The Mumbai bench of Income Tax Appellate Tribunal (ITAT) held that Security charges are not subject to Tax Deduction at Source under section 194C of Income Tax Act 1961.
Assessee “M/s ATC Telecom Infra P Ltd is engaged in the business of providing passive infrastructure to telecom companies Earlier it was known as “Wireless TT Info Services Ltd (WTTIL). The company WTTIL was wholly owned subsidiary company of M/s Tata Teleservices Ltd (TTSL).After the assessment procedure Assessing officer without considering the contentions of the assessee added the security expenses as per section 194C of Income Tax Act 1961 carried by the assessee company along with additions made under section 40(a)(ia) Income Tax Act 1961.Aggrieved assesee filed appeal before Commissioner of Income Tax Appeal (Appeal) CIT (A).But CIT (A) upheld the decision of the assessing officer. Against the order the assessee filed an appeal before the ITAT.
Section 194C of Income Tax Act 1961 provides that any person who pays any amount to any resident or non resident contractor on the basis of a contract which was to pay for any work carried by them shall be deducted an amount.
section 40(a)(ia) Income Tax Act 1961 provides that if a person did not deduct tax at source or non payment of tax deducted at source from certain amount paid to residents ,the entire amount of expenditure which seeking for tax deduction was disallowed under section 40(a)(ia) Income Tax Act 1961.
J. Pardiwalla counsel for the assessee submitted that the provisions of sec. 194C shall be attracted only if it involves “carrying on of any work”. Even though supply of laborers is included u/s 194C, yet the said supply should be for carrying on any work. And the security staff did not carry on “any work” mentioned in sec. 194C of the Income Tax Act 1961 and hence the said TDS provisions will not apply to the assessee.
Sandeep Raj counsel for the revenue supported the order passed by the assessing officer on this issue.
After considering the contentions of the both parties the division bench of ITAT comprising Kavitha Rajagopal (Judicial Member) and B.R. Baskaran, (Accountant Member) allowed the appeal filed by the assessee and observed that the security charges involve supply of manpower only and the same did not involve “carrying on of any work” within the meaning of the definition of the term “work” given in the Explanation III. Hence the provisions of sec.194C are not attracted for expenses claimed as “security charges”. Supply of manpower may not fall under the provisions of sec. 194J relates to “professional fees”.
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