The Kolkata bench of ITAT recently held that TDS provisions under the Income Tax Act, 1961 are applicable to payments made under an oral agreement.
The bench comprising single judge P.M. Jagtap, AM held so while dismissing the ground of appeal raised by the assessee against the order of CIT (A).
During the assessment proceedings assessee submitted that a total sum of Rs. 2,31,120/- was paid by the assessee to 3 persons on monthly basis as retainership and the said persons were computer experts and accountants and the amounts in question was paid to them for performing accountancy job and computer consultancy.
The assessee also added that said three persons were not professionals and therefore, tax at source was not required to be deducted from the payments made to them as per section 194J and there was no agreement between them.
AO drew a conclusion that the amount in question having been paid by the assessee at the rate fixed on a monthly basis, there was an oral contract between the assessee and the said persons and the assessee was required to deduct tax at source as per the provisions of section 194C.
On appeal, CIT (A) confirmed the said disallowance made by the A.O. for the same reasons as given by the A.O.
After hearing both the parties, the bench observed that “As rightly held by the authorities below, when the amount in question was paid by the assessee to the concerned 3 persons at the fixed rate on monthly basis for the specified services rendered by them, there was bound to be an oral contract on the basis which the services were agreed to be rendered on retainership basis. The assessee, therefore, was liable to deduct tax at source in terms of section 194C and having failed to do so, the amount in question was liable to be disallowed under section 40(a)(ia).”
The tribunal bench, therefore, restored the impugned order of the CIT (A) confirming the disallowance made by the A.O. under section 40(a)(ia) and upholds the same.
Subscribe Taxscan Premium to view the Judgment
