MR.JUSTICE AKIL KURESHI J- Revenue has filed these tax appeals arising out of common judgement of the Income Tax Appellate Tribunal dated 09.11.2016 raising following question for our consideration:
“Whether the assessee is liable to deduct tax at source for license fees paid to IRCTC?”'
2. The issue in the nutshell pertains to the disallowance under section 201(1) read with section 194J of the Act on the payments made by the assessee by way of license fees to Indian Railway Catering and Tourism Corporation Limited ['IRCTC' for short]. The Revenue contends that the assessee had to deduct tax at source as provided under section 194J of the Act. Failure to do so would invite disallowance under section 201 for such expenditure. Similar issue came up for consideration before this Court in Tax Appeal No. 569 of 2017 in context of disallowance made by the Assessing Officer under section 40(a) (ia) of the Act. The Court rejected Revenue's appeal making following observations:
“4. Having heard learned advocates for the parties, what emerges from the record is that the assessee was granted a contract by IRCTC for providing catering service for which the assessee would make payment in the nature of licence fee. According to the Revenue, on such payments, the assessee had to deduct tax at source which admittedly the assessee had not done. Section 194J of the Act raises the requirement for deduction of tax on payment of professional or technical service fee and for obvious reasons therefore this provision would have no applicability in the present case. Section 194C of the Act pertains to requirement of deduction of tax at source on payments to contractors. Under sub-section (1) of Section 194C, any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract between the contractor and the specified person is required at the time of credit of such sum in the account of the contractor or at the time of payment to deduct tax at specified rate. The Tribunal was thus right in observing that section 194C of the Act would apply in case of a payment being made by a contractor to a contractee and not vice-versa. In the present case, the payment of licence fee was made by the contractee to the contractor and therefore section 194C of the Act would not apply.
5. We are broadly in agreement with the view of the Tribunal. In plain terms, section 194C of the Act does not cover the present situation where the assessee was making payment of licence fee to the IRCTC for catering service. In that view of the matter, we see no reason to interfere. However, this may not be seen as our confirmation of the Tribunal’s view that IRCTC was a government body and therefore also requirement of deducting tax at source did not arise or that proviso to sub-section (1) of Section 201 may have retrospective effect. We keep both these questions open.”
3. In the result, Tax appeals are dismissed.