1 itxal-687-11 sas IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (L0D) NO.687 OF 2011 The Commissioner of Income Tax-III, Pune ..Appellant. V/s. Shruti Medical Institute ..Respondent. Mr. N.N. Singh for the appellant. None for the respondent. CORAM : J.P. DEVADHAR AND K.K. TATED, JJ. DATED : 20TH SEPTEMBER, 2011 P.C. :- 1. Whether the ITAT was justified in setting aside the order passed by the CIT under Section 263 of the Income Tax Act, 1961, is the question raised in this appeal. 2. The assessment year involved herein is AY 2005-06. 3. Though the CIT had invoked jurisdiction under Section 263 of the Income Tax Act, 1961 (‘the Act’ for short) on three issues, counsel for the revenue states that he is now pressing the appeal only on one 2 itxal-687-11 issue relating to the amount of Rs.19,10,708/- paid by the assessee to KEM Hospital Trust towards the service charges. 4. In the present case, by an agreement dated 16/7/2000, the KEM Trust permitted the assessee to run an MRI Centre in its premises subject to certain terms and conditions. The amount of Rs.19,10,708/- was credited by the assessee to the account of KEM Trust without deducting tax at source. The CIT was of the opinion that the service charges paid by the assessee to the KEM Trust was towards professional services covered under Section 194J of the Act and, therefore, the assessee was obliged to deduct tax at source. Since the assessee had not deducted tax at source while making the payment of service charges, the provisions of Section 40(a)(ia) of the Act were attracted. 5. The ITAT while setting aside the order of CIT, in para 8 of its judgment has recorded a finding that the CIT has not brought out as to how the service charges in question fell within the definition of fees for ‘professional services’ or ‘fees for technical services’ covered under Section 194J of the Act. The Tribunal held that the argument of the assessee that the service charges paid were in the nature of rent, was a possible view. The Tribunal further held that in the assessment year in question, viz. AY 2005-06, there was no obligation to deduct tax at 3 itxal-687-11 source and that the obligation to deduct tax on payment of rent has been introduced by amending Section 194I with effect from 1/4/2006 applicable to AY 2006-07. 6. In these circumstances, the decision of the ITAT in holding that the assessee was not liable to deduct tax at source and consequently, the provisions of Section 40(a)(ia) of the Act were not attracted, cannot be faulted. Accordingly, the appeal is dismissed with no order as to costs. (K.K. TATED, J.) (J.P. DEVADHAR, J.)