Allahabad High Court Judgement

Allahabad High Court Judgement

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JUDGEMENT HEADLINE : There Has Been No Independent Evaluation Of Whether The Services Which Are Rendered By The Federation Are Technical Services Or Professional ......
JUDGEMENT TITLE : Commissioner Of Incom Tax, Bareilly Vs. Kisan Sahkari Chini Mill Ltd. On 01/05/2014 By Allahabad High Court
CASE NO : INCOME TAX APPEAL NO. 93 OF 2014
CORAM : Hon'ble Dhananjaya Yeshwant Chandrachud,Chief Justice And Hon'ble Dilip Gupta,J.

HIGH COURT OF JUDICATURE AT ALLAHABAD

Chief Justice's Court A.F.R.

Case :- INCOME TAX APPEAL No. - 93 Of 2014

Appellant :- Commissioner Of Incom Tax, Bareilly
Respondent :- Kisan Sahkari Chini Mill Ltd.
Counsel For Appellant :- Dhananjay Awasthi

Hon'ble Dr. Dhananjaya Yeshwant Chandrachud,Chief Justice
Hon'ble Dilip Gupta,J.

This Appeal By The Revenue Under Section 260-A Of The Income Tax Act, 1961 Arises From An Order Of The Income Tax Appellate Tribunal At Its Lucknow Bench Dated 29 November 2013. The Assessment Year To Which The Appeal Relates Is A.Y. 2006-07.
The Revenue Has Framed The Following Questions Of Law:
"(1) Whether The ITAT Erred In Law In Giving A Very Restrictive Meaning To The Terms "fee For Professional" And "fee For Technical Services" When The Services Provided By The Federation To The Assessee Are Covered Under These Terms And Are Also Covered U/.194-J.
(2)Whether The ITAT Erred In Law In Concluding That Services Provided By The Federation To The Assessee Are Not Professional Or Technical Services As Provided U / S. 194-J.
(3)Whether The ITAT Erred In Law In Concluding That The Services Provided By The Federation To The Assessee Are Not Covered U/s. 194-J Without Interpreting The Terms Professional And Technical Services As Provided U/s. 194-J.
(4)Whether The ITAT Was Justified In Dismissing The Revenue's Appeal On Account Of Disallowance Rightly Made By The Assessing Officer Towards The Payment Of Subscription To Federation U/s. 40(a)(ia) Of The I.T. Act At Rs. 48,80,057."
At The Hearing, The Appeal Has Been Pressed Only Insofar As The First Three Questions Are Concerned. The Assessing Officer Had Made A Disallowance Under Section 40(a)(ia) On The Ground That The Assessee Had Failed To Deduct Tax At Source Of Rs.48,80,057/- Which Was The Subscription To The U.P. Cooperative Cane Federation. The Issue Was Whether, Within The Meaning Of Section 194-J Of The Income Tax Act, 1961, Any Fees For Professional Services Or For Technical Services Had Been Paid. The Assessing Officer Referred To The Objects Of The U.P. Cooperative Sugar Federation As Being To Assist, Coordinate, Supervise And Facilitate The Working Of Cooperative Sugar Factories And To Arrange For The Manufacture And Supply Of Sugar Machinery To Cooperative Mills And Held That The Federation Provides Financial Advice And Other Services To The Factories From Time To Time. Each Factory Pays Subscription To The Federation To Meet Expenses On The Basis Of Production Of Sugar. The Assessing Officer Was Of The View That The Services Which Were Provided Were Technical Services And, Accordingly, Made A Disallowance On The Ground That The Tax Was Not Deducted At Source. The CIT(A), In Appeal, Merely Recorded The Submission Of The Assessee. After Recording The Submissions, The Only Reasoning In The Order Of The CIT(A) Reads As Follows:
"Looking In To The Circumstances Of The Case, The Disallowance On Account Of Subscription To Federation Which Is Being Paid To The Federation Not In The Course Of Carrying On Any Activity By The Federation Office As Per Explanation As Given In Section 194J Is Deleted."

Ex Facie, It Is Clear That There Is No Independent Application Of Mind By The CIT(A).
In The Appeal By The Revenue, The Tribunal Has Observed That The Assessee Had Furnished Details Of The Activities Provided By The Federation Which Has Been Recorded By The CIT(A). Having So Held, The Tribunal Merely Concluded That In The Given Facts And Circumstances Of The Case, The CIT(A) Had Rightly Deleted The Addition On The Ground That The Services Rendered By The Federation Did Not Fall Within Section 194J.
The Expression 'professional Services' Is Defined By The Explanation (a) To Section 194J As Follows:
"(a) "professional Services" Means Services Rendered By A Person In The Course Of Carrying On Legal, Medical, Engineering Or Architectural Profession Or The Profession Of Accountancy Or Technical Consultancy Or Interior Decoration Or Advertising Or Such Other Profession As Is Notified By The Board For The Purposes Of Section 44AA Or Of This Section."

Similarly, Explanation (b) Defines The Expression 'fees For Technical Services' To Have The Same Meaning As In Explanation 2 To Section 9 (1) (vii). Explanation 2 To Section 9 (1) (vii) Reads As Follows:
"Explanation 2.--For The Purposes Of This Clause, "fees For Technical Services" Means Any Consideration (including Any Lump Sum Consideration) For The Rendering Of Any Managerial, Technical Or Consultancy Services (including The Provision Of Services Of Technical Or Other Personnel) But Does Not Include Consideration For Any Construction, Assembly, Mining Or Like Project Undertaken By The Recipient Or Consideration Which Would Be Income Of The Recipient Chargeable Under The Head "Salaries".

Hence, The Expression 'fees For Technical Services' Is Defined To Mean Any Consideration For The Rendering Of Any Managerial, Technical Or Consultancy Services Subject To The Exclusion Noted Above.
Both The CIT(A) As Well As The Tribunal Have Completely Failed To Even Refer To The Essential Ingredients Of The Definitions Of The Expressions 'fees For Professional Services, And 'fees For Technical Services'. There Has Been No Independent Evaluation Of Whether The Services Which Are Rendered By The Federation Are Technical Services Or Professional Services. As We Have Noted, The CIT(A) Merely Recorded Submissions And Arrived At A Conclusion Without Any Reason Whatsoever. The Tribunal Has Chosen To Affirm That Conclusion Without Any Independent Reasons Of Its Own.
In The Circumstances, We Are Of The View That The Appropriate Course Of Action Would Be To Restore The Proceedings Back To The CIT(A) For A Fresh Evaluation. We Clarify That In The View Which We Have Taken, It Is Not Necessary For The Court To Express Any Conclusion On Whether The Provisions Of Section 194J Were Attracted. This Being A Mixed Question Of Fact And Law, We Consider It Appropriate To Restore The Proceedings Back To The CIT(A).
In The Circumstances, It Is Not Necessary To Answer The Questions Of Law. The Proceedings Shall Stand Restored To The File Of CIT(A) For Consideration Afresh.
The Appeal Is, Accordingly, Disposed Of. There Shall Be No Order As To Costs

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