2015 (10) TMI 745 - AT - Income Tax

Levy of interest on short deduction of tax u/s 201(1A) - Assessee had deducted TDS u/s. 194C on the amounts paid to A.P. Genco Ltd. for operation and maintenance of Plants - AO was of the opinion that assessee should have deducted tax u/s. 194J at 10% on O&M Charges - CIT(A) deleted the levy of interest - Held that - Nothing was brought on record to counter the findings of Ld. CIT(A). As seen from the copy of the agreement placed on record along with decisions relied on by the Ld. Counsel, we agree with the findings of CIT(A) that A.P. Genco has undertaken the entire contract work for Operation and Maintenance of plants, equipments, amenities, fire fighting services etc., which is covered under the provisions of Section 194C and not by Section 194J. Ld. CIT(A) also analysed the issue keeping in mind the decision of coordinate bench of ITAT Ahmedabad in the case of Gujarat State Electricity Corporation Vs. ITO 2003 (5) TMI 190 - ITAT AHMEDABAD-C . The payment made by the appellant for carrying out entire operation and maintenance of power plant cannot be treated as fees for professional/technical services, therefore, the liability of TDS is under 194C and not U/s. 194J. As the appellant had correctly deducted TDS U/s.194C, the question of levying interest U/s. 201(1A) does not arise - Decided against revenue.

Summary

Issues:
Levy of interest on short deduction of tax u/s 201(1A).

Analysis:
The appeal pertains to the issue of interest levy due to short deduction of tax u/s 201(1A). The appellant, engaged in power generation and sale, debited its P&L A/c with Operation and Maintenance Charges and Repairs and Maintenance of Plant & Machinery. The Assessing Officer (AO) found that TDS was deducted u/s 194C, but he opined that tax should have been deducted u/s 194J on Operation and Maintenance Charges. The AO considered the Charges as technical services by A.P. Genco based on various reasons, including service tax application and the nature of payments as per the agreement. The appellant contended that the payments were for contract work, citing the Gujarat State Electricity Corporation case. The CIT(A) deleted the interest levy after analyzing the agreement between the parties, which showed that A.P. Genco was responsible for various operational and maintenance aspects, indicating a contract work scenario under section 194C, not 194J.

The CIT(A) highlighted the extensive scope of services covered in the agreement, emphasizing the operational and maintenance nature of the contract. The CIT(A) compared the facts with the Gujarat State Electricity Corporation case, where the ITAT held that payments for operation and maintenance of power plants do not fall under technical or professional services but are considered contract work under section 194C. The ITAT concurred with the CIT(A)'s findings, noting the absence of evidence to challenge the decision. By aligning with the Gujarat State Electricity Corporation case and considering the nature of services provided under the agreement, the ITAT dismissed the Revenue's appeal, affirming that the TDS liability was rightly under section 194C, thus negating the need for interest levy under section 201(1A).

In conclusion, the judgment clarifies the distinction between technical services and contract work in the context of TDS deductions, emphasizing the specific nature of services provided under the agreement to determine the appropriate tax deduction section. The decision underscores the importance of analyzing the agreement terms and the actual services rendered to ascertain the correct tax treatment, ultimately leading to the dismissal of the Revenue's appeal regarding the interest levy issue.