No TDS on Service Tax on Professional or Technical fees

Here is an important judgement of the Honble Rajasthan High Court, in the case of Commissioner of Income Tax (TDS), Jaipur Vs. M/s. Rajasthan Urban Infrastructure [2013 (8) TMI 12-RAJASTHAN HIGH COURT] on following issue:

Issue:

Whether TDS is to be deducted on the amount of Service Tax charged on professional/ technical fees under Section 194J of the Income Tax Act, 1961?

Facts & Background:

M/s Rajasthan Urban Infrastructure Development Project (the Respondentor the RUIDPor the assessee) is a project of Government of Rajasthan for the Infrastructure Development and Civic Amenities in the specified areas/ cities in the state of Rajasthan. The RUIDP appoints the technical and project consultants and deducts income tax at source from the amount of fee payable as per the agreement and deposit the same as per the relevant provisions of the Income Tax Act, 1961 (the Income Tax Act) and subsequently files the return for the same within due time.

The Assessing Officer, vide its order dated 30.01.2009 raised a demand of Rs. 1,70,881/- along with interest thereon amounting to Rs. 44,776/-, on account of TDS on the amount paid as Service Tax pertaining to Financial Year 2005-06. The assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Jaipur which was allowed. Being aggrieved with the same, the Revenue filed an appeal before the Income Tax Appellate Tribunal, Jaipur but the same was dismissed. Hence the revenue preferred an appeal before the Honble Rajasthan High Court.

Held:

It was held by the Honble Rajasthan High Court that if Service tax is payable in addition to professional/ technical fees under the contract, the withholding tax will be restricted to the professional fees. Hence, examination of contract terms is imperative.

The Honble Rajasthan High Court held that the words any sum paid used in Section 194J of the Income Tax Act, relate to fees for professional services or fees for technical services. In terms of the agreement, the amount of Service Tax was to be paid separately and was not included in the fees. Hence the orders passed by Appellate Authority as well as the Appellate Tribunal are in accordance with the provisions of Section 194J of the Income Tax Act.

Points to note:

The Central Board of Direct Tax (the CBDT) vide its Circular No. 4/2008, dated 28.04.2008 held that TDS under Section 194I of the Income Tax Act would be required to be made on the amount of rent paid/payable without including the Service Tax. However, the CBDT vide its Circular No. 275/73/2007-IT(B), dated 30.06.2008 decided not to extend the scope of Circular No. 4/2008 to payment made under Section 194J of the Income Tax Act since it covers any sum paid.

Therefore, it remains to be seen that whether the Revenue files another appeal before the Honble Supreme Court or accepts the above judgment of the Honble Rajasthan High Court and gives relief to assessees.

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6 thoughts on “No TDS on Service Tax on Professional or Technical fees

  1. Jayaprakash Udupa

    What i mean to say that if we go as per the above judgement the service tax is not applicable on professiona charges paid. My question whether the same is still effective for the assessment year 2013-14 & 2014-15

    Reply
    1. Jayaprakash Udupa

      I think still the question is not reached to you.If we as per the judgement Passed by Hon’ble Rajasthan High Court, CIT (TDS), Jaipur vs M/s Rajasthan urban Infrastructure 2013(8)TMI12 Then service tax is not applicable for profession charges. Whether the same is effective for the assessment year 2013-14 & 14-15? Plese clarify immediately

      Reply
  2. K.D.Singh

    We had worked in M/s Odisha Power Generation Corporation Ltd. and we had worked for one of the machine working in Coal handling plant machine as per the condition of NIT. We had made invoice an amount of approx Rs. 57304.00 Now they have deducting ITDS-Connsultancy Fees U/S-194J@10%Rs.5730.00 against this invoice. Now please educated what is reason? Please clarify.
    Our mail id is cavihs@yahoo.com
    For Avihs Consultancy & Engineering Service
    K.D.Singh
    Manager Tech.
    Cont.No. 09413318924
    Udaipur – Rajasthan

    Reply
  3. K. Babu

    I have been providing keyboarding services to a company (for their digital publishing) for the last 14 years, this company has been deducting approx. 7% of the invoices every month, only 1% depositing to my account against my PAN, rest for 6% no information, their explanation is deduction against ESI.
    Now, from January onwards they have sent new invoice format saying deduction @12.36% of the invoice, in addition to above, deduction, i.e. about 20% of the invoice.
    Pleas advice, these are genuine, or just misleading people who are lack of knowledge on Indian tax system.
    Thanks
    K. Babu

    Reply

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