Windmill operation and maintenance charges attract TDS under section 194C not section 194J

The ITAT Rajkot held that payments for operation and maintenance charges and AMC charges for windmill services attract TDS under section 194C rather than section 194J. The tribunal examined the contract terms which involved greasing bearings, spare repairs/replacement, breakdown repairs, and equipment painting. These services were determined to be primarily operational and maintenance in nature rather than technical services. The decision followed precedents from ITAT Pune in Bharat Forge Ltd and ITAT Mumbai in Asian Heart Institute Research Centre, both establishing that maintenance payments fall under section 194C provisions.

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Issues involved:
1. Whether the tax should be deducted under section 194J or section 194C of the Income Tax Act for payments made to M/s Suzlon Group Companies.
2. Whether the delay in filing the appeal should be condoned.
3. Whether the CIT(A) erred in confirming the order passed by the AO under section 201(1) r.w.s. 201(1A) of the Act.
4. Whether the CIT(A) failed to follow the CBDT Circular, binding precedents, and decisions of the ITAT, Ahmedabad.

Issue-wise detailed analysis:

1. Tax Deduction under Section 194J vs. Section 194C:

The primary issue in both assessment years (2014-15 and 2015-16) was whether the payments made by the assessee to M/s Suzlon Group Companies for operation and maintenance services should be subject to tax deduction under section 194J (fees for technical services) or section 194C (contractual services) of the Income Tax Act.

The AO observed that the payments were for technical services and should be taxed under section 194J. The CIT(A) upheld this view, noting that the invoices clearly indicated payments for technical services. However, the assessee argued that the services provided were routine maintenance and upkeep, which should fall under section 194C.

Upon reviewing the agreements, the Tribunal noted that the services included routine maintenance tasks such as blade cleaning, transformer oil filtration, and site maintenance, which are primarily contractual in nature. The Tribunal also referenced several judicial precedents where similar services were held to fall under section 194C. Consequently, the Tribunal concluded that the payments should be taxed under section 194C and not section 194J.

2. Delay in Filing the Appeal:

The appeal was time-barred by 298 days. The assessee's counsel argued that the delay was due to the COVID-19 pandemic, which led to nationwide lockdowns and extended limitation periods as per the Supreme Court's orders in Cognizance for Extension of Limitation cases. The Tribunal accepted this explanation and condoned the delay, noting that the delay fell within the extended period allowed due to the pandemic.

3. CIT(A)'s Confirmation of AO's Order:

The CIT(A) had confirmed the AO's order, treating the assessee as in default and demanding differential tax with interest under section 201(1) r.w.s. 201(1A). The Tribunal, however, found that the CIT(A) erred in this confirmation. The Tribunal's detailed analysis of the agreements and judicial precedents led to the conclusion that the payments were rightly covered under section 194C, thus invalidating the AO's and CIT(A)'s stance on the short deduction of tax.

4. CIT(A)'s Adherence to CBDT Circulars and Precedents:

The assessee contended that the CIT(A) failed to follow the CBDT Circulars and binding judicial precedents, particularly the decisions of the ITAT, Ahmedabad, which were applicable to the issue. The Tribunal agreed with the assessee, noting that the CIT(A) did not adequately consider these precedents and circulars, which supported the assessee's position that the payments were for contractual services under section 194C.

Conclusion:

The Tribunal allowed the appeals for both assessment years (2014-15 and 2015-16), ruling that the payments made to M/s Suzlon Group Companies were subject to tax deduction under section 194C and not section 194J. The Tribunal also condoned the delay in filing the appeals due to the COVID-19 pandemic. The orders passed by the lower authorities were quashed and set aside.

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