Accountant does not become technical person for writing accounts of two firms
Facts and Issues of the case
The assessee is proprietor in two firms namely M/s Laxmi Trading Company and M/s Chaudhary Filling Station and in both firms the assessee had debited Rs.60, 000/- as salary paid to the accountant and Assessing Officer instead of treating the same as salary, held the same to be in the nature of accounting charges and therefore, held that since the assessee had not deducted TDS and as per the provisions of section 40(a)(ia) of the Act, he made the addition.
Observations by the Court
The Court has heard the rival parties and has gone through the material placed on record. The Court finds that the first disallowance was out of salary paid to the accountant of the assessee for maintaining books of account of two proprietorship concerns.
The assessee had filed confirmation from the accountant regarding the fact that the above payment was made against salary and further the court find that Assessing Officer has invoked section 194J for holding that the accountant was providing professional and technical services and therefore, the assessee was required to deducts TDS. However, the application of the above section to the assessee is contrary to the facts as the accountant himself had confirmed that he was being paid as an employee.
The employee need not be a full time employee and he can be a part time employee also. Simply because the accountant was writing books of account of two firms, cannot be said that he was acting as a technical person. Therefore, the provisions of section 40(a)(ia) were not applicable and therefore, the assessee was not liable to deduct TDS and therefore, this ground of the appeal is allowed.
The salary of an accountant cannot be treated as professional service for managing books of two firms to invoke TDS under section 194J.Rajendra-Kumar-Chowdhary-Vs-ITO-ITAT-Lucknow