Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Breach Candy Hospital Trust Dy. Commissioner of Income Tax, 60A, Bhulabhai Desai RD, Vs. TDS 1(1) Mumbai-400 026 Mumbai, .. Appellant Respondent PAN No. AAATB0214D .. S/Shri Shyamsunder Sharma & Assessee by Neeraj Sheth, AR Revenue by .. Shri M.C. Omi Ningshen, DR .. Date of hearing 16-03-2017 Date of pronouncement .. 16-03-2017 O R D E R PER MAHAVIR SINGH, JM:
These three appeals by the assessee are arising out of the common order of CIT(A)-14, Mumbai, in appeal No. CIT(A)-14/IT-1094/1095/1120-TDS-11- 12 dated 16-07-2014. The TDS Assessments were framed by DCIT (TDS)-1(1), Mumbai for the A.Yrs. 2009-10, 2010-11 & 2011-12 vide order dated 29-03-2011 under section 201/201(1A) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The only common issue in these three appeals of assessee is against the order of CIT(A) confirming the action of the AO in holding that the payments made towards the maintenance of medical equipment were subject to deduction of Tax at Source under section 194J of the Act as payment for technical services instead of tax deducted by assessee under section 194C of the Act being contractual payments and held the assessee in default in terms of section 201(1) of the act and consequently charged interest under section 201(1A) of the Act. For this assessee has raised following grounds: - ,6226 & 6227/Mum/2014 Breach Candy Hospital Trust; AY:09-10,10-11&11-12 “1. The learned CIT(A) erred in confirming the action of AO holding that the payment of Rs.59,37,848 towards maintenance of medical equipment were subject to deduction of tax at source under section 194J of the Income-tax Act, 1961 ('the Act').
2. The learned CIT(A) ought to have appreciated the fact that that payment is made for routine maintenance of medical equipment and hence not covered by section 1 94J.The learned CIT(A) ought to have held that the payment made for maintenance of medical equipment were liable for deduction of tax under section 194C of the Act.
3. The learned CIT(A) erred in not applying clarification issued by Central Board of Direct Taxes vide Circular No. 715 dated 8 August 1995in respect of annual maintenance contract of medical equipment.
4. The learned CIT(A) erred in observing that the appellant was asked to produce all the contracts entered into with the different parties for annual maintenance. The appellant submits that during the course of hearing only few sample copies of contract were required to be submitted. The appellant therefore submits that the learned CIT(A) has not given proper opportunity of being heard in the appeal.”
Briefly stated facts are that the assessee is a hospital trust engaged in providing medical facilities to its patient admitted into hospitals. The assessee has installed hospital equipments with X-ray, Prodigy advance machine, roller pumps, STA compact analyser, Sysmex blood cell counter etc. and to ensure proper functioning of machines entered into Annual Maintenance Contract (AMC) with various contractors for carrying out routine maintenance and repair work. In term of AMC vendors or suppliers provide services only for the ,6226 & 6227/Mum/2014 Breach Candy Hospital Trust; AY:09-10,10-11&11-12 maintenance and repair of the machines. The assessee claimed that cost of spare parts would be charged separately to the assessee. Accordingly, the contractors in pursuance of AMC provide the services relating to lubricating, cleaning and repairing of machinery and supplying of spare parts whenever require for replacement. But the AO while make assessment for TDS without specifying any reason or discussion treated the payments as technical in nature covered under section 194J of the Act instead of assessee treating the same as contractual payment under section 194C of the Act, by observing in para 4 as under: - “4. During the course of survey, it was found that assessee was deducting tax u/s 194 C in respect of contract on maintenance of Bio Medical equipment. Since the job is of technical nature, it should have been covered u/s 194 J. after giving ample opportunity assessee failed to produce any satisfactory explanation in this regard. Hence, the assessee is treated as an assessee in default in terms of Section 201(1)201(1A) for short deduction of TDS and for non-payment of interest thereon. The tax liability is computed as under. …”
Aggrieved assessee preferred the appeal before CIT(A). Before CIT(A) assessee filed details of 8 contractors and on perusal of the terms of contract the CIT(A) except Medi-Tech (India) Private Ltd., noted that the contracts are routine contracts and no professional or technical services were involved and therefore, the assessee has rightly deducted the TDS under section 194C of the Act. Whereas, CIT(A) noted that in respect to other 10 (ten) contracts no details were filed by assessee. Now, assessee before us as well as before CIT(A) in the rectification application dated 15-11-2014 has filed the detail of remaining 10(ten) contractors as under: - In this regard, we enclose the following balance 10 contracts for determining the nature of payment and applicability of correct rate of withholding tax. Copies of ,6226 & 6227/Mum/2014 Breach Candy Hospital Trust; AY:09-10,10-11&11-12 the 10 contracts are enclosed at page 8 to 85 of the compilation.
Sl No. Name of contracts 1. Philips Electronics India Ltd. 2. Labcon Scientific Instruments P. Ltd. 3. Siemens Limited 4. Carestream Health India P. Ltd. 5. Labindia Instruments P. Ltd. 6. Transasia Bio Medicals Ltd. 7. Klenzaids Contamination Controls P. Ltd. 8. Mazda Medical Electronics 9. Becton Dickinson India P. Ltd. 10. Trivitron Medical Systems P. Ltd.
In the above circumstances, it is respectfully prayed that to rectify mistake apparent from record Your Honour may recall the above impugned para 5.6 of the order dated 16 July 2014 and pass an appropriate order under the provisions of section 154 of the act after considering the aforesaid 10 contracts. We further request Your Honour to grant usan opportunity of being heard in the matter.”
The learned Counsel for the assessee stated that even in the case of Merchant Medi-Tech (India) Pvt. Ltd., the copy of agreement of AMC is enclosed in assessee’s paper book at Pages 38 to 42 which clearly reveals that the contract is purely regular maintenance contract. The learned Counsel for the assessee drew our attention to the scope of contract which reads as under: - “SCOPE OF THE CONTRACT
a) Under this agreement, EMERGENT shall provide 2 Preventive Maintenance Calls and any number of Break Down Calls as and when occurs and repot-led to us. ,6226 & 6227/Mum/2014 Breach Candy Hospital Trust; AY:09-10,10-11&11-12 b) For maintenance of your system, EMERGENT Engineer will call on you, upon your request: The parts replaced during the breakdown repair will be charged at actual or to be provided by the CUSTOMER- c) Whenever a breakdown call is attended, then during such visit, Preventive Maintenance can also be carried out. Hence, such a visit will be treated as a Preventive Maintenance Visit also. d) EMERGENT will dispute their Service Engineer for breakdown calls at the earliest from the date of reporting the nature of breakdown by the CUSTOMER. The first call will be attended within 24 hrs. EMERGENT shall not be responsible for delay in servicing due to non- availability of spare or due to any reasons beyond its control. e) EMERGENT’s service shall be provided for 24 hrs inclusive of Saturday’s, Sundays and Holidays. f) Any defects in the electrical installation and or wiring outside the IABP or Main A.C. Power Supply fluctuation will be rectified by CUSTOMER at his own cost. g) It would be CUSTOMER's obligation to provide proper environmental conditions for IABP. EMERGENT shall hot be responsible for any damage; toss or malfunction of the System due to non-availability of proper environmental conditions. h) EMERGENT shall not be responsible to carry out the repairs where:-
> Repairs and/or modification are required due to applications/usage other than those for which the equipment is designed for.
,6226 & 6227/Mum/2014 Breach Candy Hospital Trust; AY:09-10,10-11&11-12
> The equipment is opened/serviced/repaired or modified by unauthorized agency/personnel.
> The equipment has been disabled by accidents, explosion, tampering, neglect or misuse, failure of electrical power, Air-conditioning, humidity control or caused other than ordinary use.
> Nature wear and tear has taken its toll.
> In case some sub-assembly is irreparable. h) EMERGENT shall, not be liable for any toss, directly or indirectly due to faulty operation/application of the IABP. i) EMERGENT shall also not be responsible for any consequential loss or damage.
J) This agreement shall be entered into by EMERGENT after checking the equipment of its satisfactory working. If any repairs are considered necessary to bring the equipment to good conditions before takeover under service contract, such repairs will be charged for separately. This clause shall not apply if the agreement is entered immediately after the expiry of warranty period or at the time of renewal of an existing arrangement with EMERGENT. k) CUSTOMER will give EMERGENT Representative full access to the equipment to enable him provides maintenance service. CUSTOMER will provide EMERGENT Service Engineer all necessary operation service manual/schematic diagrams for the equipment covered by the Contract. Also assistance by Customer's staff working on the system will be extended to EMERGENT Engineer as and when required.” ,6226 & 6227/Mum/2014 Breach Candy Hospital Trust; AY:09-10,10-11&11-12
From the above, it is clear that this is purely a contract for repairs and maintenance and falls under the provisions of Section 194C of the Act being contractual obligation. The assessee taking only services qua maintenance of the equipments and these are not technical or professional services as prescribed under section 194J of the Act. According to us, these are purely contractual payment and will not come under the head technical services as provided in the provisions of Section 194J of the Act. The assessee has rightly deducted the TDS under section 194C of the Act and we reverse the orders of the lower authorities and allow the appeal of the assessee. Similarly, are the issues in other two years, hence, taking a consistent view, we allow all the appeals of the assessee.
In the result, all the appeals of assessee are allowed. Order pronounced in the open court on 16-03-2017.