2018 (3) TMI 300 - AT - Income Tax

TDS u/s 194C or 194J - contract for managing of solid waste - tds liability - whether the work carried out by the assessee would fall in the category of technical services as envisaged by the provisions of section 9 of the Act? - Held that - Mere use of machinery or human intervention by the sub contractor are the decisive factors to decide the issue against the AO. We also hold that each and every payment for the contracts would not be for professional or technical services rendered by the contractor to the assessee as per the provisions of section 194J of the Act. The Hon ble High Court in Bharat Heavy Electrical Ltd 2016 (12) TMI 955 - PUNJAB AND HARYANA HIGH COURT has also held that Section 194J of the Act was not a residuary clause, that in other words, it was not that if a contract did not fall within the ambit of section 194C, it must be deemed to fall within the ambit of section 194J, that Sections 194C and 194J were independent provisions. We find that there was no direct and Livelink between the payment and receipt/use of technical services/information. In our opinion the AR head rightly argued that technical services would not include services provided by the machines. In the case of Parsurampuria Synthetic Ltd. (2007 (11) TMI 436 - ITAT DELHI), the tribunal has held that there might be use of services of technically qualified person to render the services, that same would not bring the amount paid as fee for technical services within the meaning of explanation 2 to section 9 (1) (vii)of the Act. Accordingly, we hold that payment made by the assessee to UEEL for exhibiting the work contract would fall within the provisions of section 194C of the Act and not under the section 194 J.

Summary

Issues:
Deduction of tax at source under sections 194C and 194J.

Analysis:
The appellant challenged the CIT(A)'s order regarding tax deduction at source. The Assessing Officer (AO) observed that payments to a company were for technical services, not contract payments. The AO demanded TDS and interest, which the appellant contested. The First Appellate Authority (FAA) upheld the AO's decision, emphasizing the technical nature of the services. The appellant argued that the services were for works contract, not technical services. The Tribunal analyzed the nature of the contract and the involvement of technical elements. Referring to relevant case laws, it was determined that the payments were for a works contract, not technical services. The Tribunal emphasized that the use of machinery or personnel does not automatically classify a contract as technical services under section 194J. Various judgments were cited to support the conclusion that the payments made were for a works contract under section 194C, not technical services under section 194J. Consequently, the appeal was allowed in favor of the assessee.

Conclusion:
The Tribunal ruled that the payments made by the assessee were for a works contract, falling under section 194C, not technical services under section 194J. The decision was based on a detailed analysis of the contract nature and relevant legal precedents, emphasizing that technical services involve more than just the use of machinery or personnel. The judgment favored the assessee, allowing the appeal against the tax deduction at source under sections 194C and 194J.