IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH

ITA No: 2992/AHD/2013
Assessment Year: 2009-10
Smt. Taraben Jayantibhai (Appellant) vs Income Tax Officer (Respondent)
Date of Order: 21-10-2015

PER ANIL CHATURVEDI, ACCOUNTANT MEMBER

1. This appeal filed by the Assessee is against the order of CIT(A)-XXI, Ahmedabad dated 29.11.2013 for A.Y. 2009-10.

2. The relevant facts as culled out from the material on record are as under.

3. Assessee is an individual stated to be having income from house property share trading business and other sources. Assessee filed her return of income for A.Y. 2009-10 on 20.09.2009 showing total loss of Rs. 1,57,077/-. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 24.10.2011 and the total income was determined at Rs. 3,28,409/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who vide order dated 29.11.2013 granted partial relief to the Assessee. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us and has raised the following ground:-

1. Ld. CIT (A) erred in law and on facts in confirming addition made by AO of Rs. 3,51,935/- invoking provisions of section 40(a)(ia) on the ground of non – deduction of tax u/s 194J of the Act from management fees. Ld. CIT (A) ought to have deleted addition made by AO. It be so held now.
2. Without prejudice to the above, Id. CIT (A) ought to have deleted addition since proviso to sec. 40(a)(ia) was inserted by Finance Act 2012 with retrospective effect, the appellant is not deemed to be assessee in default in terms of the said proviso for the year under consideration. The order of Id. CIT (A) deserves to be set aside and addition be deleted. It be so held now.
3. Levy of interest u/s 234A, 234B/234C & 234D of the Act is unjustified.
4. Initiation of penalty proceedings u/s 271 (l)(c) is unjustified

4. Before us, at the outset ld. A.R. submitted that the solitary issue for consideration is disallowance u/s. 40(a)(ia).

5. During the course of assessment proceedings and on perusing the Profit and Loss account, A.O noticed that Assessee had debited management fee of Rs. 3,51,935/- on which no TDS was deducted. A.O was of the view that Assessee should have deducted tax u/s. 194J of the Act and since Assessee had not deducted TDS on the management fees, the expenditure cannot be allowed. He accordingly disallowed the expenditure u/s. 40(a)(ia) of the Act. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who upheld the order of A.O by holding as under:-

5.2 I have considered the assessment order and the submissions made by the appellant. The appellant has debited Rs.3,51,935/- as management fee in the profit and loss account The said amount is paid to HDFC Portfolio Management. The professional management is clearly a professional service and liable for TDS deduction u/s. 194J and the appellant has not deducted the TDS and therefore liable for addition u/s. 40(a)(ia). The appellant has relied upon the decision of Hon'ble Kolkata Tribunal in the case of Dy. CIT Vs. Noble Enclave & Towers Pvt Ltd, in ITA No. 1241//Kol/2008. The feet of the above case is different, as in this case, the assessee has paid brokerage to M/s. Kotak Securities on derivative transaction and it has been held by the Hon'ble Tribunal that there is no TDS liability u/s. 194H on the brokerage. The issue in the present ca.se is TDS on professional service u/s. 194J, Therefore, the disallowance made by the Assessing Officer is confirmed.

6. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us.

7. Before us, ld. A.R. reiterated the submissions made before A.O and ld. CIT(A) and further submitted that the impugned management fee was paid to HDFC Portfolio Management and the payment of management fees was not covered u/s. 194J and therefore A.O was not justified in disallowing the expenditure by invoking the provisions of Section 40(a)(ia) of the Act. It was further submitted that even as per the Explanation to Section 194J, “professional services” does not bring within its ambit the fees paid to portfolio Manager and therefore no disallowance u/s. 40(a)(ia) was called for. She also placed reliance on the decision of Hiren Valves Pvt. Ltd. ITA No. 411/A/2011 order dated 12.09.2014 and also placed on record the copy of the same. She therefore submitted that the disallowance be deleted. The ld. D.R. on the other hand supported the order of A.O and ld. CIT(A).

8. We have heard the rival submissions and perused the material on record. The issue in the present case, is about the disallowance of expenses u/s 40(a)(ia) on the “Portfolio Management Fees” paid by the Assessee. We find that the Co-ordinate Bench of Tribunal in the case of Hiren Valves Pvt. Ltd. (supra) on identical issue has held that only the services rendered by a person in the course of carrying out listed professions and other notified professions constitutes “fee for professional services” and only the payment in connection with those services attract the provision for Section 194J of the Act. It thereafter considering the notification issued by the Board

decided the issue in favour of the Assessee by holding as under:-

5. The issue which requires our adjudication is whether the market survey fee paid by the assessee is a professional service within the meaning of section 194J or not?
6. The provisions of section 194J read as follows:
"194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of
(a) fees for professional services, or
(b) fees for technical services, or
(c) royalty, or
(d) any sum referred to in clause (va) of section 28,
shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income tax on income comprised therein:

Explanation: - For the purposes of this section;

(a) 'professional services, '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."

7. The above definition assumes great significance for adjudicating the issue on hand.

Fee for professional services-FPS is defined in the Explanation to section 194J of the Act and it is exhaustive definition and of course, with the power to notify the professions. Therefore, the definition is exhaustive in form in view of the use of expression "means" and inclusive in substance as the Board has power to extend the list of professional services. As per the said Explanation qua fee for professional services, the services rendered by a person in the course of carrying on listed professions and other notified professions constitutes fee for professional services and thus the payments in connection with such services attracts the provisions of section 194J of the Act. The payer is legally bound to make TDS at the rate of 10 per cent of such payment.

8. Further, we have also examined the notification issued by the Board for the purpose of Explanation (a) to section 194J of the Act, vide Notification No. S.O. 2085(E), dated August 21, 2008 and find the Board notified the services rendered by following persons in relation to the sports activities as "professional services" for the purpose of the said section, namely, sports persons, umpires and referees, coaches and trainers, team physicians and physiotherapists, event managers, commentators, anchors and sports columnists.

9. The Hon'ble Karnakata High Court in the cases of Commissioner of Income Tax Vs. Vijaya Bank [2006] 285. ITR 97/ [2005] 149 Taxman 674 stated that (page 110) "when the definition of a word begins with 'means' it is indicative of the fact that the meaning of the word has been restricted; that is to say, it would not mean anything else but what has been indicated in the definition itself......"

10. We find that no material was brought before us to show that market survey has also been notified as professional service within the meaning of section 194J of the Act. In absence of any such material brought before us, in our considered view, market survey is not covered by the provisions of section 194J of the Act. Consequently, the orders of the lower authorities in disallowing the expense of Rs 1,80,000/- are not sustainable. We, therefore, delete the disallowance of Rs 1,80,000/- and allow the ground of appeal of the assessee.

9. Before us, Revenue has not pointed any distinguishing features in the present case and that of Hiren Valves (supra) nor has demonstrated as to why the aforesaid decision rendered by the Co-ordinate Bench could not be applied to the facts of the present case. We therefore, following the same reasoning as given by the Co-ordinate Bench, hold that no disallowance of expenses u/s. 40(a)(ia) in respect of payment of management fees was called for in the present case. We therefore direct its deletion. Thus the ground of Assessee is allowed.

10. In the result, the appeal of Assessee is allowed.

Order pronounced in Open Court on 21- 10 - 2015.

Sd/-                                                      Sd/-
(S.S. GODARA)                       (ANIL CHATURVEDI)
JUDICIAL MEMBER   ACCOUNTANT MEMBER