TaxTMI 
TaxTMI 
2019 (10) TMI 1028
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of TDS & correct head of deduction. The correct Head of deduction is 194C in which rate of deduction was 2% while the Ld. Officer considered incorrect head u/s 194J in which rate of deduction taken @10% & sustained the order of DCIT(TDS) Indore which is bad in law unjustified and unwarranted should be deleted. 2. The Ld. CIT(A)-I erred in dismissed grounds of appeal No.2 of CIT appeal for the correct head of section is 194C for deduction of TDS under contractual arrangements for operation & maintenance of machines while CIT(A)-I fails to accept the correct provision of the Income Tax Act, 1961 & applied incorrect head of deduction of TDS for payment of professional & Technical services u/s 194J & sustained the order of DCIT (TDS) Indore which is wrong and justified. 3. The Ld. CIT(A)-I erred in dismissed grounds of appeal No.3 of CIT appeal for computing the correct TDS u/s 206C on sale of scrap of Rs. 21,36,296/- of all the four quarters for F.Y. 2012-13 on which correct TCS collected & deposited in time and the rate of collection of TCS was @1% of Rs. 21,36,296/- & wrong demand created u/s 206C(6A) & 206C(7) & sustained the order of DCIT(TDS) Indore which is....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or make any additional grounds of appeal as and when necessary. ITA No.103/Ind/2018 for Assessment Year 2015-16 1. The Ld. CIT(A-I erred in dismissed grounds of appeal No.1 of CIT appeal for applying rate of deduction of TDS u/s 201(1) & 201(1A) by applying incorrect rate of deduction of TDS & correct head of deduction. The correct Head of deduction is 194C in which rate of deduction was 2% while the Ld. Officer considered incorrect head u/s 194J in which rate of deduction taken @10% & sustained the order of DCIT(TDS) Indore which is bad in law unjustified and unwarranted should be deleted. 2. The Ld. CIT(A)-I erred in dismissed grounds of appeal No.2 of CIT appeal for the correct head of section is 194C for deduction of TDS under contractual arrangements for operation & maintenance of machines while CIT(A)-I fails to accept the correct provision of the Income Tax Act, 1961 & applied incorrect head of deduction of TDS for payment of professional & Technical services u/s 194J & sustained the order of DCIT (TDS) Indore which is wrong and justified. 3. The Ld. CIT(A)-I erred in dismissed grounds of appeal No.3 of CIT appeal for overlooking the facts and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....panies, the assessee filed an appeal before the ld. CIT(A) but could not succeed. 9. Now the assessee is in appeal raising common issue for A.Y. 2013- 14 to A.Y. 2015-16. Ld. counsel for the assessee took us through the provisions of u/s 194C & 194J of the Act and also made distinction between both sections with regard to the nature of payment, role of payee and final outcome. He further submitted that the task of operation and maintenance of windmill is carried out by employing skilled labours. The assessee i.e. customer has not seeked any technical service or advice from alleged four payees. Referring to the decision of Ahmedabad Tribunal in the case of Gujarat State Electricity Corpn. Ltd. vs. ITO (2004) 3 SOT 468 (Ahd.), it was contended that when there is a composite contract for operation and maintenance, it would come within the ambit of under section 194C of the Act and not u/s 194J of the Act. Reliance was also placed on the decision of I.T.A.T., Pune Bench in the case of Bharat Forge Ltd. vs. Additional Commissioner of Income Tax (2013) 36 taxmann.com 574 (Pune-Trib) and the Decision of Delhi Tribunal the case of DCIT Vs. Parasrampuria Synthetics Ltd. 20 SOT 248. Placi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 10. We have carefully considered the submissions made by the learned representatives of the parties and have gone through the orders of the learned Departmental Authorities. We have also gone through all the judgments cited by the learned representatives. 11. The operation and maintenance agreement executed between GSECL (appellant-company) and GEB on 14th Oct., 1998, relates to operation and maintenance of 200MW, Gandhinagar unit-5. The said agreement has been executed for a period of 30 years commencing on the effective date. The operating periods covered by the said agreement have been classified as Period I which commenced from the date of start of trial operation upto the start of commercial operation. The period II shall commence from the date of the start of the commercial operation of the plant and shall terminate on the expiry of the term of 30 years of this agreement, The period I commenced from 17th March, 1998, and continued till 10th Oct., 1998. The period II commenced from 10th Oct., 1998, and will remain in force for the entire term of 30 years from the effective date of this agreement. GEB has been described as "The operator" in the said agreement t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance issues. (iv) maintain record of quantity and quality of fuel received from the fuel supplier. (v) maintain record of quantity and quality of water received from Gujarat Electricity Board. (vi) advise the owner on taking appropriate insurance policies and make arrangement for the same. (vii) maintain record and data required to be maintained under the PPA. (viii) maintain the premises and the facility in good condition, except for reasonable wear and tear which does not adversely affect the efficient or proper utilisation thereof, including paining, or cleaning the exterior of the facility and make all authorised repairs and replacement. (ix) maintain all fire protection and safety equipment, (x) anti-erosion measures, maintain landscaping in good condition. (xi) hire, train, administer, supervise the workforce necessary to perform operation, maintenance and inspection work. (xii) keep the owner apprised of the operator's negotiations with the unions representing the operator's work force. (xiii) provide all personnel, services, vendor contracts, tools, equipment and materials, und....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., dt. 5th July, 1976. Para 16.3 of the said Circular is published at pp. 624 and 625 of Income-tax Law By Chaturvedi & Pithisaria, Vol-I, is reproduced below : "16.3 The expression "fees for technical services" has been defined to mean any consideration (including any lump sum consideration) for the rendering of managerial, technical or consultancy services, including the provision of services of technical or other personnel. It, however, does not include fees of the following types, namely : (i) Any consideration received for any construction, assembly, mining or like project undertaken by the recipient. Such consideration has been excluded from the definition on the ground that such activities virtually amount to carrying on business in India for which considerable expenditure will have to be incurred by a non-resident and accordingly it will not be fair to tax such consideration in the hands of a foreign company on gross basis or to restrict the expenditure incurred for earning the same to 20 per cent of the gross amount as provided in new Section 44AD of the IT Act. Consideration for any construction, assembly, mining or like project will, therefore, be charge....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... fees for professional services as contemplated in Section 194J. 14. It may now be relevant to reproduce main part of Section 194C of the Act; "194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out of a contract between the contractor and : (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central', State or Provincial Act; or (d) any company; or.......... shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to : (i) one per cent in case of advertising, (ii) in any other case two per cent, of such sum as income tax on income comprised therein." The Hon'ble apex Court has explained the meaning and scope of Section 194C in the case of Associated Cement Co. Ltd. v. CIT (supra) as under, at p. 440 : "We see no reason to curtail or to cut down the meaning o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wledge services are rendered to the assessee. In such a case, i t can not b e said t hat the amount is paid as 'fees for technical services'. Rendering services by using technical knowledge or skill is different than charging fees for technical services. In a latter case, the technical services are made available due to which the assessee acquired certain right which can be further used. In the present case, it is not so. The persons rendering certain services has only maintained machinery or converted yarn but that knowledge is not now vested with the assessee by which itself it can do research work. In the circumstances, the amount paid cannot be considered as fees for technical services within the meaning of s. 194J of the Act". 15. From going through the facts of the instant case, in the light of the above decisions as well as the provisions of law is provided u/s 194C & 194J of the Act, we are of the considered view that the alleged payment made for "operation & maintenance" of the wind mills paid by the assessee company to various payees was under a composite contract and the deduction of tax on such payment was required to be made u/s 194C of the Act @ 2%. The rev....