2018 (9) TMI 360 - HC - Income Tax

TDS u/s 194L/194LA - cost of construction incurred by the assessee is the consideration paid for acquiring such rights, interest and titles from such squatters/hutments - whether consideration given by assessee to such squatters/ hutments was not in the nature of compulsory acquisition of land/ structure ? - Held that - For the purpose of implementing the scheme of the Government relating to road widening near the railway track, the assessee evacuated the illegal/unauthorized persons who were squatters/hutment dwellers. The fact of the matter was that the possession of these persons was unauthorized and illegal and they were not the owners of the land on which they had squatted / built their illegal hutments. In fact, they were trespassers. This being the case, there was no question of the land being acquired by the assessee. In fact the ITAT, and in our view correctly, came to the conclusion that the land always belonged to the State; it was encroached upon, which encroachment was removed by the assessee; and the encroaching squatters / hutment dwellers were rehabilitated. This being the case, we find that section 194L or section 194LA of the I.T. Act, 1961 had absolutely no application to the facts and circumstances of the present case. The squatters / hutment dwellers have absolutely no title in the land on which they squat or build their illegal and unauthorized hutments. This being the case, there is no question of there being any compulsory acquisition from them under any law either under the Land Acquisition Act, 1894 or any other enactments which permit compulsory acquisition of land TDS u/s 194C or 194J - short deduction of tds - payment of of maintenance contracts which relate to minor repairs, replacement of some spare parts, greasing of machinery etc. - Held that - Assessee had made payments only in respect of maintenance contracts which relate to minor repairs, replacement of some spare parts, greasing of machinery etc. These services do not require any technical expertise, and therefore, could not be categorized as technical services as contemplated under section 194J of the I.T. Act, 1961. We must mention here that section 194J of the I.T. Act, 1961, deals with fees for professional or technical services. In contrast, section 194C of the I.T. Act, 1961 deals with payments to contractors. The assessee had correctly deducted TDS under the provisions of section 194C of the I.T. Act, 1961 and not as per the provisions of section 194J - Revenue appeal dismissed.

Summary

Issues:
1. Applicability of section 194LA of the Income Tax Act, 1961.
2. Correctness of TDS deductions under sections 194C and 194J for maintenance work.

Analysis:

Issue 1: Applicability of section 194LA of the Income Tax Act, 1961

The dispute in the case revolved around the applicability of section 194LA of the Income Tax Act, 1961, which deals with compensation on the acquisition of immovable property. The Revenue challenged the order of the CIT(A) and ITAT regarding the non-applicability of sections 194LA and 194L to the case. The Revenue contended that the cost of construction incurred by the assessee for acquiring rights from squatters/hutment dwellers should attract TDS under section 194LA. However, the ITAT correctly found that there was no compulsory acquisition of land as the squatters were unauthorized occupants without ownership rights. Therefore, the provisions of section 194LA were deemed inapplicable to the case, leading to the dismissal of the appeals.

Issue 2: Correctness of TDS deductions under sections 194C and 194J for maintenance work

Another aspect of the case involved the TDS deductions made by the assessee under sections 194C and 194J for maintenance work on air conditioners and lifts. The Revenue argued that the technical nature of the maintenance work required TDS under section 194J, not section 194C. However, the ITAT correctly determined that the maintenance services provided were routine and did not necessitate specialized technical expertise, thus falling under section 194C for payments to contractors. Consequently, the additional substantial question of law raised by the Revenue for A.Y. 2008-09 and 2009-10 was also dismissed as it did not give rise to any substantial legal issue. The appeals were ultimately dismissed as no substantial questions of law were found to be present in the case.

In conclusion, the High Court upheld the decisions of the CIT(A) and ITAT, ruling against the Revenue's contentions on the applicability of sections 194LA and 194L and the correct TDS deductions under sections 194C and 194J. The appeals were dismissed with no order as to costs.