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TMI Blog2018 (2) TMI 1700X X X X Extracts X X X X X X X X Extracts X X X X ..... se grounds of appeal are dismissed as not pressed. 4. Ground No. 1 of the appeal of the assessee is general in nature and therefore same is also dismissed 5. This leaves us with the only ground No. 2 of appeal wherein the assessee is aggrieved that the Ld. CIT (A) has erred in law and on facts of the case by confirming that the TDS at the rate of 10% under section 194J of the income tax act 1961 is required to be deducted on the services of testing and commissioning received from the BHEL and that appellant has wrongly deducted tax at source at the rate of 2% under section 194C of the income tax act 1961 on such services thereby confirming the demand of Rs. 22704170/-. 6. The brief facts shows that assessee is a company which is engaged in the business of generation of power by setting up of a supercritical thermal power plant in UP. It is a special purpose vehicle by the government of Uttar Pradesh for implementation of the power project. Survey under section 133A of the Income Tax Act 1961 was conducted on 19/6/2014 wherein the statement of the VP of the assessee company was recorded. Based on this it was found that assessee has contracted some of the work to BHEL. One of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to the quantum of work involved of aforesaid services, he bifurcated the expenses on the basis of the quantum of work involved and held that 40% of overall expenses are incurred towards erection, installation, insurance, testing and commission and balance 60% are for other works, services. Based on this for financial year 2012-13 he considered that assessee has paid a sum of Rs. 222841520/- towards testing and commissioning charges on which tax should have been deducted at the rate of 10% amounting to Rs. 22284152/- whereas the assessee has deducted it applying the rate of 2% amounting to Rs. 4456830/-. Therefore he worked out the short deduction of tax of Rs. 17827322/- and calculated the interest under section 201(1A) at the rate of 1% amounting to Rs. 4876848/- and worked out the total demand under section 201(1) and 201(1A) of Rs. 22704170/-. Consequently the order under section 201(1) trading and section 201(1A) was passed. 9. Aggrieved with the order of the Ld. assessing officer the assessee challenged the same before the Ld. CIT (A). However before the Ld. CIT (A) the assessee did not make any submission and hence the Ld. CIT (A) passed an order on 16/3/2016 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee or under section 194J of the Income Tax Act as per the version of the Ld. Assessing Officer. Identical issue has been decided by the Hon'ble Punjab and Haryana High Court in Pr. CIT Vs. Bharat Heavy Electricals Ltd 390 ITR 322 and under:- "7. The Assessing Officer held as follows : The contracts were not only for the erection and installation work, but also for the commissioning, testing and trial operation of the various equipment and other related machinery and that under the terms of the contract it is the duty of the contractor to provide all types of labour, supervisors, engineers, inspectors, measuring and testing equipment, testing and commissioning for the execution of the project as per the specifications of the respondent. Under clause 38.1 of the special conditions of contract, the contractor was to deploy all the skilled workmen to carry out the work as per the specifications. Therefore, the contractors were required to employ qualified engineers and highly skilled manpower to execute certain activities so as to provide fault-free services to the respondent. The contractors were, therefore, providing technical services to the respondent which attract the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the ambit of section 194J. Section 194C is not a residuary clause. The respondent would, therefore, be entitled to succeed even if it is established that the contract does not fall within the ambit of section 194J. If the contract also does not fall under section 194C, there would be no liability on the part of the respondent to deduct tax at source at all. The respondent has, however, not contended that the contract does not fall within section 194C. It would be appropriate, therefore, to first examine whether the contract falls within section 194J. In our view it does not. 10. Before referring to the clauses in the contracts entered into between the respondent and the contractors relied upon by Mr. Putney in support of his contention that it falls within the ambit of section 194J, it is necessary to refer to some of the other provisions thereof as well. The various contracts entered into between the respondent and the contractors are identical. Clause 1 provides that the contractors are to execute the work of erection, testing, commissioning and trial operation of power cycle piping, boiler and LP piping packages for units in Haryana and in accordance with and subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the contract. All the other provisions are with a view to ensuring the same. In other words, the other provisions of the contract are to ensure that the contractors erect, test, commission and conduct trial operation of the equipment in accordance with their obligations under the contract. Once that is seen, it is clear that the reliance upon the terms and conditions on behalf of the appellant to contend to the contrary is not well founded. 13. Mr. Putney firstly relied upon the following clause : "4. M/s. PCP confirmed that the manpower deployment plan sub mitted by them along with the offer and subsequently vide letter No. PCP/TND/960, dated June 26, 2009 is tentative and reconfirmed that the adequate manpower including supervisors will be deployed at site for timely completion of work. BHEL further pointed out that man power and qualified supervisors for BHEL's use as per clause No. 56.2 of the NIT have not been included in their deployment plan. M/s. PCP confirmed that they will deploy manpower as per clause No. 56.2 free of cost exclusively for BHEL's services. Further, M/s. PCP has also confirmed that they will be deploying additional manpower, if required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligations under the contract. It does not provide for the provision of technical assistance to the respondent. 18. He then relied upon clauses 39.1, 39.2, 39.5 and 39.11 which read as under : '39.0 Supervisory staff and workmen 39.1 The contractor shall deploy all the skilled workmen like mill wright fitters, welders, crane-operators, drivers, gas cutters, riggers, sarangs, masons, carpenters, electricians, helpers and instrument technicians to carry out the works as per specifications. In addition to skilled, semi-skilled and unskilled workmen required for all the works, suitable workmen required for handling and transporting of equipment from site storage to erection site, erection, testing and commissioning as contemplating under this specification shall be deployed. Only fully trained and competent men with previous expe rience on the job shall be employed. They shall hold valid certificates wherever necessary. BHEL reserves the right to decide on the suitability of the workers and other personnel who will be deployed by the contractor. BHEL reserves the right to insist on removal of any employee/workman of the contractor at any time, if they find him unsuita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utes the work in a timely and a proper manner. For the same reason, clauses 39.5 and 39.11 are also of no assistance to the appellant for they merely require the deployment of the necessary number of qualified electricians and qualified engineers. The deployment of the personnel is not under a contract for the supply of services/technical services, but to ensure the due and proper execution of the work by the contractor. 20. Mr. Putney then relied upon clauses 46.4, 46.13, 46.16 and 46.18 which read as under : '46.0 Testing, pre-commissioning, commissioning and post-com missioning. 46.4 The contractor shall make all necessary arrangements includ ing making of temporary closures on piping/equipment for carrying out the hydro-static testing on all piping equipment covered in the specification at no additional cost. The contractor shall carry out the required test on the pipelines such as Hydraulic Test (as per IBR requirement/instruction of BHEL), of various piping systems, Ultra sonic Test for weld defects and finding thickness, dye penetrant test, magnetic particles test for weld defects and materials defects etc. All facilities (manpower, materials, equipment, cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut to satisfy the customer on behalf of the contractor that the plant and equipment has been duly supplied as per the contractual specifications. Indeed, this entire exercise would require the deployment of technical personnel, but what is important to note is that the technical personnel are deployed not for and on behalf of the customer, but for and on behalf of the contractor itself with a view to ensuring that the contractor has supplied the equipment as per the contractual specifications. Everything done in this regard is to this end and not to supply technical services to the customer. 22. The contract entered into between the respondent and each of the contractors, therefore, did not involve the supply of professional or technical services at least within the meaning of section 194J. The consideration paid under the contracts, therefore, was not for the professional or technical services rendered by the contractors to the respondent. Section 194J is, therefore, not applicable to the present case. 23. It is not necessary to consider Mr. Putney's submission that the contracts do not fall under section 194C. The submission if accepted would be self destructive of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 201 (1) and 201 (1A) of the act is raised by order dated 16/3/2016. 18. Both the parties submitted that facts involved in this ground of appeal are identical to the facts that were involved in ground No. 2 of the appeal of the assessee for assessment year 2013 - 14. They further submitted that their arguments are also same. 19. We have carefully considered the rival contention and also perused the orders of the lower authority and find that the above ground of appeal in this appeal is identical to the ground No. 2 of the appeal of the assessee for assessment year 2013-14. We have already decided ground No. 2 of that appeal for assessment year 2013-14 cancelling the order passed by the Ld. Assessing Officer u/s 201(1) read with Section 201(1A) of the Income Tax Act respectfully following the decision of the Hon'ble Punjab and Haryana High Court. Therefore, for the similar reasons, we also decide the issue in favour of the assessee holding that the lower authorities are not correct in holding that assessee should have deducted tax at source on testing and commissioning charges at the rate of 10% under section 194J of the act. Accordingly we allow ground No. 2 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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