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2020 (9) TMI 72 - AT - Income TaxShort deduction of TDS - TDS u/s 194C or 194J - Payment for collection and disposal of waste - whether lifting material and disposal of hospital waste would fall within the definition of technical services? - HELD THAT - It is noteworthy that the deductee company has rendered services of lifting material and disposal of hospital waste from the premises of the assessee. As relying on case GUJARAT FLUOROCHEMICALS LIMITED VERSUS VS ACIT (TDS) CIRCLE, BARODA AND ITO (TDS) VERSUS VS GUJARAT FLUOROCHEMICALS LIMITED 2013 (11) TMI 371 - ITAT AHMEDABAD we hold that the services provided by the deductor would not fall in the category of technical services, therefore, the assessee has rightly deducted tax u/s 194C - Decided in favour of assessee.
Issues Involved:
1. Classification of services for TDS deduction under Section 194J vs. 194C. 2. Demand for short deduction of tax at source. 3. Interest on short deduction of tax at source. Detailed Analysis: Issue 1: Classification of Services for TDS Deduction under Section 194J vs. 194C The primary issue revolves around whether the payments made by the assessee to M/s Hoswin Incinerator Private Limited for the collection and disposal of waste should be classified as "technical services" under Section 194J of the Income-Tax Act, 1961, attracting a TDS rate of 10%, or as a contractual service under Section 194C, attracting a TDS rate of 2%. The assessee argued that the services provided by M/s Hoswin Incinerator Private Limited were purely contractual and involved no technical consultancy or specialized knowledge transfer, thus justifying the deduction of TDS under Section 194C. The assessing officer, however, opined that these services involved an element of technical consultancy, thereby falling under Section 194J. The Tribunal analyzed the definitions and judicial precedents, emphasizing the distinction between "technical services" and "standard facilities." The Tribunal referred to the Supreme Court's judgment in CIT v. Kotak Securities Ltd., which clarified that "technical services" must cater to specialized, exclusive, and individual requirements, unlike standard facilities available to all. Similarly, the Tribunal cited the case of Skycell Communications Ltd. v. DCIT, where it was held that standard facilities do not qualify as "technical services." Based on these interpretations, the Tribunal concluded that the waste collection and disposal services provided by M/s Hoswin Incinerator Private Limited did not involve any specialized or customized technical consultancy for the appellant. Hence, these services should be classified under Section 194C. Issue 2: Demand for Short Deduction of Tax at Source The assessing officer had raised a demand of ?6,948/- for short deduction of tax, asserting that TDS should have been deducted at 10% under Section 194J instead of 2% under Section 194C. The Tribunal examined the contractual nature of the services and reiterated that the payments made for waste collection and disposal did not fall under "technical services" as defined under Section 194J. The Tribunal referenced multiple judicial precedents, including the ITAT Ahmedabad Bench's decision in ITO (TDS) v. Gujarat Fluorochemicals Limited, which held that similar services were liable for TDS under Section 194C. Consequently, the Tribunal concluded that the demand for short deduction of tax was not justified and should be deleted. Issue 3: Interest on Short Deduction of Tax at Source The assessing officer had also levied an interest of ?2,073/- on the alleged short deduction of tax. Given that the Tribunal found the classification of services under Section 194C to be correct, the basis for the interest charge was invalidated. The Tribunal directed the deletion of the interest charged on the short deduction of tax. Conclusion: The Tribunal allowed the appeal, holding that the services provided by M/s Hoswin Incinerator Private Limited for waste collection and disposal were rightly classified under Section 194C of the Income-Tax Act, 1961. Consequently, the demands for short deduction of tax and the associated interest were deleted. The Tribunal's decision was based on a thorough analysis of legal definitions, judicial precedents, and the nature of the services provided.
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