TMI Blog2017 (10) TMI 1441X X X X Extracts X X X X X X X X Extracts X X X X ..... fessional engineers/staff. The contract between the two parties is for work which clearly satisfies the provisions of section 194C and does not by any stretch of imagination attract the provisions of section 194J In any case, the sub-contractor has already offered the payments received from the appellant tax. as per the evidence furnished by the AR. As per section 191 of the Act. A person shall be treated as assessee in default only when (i) he does not deduct tax at source as required under the Act from the payments made to the assessee: and (ii) the assessee has also failed to pay such tax directly. In view of the above, the appellant cannot be deemed as an assessee in default and the disputed short deduction of tax cannot be demanded from the appellant as per the case law of Hon’ble Supreme Court in Hindustan Coca Cola Beverages (P.) Ltd. V. CIT. [2007(8) TMI 12 Supreme Court]. This ratio has also been inserted subsequently w.e.f. 01.07.2012 as proviso to section 201 (I) of the Act. We confirm the finding of the Id CIT(A) that tax on such payment to subcontractor was required to be deducted 194C of the Act and same was complied with by the assessee. Therefore, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act by passing orders u/s 201 and 201(l A) on 11.03.2013. Assessee challenged the same before the Id CIT(A) who vide order dated 10.03.2014 held that tax has rightly been deducted u/s 194C of the Act. He further held that in any case the tax has already been paid by the subcontractor therefore same cannot be recovered from the assessee. 3. The revenue aggrieved with the order of the Id CIT(A) has preferred appeal before us. 4. The Authorised Representative vehemently supported the order of the Id Assessing Officer. Despite notice none appeared before us for assessee and therefore the issue is decided on the merits of the case. 5. We have carefully considered the rival contentions and also perused the order of the Id CIT(A) who decided the issue as under:- The submissions made by the AR before me in this regard are as under: - 4. 1 Section 194J mandates deduction of tax at 10% in respect of payments made towards fee for technical services . Technical services has been defined in Explanation 2 to clause (vii) of sub-section (l) of section 9 as under:- Explanation 2 - for the purpose of the clause, fees for technical services means any consideration (inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of section 194C and does not by any stretch of imagination attract the provisions of section 194J and the appellant's case is squarely covered by the decision of Hon'ble ITAT Ahmedabad Bench in Gujrat State Electricity Corporation Ltd. vs ITO [2004] 82 TTJ 456 (T.AHD). 4.3 The sub-contractor M/S IOT Engineering Project Ltd. has already offered the payments received from the appellant to tax, as per the certificate and copy definition in section 194J. The amount paid to the vendors are either for erection, installation, fabrication and commissioning of some parts of the Power Plant and hence cannot be claimed as technical services as per the definition of Technical Services . The definition of Technical Services has specifically kept the following activities out of the purview of technical services: (i) Construction (ii) Assembly (iii) Mining (iv) Other similar project In the instant case, the appellant is executing a works contract (Thermal Power Plant) for its customer. This involves men, machinery, material and other tangible and intangible in goods. For the construction of a Thermal Power Plant. the services of technical personnel includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he head salaries . This shows that construction activity has been kept out of the purview of section 194J. 5.1 As per section 194C of the Act, any person responsible for paying any sum to any resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall deduct and deposit TDS at the specified rates and sum. As per clause (iv) (e) of Explanation to section 194C, Work shall include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer. The scope of the work given to sub-contractor is construction work for grounding including straightening, cutting etc., material receipt from contractors stores or unloading in the site, transporting to preassembly/erection site. erection. alignment. welding, test inspection etc.. illumination and communication work etc. These activities are undertaken with the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clude 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 chargeable to tax on net basis. i.e. after allowing deduction in respect of costs and expenditure incurred for earning the same and charged to tax at the rates applicable to the ordinary income of the non-resident as specified in the relevant Finance Act. (ii) Consideration which will be chargeable to tax in the hands of the recipient under the head Salaries . 13. It is clear from the aforesaid circular that the expression fees for technical services dose not includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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. (Supra) as under at p.440. We see no reason to curtail or to cut down the meaning of the plain words used in the section. Any work means any work and not a works contract , which has a special connotation in the tax law. Indeed, in the sub-section, the work referred to therein expressly includes supply of labour to carry out a work. It is a clear indication of the Legislature that the work in the subsection is not intended to be confined to or restricted to works contract . Work envisaged in the sub-section, therefore, has a wide import and covers any work which one or the other of organisations specified in the sub-section can get carried out through a contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant and applicable to the facts of the appellant. 5.4 in any case, the sub-contractor has already offered the payments received from the appellant tax. as per the evidence furnished by the AR. As per section 191 of the Act. a person shall be treated as assessec in default only when (i) he does not deduct tax at source as required under the Act from the payments made to the assessee: and (ii) the assessee has also failed to pay such tax directly. In view of the above, the appellant cannot be deemed as an assessee in default and the disputed short deduction of tax cannot be demanded from the appellant as per the case law of Hon ble Supreme Court in Hindustan Coca Cola Beverages (P.) Ltd. V. CIT. [2007J163Taxman355]. This ratio has also been inserted subsequently w.e.f. 01.07.2012 as proviso to section 201 (I) of the Act. 6. The Id Id Departmental Representative could not point out any error in the order of the Id CIT(A). In view of this we confirm the finding of the Id CIT(A) that tax on such payment to subcontractor was required to be deducted 194C of the Act and same was complied with by the assessee. Therefore, there is no short deduction of tax at source u/s 201 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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