TMI Blog2016 (12) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissal of the appeal would follow in any event. The respondent has not denied that the present case falls under Section 194C. Had the respondent contended that Section 194C is also not applicable, it would have been necessary to consider whether the contract falls within the ambit of Section 194C. As the respondent has accepted that it falls within Section 194C and has complied with its obligations thereunder, we refrain from deciding the issue as to whether it falls within Section 194C. - ITA-242-2016 (O&M) - - - Dated:- 9-12-2016 - MR. S.J. VAZIFDAR AND MR. DEEPAK SIBAL, JJ. For The Appellant : Mr. Yogesh Putney, Advocate For The Respondent : Mr. Piyush Kaushik, Advocate S.J. VAZIFDAR, C.J. (ORAL) This is an appeal against the order of the Income Tax Appellate Tribunal dismissing the appeal filed by the appellant against the order of the Commissioner of Income Tax (Appeals) allowing the respondent/assessee s appeal against the assessment order. This appeal pertains to the assessment year 2012-2013. 2. According to the appellant, the following substantial questions of law arise:- (i) Whether on the facts and in the circumstances of the case, the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of various contracts and deducted tax in respect thereof under Section 194C of the Act. The Assessing Officer found that all the contracts involved the provision of professional and technical services which fall within the ambit of the provisions of Section 194J of the Act and not under Section 194C. The question, therefore, is whether the amounts paid under the contracts constitute fees for professional or technical services attracting Section 194J or whether they constitute payments to contractors attracting the provisions of Section 194C. Both the learned counsel relied upon the provisions of one of the contracts entered into between the respondent and M/s PCP International Limited, Chandigarh, dated 04.12.2009. They stated that the other contracts are identical. We will, therefore, refer to that contract alone in this judgement. 5. Sections 194C and 194J in so far as they are relevant read as under:- Payments to contractors. 194-C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pient of the amounts paid by the respondent had already paid tax at the highest rate. 7. The Assessing officer held as follows: The contracts were not only for the erection and installation work, but also for the commissioning, testing and trial operation of the various equipments and other related machinery and that under the terms of the contract it is the duty of the contractor to provide all types of labour, supervisors, engineers, inspectors, measuring and testing equipments, testing and commissioning for the execution of the project as per the specifications of the respondent. Under clause 38.1 of the Special Conditions of Contract, the contractor was to deploy all the skilled workmen to carry out the work as per the specifications. Therefore, the contractors were required to employ qualified engineers and highly skilled manpower to execute certain activities so as to provide fault-free services to the respondent. The contractors were, therefore, providing technical services to the respondent which attract the provisions of Section 194J. This conclusion was in view of the provisions of the contract which require testing, trial operation and commissioning. The nature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 194J. If the contract also does not fall under Section 194C, there would be no liability on the part of the respondent to deduct tax at source at all. The respondent has, however, not contended that the contract does not fall within Section 194C. It would be appropriate, therefore, to first examine whether the contract falls within Section 194J. In our view it does not. 10. Before referring to the clauses in the contracts entered into between the respondent and the contractors relied upon by Mr. Putney in support of his contention that it falls within the ambit of Section 194J, it is necessary to refer to some of the other provisions thereof as well. The various contracts entered into between the respondent and the contractors are identical. Clause 1 provides that the contractors are to execute the work of erection, testing, commissioning and trial operation of power cycle piping, boiler and LP piping packages for units in Haryana and in accordance with and subject to the terms and conditions contained in the contract and the document incorporated therein such as the instructions to tenderers, General Conditions of Contract and Special Conditions. Clause 5 provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t trial operation of the equipment in accordance with their obligations under the contract. Once that is seen, it is clear that the reliance upon the terms and conditions on behalf of the appellant to contend to the contrary is not well founded. 13. Mr. Putney firstly relied upon the following clause:- 4. M/s PCP confirmed that the manpower deployment plan submitted by them alongwith the offer and subsequently vide letter No.PCP/TND/960 dated 26.06.2009 is tentative and reconfirmed that the adequate manpower including supervisors will be deployed at site for timely completion of work. BHEL further pointed out that manpower and Qualified Supervisors for BHEL s use as per clause no. 56.2 of the NIT have not been included in their deployment plan. M/s PCP confirmed that they will deploy manpower as per clause No. 56.2 free of cost exclusively for BHEL s services. Further, M/s PCP has also confirmed that they will be deploying additional manpower, if required at no extra cost to BHEL, for timely completion of work. 14. The deployment of manpower is precisely for the purposes stated in clause 4, namely, for timely completion of work . The work is the erection, testing, commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall deploy all the skilled workmen like millwright fitters, welders, crane-operators, drivers, gas cutters, riggers, sarangs, masons, carpenters, electricians, helpers and instrument technicians to carry out the works as per specifications. In addition to skilled, semi-skilled and unskilled workmen required for all the works, suitable workmen required for handling and transporting of equipment from site storage to erection site, erection, testing and commissioning as contemplating under this specification shall be deployed. Only fully trained and competent men with previous experience on the job shall be employed. They shall hold valid certificates wherever necessary. BHEL reserves the right to decide on the suitability of the workers and other personnel who will be deployed by the contractor. BHEL reserves the right to insist on removal of any employee/workman of the contractor at any time, if they find him unsuitable. The contractor shall remove him forthwith. 39.2 The supervisory staff including qualified Engineers deployed by the contractor shall ensure proper out-turn of work and discipline on the part of the labour put on the job by the contractor. They should in gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under a contract for the supply of services/technical services, but to ensure the due and proper execution of the work by the contractor. 20. Mr. Putney then relied upon clauses 46.4, 46.13, 46.16 and 46.18 which read as under:- 46.0 TESTING, PRE-COMMISSIONING, COMMISSIONING AND POST-COMMISSIONING. 46.4 The contractor shall make all necessary arrangements including making of temporary closures on piping/equipment for carrying out the hydro-static testing on all piping equipment covered in the specification at no additional cost. The contractor shall carry out the required test on the pipelines such as Hydraulic Test (as per IBR requirement/instruction of BHEL), of various piping systems, Ultrasonic Test for weld defects and finding thickness, Dye penetrant test, Magnetic particles test for Weld defects and materials defects etc. All facilities (manpower, materials, equipment, consumables etc.) including proper approaches wherever required shall be provided by the contractor for satisfactory conduction of above test. Special equipment such as magnetic particle tester, Metelascope for analysis of weld material of T/P-91 pipings, ultrasonic test kit and engineers required fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, but for and on behalf of the contractor itself with a view to ensuring that the contractor has supplied the equipment as per the contractual specifications. Everything done in this regard is to this end and not to supply technical services to the customer. 22. The contract entered into between the respondent and each of the contractors, therefore, did not involve the supply of professional or technical services at least within the meaning of Section 194J. The consideration paid under the contracts, therefore, was not for the professional or technical services rendered by the contractors to the respondent. Section 194J is, therefore, not applicable to the present case. 23. It is not necessary to consider Mr. Putney s submission that the contracts do not fall under Section 194C. The submission if accepted would be self destructive of the Revenue for then the assessee would not have been liable to deduct tax at source at all and would, therefore, be entitled to a refund. As we mentioned earlier, Section 194J is not a residuary clause. In other words, it is not that if a contract does not fall within the ambit of Section 194C, it must be deemed to fall within the ambit of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch case was made out even before us at the hearing of this appeal. The case before us merely requires a construction of the contract. The extent of human intervention that was relied upon by the department is based on the provisions of the contract itself. Based on these provisions, it was contended that the human intervention contemplated under the contract constituted the consideration payable thereunder to be for professional and technical services. On the other hand, before the Supreme Court, the case was entirely different as noted in paragraph 6 of the judgement itself. As observed by the Supreme Court, in that case there was no expert evidence to show how human intervention takes place particularly during the process when the calls take place from one place to another. The illustration furnished by the Supreme Court was where Bharat Sanchar Nigam Limited (BSNL) has no network in Nainital, whereas it had a network in Delhi. The inter-connect agreement enables M/s Bharti Cellular Limited to access the network of the BSNL in Nainital and the same situation can arise vice-versa in the given case. The issue as to whether during such calls there is any manual intervention was one ..... X X X X Extracts X X X X X X X X Extracts X X X X
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