Section 194C — As per explanation III(c) to section 194C(2) payment made by assessee for using facility for movement of goods should be categorised as payment for carriage of goods and not as technical fees u/s.194J.

Section 201(1) & 201(1A) — Person responsible to deduct tax at source cannot be treated as assessee in default in respect of tax u/s.201(1), if payee has paid tax directly — However, payee is liable to pay interest u/s.201(1A), from date of deduction to actual payment of tax.

Facts

•  Payment was made by the assessee to the NSICT for movement of containers to the vessel and from the vessel. On payment to NSICT the assessee deducted tax u/s.194C.

•   However the AO rejected the same on the ground that services received by the assessee are in the nature of technical services. Therefore, tax should be deducted u/s.194J. Subsequently the AO raised the demand for short deduction u/s.194J of Rs.36,08,701 and interest u/s.201(1A) of Rs.24,90,004.

• Aggrieved by the order of the AO the assessee filed the appeal before CIT(A).

• The CIT(A) up held the contention of the assessee of deducting tax under 194C. However the CIT(A) upheld the order of AO u/s. 201(1) and 201(1A).

Held

•  In order to be covered by sec 194J, there should be consideration for acquiring/using technical know-how provided/made available by human intervention. Section 194J is to be read with explanation 2 to section 9(1)(vii) which defines fees for technical services. Involvement of human element is essential to bring any service with in the meaning of technical service.

•  In the present case payment was made by the assessee for using a facility and not for availing any technical service which may have gone into making of the facility.

• In order to be covered by section 194J, there should be direct link between the payment and receipt of technical service/information. Technical service does not include service provided by machines/robots. (CIT v. Bharti Cellular Ltd.) Held that the assessee had rightly deducted tax u/s.194C and the AO had erred in applying provisions of section 194J.

Facts

• The AO considering the deduction to be a short deduction of the raised demand for the interest u/s.201(1A) of Rs.29,00,004.

• On appeal by the assessee to the CIT(A), the learned CIT(A) held that the assessees’s liability for deducting tax at source was not washed away by payment of tax by recipient. The CIT(A) upheld order of the AO passed u/s. 201(1) and 201(1A).

• The assessee filed appeal before the ITAT for payment of interest u/s.201(1A) and for treating order of the AO u/s.201(1) and 201(1A) as time-barred.

Held

1.    Payment of interest u/s.201(1A) of Rs.2490004:

(a)    As there was no liability on the assessee to deduct tax u/s.194J, demand of interest u/s.201(1A) is incorrect.
(b)    However from a legal and academic point of view, the liability of payer to pay interest u/s.201(1A) exists for the period between the date on which tax was deductible till date of actual payment.
(c)    Any demand u/s.201(1) of the Act should not be enforced after the tax deductor has satisfied AO that taxes due have been paid by the payee.

2.    Treating order as time-barred:

(a)    Held that, time limit for initiating and completing the proceeding u/s.201(1) has to be at par with the time limit available for initiating and completing the reassessment. Thus the order passed by the AO is within the time limit.
(b)    Thus appeal of the Revenue was dismissed and cross-objection of the assessee was partly allowed.