2022 (5) TMI 99 - AT - Income Tax

TDS u/s 194C or 194J - nature of Service agreement entered by the appellant with various agencies for supply of labour and work - AO concluded on the basis of scope of agreement that the services carried out by the agencies are a professional service and include amount other things conducting different medical tests i.e. DTT, HPLC etc. for Sickle Cell Anemia on the target population, tagging population as per the tests performed, making a database of such tests their results and making all data available to the society - HELD THAT - In this case, the assessee has entered into agreement with the abovementioned entities for the purpose of carrying out screening (i.e. DTT test, HPLC test etc.) of Sickle Cell Anemia in tribal district of Gujarat. It was seen that the function performed by the above entities fall under the purview of professional services/managerial and consultancy services as per section 194J of the Act and therefore liability of the deduction of tax arises @ 10% u/s. 194J instead of u/s. 194C As it is apparent and clear from the terms of the agreement that technical persons carried out tests and Laboratory Technician will be with minimum qualification of MLT/DMLT with science graduate while paramedical worker will be with minimum qualification of SI. It is clear that aforesaid services come within Section 194J and not u/s 194C of the Act. Therefore, we do not find any ambiguity in the order passed by the learned CIT(A). In our considered opinion, learned CIT(A) has passed a detailed and reasoned order and same does not required any interference at our end. - Decided against assessee.

Issues Involved:
1. Determination of the nature of the service agreement under Section 194J versus Section 194C of the Income Tax Act, 1961.
2. Confirmation of interest charged under Section 201(1A) of the Income Tax Act, 1961.
3. Evaluation of the nature of work performed by the agencies.
4. Consideration of submissions and explanations provided by the appellant.

Detailed Analysis:

1. Determination of the nature of the service agreement under Section 194J versus Section 194C of the Income Tax Act, 1961:

The primary issue was whether the services rendered by the agencies for screening Sickle Cell Anemia in tribal districts of Gujarat should be classified as "professional services" under Section 194J, which mandates a 10% TDS, or as "contractual work" under Section 194C, which mandates a 2% TDS. The Assessing Officer (AO) concluded that the services performed by the agencies, which included conducting medical tests (DTT, HPLC), tagging the population, and creating a database, were professional in nature and thus fell under Section 194J. The appellant argued that the services involved were performed by laborers without technical qualifications, and thus should be classified under Section 194C. However, the Tribunal noted that the agreements required the agencies to employ technically qualified personnel, such as lab technicians with MLT/DMLT qualifications and paramedical workers with SI qualifications. Consequently, it was determined that the services indeed fell under Section 194J.

2. Confirmation of interest charged under Section 201(1A) of the Income Tax Act, 1961:

The appellant contested the interest charged under Section 201(1A), claiming that they had correctly deducted and paid the required TDS and that there was no loss to the revenue. The Tribunal, however, upheld the interest charge, noting that the appellant had not deducted the appropriate amount of TDS as required under Section 194J. The interest was therefore warranted to compensate for the delay in the correct amount of tax being deposited.

3. Evaluation of the nature of work performed by the agencies:

The Tribunal evaluated the nature of work performed by the agencies, which included conducting screening tests, making micro-planning for screening, conducting interdepartmental meetings, nominating program coordinators, and ensuring that all staff were trained for DTT testing. The Tribunal found that these tasks required technical expertise and thus qualified as professional services under Section 194J. The appellant's argument that the work was performed by unqualified laborers was not substantiated by the terms of the agreements, which clearly specified the need for technically qualified personnel.

4. Consideration of submissions and explanations provided by the appellant:

The appellant argued that the lower authorities had not properly considered their submissions, explanations, and information provided regarding the agreements with various agencies. However, the Tribunal found that the CIT(A) had passed a detailed and reasoned order based on the terms of the agreements and the nature of the services rendered. The Tribunal did not find any breach of law or principles of natural justice in the orders passed by the lower authorities.

Conclusion:

The appeals filed by the assessee for A.Y. 2013-14, 2014-15, and 2015-16 were dismissed. The Tribunal upheld the classification of the services under Section 194J, the interest charged under Section 201(1A), and found no fault in the consideration of the appellant's submissions by the lower authorities. The Tribunal's decision was pronounced in open court on 18/04/2022.

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