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2018 (3) TMI 300

ovisions of section 9 of the Act? - Held that:- Mere use of machinery or human intervention by the sub contractor are the decisive factors to decide the issue against the AO. We also hold that each and every payment for the contracts would not be for professional or technical services rendered by the contractor to the assessee as per the provisions of section 194J of the Act. The Hon’ble High Court in Bharat Heavy Electrical Ltd [2016 (12) TMI 955 - PUNJAB AND HARYANA HIGH COURT] has also held that Section 194J of the Act was not a residuary clause, that in other words, it was not that if a contract did not fall within the ambit of section 194C, it must be deemed to fall within the ambit of section 194J, that Sections 194C and 194J were independent provisions. - We find that there was no direct and Livelink between the payment and receipt/use of technical services/information. In our opinion the AR head rightly argued that technical services would not include services provided by the machines. In the case of Parsurampuria Synthetic Ltd. (2007 (11) TMI 436 - ITAT DELHI), the tribunal has held that there might be use of services of technically qualified person to render the servi .....

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the manufacture of organic manure/compost and disposal of the residue, that CBDT Circular No. 715, dtd. 08/08/1995, dealt with payments made towards advertisements and did not lay down any general Rule that section 194C would be applicable in all cases, that the assessee had outsourced a part of the composite contract which required technical expertise, that the assessee had to deduct tax as per the provisions of section 194J of the Act. Accordingly he worked out TDS at ₹ 54. 18 lakhs for the period of 01/04 2011 to 31/3/2012 and charged interest u/s. 201(1A) amounting to ₹ 12. 84 lakhs resulting in a demand of ₹ 66. 03 lakhs. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA)and made detailed submissions. It also relied upon certain case laws. After considering the available material, he held that the basic issue to be decided was as to whether the contract between the assessee and UEEL was a work contract or a service contract. He referred to the case of Bharti Cellular Ltd. (319ITR139)and held that word techni -cal services had to be read in narrower sense, that the words technical services in sectio .....

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(1)of the Act. He also held that interest chargeable u/s. 201(1A) would be applicable till the date of payment of taxes by UEEL. 4. During the course of hearing before us, the Authorised Representative(AR)stated that the assessee was not supplying any of the services of technical nature, that the services provided by it fell under works-contract. He referred to cases of Ruby Maacons Ltd. (ITA 4056/ Mum/ 2008-AY. 2006-07, dtd. 11/6/2010), Senior Manager (Fin. ), Bharat Heavy Electricals Ltd. (390 ITR322), Gujarat Flurochemicals Ltd. (ITA/1956-8/Ahd/2012/), and Parsurampuria Synthetics Pvt. Ltd. (20SOT248). He further argued that the sub-contractor might be using technical help, that the assessee was not carrying out any technical service, that the sub contractor was not imparting technical knowledge to the assessee, that from Municipal Corporation the assessee got the contract, that it sub contracted the job (Pg-132 of the PB), that the work done by the assessee was for service contract. The Departmental Representative (DR)supported the order of the revenue authorities and stated that contract was for managing of solid waste, that technical people were involved in the whole process, .....

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4C. The AO held that the contracts were not only for the erection and installation work, but also for the commissioning, testing and trial operation of the various equipment and other related machinery and that under the terms of the contract it was the duty of the contractor to provide all types of labour, supervisors, engineers, inspectors, measuring and testing equipment, testing and commissioning for the execution of the project in accordance with the specifica - tions of the assessee. He held that the level of human intervention was high and sophisticated and accordingly held the assessee in default under section 201(1A) for having failed to deduct the tax at source and invoked the provisions of sections 200 and 201 read with rule 30 of the Income-tax Rules, 1962. The FAA held that the scope of the work given to the sub-contractors involved construction work, welding, erection, alignment, transportation of equipment and materials with the help of machines which did not fall within the scope of technical services as defined in Explanation 2 to section 9(1)(vii). He also held that merely because technical personnel were employed in the execution of the contract it did not follow .....

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plan providing a standard facility and if any workforce is involved in maintaining the standard facility it cannot be said that a special scheme/knowledge was passed on by individuals to assessee in view of a specified fee. Such being the case, we are of the considered opinion that it cannot be considered as a payment in form of fee for technical services. We find that there was no direct and Livelink between the payment and receipt/use of technical services/information. In our opinion the AR head rightly argued that technical services would not include services provided by the machines. In the case of Parsurampuria Synthetic Ltd. (supra), the tribunal has held that there might be use of services of technically qualified person to render the services, that same would not bring the amount paid as fee for technical services within the meaning of explanation 2 to section 9 (1) (vii)of the Act. Accordingly, we hold that payment made by the assessee to UEEL for exhibiting the work contract would fall within the provisions of section 194C of the Act and not under the section 194 J. Effective ground of appeal is decided in favour of the assessee. As a result, appeal filed by the assessee .....

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