Commissioner Of Income Tax (Tds), Jaipur v. M/S. Gandhi Vidhya Mandir, Gvm Road, Sardarshahar, Churu

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 182 / 2017 Commissioner of Income Tax (TDS), Jaipur ----Appellant Versus M/s. Gandhi Vidhya Mandir, GVM Road, Sardarshahar, Churu ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.D. Mathur & Mr. Prateek Kedawat for Mr. R.B. Mathur For Respondent(s) : _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Order 08/08/2017 1.By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal of the department confirming the order ofCIT(A). 2.Counsel for the appellant has framed the following substantial questions of law:- “i) Whether in the facts and circumstances of thecase, the Tribunal was justified in deleting the demandu/s 201(1)/201(A) for non deduction of TDS u/s 194Jon payment made for technical services rendered bythe study center as per requirement of assessee. ii) Whether in the facts and circumstances of the case,the assessee is liable to deduct TDS u/s 194J of the ITAct for payment to the study centers. iii) Whether in the facts and circumstances of thecase, the payments made by the assessee, Gandhi Vidhya Mandir to various study centers for providingacademic facilities to its distance learning programswere liable for deduction of tax at source (TDS) u/s194J or 194C? 3.We have gone through the order of the Tribunal whereby theTribunal while appreciating the case has considered the factualmatrix between the three institutions which has entered intoagreement with the parties. 4.Taking into consideration the observations made by the Tribunal which reads as under:- ii) Whether in the facts and circumstances of the case,the assessee is liable to deduct TDS u/s 194J of the ITAct for payment to the study centers. iii) Whether in the facts and circumstances of thecase, the payments made by the assessee, Gandhi Vidhya Mandir to various study centers for providingacademic facilities to its distance learning programswere liable for deduction of tax at source (TDS) u/s194J or 194C? 3.We have gone through the order of the Tribunal whereby theTribunal while appreciating the case has considered the factualmatrix between the three institutions which has entered intoagreement with the parties. 4.Taking into consideration the observations made by the Tribunal which reads as under:- “6. We also refer to the decision of the Hon’bleRajasthan High Court in the case of CIT vs.Rajasthan Knowledge Corporation Ltd dated8.01.2016 reported in 385 ITR 427 affirming thedecision of the Coordinate Bench relied upon bythe assessee and followed by the ld CIT(A). In thatcase, the facts of the case were that therespondent was a private limited companypromoted by the Government of Rajasthan,Maharashtra Knowledge Corporation Limited(MKCL), Pune, Rajasthan University, Jaipur,Maharana Pratap University of Agriculture andTechnology, Udaipur, Vardhman Mahaveer OpenUniversity, Kota, Rajcomp, Jaipur and Centre for E-governance, Jaipur mainly imparting computereducation to Government employees and studentsand other persons in the State of Rajasthanthrough its business franchisee network, i.e.,District lead centres (DLCs), and I.T. Gyan Kendra(ITGK) through its programme support agency(PSA) and was running technical courses namely;RS-CIT, a basic computer literacy course alongwith other courses like RS-CFA, RS-CEL, RS-CRMand RS-CBFSI. These agencies/centres have beenentrusted with imparting computer training andthese agencies and centres are being paid for theirservices/jobs by the respondent-company.According to the Assessing Officer, the IT GyanKendras collects Rs.2,300/- per student for thecourse and sends the full amount to therespondent-RKCL which in turn after keepingRs.850/- with itself, sends back Rs.1,450/- to I.T.Gyan Kendras as their share. Out of this amount ofRs.850/-, the respondent M/s. RKCL pays Rs.100/-per student to programme support agencies andRajasthan High Court in the case of CIT vs.Rajasthan Knowledge Corporation Ltd dated8.01.2016 reported in 385 ITR 427 affirming thedecision of the Coordinate Bench relied upon bythe assessee and followed by the ld CIT(A). In thatcase, the facts of the case were that therespondent was a private limited companypromoted by the Government of Rajasthan,Maharashtra Knowledge Corporation Limited(MKCL), Pune, Rajasthan University, Jaipur,Maharana Pratap University of Agriculture andTechnology, Udaipur, Vardhman Mahaveer OpenUniversity, Kota, Rajcomp, Jaipur and Centre for E-governance, Jaipur mainly imparting computereducation to Government employees and studentsand other persons in the State of Rajasthanthrough its business franchisee network, i.e.,District lead centres (DLCs), and I.T. Gyan Kendra(ITGK) through its programme support agency(PSA) and was running technical courses namely;RS-CIT, a basic computer literacy course alongwith other courses like RS-CFA, RS-CEL, RS-CRMand RS-CBFSI. These agencies/centres have beenentrusted with imparting computer training andthese agencies and centres are being paid for theirservices/jobs by the respondent-company.According to the Assessing Officer, the IT GyanKendras collects Rs.2,300/- per student for thecourse and sends the full amount to therespondent-RKCL which in turn after keepingRs.850/- with itself, sends back Rs.1,450/- to I.T.Gyan Kendras as their share. Out of this amount ofRs.850/-, the respondent M/s. RKCL pays Rs.100/-per student to programme support agencies and Rs.75/- per student to District lead centres (DLCs)on which the company is deducting tax at source.On verification of the records, it came to the noticeof the Assessing Officer that the respondent-RKCLis not deducting tax at source on the amount ofRs.1,450/- paid to IT Gyan Kendras by it for eachstudent and noticing certain irregularities in non-deduction of tax at source, a show-cause noticewas issued and the respondent-RKCL was directedto clarify the situation as to why the tax was notbeing deducted at source. According to theAssessing Officer, the assessee was liable todeduct tax at source on the said amount. In thecontext of above facts, the Hon’ble Rajasthan HighCourt has given its findings and held as under:“(6) We have considered the arguments advancedby learned counsel for the Revenue, we havealready noticed that the respondent was promotedby the State of Rajasthan to impart computereducation program for the benefit of students andtheir own staff. We have also noticed earlier theamount to be shared by the three entities. It maybe appropriate to mention that in so far aspayment of Rs.850/- is concerned, tax was beingdeducted at source and the only dispute raised bythe Revenue was on account of Rs.1,450/- whichwas being paid to ITGKs by the respondent.Admittedly, the amount has been shared by therespondent amongst various agencies referred toherein above. Both the appellate authorities havetaken into consideration the agreement entered byand between the parties/stakeholders and thedominant intention of the parties was to conductthe business of providing specific e-learningcourses in the State of Rajasthan and share therevenue generated by way of fees received fromthe learners. Admittedly, in the revenue sharingmodel, the entry fees (course fee/exam fee),collected from the learners have been received bythe respondent, which in turn redistributed it to beshared with the ITGKs and VMOU as per theagreement. For instance, the aggregate revenue ofRs.2,300/- for RS-CIT course, which is received bythe ITGK from the learner, is transferred to therespondent which is shared among the threestakeholders. In our view, the transaction betweenthe ITGK and RKCL and VMOU are not of a serviceprovider or service receiver. The relation betweenthese stakeholders is one of collaborators as perthe agreement made and the revenue sharedcannot be said to be payments for technicalservices rendered by ITGKs and VMOU to RKCL asheld by the Assessing Officer.” 7. On review of thenorms/guidelines for setting up of the study centre as well as for conducting IASE universityprogrammes through such study centres, it is clearthat these study centres will be responsible forfollowing the course curriculum of IASE and shallprovide the students the required number of hoursof contact programme, conduct theory classes,practical’s and counselling sessions in eachsemester/year. The study centres shall alsoprovide all the facilities such as qualified faculties,library, laboratory and other infrastructure facilitiesin conformity with the courses being run by thecentre besides providing basic amenities to thestudents. The study centre will be responsible forall the financial liabilities such as salaries ofemployees, cost of additional infrastructure and itsmaintenance and repayment of loan etc. The IASEUniversity on its part shall provide necessaryadministrative, technical advice and guidance tothe study centres to impart quality education andmaintain and improve the infrastructure facilities.For these purposes, the university shall keep andmaintain track records through inspections andself assessments done by the study centres fromtime to time. The prospectus and study material inrespect of various programmes/courses shall beprovided by the University and the University shallbe conducting the examination and will be issuingthenecessarymark-sheetandfinaldegree/diploma certificates to the qualifyingstudents. The course fees, examination fees,enrolment and verification fees, etc for thevarious study programme shall be fixed by theUniversity and shall be binding on all the studycentres. The study centres will be responsible forcollecting all the fees from the students anddepositing the same in full with the University. Outof the fees so collected, a sum of 50% of thecourse fees will be paid by the University to thestudy centres subject to the satisfactory supportsservices provided by the centres to the students interms of library, labs, practical and theory classes,and training etc. On review of the abovearrangements entered into between the IASEUniversity and the various study centres, it is clearthat the dominant intention of such arrangementsis to provide quality education through distancelearning of various IASE structured studyprogrammes and to share the revenues generatedby way of course fees and other related feescollected from the students. The arrangementsdefines the mutual rights, duties and obligation ofthe IASE University and the respective studycentres and on a proper construction of sucharrangements, it is clear that true intention or the dominant intention is to provide quality educationto the students and the arrangements between theIASE university and the study centres are in thenature of business arrangements wherein sharingof profit in terms of course fees and other feescollected from the students has been emphasisedand mutually agreed upon. It is not anarrangement for rendering of any services by thestudy centre to the university rather the services,if at all, has been rendered is to the students whohave enrolled for the various courses.” 5.In that view of the matter, we see no reason to interferewith the matter. No substantial question of law arises. 6.Hence, the appeal stands dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. A.Sharma/38