Revenue appeals against an order in its favour - This sort of mindless action by Revenue does attract levy of cost - ITAT
NORMALLY you appeal to the Tribunal against an order of the Commissioner if you are aggrieved by it, but here is a case where the Revenue has appealed to the ITAT against an order in its favour!
The AO noticed that the assessee was deducting TDS on software development, u/s. 194C but not u/s. 194J as required. A.O. noticed that the software development charges in India in fact were the payments towards technical services/fees and liable for TDS u/s. 194J. After examining the agreement copies with the companies with which assessee entered into agreement for the A.Y. 2004-05 for software development services, A.O. concluded that expenditure was fees for professional services and technical services and covered by section 194J of the Act and accordingly calculated the tax and interest.
Even though the CIT(A) confirmed the action of the A.O. to the extent of application of provisions of section 194J, surprisingly Revenue has raised the grounds as under in its appeals in to the ITAT:
1. The order of the CIT(A)-II is erroneous and prejudicial to the interest of the revenue.
2. The CIT(A)-II, Hyderabad has erred in not deciding the core issue of the provisions of the Act with regard to applicability of section 194C or 194J which covers such payments impugned in appeal.
The ITAT noted,
As can be seen from the order of the Ld. CIT(A), Ld. CIT(A) upheld the contention of the A.O. that the amounts are covered by the provisions of section 194J. In fact, assessee also preferred the appeal on the same issue. We are surprised that Revenue is contesting on an issue which was decided in its favour, which indicates the non-application of mind not only by the A.O. but also by the Ld. CIT-(TDS), who approved the filing of appeal. This sort of mindless action by the Revenue does attract levy of cost. However, we refrain from doing so. We advise the Revenue authorities to apply their mind before preferring appeals to ITAT. Revenue appeals, therefore, are infructuous and accordingly dismissed.
The Revenue Departments are not influenced by such strictures by Courts - only stiff, quick and exemplary punishment can set right things.