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TDS u/s 194J OR 194C - design & drawings of the work are prepared by BHEL which is executed by the contractors under the supervision of BHEL - technical services - work by subcontractors - short deduction of tax - Held that:- CIT (A) has rightly observed that the scope of work given to the sub-contractors is for erection, testing, commissioning and trial operation and handing over of boiler units, electrostatic precipitators etc. and these activities involve construction work, welding, erection, alignment, transportation of equipment and materials etc. with the help of men & machines, which cannot be termed as technical services as per the definition given in section 9 of the Act. The ld. CIT (A) correctly stated that the contracts awarded by the assessee are for the Erection/Testing/ Commissioning of Plant & Machinery and are in the nature of carrying out any work including supply of labour for carrying out such work. We take note that the supply of labour to carry out the work/contract involves both skilled & unskilled labour. Further, we take note that for commission of power plant, qualified engineers and skilled manpower along with unskilled labour need to use by the sub-contractors for execution of the contract including testing/trial operations. The nature and scope of the subcontract as rightly held by the ld. CIT (A) was actual execution of work involving the services of technical personnel as well as non-technical personnel. In a turn-key project like commissioning of power plant etc. what the assessee intended to get from its sub-contractor was a physical output, a tangible structure and not merely the services of its qualified engineers/ staff.

CIT (A) has rightly observed that any payment for technical services in order to be covered u/s 194J, should be a consideration for acquiring or using technical know-how provided or made available by human element. The work entrusted for the sub-contractors is part of the contract offered to the assessee by its client and hence the sub-contractors also come in the purview of the Act and the assessee has deducted the tax is u/s 194C from the payments made to it. The amounts paid to sub-contractors is either for erection, installation, fabrication, commissioning, testing & trial operation of some parts of the Power Plant and therefore cannot be termed as technical services as per the definition in Explanation 2 to section 9 (1) (vii).

We also take note that in any case, the sub-contractors have already offered the payments received from the assessee to tax and so the short deduction of tax cannot be demanded from the assessee as per the case law of Hon'ble Supreme Court in Hindustan Coca Cola Beverage (P) Ltd. V. CIT (2007 (8) TMI 12 - SUPREME COURT OF INDIA). - Decided in favour of assessee





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