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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 ..... 94C. Departmental Representative could not point out that how the services are different from the nature of services considered before the Hon’ble High Court. No other contrary decision was also pointed out before us. - Decided in favour of assessee. - ITA No. 2922 to 2924/Del/2016 - - - Dated:- 20-2-2018 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Shri Piyush Kaushik, Adv Shri KVSR Krishna, CA Shri Niresh Garg, Adv Shri Aman Goel, FCA For The Revenue : Shri Gudrun Mehar, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 1. These three appeals are preferred by the assessee against the common order of the Ld. Commissioner of Income Tax (Appeals) I, Noida for assessment year 2012-13 to 2014-15 confirming the order of the Ld. ACIT(TDS) passed u/s 201(1) and 201(1A) of the Income Tax Act on 15/01/2015. 2. At the time of the hearing of the appeal the Ld. authorised representative submitted that he does not want to press appeal for assessment year 2012 13. In view of this ITA No. 2922/Del/2016 is dismissed. 3. Coming to the appeal of the assessee for assessment year 2013-14 in ITA No. 2923/del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cause as to why tax deduction at source should not have been made at the rate of 10% under section 194J of the Income Tax Act. 7. In response to the show cause notice assessee filed its reply on 15/12/2014 stating that above services are falling under the provisions of section 194C of The Income Tax Act and tax is not required to be deducted under provisions of section 194J of the Act. With respect to the erection and installation services it was stated that it has been specifically excluded from the definition of fees for technical services under section 9 of the income tax act as it is involving construction, assembly, mining, like project undertaken. 8. The Ld. assessing officer considered the explanation of the assessee and held that the testing etc is a complex work that involved testing of various components from the commencement of structure system or component to ensure that the construction is the of the appropriate quality and the equipment is in a fit state for commissioning to be started. Therefore, services of testing and commissioning is specialised technical work performed by the technically competent manpower and therefore they are fees for technical servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C of the Act. He further referred to the para No. 7 of that particular order wherein the activities for which the payment was made in that case was discussed. He submitted that the services availed by the assessee are exactly the same. He further referred to the para No. 21-23 of that particular order wherein it has been held that the services are not covered under the provisions of section 194J of the income tax act. In view of this, he submitted that the issue is squarely covered in favour of the assessee by that decision. 11. The Ld. departmental representative vehemently supported the orders of the lower authorities. She submitted that the commissioning and testing services falls within the provisions of section 194J of the Act and not under section 194C of the Act because of the reason that the services are highly technical. She further referred to the provisions of section 9 where the fees for technical services are defined to show that the services received by the assessee are falling under that category. 12. We have carefully considered the rival contention and also perused the orders of the lower authorities. In the present case the issue involved is whether on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and trial operation and handing over of boiler units, electrostatic precipitators etc which involved construction work, welding, erection, alignment, transportation of equipment and materials with the help of machines which did not fall within the scope of technical services as defined in Explanation 2 to section 9(1)(vii) of the Act. The services of qualified engineers and skilled manpower were utilized for this purpose which was inevitable. What the respondent was to get from the contractor was a physical output, the tangible structure and not merely the services of the qualified engineers/staff. The word merely appears to be inadvertent. What was meant is that the services were required in connection with the works contract. Merely because technical personnel are employed in the execution of the contract it does not follow that the contract is one for technical services. The Commissioner of Income-ax (Appeals) also held in favour of the respondent on the alternative contention. The Tribunal in effect confirmed these findings. 9. Mr. Putney, learned counsel appearing on behalf of the appellant, firstly sought to demonstrate that the contract falls within the ambit of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executing the work, namely, the work of erection, testing, commissioning and trial operation. In other words, their services were not engaged per se for the benefit of the respondent. They were in fact engaged by the con tractor itself for its own benefit for executing the contract as required by the terms and conditions thereof. 11. The special conditions of contract are also relevant. They also enumerate the list of major tools and plants to be provided by the contractor at its own cost. There is no reference to the contract being for one of providing technical services. There is a detailed reference in clause 40 which again enumerates the equipment that is to be supplied. There is no similar clause in respect of the deployment of technical personnel. There is a similar schedule for the deployment of manpower as the one under the general conditions of contract. Clause 46 of the special conditions contains detailed provisions regarding the testing, pre-commissioning, commissioning and postcommissioning in respect of the equipment to be supplied. Mr. Putney had relied upon clause 46.13 which we will refer to later while dealing with his submissions. 12. The contract re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , stacking, storing, erecting, testing and commissioning of the equip ment to the entire satisfaction of BHEL. Thus, the supply of labour, material and equipment is for the satis factory site transportation, handling, stacking, storing, erecting, testing and commissioning of the equipment to the respondent's satisfaction. In other words, the labour, employees, tools and tackles are not supplied under the contract, but for the purpose of executing the contract as per the contrac tual stipulations. 16. Mr. Putney then relied upon clause 27.4 which reads as under : '27.4 All electrical equipment, connections and wiring for construc tion power, it's distribution and use shall conform to the requirements of the Indian Electricity Act and Rules. Only electricians licensed by the appropriate statutory authority shall be employed by the contrac tor to carry out all types of electrical works. All electrical appliances including portable electric tools used by contractor shall have safe plugging system to source of power and be appropriately earthed. 17. He relied upon the provision that only electricians with certain qualifications and licences shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el-2 NDT Engineers and Welding Engineers exclusively for the welding works envisaged under the package works. 19. By clause 39.1, the respondent required the contractor to deploy skilled workmen and technicians not under a contract for the supply of technical services, but, as the clause itself states, to carry out the works as per the specifications . The contractor was bound to carry out the work as per the specifications to safeguard against any defective work and to ensure that the work is of the requisite quality. The respondent was entitled to insist upon the contractor carrying it out in the correct manner which would include the work of the contractor itself being done and supervised by qualified personnel. By clause 39. 2, the respondent required the contractor to depute supervisory staff including qualified engineers not under a contract for the supply of such staff, but as stated in the clause itself by ensuring 'proper out-turn of work and discipline on the part of the labour put on the job by the contractor'. The clause also required the contractor's supervisory staff to ensure that the work is carried out in a proper manner and in co-ordi nation wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed by the contractor. 46.16 During this period though the BHEL's/client's staff will also be associated in the work, the contractor's responsibility will be to arrange for the complete requirement of supervision, consumables, labour, T and P and IMTEs required till such time the commissioned units are taken over by the BHEL's customer. 46.18 It shall be the responsibility of the contractor to provide workmen of various categories in sufficient numbers along with Engi neers/Supervisors including necessary consumables, T and P, IMTEs etc. during pre-commissioning, commissioning and post commis sioning period to assist in commissioning of equipment and attending any problem in equipment erected by the contractor till handing over. The rates quoted shall include all these contingencies also. Association of BHEL's/Client's staff during above period will not absolve contractor from above responsibilities. 21. These are usual clauses in such contracts. The testing, precommissioning, commissioning and post-commissioning are required to be carried out by a contractor to satisfy the customer that the work has been executed in a proper manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereunder, we refrain from deciding the issue as to whether it falls within section 194C. 13. The Ld. Departmental Representative could not point out that how the services are different from the nature of services considered before the Hon ble High Court. No other contrary decision was also pointed out before us. In view of this respectfully following the decision of the Hon ble Punjab and Haryana High Court in 390 ITR 322 we reverse the finding of the lower authorities and cancel order passed by the Ld. assessing officer under section 201 (1) and section 201 (1A) for Assessment Year 2013-14. In view of this ground No. 2 of the appeal of the assessee is allowed. 14. In the result appeal of the assessee in ITA No. 2923/Del/2016 for assessment year 2013 14 is partly allowed. 15. The assessee has raised identical grounds of appeal in ITA No. 2924/Del/2016 for assessment year 2014 15. 16. The assessee has submitted that ground No. 1 is general in nature and further ground No. 3 6 assessee does not want to press. Therefore all these grounds are dismissed. 17. This leaves us with the only 2nd ground of appeal wherein the assessee is aggrieved by the order of the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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