55 TDS – Section 194J – A. Ys. 2009-10 to 2012-13 – Fees for professional and technical services – Scope of section 194J – State Development Authority newly constituted getting its work done through another existing unit – Reimbursement of expenses by State Development Authority – Not payment of fees – Tax not deductible at source

The assessee, the H. P. Bus Stand Management and Development Authority, an entity established for development and management of bus stands within the State of Himachal Pradesh, was established w.e.f. April 1, 2000. Prior thereto, such work was being carried out by the State Road Transport Corporation itself. Since the assesee had no independent establishment and infrastructure of its own to carry out the objects, a decision was taken to have the same executed through the employees of the Corporation. This arrangement was to continue till such time as the assessee developed its own infrastructure. Since ongoing projects were required to be executed, which was so done in public interest, as per the arrangement arrived at, certain payments were released by the assessee in favour of the Corporation. The expenditure was to be shared by way of reimbursement. Since the assesee did not deduct any amount in terms of section 194J of the Act, with respect to the amount paid to the Corporation, the Assessing Officer disallowed the deduction of the amount paid to the Corporation for failure to deduct tax at source. The Commissioner (Appeal) and the Tribunal deleted the addition.

On appeal by the
Revenue, the Himachal Pradesh High Court upheld the decision of the Tribunal
and held as under:

“i) The
arrangement arrived at between the two entities could not be said to be that of
rendering professional services. No legal, medical, engineering, architectural
consultancy, technical consultancy, accountancy, nature of interior decoration
or development was to be rendered by the Corporation. Similarly, no service,
which could be termed to be technical service, was provided by the corporation
to the Development Authority, so also no managerial, technical or consultancy
services were provided.

ii) The arrangement was
simple. The staff of the corporation was to carry out the work of development and management of the
Development Authority till such time as, the assessee developed its
infrastructure and the expenditure so incurred by the Corporation was to be
apportioned on agreed terms. It was only pursuant to such arrangement, that the
assessee disbursed the payment to the Corporation and no amount of tax was
required to be deducted at source on the payment.” _