National Research & Technologies Consortium cannot Deduct TDS as was not a "specified person" as defined Under Section 194C of Income Tax Act: ITAT [Read Order]

The Chandigarh bench of the Income Tax Appellate Tribunal (ITAT) has held that National Research & Technologies Consortium (NRTC) was not required to deduct tax at source (TDS) under Section 194C of the Income Tax Act, 1961 as NRTC was not a "specified person" as defined under Section 194C of the Act.

The assessee, State Council for Science Technology & Environment  (SCSTE), a non-profit organization that is engaged in scientific research. It received grants from the Government of India for carrying out scientific research. The Taxing Authorities held that SCSTE was required to deduct tax at source (TDS) under Section 194C of the Income Tax Act. The assessee challenged this decision in the Income Tax Appellate Tribunal (ITAT).

The assessee argued that it was not required to deduct tax at source under Section 194C of the Income Tax Act, 1961, as it was a non-profit organization registered under the Societies Registration Act, 1860, and a "scientific research association" as defined under Section 3(35) of the Income Tax Act.

The assessee also argued that it was not a "contractor" and had filed certificates from its chartered accountant stating that the received amount had been subjected to income tax.

The revenue authorities argued that the assessee, as a "contractor" under Section 2(20) of the Income Tax Act, was required to deduct TDS under Section 194C. However, they argued that the assessee had not filed any certificates from its chartered accountant stating that the received amount was subjected to income tax.

The Tribunal observed that the Taxing Authorities erred in charging interest under Section 201(1A) of the Act, as there was no revenue loss to the exchequer, and that NRTC was not given an opportunity to be heard before being treated as a defaulter.

The Two member bench comprising Vikram Singh Yadav (Accountant Member) and Aakash Deep Jain (Vice President) allowed the appeals filed by NRTC and held that it was not required to deduct TDS under Section 194C of the Income Tax Act. 

The Tribunal also held that the Taxing Authorities had erred in charging interest under Section 201(1A) of the Act, as there was no revenue loss to the exchequer and remanded the matter back to the Assessing Officer (AO) for fresh adjudication in accordance with the law.

To Read the full text of the Order CLICK HERE

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