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2018 (5) TMI 850 - AT - Income TaxTDS u/s 194C OR 194J - scope of work of the contracts entered into by the assessee with the parties/contractors - tds liability - TCS had entered into an agreement with the assessee company for creation of Geographical Information system in the State of Maharashtra and Gujarat - Held that - As the payments made to the vendors for the work done by them by deploying semi-skilled personnel, did not involve any technical or professional knowledge on their part, the same could not be brought within the sweep of Sec. 194J and had rightly been subjected to deduction of tax at source by the assessee under Sec. 194C. We thus being of the view that the assessee had correctly deducted tax at source on the payment made to the vendors, therefore, no disallowance under Sec.40(a)(ia) as regards the same was liable to be made in the hands of the assessee. We thus finding no infirmity in the order of the CIT(A), uphold the same in context of the issue under consideration.- Decided against revenue
Issues Involved:
1. Whether the payments made to the parties/contractors were subject to deduction of tax under Section 194C or Section 194J of the Income Tax Act, 1961. Issue-Wise Detailed Analysis: 1. Deduction of Tax at Source Under Section 194C vs. Section 194J: Facts of the Case: The assessee company, engaged in Information Technology/Information Technology enabled services, had filed its return of income for A.Y. 2012-13. The case was taken up for scrutiny assessment under Section 143(2). The company was involved in a project under the Restructured Accelerated Power Development and Reforms Programme (R-APDRP) initiated by the Ministry of Power, Government of India. Tata Consultancy Services (TCS) was awarded the project and subcontracted the creation of Geographical Information Systems (GIS) to the assessee company. The work involved both technical and non-technical tasks, with non-technical tasks outsourced to various vendors. Assessing Officer's (A.O) View: The A.O observed that the assessee deducted tax at source under Section 194C for payments made to vendors for survey expenses. However, the A.O held that these payments were for technical services and should have been subjected to tax deduction under Section 194J. Consequently, the A.O disallowed a proportionate amount under Section 40(a)(ia) for non-compliance. CIT(A)'s Decision: The assessee appealed to the CIT(A), arguing that the work performed by the vendors did not qualify as technical services under Section 194J but fell under works contract as defined in Section 194C. The CIT(A) agreed, noting that the A.O relied primarily on the contract's terms rather than the actual nature of the work. The CIT(A) found that the work involved non-technical tasks such as data collection, which did not require technical or professional knowledge. The CIT(A) concluded that the assessee correctly deducted tax under Section 194C. Tribunal's Analysis: The Tribunal upheld the CIT(A)'s decision, agreeing that the nature of work performed by the vendors did not involve technical or professional skills. The Tribunal noted that the tasks included field surveys, data collection, and data entry, all of which were carried out by semi-skilled laborers. The Tribunal emphasized that the A.O had not provided any material evidence to contradict the CIT(A)'s observations. Additionally, the Tribunal referenced a certificate for lower tax deduction under Section 197 issued to one of the vendors, which supported the contractual nature of the work. The Tribunal concluded that the work fell within the scope of "carrying out any work through supply of labor" under Section 194C, and the assessee had rightly deducted tax at source under this section. Final Judgment: The Tribunal dismissed the revenue's appeal, affirming that the payments made to the vendors were correctly subjected to tax deduction under Section 194C and not Section 194J. Consequently, no disallowance under Section 40(a)(ia) was warranted. Additional Points: - The revenue did not contest other reasons cited by the CIT(A) for striking down the disallowance under Section 40(a)(ia). - Grounds of appeal No. 2 and 3 were dismissed as general and not pressed. Conclusion: The Tribunal's order pronounced on 11.05.2018, dismissed the revenue's appeal, upholding the CIT(A)'s decision that the payments made to the vendors were subject to deduction of tax under Section 194C and not Section 194J.
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