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2016 (10) TMI 90 - AT - Income TaxTDS u/s 194C or 194J - services rendered by the contractor ULPL to the assessee in providing reachstacker and its operational personnel - short deduction of TDS - Held that - We find from the order of the Ld. CIT(A) that the CIT(A) has accepted the contentions of the assessee that since the recipient has accounted for the contract receipts received from the assessee, no tax is required to be deducted. He also accepted the contention that owing to the losses by the recipient ULPL no tax is liable to be paid by the recipient and therefore no interest liability could be raised u/s. 201(1A) of the Act on the assessee and he has given a direction to the Assessing Officer to verify and pass necessary orders to delete the interest if the ULPL is found to have filed returns declaring losses. Therefore, we are of the considered view that the assessee has no grievance at this stage as the contention of the assessee were accepted and no liability to tax u/s. 201(1) or interest u/s. 201(1A) are existed. Therefore, we left open the issue of whether the payments made by the assessee to ULPL fall under fees for technical services u/s. 194J or fall under provisions of Sec. 194C of the Act as contract service. The assessee may raise its objections at appropriate stage. - Decided in favour of assessee for statistical purposes.
Issues involved:
- Determination of tax deduction under sections 194C and 194J of the Income Tax Act for payments made to a contractor for equipment hire charges. - Assessment of whether the services provided by the contractor constitute technical services under the Act. - Liability of the assessee for interest under section 201(1A) for short deduction of tax at source. Analysis: Issue 1: Determination of tax deduction under sections 194C and 194J: - The assessee contended that the payments made to the contractor were for carriage services and fell under section 194C, not section 194J, as per the terms of the agreement. - The Assessing Officer disagreed, considering the services provided as technical services under section 194J, leading to a short deduction of tax. - The Ld. CIT(A) upheld the view that tax should have been deducted under section 194J for the payments made to the contractor for hiring equipment. - The Tribunal left the issue open for further consideration, as the recipient had accounted for the receipts and no tax liability existed, thereby allowing the appeals for statistical purposes. Issue 2: Assessment of services as technical services: - The contractor provided reachstacker equipment and operational personnel to the assessee for port operations. - The Assessing Officer deemed these services as technical/managerial, falling under fees for technical services as per the Act. - The Ld. CIT(A) concurred with this assessment, holding that the services provided were indeed technical/managerial in nature, requiring tax deduction under section 194J. - The Tribunal did not conclusively determine whether the services rendered constituted technical services, as no tax liability or interest was found due to the recipient's losses. Issue 3: Liability for interest under section 201(1A): - The Assessing Officer imposed interest under section 201(1A) for the short deduction of tax at source by the assessee. - However, considering the recipient's acknowledgment of income and lack of further tax recovery, the interest liability was not enforced by the Ld. CIT(A). - The Tribunal upheld this decision, directing the Assessing Officer to verify and delete the interest if the recipient was found to have filed returns declaring losses. In conclusion, while the nature of services provided by the contractor was disputed between sections 194C and 194J, the ultimate decision favored the assessee due to the absence of tax liability and interest. The Tribunal allowed the appeals for statistical purposes, leaving the issue of tax deduction classification open for future challenge by the assessee.
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