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2017 (2) TMI 281 - AT - Income TaxTDS u/s 194J or 194C - payments made towards various services rendered by M/s K12 Techno Services Pvt. Ltd. - difference between the TDS deducted and the TDS that ought to have been deducted - assessee in default - Held that - We find that M/s K12 Techno Services Pvt. Ltd has rendered various services to the assessee for the efficient and effective running of the educational institution. The services rendered by M/s K12 Techno Services Pvt. Ltd. are distinguishable from each other and though the recipient of all the payments is a single party the nature of the services are discernible and different. If the contention of the Revenue was to be accepted then why should the TDS be deducted u/s 194J and not u/s 194C for all the payments treating the entire agreement as a work contract?. When the basket of services is filled with different and distinguishable services we are of the opinion that the assessee was correct in adopting different rates of TDS for different types of payments. Even the CBDT circular relied upon by the Ld. DR provided that the all the payments cannot be covered under one section. Therefore in our opinion the Assessing Officer and CIT(A) have erred heard in holding that the assessee ought to have made TDS u/s 19J of the Act on the entire payment to M/s K12 Techno Services Private Limited. - Decided in favour of assessee
Issues:
Interpretation of a composite agreement for TDS deduction under sections 194C and 194J of the Income Tax Act. Analysis: 1. Background and Facts: The case involves an appeal by the assessee against the order of the CIT (A) regarding the deduction of tax at source under section 194J of the Income Tax Act from payments made to M/s K12 Techno Services Pvt. Ltd. The assessee, a society running educational institutions, had entered into an agreement with M/s K12 Techno Services Pvt. Ltd for various services. 2. AO's Observation and Order: The Assessing Officer (AO) concluded that all services provided by M/s K12 Techno Services Pvt. Ltd should be subject to TDS at 10% under section 194J. The AO relied on various decisions to support this view and calculated the shortfall in TDS, treating the assessee as in default under section 201(1) of the Act. 3. Arguments and Counterarguments: The assessee contended that the services rendered were distinguishable and should be subject to varying TDS rates based on the nature of each service. The Revenue argued that the agreement was composite, warranting a uniform TDS rate under section 194J. 4. Tribunal's Decision: After examining the master services agreement and supplement agreement between the parties, the Tribunal found that the services provided were distinct and billed separately based on service types and recipients. The Tribunal noted that the nature of services was clear, and the TDS rates should vary accordingly. It disagreed with the AO and CIT (A) that a uniform 10% TDS rate under section 194J should apply to all services. 5. Legal Precedents: The Tribunal distinguished the decisions cited by the Revenue, emphasizing that they were not directly applicable to the case at hand. The Tribunal highlighted the differences in services provided by the assessee and the cases referenced by the Revenue to support its decision. 6. Conclusion: The Tribunal allowed the assessee's appeal, emphasizing the distinguishable nature of services rendered by M/s K12 Techno Services Pvt. Ltd. It held that the assessee correctly applied varying TDS rates based on the services provided, rejecting the uniform 10% TDS rate proposed by the Revenue. In summary, the Tribunal's judgment focused on the interpretation of a composite agreement for TDS deduction, emphasizing the need to apply varying TDS rates based on the nature of services rendered, rather than a uniform rate.
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