JM FINANCIAL INSTITUTIONAL SECURITIES LTD,MUMBAI vs. ITO TDS 2(3), MUMBAI

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ITA 4479/MUM/2014Status: DisposedITAT Mumbai10 October 2018AY 2010-114 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that routine maintenance contracts for office and electrical systems, without imparting technical know-how, are covered under Section 194C and not Section 194J. Therefore, the assessee was not in default for not deducting TDS under Section 194J.

What were the facts?

The assessee made payments for Annual Maintenance Contracts (AMCs) for electrical and computer systems, deducting TDS under Section 194C. The AO and CIT(A) held that TDS should have been deducted under Section 194J as fees for technical services.

What were the issues?

Whether payments for Annual Maintenance Contracts for routine maintenance of electrical and computer systems constitute fees for technical services taxable under Section 194J, or are covered under Section 194C.

Which sections of the Income-tax Act were involved?

Section 194C,Section 194J,Section 201(1)

AI-generated summary — verify with the full judgment below

PER PAWAN SINGH, JUDICIAL MEMBER;

1.

This appeal by assessee under Section 253 of Income-tax Act is directed against the order of ld. CIT(A)-14, Mumbai dated 17.04.2014 for Assessment Year 2010-11. The assessee has raised the following grounds of appeal:

A. ALLEGED SHORT DEDUCTION OF TAX AT SOURCE ON PAYMENTS TO PARTIES FOR ANNUAL MAINTAINENCE CONTRACTS OF RS. 1,38,174/- 1. On the facts and in the circumstances of the case and in law, the Honorable Commissioner of Income Tax (Appeals) ("the CIT(A)"), erred in confirming the action of the Income Tax Officer (TDS) -2(3) ("learned Income Tax Officer") who held the Appellant as deemed to be in default on the ground of alleged short deduction of tax at source on certain credits/payments made to parties for Annual Maintenance Contracts in respect of Electrical systems and Mum 2014- JM Financial Institutional Securities Ltd.

Computer systems debited under the head Repairs & Maintenance, by holding that tax should have been deducted at source as per the provisions of section 194J of the Income Tax Act, 1961 ("the Act") and not as per the provisions of section 194C of the Act as done by the Appellant; without considering the facts of the case and the submission of Appellant in this respect.

2. The CIT (A) and the Learned Income Tax Officer failed to appreciate the fact that the Annual Maintenance Contracts entered into with the said parties are routine maintenance contracts to maintain the electrical and computer systems which are covered under section 194C and the said services are not covered under the provisions of Section 9(vii) to be classified as Fees for Technical Services.

3. In view of the above, the ld. Income Tax Officer be directed to have the demand raised on the Appellant be deleted as the Appellant has complied with the Provisions of Chapter XVIIB.

2.

At the outset of hearing, the ld. Authorized Representative (AR) of the assessee submits that the grounds of appeal raised by assessee are covered in assessee’s own case for Assessment Year 2011-12 in dated 10.07.2017 and in assessee’s group entity (which was merged with assessee) for Assessment Year 2010-11 in ITA No. 2442/Mum/2015 dated 20.07.2016, wherein the Tribunal held that in case of Annual Maintenance Charges no technology was made available, which are for regular maintenance of office and electrical system shall be liable for deduction of TDS under section 194C and not under section 194J. The ld. AR of the assessee also furnished the copy of decision of Tribunal dated 20.07.2016 in ITA No. 2442/Mum/2015 dated 20.07.2016 and in ITA No. 3433/Mum/2015 dated 10.07.2017.

3.

On going through the grounds of appeal, decision of Tribunal, the ld. Departmental Representative (DR) for the Revenue agreed that the Mum 2014- JM Financial Institutional Securities Ltd. grounds of appeal raised by assessee are covered in favour of assessee by the decision of Tribunal as referred by ld. AR of the assessee.

4.

We have considered the submission of the parties and have gone through the orders of authorities below. We have noted that similar grounds of appeal was raised by assessee in appeal for Assessment Year 2011-12 and the Co-ordinate Bench of Tribunal while considering the decision in assessee’s own group entity (Lateron managed with assessee) for Assessment Year 2010-11. The Tribunal in assessee’s own case for Assessment Year 2011-12 passed the following order:

8. We have gone through the decisions relied upon by the assessee as mentioned above and also the order of Hon'ble ITAT In assessee's own case, we notice that the Hon'ble ITAT in assessee's own case in for A Y 2010-11 has held that the payment for technical services, in order to b covered U/s 194J of the Act should be a consideration for acquiring or using technical knowhow simplicitor provided or made available by human clement. In the instant case also, the payments have been made for rendering services in connection with maintenance of equipments. By offering the said services, the service provider has not imparted any technical knowledge to the assessee nor did the assessee acquire any technical information. Merely because a technician having knowledge of functioning of equipments renders maintenance service, the same shall not result in rendering of technical services contemplated u/s 194J of the Act. Accordingly, following the principle of judicial consistency and judicial discipline and while finding merits in the contentions of the assessee, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the demand raised u/s 201(1) of the Act as well as the interest charged u/s 201(1) of the Act.

Mum 2014- JM Financial Institutional Securities Ltd.

5.

Considering the decision of Tribunal in assessee’s own case for Assessment Year 2011-12, the grounds of appeal raised by assessee are allowed in favour of assessee.

6.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 10/10/2018.

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