Services not requiring specialized skills or expertise are not covered under Section 194J

CG Professional Exam Board Vs DCIT (ITAT Raipur) :

The State of Chhattisgarh’s self-governing body, which oversees examination for recruitment of employees, underwent a TDS survey under section 133A(2A) of the Act on 10.10.2017. During the proceedings, it was discovered that the assessee had neglected to deduct tax at source on payments made under a confidential head to a processing agency as laid down in section 194J of the Act. The AO concluded that the assessee had incorrectly deducted tax at source on payments made to the processing agency u/s. 194C of the Act instead of u/s. 194J.

The ITAT Raipur held that with the view taken by the lower authorities that the services rendered by the processing agency requires any professional expertise or skill, nor can I persuade myself to conclude that these services could be brought under the meaning of “technical consultancy” in Explanation (a) of Section 194J. Based on my observations and considering that rendering of said services does not require a professional degree or specialized knowledge, it is clear that the same falls outside of the scope and definition of “professional services” under Section 194J. Consequently, I overturn the order of CIT(Appeals) insofar as he concluded that taxes should be deducted from payments made to processing agency under Section 194J.

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