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Facts
The assessee, a hotel company, made payments for Annual Maintenance Contracts (AMC) for various equipment, deducting TDS at 2% under Section 194C. The AO held that these payments were for technical services and mandated TDS at 10% under Section 194J, deeming the assessee an assessee in default.
Held
The Tribunal held that the payments for AMC of equipment, including day-to-day maintenance, repairs, and upkeep, qualify as 'work' under Section 194C, not as professional or technical services under Section 194J.
Key Issues
Whether the payments made for Annual Maintenance Contracts (AMC) are classifiable as 'works contract' attracting TDS under Section 194C, or as 'fees for professional or technical services' attracting TDS under Section 194J.
Sections Cited
194C, 194J, 201(1), 201(1A)
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Income Tax Appellate Tribunal, DELHI ‘C’ BENCH,
Before: SHRI ANUBHAV SHARMA, & SHRI NAVEEN CHANDRA
This appeal by the assessee is directed against the order of the ACIT, Gurgaon dated 20.06.2025 pertaining to A.Y 2016-17.
Briefly stated, the facts of the case are that the assessee is a limited company engaged in running hotels in Gurgaon. During the year under consideration the Assessee Company had made payments [A.Y 2016-17] Orbit Resorts Ltd Vs ACIT aggregating to Rs. 2,16,44,982/- on account of Annual Maintenance Contracts ("AMC") of Computers, DG Set, Elevator, Internet Telecommunication Services etc. on which it has duly deducted TDS @ 2% u/s 194C of the Act.
A survey/inspection was carried out at the assessee company’s premises on 29.02.2016 by the Income Tax Department. Based on the inspection findings, the Assessing Officer held that the payments made by assessee are provided by technical experts and professionals having strong technical knowledge and accordingly, the assessee Company should have deducted TDS on these payments @ 10% as per the provision u/s 194J of the Act. Subsequently, the AO vide his order dated 08.05.2019, held the assessee as ‘assessee in default’ and passed an order u/s 201(1) and 201(1A) of the Act for A.Y 2016-17, raising a demand of Rs. 24,96,812/- [ Rs. 17,34,780/- under Section 201(1) and interest of Rs. 7,62,031/- under Section 201(1A)] towards short deduction of tax u/s 194J on payments of Rs 2,16,44,982/-. The CIT(A)
on the other hand, gave part relief and held that the assessee was liable as assessee in default u/s 201(1)/201(1A) for short deduction of TDS u/s 194J on payment of Rs.97,85,332/- only.
Now the further aggrieved assessee is in appeal before us.
Page 2 of 8 [A.Y 2016-17] Orbit Resorts Ltd Vs ACIT 5. Before us, the contention of the assessee is that the CIT(A) is not justified to holding the assessee Company as an "assessee in default" and the payments made do not qualify as professional or technical service u/s 194J of the Act but is payments to Contractors where TDS is to be deducted u/s 194C. The ld AR submitted that the impugned payments have been made under "works contracts" on which tax is correctly deducted u/s 194C. It is the say of the Ld AR that contrary to the definition of "works contract", the definition of "professional services" and "fees for technical services" are both specific definitions thereby necessarily limiting their scope and gamut.
It is the say of the ld. counsel for the assessee that the receipts disclosed by the recipients in their ITR would lead to double taxation of the same amount both in the hands of the assessee and of the recipient.
The ld. counsel for the assessee relied upon the decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt Ltd 293 ITR 226 [Supreme Court] for the proposition that when deductee has paid its tax, the deductor cannot be held to be in default.
The ld AR relied on the Circular no 715 dated 08.08.1995 issued by the CBDT which has clarified that such transactions attract TDS @ 2% under section 194C of the Act. The ld AR further relied on the following Page 3 of 8 [A.Y 2016-17] Orbit Resorts Ltd Vs ACIT judicial precedents which held that similar transactions are within the purview of works contract and would attract 194C and not section 194J: i. CIT v. Mumbai Metropolitan Regional Development Authority [(2018) 408 ITR 111 (Bom)] ii. ITO v. Dr. Balabhai Nanavati Hospital [167 ITD 178 (Mum- ITAT)] iii. CIT v Asian Heart and Research Centre (P) Ltd (2019) 262 Taxman 395(Bom)] iv. CIT v Saifee Hosital (2019) 262 Taxman 343(Bom)] v. PCIT v Santech Solutions (P) Ltd (2019) 105 taxmann.com 98(SC)] vi. CIT V Global Broadcasting Co Ltd 263 taxman 465(SC)
The ld AR pleaded the principle of consistency saying that the AO seeks to overturn a position accepted repeatedly by the Department in earlier years without any cogent reasons and justification.
Per contra, the ld. DR relied on the orders of the authorities below.
We have heard the rival submissions and have gone through the submissions of the assessee and have perused the relevant material on record. The issue for adjudication is whether the payment made is for 'works contract' or 'professional service' and 'technical service'. It is therefore relevant for us to reproduce the provisions of Sections 194J/194C for definitions of 'works contract', 'professional service' and 'technical service', which are as follows:
Page 4 of 8 [A.Y 2016-17] Orbit Resorts Ltd Vs ACIT (i) Fees for professional or technical services. 194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of- (a) fees for professional services, or (b) fees for technical services, or shall, at the time of credit of such sum to the account of the payee 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 ten per cent of such sum as income-tax on income comprised therein: Explanation. For the purposes of this section, (a) "professional services" means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section; (b) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (ba)
(ii) Fee for Technical Services is defined in Explanation 2 to Section 9(1)(vi) as follows:-
For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries".
(iii) Payments to contractors.
Page 5 of 8 [A.Y 2016-17] Orbit Resorts Ltd Vs ACIT 194C. (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 contract between the contractor and a specified person 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- (1) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. Explanation. -For the purposes of this section, ****** (iii) "contract" shall include sub-contract; (iv) "work" shall include- (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods or passengers by any mode of transport other than by railways; (d) catering; (e) 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.
Considering the definitions of ‘contract’; ‘professional’ or technical’ service as above and juxtaposing the same to the factual Page 6 of 8 [A.Y 2016-17] Orbit Resorts Ltd Vs ACIT matrix of the instant case, we find that the assessee is being provided day to day maintenance of the equipment that have been installed by the assessee, on annual contracts basis wherein the service provider, periodically or as and when required, repairs/maintains the machinery, in terms of the contracts. The payment for such maintenance ‘work’, according to us, would therefore qualify for TDS to be made u/s 194C.
Further, we are of the considered view that the services rendered for Annual Maintenance Contracts ("AMC") of Computers, DG Set, Elevator, Internet Telecommunication Services maintenance do not qualify as rendering of any managerial, technical or consultancy services u/s 194J nor is within the purview of "fees for technical services" within the meaning of Explanation 2 to section 9(1)(vii) even though the personnel of the providers are technically qualified persons to render the services.
In view of the discussion above, we are of the considered view that the assessee company cannot be held to be an assessee in default u/s 201(1). The order u/s 201(1)/201(1A) is accordingly, set aside. The Assessing Officer is directed to delete the addition made. Grounds of appeal raised by the assessee is allowed.
Sd/- Sd/- [ANUBHAV SHARMA] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 21st January, 2026. VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl PARTICULARS DATES No.
Date of dictation of Tribunal Order 2. Date on which the typed draft order is placed before the Dictating Member 3. Date on which the typed draft order is placed before the other Member [in case of DB] 4. Date on which the approved draft order comes to the Sr. P.S./P.S.
Date on which the fair Order is placed before the Dictating Member for sign 6. Date on which the fair order is placed before the other Member for sign [in case of DB] 7. Date on which the Order comes back to the Sr. P.S./P.S for uploading on ITAT website 8. Date of uploading, inf not, reason for not uploading 9. Date on which the file goes to the Bench Clerk 10. Date on which the file goes for Xerox 11. Date on which the file goes for endorsement 12. The date on which the file goes to the Superintendent for checking 13. Date on which the file goes to the Assistant Registrar for signature on the order 14. Date on which the file goes to the dispatch section for dispatch the Tribunal order 15. Date of Dispatch of the Order 16. Date on which the file goes to the Record Room after dispatch the order
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