Income Tax Appellate Tribunal - Jaipur
Rajasthan Knoledge Corporation ... vs Assessee on 27 January, 2016
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM
vk;dj vihy la-@ITA No. 896/JP/2014
fu/kZkj.k o"kZ@Assessment Year : 2012-13
Rajasthan Knowledge cuke Income Tax Officer,
Corporation Limited, Vs. TDS-2,
7-A, Jhalana Institutional Area, Jaipur.
Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. JPRR05102G
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri R.S. Singhvi (CA) &
Shri P.D. Baid (CA)
jktLo dh vksj ls@ Revenue by : Shri O.P. Bhateja (Addl.CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 27/11/2015.
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 27/01/2016.
vkns'k@ ORDER
PER T.R. MEENA, A.M.
This is an appeal filed by the assessee against the order dated 22/10/2014 of the learned C.I.T.(A)-III, Jaipur for A.Y. 2012-13. The effective grounds of appeal are as under:-
1(i) That in the facts and circumstances of the case, the order passed by the Learned Income Tax Officer, TDS-2, Jaipur 2 ITA No. 896/JP/2014 Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS (hereinafter referred as 'Assessing officer') and Commissioner of Income Tax (Appeals)-III, Jaipur is bad in law as well as in facts, for the grounds contained hereinafter and needs to be quashed.
ii) That the learned Assessing officer has not followed Principal of Natural Justice and has passed a mechanical order and CIT (Appeals)-III in confirming the same, without considering the submissions/ evidences produced by the appellant.
iii) That learned Assessing Officer and Commissioner of Income Tax (Appeals)-III, Jaipur has not considered the findings and detailed Order given by Learned CIT (Appeal, Alwar) in Appeal No. 1083/JPR/11-12, 1081/JPR/11-12 and 1082/JPR/11-12 relating to Assessment year 2009- 10, 2010-11 and 2011-12 respectively, passed on considering the transactions between appellant and ITGK as not covered by the provisions of Section 194(J) of Income-tax Act, 1961 and favorably deciding all the issues.
2. That the learned Assessing officer and Commissioner of Income Tax (Appeals)-III, Jaipur has erred in law as well in the facts of the case that payments by appellant are in the nature of payment for technical services and appellant is under obligation to deduct TDS under section 194J of the Income tax Act, 1961, whereas it has been submitted that it is only arrangement for sharing of fees/Revenue received from the learners and therefore, the findings of learned assessing officer need to be quashed and liability to be deleted.
3(i) That the learned assessing officer and Commissioner of Income Tax (Appeals)-III, Jaipur has further erred in law as well as in facts in holding that the appellant is liable to 3 ITA No. 896/JP/2014 Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS deduct tax U/ s 194J of the Income- tax Act, 1961 from the remittances made by the appellant to ITGK for its share in RS-CIT Course fees and also for other courses, the appellant is not liable for deduction of tax at source, remittance being in the nature of sharing of fees hence the order may be quashed and liability be deleted.
(ii) That detailed written/oral submission made during the course of hearing including citation of various rulings were not considered properly and hence the Order passed by Assessing Office needs to be quashed and relief granted.
4. That the Learned Assessing Officer and Commissioner of Income Tax (Appeals)-III, Jaipur has erred and has wrongly held that appellant has not deducted at sources on amount paid aggregating to Rs.1,60,17,471/- being 'Centers share' in course fees. In fact this remittance was also for fee for 'Other Courses' remitted to ITGK only and is of the same nature as other remittance and hence finding needs to be deleted.
5(i) Without prejudice to above, that the learned Assessing officer and Commissioner of Income Tax (Appeals)-III, Jaipur has not considered the various Judgments of the Hon'ble High Courts and also the ratio of Hon'ble Supreme court in the case of Hindustan Coco-Cola Beverages Private Limited v CIT reported at (2007) 163 Taxman- 355 cited by the appellant and accordingly the appellant is not under any obligation to deduct TDS and hence order under appeal needs to quashed and necessary relief granted. However, the Assessing Officer has wrongly mentioned that full particulars/ details in support of assessee's claim in this connection were not provided by appellant, whereas no such details/papers in this connection were called for.
4 ITA No. 896/JP/2014Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS
(ii) The CIT (Appeals)-III has also erred in giving certain findings, which are not relevant to appellant's case and without giving an opportunity to appellant to distinguish its stand.
(iii) Further the Learned CIT (Appeals)-III has erred in not giving any finding in respect of ground (Ground No. 5) as contained in grounds of appeal filed before CIT (Appeals)- III and which has now been referred in Ground 5 (i) above and hence the order also needs to be deleted on this ground.
6. That the appellant reserves the right to add, alter, or amend all or any part of the grounds of appeal before or at the time of hearing of the appeal."
2. All the grounds are revolving around the payments made by the appellant to ITGK for its share in RS-CIT course fees and liable to deduct TDS U/s 194J of the Income Tax Act, 1961 (in short the Act).
The ITO (TDS)-2, Jaipur has observed that the assessee had made following payments under various heads as under:-
Head Particulars F.Y. 2011-12
Share in RS-CIT ITGK's share in RS-CIT 15,30,61,420/-
Course Fees Course fees
Vardhaman Mahaveer 1,12,14,000/-
Open University share in
RS-CIT Exam
Share in course fees Center's Share in course 1,60,17,471/-
fee
As per his observation, he has not deducted TDS on total payment of Rs. 18,02,92,891/- U/s 194J of the Act @ 10%. He gave reasonable 5 ITA No. 896/JP/2014 Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS opportunity of being heard, which was considered by him. The reply of the assessee has been reproduced on page 2 to 6 of the assessment order. The Assessing Officer has held that the assessee has run IT literacy courses for IT education and the IT enabled education with the basic teaching, learning process and its management namely RS-CIT.
The assessee was carrying out these activities through various supporting agencies/centres like DLC, PSA & ITGKs. He further considered the word 'technical' with reference to fees for technical services and held that payment made to ITGK by the assessee falls under the category of technical service and is liable to be deducted TDS U/s 194J of the Act. The payment made to ITGK was claimed as sharing of income for course fees not expenditure. The assessee company for the purpose of its convenience, had categorized the said fees shared as marketing claim and infrastructure claim. After considering the CBDT's circular No. 275/201/95-IT(B) dated 29/01/1997 and the decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages (P) Ltd. Vs. CIT 293 ITR 226 (SC) has held liable to be deducted TDS U/s 194J. Accordingly, he created demand U/s 201(1)/201(1A) as under:-
6 ITA No. 896/JP/2014Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS Head Particulars Payment Rate of Short Interest Total amount TDS U/s deduction U/s demand 194J U/s 201(1) 201(1A) @% Share ITGK's 153061420 10 15306142 2544753 17850895 in RS- share in CIT RS-CIT Course Course Fees Fees Share Centres 16017471 10 1601747 216035 1817782 in Share course fees Total 1,69,07,889 27,60,788 1,96,68,677
3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the order of the ld Assessing Officer by observing as under:-
4.3 I have carefully considered the findings of the AO as also the submission of the appellant. The undisputed facts are that M/s RKCL has been incorporated with the main objective to develop a new educational framework to implement, supervise and regulate the IT Education in the state of Rajasthan by promoting IT enabled education programmes mainly for the employees of Govt. of Rajasthan as also for people of Rajasthan. It is also fact that for such mandate M/s RKCL has involved MKCL(Maharashtra knowledge Corporation Ltd.), VMOU, DLC's, PSA's and ITGK's. M/s MKCL was the technology provider, PSA's were appointed to implement the RKCL 7 ITA No. 896/JP/2014 Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS programmes and to appoint ITGK's. DLC's were appointed for inter related other procedural activities and VMOU was appointed for conducting of exams. It is also fact that M/s RKCL for completion of such task has assigned various specific works to different agencies as mentioned above and for such assigned works, necessary agreements have also be assigned. For such assigned work M/s RKCL has made payment to these agencies. It is also fact that while making payment to PSA's, DLC's and MKCL's TDS has been deducted. However, in respect of payment made to ITGK's and VMOU's no TDS has been deducted. As regards VMOU as per A.O. the income of VMOU being a university was exempt u/s 10(23)(C)(ii)(ab) and therefore TDS was not to be deducted. The A.O.'s case is that all these agencies were entrusted with the work of imparting of computer training etc. and for such work all these agencies were paid for their services and therefore TDS was to be deducted. The A.O. also noted that as per definition of technical services in Explanation 2 to sec. 9 l(vii), any services in consideration of any managerial, technical or consultancy services was covered in the definition of technical services and that the services rendered by ITGK's were covered under this definition. Accordingly as per A.O. the payment made/indirectly received from M/s RKCL by the ITGK's was liable for TDS and accordingly the A.O. determined the TDS liability u/s 201(1 )/201(1A) of IT Act. On the other hand 8 ITA No. 896/JP/2014 Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS the appellant case is that for applicability of application 194J one person should be paying a particular amount to another person for rendering of any services and that in the present case M/s RKCL and ITGK have not made or received any payment and in fact they have shared the course fees as per the agreed terms and conditions. As per the appellant, M/s ITGK, RKCL and VMOU were three independent collaborator partners in this project and each of these three collaborators were performing their own responsibilities for completing education to the learners and that they were sharing the fees as per their agreed terms and conditions. It is also stated that both M/s ITGK and VMOU have not issued any bills or invoices on the RKCL and that accordingly it cannot said that any payment was made by M/s RKCL to ITGK's for rendering of any technical services. The appellant has also placed reliance on various case laws including decision of CIT(A), Alwar in appellant own case. However, on careful consideration of all these relevant facts, I find merit in the findings of the A.O. that such payments were on account of professional/technical services and TDS was to be deducted u/s 194J of IT Act. It may be noted that the whole of the initiative for imparting of such IT enabled education to the employees of Govt. of Rajasthan and other people have been taken by M/s RKCL i.e. appellant at the instance of Govt. of Rajasthan and undoubtedly M/s RKCL was the dominant player in such 9 ITA No. 896/JP/2014 Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS venture. It may also be noted that for M/s RKCL it was never a business model and in fact the objective was to promote the IT enabled educational pragramme and accordingly M/s RKCL assigned different work to different agencies i.e DLC, PSA, ITGK, VMOU etc. M/s RKCL developed different support system and involved various agencies who were assigned specific work and these agencies including M/s ITGK were to deliver such work/services as per the requirement of M/s RKCL for which payment was made to these agencies. All these agencies have carried out their work which were in the nature of managerial and technical services as per the directions of M/s RKCL, therefore the relation between M/s RKCL and other different agencies including ITGK's were never of principal to principal basis and in fact the relation and transactions between these agencies were of principal to agent basis and therefore on payments made to these agencies, TDS was to be deducted. It is also fact that on the similar work assigned to PSA's, DLC's and MKCL, the appellant has deducted TDS on the payments. As regards the contention of the appellant that no payment was made by M/s RKCL to M/s ITGK, it may be noted that such contention cannot said to be correct in as much as it was only for the procedural purpose and administrative convenience that the aggregate amount from the learners was first collected by M/s ITGK and then the whole amount 10 ITA No. 896/JP/2014 Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS was remitted to M/s RKCL. Subsequently M/s RKCL kept Rs. 850/- and remaining amount of Rs. 1450/- per learner was remitted/paid to the ITGK's. The payment of Rs. 1450/- per learner to the ITGK's was for rendering of technical services as per provisions of sec. 194J of IT Act and on aggregate of such payment TDS was to be deducted. The appellant has mainly relied on the decision of CIT Vs. NUT Ltd. [2009], 318 ITR 89. The another decision in the case of CIT Vs. Carrier Launcher India Ltd. was decided relying on the decision in the case of CIT Vs. NIIT Ltd. Even the worthy CIT(A), Alwar has decided the issue relying on the decision in the case of CIT Vs. NIIT Ltd. (supra). However, as mentioned by the A.O. the facts in the case of CIT Vs. NIIT Ltd. were different with the facts of the appellant case and the basic and vital difference in the facts of the appellant case was that in the appellant case the appellant is the dominant player and other agencies have rendered the services as per the requirement of assessee company. Moreover, in the case of NIIT Ltd., the NIIT was an existing business brand for computer education and this was always a business model and anybody could have taken this business model as per normal terms and conditions. However, in the case of the appellant there was never any such business model or the existing brand and the appellant has taken the services of other agencies for fulfilling the objective of computer education in the state of Rajasthan 11 ITA No. 896/JP/2014 Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS as per the mandate given by Govt. of Rajasthan. It may be mentioned that in the case of NIIT their computer programmes under the brand name NIIT was just like a saleable product and any interested party could purchase the same with certain conditions. But in the appellant case no such business brand or saleable product was in existence. In fact the objective and mandate in the case of the appellant was to enhance and improve the IT enabled education in the state of Rajasthan and for achievement of such object the appellant has taken professional and technical services of other agencies including ITGK's for which payments were made. Therefore, the facts of the case of NIIT altogether different with the facts of the appellant case. In this background, it cannot said that the three collaborators namely M/s RKCL, ITGK and VMOU have independently carried out their business responsibilities and shared the fees as per the agreed terms. The facts remains that M/s ITGK's have performed the assigned responsibilities as per the directions and overall control of M/s RKCL which were in the nature of technical services and on the payment made on account of such services TDS was to be deducted u/s 194J of IT Act. In view of these facts the A.O. has rightly raised demand u/s 201(1)/201(1A) of IT Act amounting to Rs. 19668677/-. The grounds of appeal are accordingly dismissed."
12 ITA No. 896/JP/2014Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS
4. Now the assessee is appeal before us. The ld AR of the assessee has reiterated the arguments made before the ld CIT(A) and also argued that the appellant has not liable to deduct any tax at source on the payment made to ITGK/VMOU. This payment is not covered U/s 194J of the Act but it an arrangement of sharing of the course fees collected from learners. These payments are also not covered fees for technical services as enumerated in Section 194J. He further explained the main object of the company, course conducted with the help of various agencies and collaborations. The main agencies are Information Technology Gyan Kendra (ITGK), Program Supporting Agency (PSA), Maharastra Knowledge Corporation Ltd. (MKCL) and District Lead Centre (DLC). The PSA has a relevant expertise/experience carrying out certain activities on behalf of the assessee. The assessee shall pay Rs. 100 per confirmed learner. Various technologies and services are provided by MKCL as per agreement. These activities were carried out by DLC. The certification has been given by the Vardhaman, Mahaveer Open University, Kota. The learner is required to deposit entire course fees @ Rs. 2300 for RS-CIT with the concerned ITGK, who received the sum on behalf of the stakeholders and also issued a receipt for the same. The 13 ITA No. 896/JP/2014 Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS entire receipt from the learner by ITGK was deposited in the account of the assessee for the purpose of centralize collection and onward distribution of revenue shared out of the course fees as per collaboration between them. Rs. 2300/- is shared between various agencies as under:-
S.No. Stakeholder Revenue share
(i) ITGK Rs. 1450/-
(ii) RKCL Rs. 750/-
(iii) VMOU Rs. 100/-
Total Rs. 2300/-
He has further drawn our attention on assessee's case decided by this Bench in ITA No. 38 to 40/JP/2013 for A.Y. 2009-10 to 2011-12 vide order dated 13/2/2015 wherein identical issue has been considered by the Hon'ble Bench and decided the appeal in favour of the assessee.
Therefore, he prayed to reverse the order of the ld CIT(A).
5. At the outset, the ld DR has vehemently supported the order of the lower authorities and prayed to uphold the order of the ld CIT(A).
6. We have heard the rival contentions of both the parties and perused the material available on the record. The identical issue has been decided by the Coordinate Bench in assessee's own case for A.Y. 14 ITA No. 896/JP/2014 Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS 2009-10 to 2011-12 vide order dated 13/2/2015. The operative portion of the Coordinate Bench's order is reproduced as under:-
"6. We have heard the rival contentions of both the parties and perused the material available on the record. The contents of the agreements referred to by the assessee, placed on the record, have not been disputed by the department. Thus, the uncontroverted fact which emerges from the record is to the effect that the payments in question were not made by assessee qua any service of professional or technical nature rendered to the payee. All the above entities by a valid collaboration, formed a business module on the revenue sharing basis for imparting computer education to Rajasthan Govt. employees and others. The services if any were provided to the students and the payee in question. The nature of internal distribution of revenue based on the mutual agreements can't be held to be rendering of professional or technical services by any stretch of imagination. We find merit in the erudite contentions of ld. counsel for the assessee. Our view is reinforced by Hon'ble Delhi High court judgment in the case of Career Launchers, the act of sharing of revenue in a multi entity business model cannot be held as contract payments and taking the logic further they cannot be held as payments on account of rendering of any professional or technical services as contemplated by Section 194J of the 15 ITA No. 896/JP/2014 Rajasthan Knowledge Corp. Ltd. Vs. ITO TDS Act. In view therefore, we find no infirmity in the impugned orders of the learned CIT(A), which are upheld.
By respectfully following the order of the Coordinate Bench in assessee's own case, we reverse the order of the ld CIT(A) and allow the assessee's appeal.
7. In the result, the assessee's appeal is allowed.
Order pronounced in the open court on 27/01/2016.
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(Laliet Kumar) (T.R. Meena)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 27th January, 2016
Ranjan*
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Rajasthan Knowledge Corporation Limited, Jaipur.
2. izR;FkhZ@ The Respondent- The Income Tax Officer, TDS-2, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No.896/JP/2014) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar