehend as to how it would find a place within the meaning of “professional services” as envisaged in the “Explanation (a)” of Section 194J of the Act. In case, if a view to the contrary is taken, then all the services rendered by any agency by deploying computers/internet services, irrespective of the fact that the same would not require any professional skill or expertise would have to be categorized as “professional services”. Considering my aforesaid observations, wherein neither I am able to concur with the view taken by the lower authorities that the services rendered by the processing agency requires any professional expertise or skill, much the less those specified in “Explanation (a)” of Section 194J, AND also is unable to persuade myself to conclude that the services in question could be brought within the meaning of “technical consultancy” [as forms part of the definition of “professional services” in Explanation (a) of Section 194J], therefore, the same in my considered view could not have been brought within the meaning of Section 194J of the Act. On the basis of my aforesaid observations I set-aside the order of the CIT(Appeals) to the extent he had concluded that the assessee was liable to deduct tax at source on the payments made to the processing agency u/s.194J of the Act.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The captioned appeals filed by the assessee are directed against the orders passed by the CIT(Appeals)-1, Raipur dated 25.11.2019 & 26.11.2019, which in turn arises from the consolidated order passed by the DCIT, Circle TDS, Raipur under Sec.201(1) r.w.(1A) of the Income Tax Act, 1961 (for short ‘the Act’) dated 03.12.2018 for assessment year(s) 2012-13 to 2018-19. As common issues are involved in the aforementioned appeals, therefore, the same are being taken up and disposed off together by way of a consolidated order.
2. I shall take up the appeal in ITA No.21/RPR/2020 for the assessment year 2012-13 as the lead matter and the order therein passed shall apply mutatis-mutandis to the remaining cases. The assessee has assailed the impugned orders of the CIT(Appeals) on the following grounds of appeal before me :
“1. The impugned order passed by the learned Commissioner of Income-tax [Appeals] u/s.250 and that of the learned Assessing Officer under Section 201(1) r.w.s (1A) of the I.T Act, 1961 of the Act is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant’s case.
2. The appellant denies the tax liability determined by the learned assessing officer as short deduction under section 201(1) amounting to Rs.24,67,932/- (and interest thereon under section 201(1A) Rs.20,77,260/-) and confirmed by the learned Commissioner of Income-tax [Appeals], as against the income reported by the appellant on the facts and circumstances of the case.
3. The Honourable CIT-(A), passed an order, without providing an opportunity of being heard (i.e. without proposal notice) whereby the assessee is aggrieved by the order passed u/s 250, being violation of principle of Natural Justice.
4. The Honourable CIT(A) relied on Judicial decisions which is not applicable under fact and circumstance, which deals with Disallowance under section 40(a)(ia) is not relevant to fact of the case to ascertain default under section 201(1) & 201(1A).
5. Without prejudice, the learned CIT(A) is not justified in passing order without following the decision of Calcutta High Court in case of CIT v. S.K. Tekriwal [2014] 361 ITR 432, and merely relying on contradictory decision arrived at without considering president of different High court with regard to section 40(a)(ia).
6. The Appellant is not liable for deduction of any TDS as the assessee has made payment for purchase of products (answer sheets, marks sheet, OMR sheet), as per specification of the assessee, without any Job work. [i.e. contract for supply of material is contract for sale does not contract for technical services].
7. Without prejudice, the learned Assessing officer is not justified in providing the part of the works (printing) as works contract and liable to TDS under section 194C and the balance part (such as scanning etc.) as professional under section 194J, when the entire work form part of one composite work. [i.e., contract for supply of material & service being incidental, ought to be treated as contract for works contract and not contract for technical services]
8. Without prejudice, thought the assessee with an abundant caution has deducted TDS u/s 194C, The Appellant is not liable for deduction of any TDS u/s 194J as the assessee has made payment as there is no “consultancy services” involved in printing of material as per requirements of Assessee.
9. Without prejudice, though the assessee has deducted TDS u/s 194C, The Honourable CIT(A) passed an order without any material evidence that the printers or suppliers/vendors are possessing any technical and professional qualification.
10. Without prejudice the Learned AO having bifurcated the process ought to applied section 194J only on those process where computers are involved and balance process/work TDS ought to have been applied u/s 194C.
11. Order based on surmise/presumption -The Entire Assessment order and CIT(A) order has been passed based on assumption that software has been used / software coding is done by the vendor, without any evidence that the customized software has been used by the vendors.
12. Without prejudice the appellant submits that the learned Assessing officer and Honourable CIT(A) is not justified in separating/ dividing the composite work of printing work from application to reporting the results, as contract and technical services
13. Without prejudice The appellant submit that the appellant is covered by the proviso to section 200(1) i.e., The Deductee has filed his return of income under section 139(1) taking into Account of the amount paid by the appellant and tax has been paid by him.
14. The appellant submits that the appellant is covered by proviso to section 201(1A), i.e., Interest is not applicable for a period of time beyond the due date of filing the return of income of deductee.
15. The learned assessing officer also erred in levying the interest u/s.201(1A) of the Act and the same are not in accordance with law on the facts and circumstances of the case. Further, the quantum, period and rate are not discernible from the assessment order.
16. The appellant craves leave of the Hon’ble Members of Income Tax Appellate Tribunal, to add, alter, modify, delete or substitute any or all of the above grounds of appeal as may be necessary at the time of hearing.
17. For these and other grounds that may be urged at the time of hearing of appeal, the Appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.”
3. Succinctly stated, the assessee which is a self-governing body under the State of Chhattisgarh and conducts examination for recruitment of employees was subjected to a TDS survey u/s.133A(2A) of the Act on 10.10.2017. During the course of survey proceedings certain infirmities were observed by the survey officials, viz. (i). that the assessee had failed to deduct and deposit tax at source on the payments made to caterer; (ii). that the deductor had failed to deduct tax at source on payments made under a confidential head to a processing agency in accordance with section 194J of the Act; and (iii). that the deductor had though deducted and deposited the amount of tax at source, but had failed to reflect the names and PAN’s of the payees in its TDS returns for the respective quarters.
4. During the course of the proceedings before the Dy. CIT, TDS, it was admitted by the assessee that there was failure on its part to deduct and deposit tax at source on the payments made towards catering services. Apropos the payments which were made by it under the head secret expenses, it was observed by the A.O that the same were made on two-fold counts, viz. (i) payments made to printing agency; and (ii) payments made to a processing agency. On a perusal of the details, it was observed by the A.O that while for the printing agency was paid on account of its multi-facet job works, viz. printing applications, examination papers, copies etc., while for on the other hand the processing agency was paid for the services rendered by it on account of checking of papers, preparation of mark sheets, tabulation and other computer assisted work. It was observed by him that the assessee had deducted tax at source on the payments made to both the aforesaid agencies u/s.194C of the Act. It was, however, noticed by the A.O that the names and details of both the agencies to whom the payments were made after deduction of tax at source were not reflected in the assessee’s quarterly TDS returns, for the reason that as the said details were confidential in nature, therefore, it was not permissible to put the same in the public domain. It was the claim of the assessee that as it had duly deducted and deposited tax at source on the respective payments, thus, no adverse inferences qua furnishing of the details was called for in its hand.
5. On a perusal of the details, it was, inter alia, observed by the A.O that the assessee had wrongly deducted tax at source on the payments made to the processing agency u/s.194C of the Act, as against that which ought to have been made u/s.194J, as under:
