Income Tax Appellate Tribunal (ITAT), Mumbai held that payments made to Social Kinnect would fall within provisions of Section 194C.
The assessee, M/s. Cowtown Software Design Pvt Ltd, is in the business of providing shared services to group companies which includes man power services and infrastructure services. Survey u/s.133A(2A) of the Act was conducted on 04/10/2018. During the course of survey, it was found that assessee had made certain payments to certain parties which were not in compliance with provisions of Chapter XVIIB of the Act.
The survey revealed that certain payments made by the assessee were not subjected to deduction of tax at source or tax was deducted at a lesser rate, as the case may be. Accordingly, an order u/s.201/201(1A) was sought to be passed in the hands of the assessee treating the assessee as “assessee in default” u/s.201 of the Act by raising TDS demand and charging interest thereon u/s.201(1A) of the Act on the assessee.
The only issue to be decided in this appeal was, to whether the CIT(A) was justified in upholding the action of the AO by considering the total transactions entered into by the assessee with Social Kinnect by construing it to be in the nature of professional services u/s.194J of the Act.
The Bench consisting of Aby T Varkey, Judicial Member and M Balaganesh, Accountant Member observed that “Social Kinnect would engage various professional artists for preparation and execution of the advertisement content and Social Kinnect would provide ultimate advertisement content on behalf of the assessee in digital platform.
Once the advertisement content is provided by Social Kinnect in a digital platform, the assessee is bound to make payments to Social Kinnect for that advertisement content. This would constitute the payment made for carrying out any “work” falling within the ambit of provisions of Section 194C of the Act only. “
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
