2017 (1) TMI 664 - AT - Income Tax

Assessee's Payment for Contractual Work

Income Tax Officer (TDS) Versus Mandke Foundation, (Kokilaben Dhirubhai Ambani Hospital)

The Tribunal held that payments made by the assessee to various entities were for contractual work and not for professional or technical services. ... TDS u/s 194C OR 194J - whether work is of nature of professional or technical services - services provided by highly skilled / technical professionals - supply and installation of HT and LT electrical installation equipments - expenses incurred in respect of advertisement - production/designing of Artwork - services for effective and smooth working of the hospital - electrical installation and AMC thereof - Held that:- No infirmity in the well reasoned order passed by the ld. CIT(A) which we are not inclined to interfere , hence, we hereby hold that the payments made by the assessee to the vendors for the assesses’ work executed by these vendors were towards contractual payment for work done by these vendors as specified in the preceding para’s , and not towards fee for acquiring technical services or professional services as per mandate of Section 194J of the Act, and the assessee has rightly deducted tax at source in respect of above payments under section 194C of the Act .We order accordingly. Issues Involved:1. Whether the payments made to M/s. Pravin Electricals Pvt. Ltd. fall under Section 194C or Section 194J of the Income-tax Act, 1961.2. Whether the payments made to M/s. Brandtherapist fall under Section 194C or Section 194J of the Income-tax Act, 1961.3. Whether the payments made to M/s. Absotherm Facility Management Pvt. Ltd. fall under Section 194C or Section 194J of the Income-tax Act, 1961.4. Whether the payments made to M/s. Blue Star Ltd. fall under Section 194C or Section 194J of the Income-tax Act, 1961.5. Whether the payments made to M/s. Lift Schindler India Pvt. Ltd. fall under Section 194C or Section 194J of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Payments to M/s. Pravin Electricals Pvt. Ltd.:The Assessing Officer (AO) observed that the services provided by M/s. Pravin Electricals Pvt. Ltd. involved technical expertise and thus should be subjected to TDS under Section 194J of the Income-tax Act, 1961. The assessee argued that these payments were for works contracts involving supply and installation of electrical equipment, falling under Section 194C. The CIT(A) and the Tribunal upheld the assessee’s contention, noting that the services did not constitute professional or technical services under Section 194J but were contractual in nature under Section 194C.2. Payments to M/s. Brandtherapist:The AO held that the payments for production/designing of artwork by M/s. Brandtherapist, a division of Mudra Communications Pvt. Ltd., were professional/technical services covered under Section 194J. However, the assessee contended that these were advertisement contracts falling under Section 194C. The CIT(A) and the Tribunal agreed with the assessee, emphasizing that these services were not technical in nature and thus correctly subjected to TDS under Section 194C.3. Payments to M/s. Absotherm Facility Management Pvt. Ltd.:The AO considered the payments to M/s. Absotherm Facility Management Pvt. Ltd. for operation and maintenance services as technical/professional services under Section 194J. The assessee argued that these were routine maintenance services falling under Section 194C. The CIT(A) and the Tribunal upheld the assessee’s view, noting that the services were part of a works contract and did not involve any technical knowledge transfer, thus falling under Section 194C.4. Payments to M/s. Blue Star Ltd.:The AO held that the payments for annual maintenance and installation of HVAC systems by M/s. Blue Star Ltd. were technical/professional services under Section 194J. The assessee contended that these were works contracts under Section 194C. The CIT(A) and the Tribunal agreed with the assessee, stating that the services were part of a works contract and did not involve technical expertise that would necessitate TDS under Section 194J.5. Payments to M/s. Lift Schindler India Pvt. Ltd.:The AO observed that the services for maintenance of lifts and AMC for Lobby Vision by M/s. Lift Schindler India Pvt. Ltd. were technical/professional services under Section 194J. The assessee argued that these were works contracts under Section 194C. The CIT(A) and the Tribunal upheld the assessee’s position, noting that the services were contractual in nature and did not involve technical expertise under Section 194J.Conclusion:The Tribunal concluded that the payments made by the assessee to the aforementioned parties were contractual payments for work done and not for professional or technical services. Therefore, the assessee correctly deducted tax at source under Section 194C of the Income-tax Act, 1961, and there was no additional TDS liability under Section 194J. The appeal filed by the Revenue was dismissed.