Applicability of Tax deduction at source Under section 194J on Payment towards data line charges

short overview : Even though amendment was given a retrospective effect but by that time assessee had already done the transactions without complying section 194J for payment made towards data line charges, therefore, assessee could not be held to have violated the provisions of section 194J, because the law cannot possibly compel a person to do something which is impossible to perform.

Assessee was engaged in the business of providing online news, information, communication, entertainment and shopping services. AO alleged that assessee had made certain payment on account of data line charges without deducting tax in terms of section 194J and disallowed the expense.

it is held that The dispute with regard to the nature of payment made for purchase of software was settled at rest only by Finance Act, 2012 through which Explanation 4 was added to section 9(1)(vii). Although the said amendment was given retrospective effect, however, the law cannot possibly compel a person to do something which is impossible to perform. The amendment was given a retrospective effect but by that time the assessee had already done the transactions without deducting tax at source. Therefore, assessee could not be held to have violated the provisions of section 194J.

Decision: In assessee’s favour.

Referred: ACIT, (TDS), Mumbai v. Rediff.Com India Ltd. [ITA Nos. 3116-17/Mum/2014 dt. 4-11-2015] : 2016 TaxPub(DT) 0901 (Mum-Trib), Rich Graviss Products (P.) Ltd. v. Addl. CIT (2014) 166 TTJ 329 (Mum) : 2014 TaxPub(DT) 4493 (Mum-Trib), New Bombay Park Hotel (P.) Ltd. v. ITO [ITA No. 7641/M/2011] : 2014 TaxPub(DT) 0792 (Mum-Trib) and Channel Guide India Ltd. v. Asstt. CIT (2013) 139 ITD 49 (Mum) : 2013 TaxPub(DT) 0056 (Mum-Trib).

 

IN THE ITAT, MUMBAI BENCH

MAHAVIR SINGH, J.M. AND MANOJ KUMAR AGGARWAL, A.M.

Dy. CIT v. Rediff.Com India Ltd.

ITA No. 5497/Mum/2017

13 March, 2019

Appellant by: D.G. Pansari-Learned Departmental Representative

Respondent by: Pankaj Jain-Learned Authorised Representative

Manoj Kumar Aggarwal, A.M.

1. Aforesaid appeal by revenue for assessment year [in short referred to as ‘AY’] 2012-13 contest the order of learned Commissioner(Appeals)-60, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-60/IT-31/ITO(TDS)RG.3(4)/2014-15 dt. 20-6-2017 qua deletion of certain addition under section 201(1)/201(1A). The assessee was engaged in the business of providing online news, information, communication, entertainment and shopping services.

2. The genesis of the same lies in order under section 201(1)/201(1A) dt. 28-2-2014 for assessment year 2012-13 passed by learned Assistant Commissioner of Income Tax (TDS)-3(2) wherein it transpired that the assessee failed to deduct tax at source [TDS] on payment of Rs. 13.81 Crores representing payment for Data Line Charges as per the provisions of section 194J.

Although the assessee defended its stand vide reply dt. 11-2-2014, inter-alia by contending that the provisions of section 194J were not applicable to such payments and secondly, the payee had offered the aforesaid receipts in their respective return of income, however, not convinced, learned assessing officer, treating the assessee as assessee-in-default, raised a TDS demand of Rs. 138.17 Lacs under section 201(1) and corresponding interest demand under section 201(1A) for Rs. 41.75 Lacs.

3. The first appellate authority deleted the same by relying upon the decision of this Tribunal rendered in assessee’s own case for assessment years 2010-11 & 2011-12. Although learned Departmental Representative supported the view of learned assessing officer, however, failed to demonstrate any distinguishing feature in the Impugned AY. No contrary judgment has been placed on record.

4. Upon perusal of Tribunal’s order ITA Nos. 3116-17/Mum/2014 dt. 4-11-2015] : 2016 TaxPub(DT) 0901 (Mum-Trib), we find that the matter has been concluded in assessee’s favor by making following observations: –

“6. We have carefully perused the orders of the authorities below. In our considered opinion, the dispute with regard to the nature of payment made for purchase of software was settled at rest only by Finance Act, 2012 through which Explanation 4 was added to section 9(1)(vii). Although the said amendment was given retrospective effect, legal maxim, lex non cogit ad impossibillia, meaning thereby that the law cannot possibly compel a person to do something which is impossible to perform.

6.1. As mentioned elsewhere, the amendment was given a retrospective effect but by that time the assessee has already done the transactions without deducting tax at source. On these facts, the assessee cannot be held to have violated the provisions of section 194J of the Act. Our view is fortified by the decisions of the Tribunal in the case of Channel Guide India Ltd. v. ACIT (2013) 139 ITD 49 (Mum) : 2013 TaxPub(DT) 0056 (Mum-Trib) and Rich Graviss Products (P) Ltd. (2014) 166 TTJ 329 (Mum) : 2014 TaxPub(DT) 4493 (Mum-Trib) and also by the decision in the case of New Bombay Park Hotel (P.) Ltd. v. ITO in [ITA No. 7641/M/2011] : 2014 TaxPub(DT) 0792 (Mum-Trib). Respectfully following the decisions of the Co-ordinate Bench (supra), we do not find any reason to interfere with the findings of the learned Commissioner(Appeals).”

The first appellate authority has provided relief to the assessee by placing reliance on this decision of the Tribunal. Therefore, no infirmity could be find in the same.

5. The appeal stands dismissed.

Order pronounced in the open court on 13-3-2019