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2019 (10) TMI 1028 - AT - Income TaxTDS u/s 194C or 194J - short deduction of TDS - amounts paid by the assessee towards operation maintenance of windmill machines - HELD THAT - The provisions of law is provided u/s 194C 194J of the Act, we are of the considered view that the alleged payment made for operation maintenance of the wind mills paid by the assessee company to various payees was under a composite contract and the deduction of tax on such payment was required to be made u/s 194C of the Act @ 2%. The revenue authorities have failed to refer to any of the specific clause of the agreement which could show that the amount has been paid towards taking the technical services through which the assessee has acquired certain rights which could be used in the future. Therefore, there remains no dispute that the alleged payment is a payment for contractual payment of labour for operations and maintenance work liable for deduction of tax at source u/s 194C of the Act and not 194J Default in collection of TCS - HELD THAT - We find that the figure of sale of scrap of ₹ 21,36,296/- is not undisputed. The Assessing Officer has computed the non collection of TCS on the amount of sale of scrap of ₹ 9,59,608/- which is the difference between the total sale of scrap of ₹ 21,36,296 less ₹ 11,76,688) on which TCS has been collected. The ld. AO has not doubted on the collection of TCS of ₹ 11,76,688/- paid by the assessee for sale of scrap but failed to give credit for the TCS claimed to have been deposited of ₹ 9596/-. In our view this issue needs to restored back to the file of Ld. AO so that the assessee can prove the payment of tax deducted at source at ₹ 21,363/- which inter alia includes the TCS payment of ₹ 9596/-. If the Ld. AO is satisfied with the necessary supporting evidence, the alleged demand of ₹ 9596/- and the interest charged thereon may be deleted after giving reasonable opportunity of being heard to the assessee.
Issues Involved:
1. Rate of Deduction of TDS under Section 194C vs. 194J. 2. Lower Deduction of Tax Collected at Source (TCS) for the Assessment Year 2013-14. Issue-wise Detailed Analysis: 1. Rate of Deduction of TDS under Section 194C vs. 194J: The primary issue under consideration was whether the assessee correctly deducted TDS at 2% under Section 194C for payments made towards the operation and maintenance of windmill machines or whether the Assessing Officer (AO) was justified in applying a 10% rate under Section 194J for professional and technical services. Facts: The assessee entered into contracts for the operation and maintenance of wind turbine generation plants with various companies. The assessee deducted TDS at 2% under Section 194C, treating the payments as part of a works contract. However, the AO argued that the services required specialized technical knowledge and thus should be subject to a 10% TDS rate under Section 194J. Arguments: The assessee contended that the operation and maintenance tasks were carried out by employing skilled labor and did not involve seeking technical advice or services from the contractors. They cited precedents from the Ahmedabad Tribunal and Pune Bench, asserting that composite contracts for operation and maintenance fall under Section 194C and not Section 194J. Judgment: The Tribunal reviewed the contracts and found no specific clauses indicating that the payments were for technical services. It was determined that the contracts were indeed for "operation and maintenance work," which is a composite contract. The Tribunal concluded that the payments should be subject to a 2% TDS rate under Section 194C, aligning with the decisions in the cases of Gujarat State Electricity Corporation Ltd. and Bharat Forge Ltd. Consequently, the Tribunal ruled in favor of the assessee for the Assessment Years 2013-14 to 2015-16, allowing the appeals on this issue. 2. Lower Deduction of Tax Collected at Source (TCS) for the Assessment Year 2013-14: The second issue pertained to the alleged short deduction of TCS on the sale of scrap, resulting in a demand of ?11,899, including interest. Facts: The AO observed a short deduction of TCS amounting to ?9,596, with an additional interest of ?2,303. The assessee argued that the entire TCS of ?21,363 had already been deposited, but this was overlooked by the revenue authorities. Arguments: The assessee submitted that the calculation by the revenue authorities was incorrect and that they had already deposited the full TCS amount. The AO computed the non-collection of TCS based on a discrepancy between the total sale of scrap and the amount on which TCS was collected. Judgment: The Tribunal found that the issue required further verification. It restored the matter to the AO to allow the assessee to provide evidence of the TCS payment. If the AO is satisfied with the evidence, the demand of ?9,596 and the associated interest should be deleted. The appeal on this issue was allowed for statistical purposes. Conclusion: The Tribunal allowed the appeal for the Assessment Year 2013-14 partly for statistical purposes and fully allowed the appeals for the Assessment Years 2014-15 and 2015-16. The order was pronounced in the open court on 13.09.2019.
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