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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI JOGINDER SINGH & SHRI RAMIT KOCHAR
PER RAMIT KOCHAR, Accountant Member
Out of these three appeals, one appeal, filed by the assessee, being ITA No. 6029/Mum/2014, is directed against the appellate order dated 16.07.2014 passed by learned Commissioner of Income-tax(Appeals)- 14,Mumbai (Hereinafter called “the CIT(A)”) in second round of litigation which appeal before the learned CIT(A) has arisen against order dated 11-03- 2013 passed by the ITO (TDS)- 2(2) Mumbai for the assessment year 2008-09 in second round of litigation giving effect to CIT(A) orders dated 24.10.2012 passed in first round of litigation which set aside the matter to the file of the learned ITO(TDS)-2(2), Mumbai being Assessing Officer (hereinafter called “the AO”) having passed orders u/s 201(1)/201(1A) of the Income-tax Act,1961 (Hereinafter called “the Act”) . The other two are cross appeals, one filed by the assessee being ITA No. 6030/Mum/2014 and another filed by the Revenue being ITA No. 5950/Mum/2014 are directed against the order passed by the ld. CIT(A) -14, Mumbai dated 21.7.2014 arising from the order dated 28-03-2013 passed by the A.O. u/s 201(1)/201(1A) of the Act.
First, we shall take up the appeal filed by the assessee in ITA No. 6029/Mum/2014 for the assessment year 2008-09 wherein the grounds of appeal raised by the assessee in the memo of appeal filed with the Income-
3 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:-
“1. The learned CIT (Appeals) erred in holding that contract to DBM Geotechnics Construction Pvt. Ltd. has not been given for simple rock excavation work but is given for Marine Geo Technical Investigation for rock excavation in Mithi River. Therefore, it is covered by the provisions of section 194J and not as per the provisions of section 194C for deduction of TDS on total payment amounting to Rs. 22,02,652/- made to DBM Geotechnics Construction Pvt. Ltd.
The learned CIT (Appeals) further erred in holing that Interest u/s 201(1A) is chargeable on lesser deduction of TDS from date on which tax is deductible till the date of filing return of income by the deductee.”
The brief facts of the case are that a survey u/s 133A of the Act was conducted by the Revenue on 04-07-2008 against the assessee at its premises at Bandra Kurla Complex, Bandra(E), Mumbai and order was passed by the A.O. u/s 201(1)/201(1A) of the Act for the assessment year under consideration on 30-03-2011 in the first round of litigation, wherein it was held by the AO as under:
“ Payments made to DBM Geotechnics Construction Pvt Ltd.:- During the F.Y under reference the assessee had made payment totaling to Rs. 2,47,51,050/- to M/s DBM Geotechnics Construction Pvt Ltd for marine geotechnical investigation for rock excavation in mithi river on which TDS has been deducted u/s 194C . From the nature of service rendered by M/s DBM Geotechnics Construction Pvt Ltd., prima facie it appears to be in the nature of professional/technical services. Hence the amount paid to M/s DBM Geotechnics Construction Pvt Ltd should have been subjected to TDS u/s 194J, as geotechnical investigation work is professional / technical in nature . Accordingly, TDS liability it determined under section 194J @11.33% which works out to Rs. 28,04,294/- .Since the assessee has already deducted TDS amounting to Rs. 51,923/- balance amount determined at Rs. 27,52,371/- and interest u/s 201(1A) is worked at Rs. 12,11,043/- for 44 months.”
4 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014
The dispute is in narrow range as to the deductibility of the tax at source by the assessee to the payments made to M/s DBM Geotechnics Construction Private Limited, i.e. whether the payments are covered for deductibility of tax at source u/s 194C of the Act as payments to contractors or u/s 194J of the Act being payment in the nature of professional or technical services . The assessee carried the matter before the ld. CIT(A) in appeal who decided the matter vide appellate orders dated 24.10.2012 by observing as under:-
"Since the facts, as stated by the AO and as stated by the appellant are opposite, the appellant is directed to furnish necessary evidence in support of the above facts, if any before the AO. After verifying the correctness of the facts pleaded by the appellant, the AO shall accordingly take a decision in this regard. If the contract to DBM Geotechnics Construction Private Ltd. has been given for rock excavation work, the AO shall not treat the appellant to be in default and shall accordingly delete the demand raised. However, if as observed by the AO, the contract is for marine geo-technical investigation for the purposes of rock excavation in Mithi river, the AO's decision in this regard shall be upheld. In that case, however, the AO shall give relief to the appellant in respect of the tax already paid by DBM Geotechnics Construction Private Ltd. if any, on its receipts from the appellant, in view of the decision of the Hon'ble Apex Court in the case of Hindustan Coca Cola Beverage (P) Ltd. vs. CIT [2007] 293 ITR 226. The AO is therefore directed accordingly."
Thus, the matter was set aside by learned CIT(A) in the first round of litigation to the file of the A.O. for de-novo determination of the issue in accordance with directions of the learned CIT(A) , and the A.O. in second round of litigation gave an opportunity to the assessee to provide the following information vide letter dated 30-11-2012 :-
“1. Copy of the agreement with M/s. DBM Geotechnics Construction Pvt. Ltd. of the work contract.
Copy of ledger a/c of M/s. DBM Geotechnics Construction Pvt. Ltd. in your books of accounts for the F. Y.2007-08.
5 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014
Copies of bills raised by M/s. DBM Geotechnics Construction Pvt. Ltd. of the work done by them during the financial year 2007-08.
Details of payments made to M/s. DBM Geotechnics Construction Pvt. Ltd. during the financial year 2007-08 along with details of tax deducted and proof of payments made into the Govt. treasury.
You may also make detailed submissions on applicability of decision of Apex Court pronounced in the case of M/s. Hindustan Coca Cola, as reported in 293 ITR 226 and adduce necessary documentary evidences in support of your submissions. You may also adduce evidence as to whether your case is covered by Board's Circular No. 275/201/95-IT(B) dated 29.01. 1997."
In response to the above query by the A.O., the assessee submitted the tender documents and the ledger accounts of M/s DBM Geotechnics Construction Pvt. Ltd. etc. and after going through above said documents, the A.O. observed as under:-
“"Marine Geotechnical Investigation for rock excavation in Mithi River approach channel (2.14 Km) situated at sea side of Mahim Causeway."
Further reference is also seen on page no.3 of the tender document (enclosed to this order, marked as Annex 'B') published in the news paper. In this advertisement also, it is mentioned that tender was for Marine Geotechnical Investigation of Rock Excavation in Mithi River approach Channel. It is quite apparent that the nature of work was not that of simple contract works but requires special technical skills, knowledge and experience.
On further observation of the tender document it is seen that page no. 12 has a title "Indicative Check List for Informations from Consultants". On this page, the details of contract experience in carrying out Cadastral Survey under tidal condition as measurement and collection of Hydraulic and Physio-Chemical Parameters are given. It is further required that there shall be at least 3 Key personnel having Bachelor's degree in Civil Engineering/Diploma in Survey Technology/Master's in Science/Environment. Courses/Degree in Geographical Information Systems. This page no. 12 is annexed to this order marked as Annex. 'C'.
6 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014
On further examination of the tender document, it is seen in Chapter VII (e) Schedule B at page no. 82 onwards of tender documents (enclosed as Annex. '0' to this order) speaks about item of work to be carried out and rate for the same work. In this Schedule at item no. 7 on page nO.83 is the list of laboratory test and number of such tests required to be conducted to carry out excavation of rocks by the contractor. The same are listed out as under:
Laboratory Tests: 1) Moisture Content 2) Specific Gravity 3) Consistency Limits. 4) Gravel & Fine Sieve analysis 5) Hydro Meter analysis 6) Consolidation 7) Direct Shear Test 8) Triaxial (UU) 9) UDS all about tests. Rock Samples: 10) Specific Gravity 11) Water absorption 12) Porosity 13) Crushing Strength 14) Tensile Test 15) Modulus of Elasticity & Poission's ratio 16) Chemical analysis of soil to determine Chloride & Sulphate content and
17) Chemical analysis of groundwater to determine chlorine and sulphate content and PH.
From the above list of laboratory test and rock examination, it is crystal clear that the contract was not just a simple work contract, but was for providing highly technical services. The every entry in this list clearly speaks out that DBM was required to provide scientific and technical services coupled with consultancy. Such specialized services cannot be accomplished without involvement of professional caliber and merit.”
7 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014
The A.O. also observed that the assessee has not furnished the copy of technical bid which describes information based upon the nature of services. The A.O., however, based upon the limited information furnished by the assessee came to the conclusion that the services rendered by DBM Geotechnics Construction Pvt. Ltd. is not covered by section 194C of the Act but a contract is covered by the provisions of section 194J of the Act being payments for technical services, hence, the payment made by the assessee to DBM Geotechnics Construction Pvt. Ltd. falls within the ambit of section 194J of the Act for deductibility of tax at source and not under section 194C of the Act. As such it was held by the AO that the assessee committed default and the liability in this regard was worked out by the AO as under, vide orders dated 11-03-2013 passed by the AO in second round of litigation giving effect to the learned CIT(A) order dated 24.10.2012 :
“TDS liability determined u/s 194J @ 11.33% works out to Rs.28,04,294 Less: TDS already deducted as per provision of Sec.194C Rs. 51,923 by the assessee Rs. 27,52,371 Add: Interest u/s 201(1A)@ 1% for 44 months Rs.12,11,043 Total amount payable by assessee Rs.39,63,414 ===========
Since the assessee did not submitted the details in compliance with the decision of Hon’ble Apex Court in the case of M/s Hindustan Coca Cola Beverage (P) Ltd. v. CIT [2007] 293 ITR 226(SC) by adducing the necessary documentary evidence in support of assessee’s submission of deductee having paid the due taxes and having filed its return of income with the Revenue, the A.O. held that the assessee’s case is covered by the provisions of section 194J of the Act and accordingly the asessee was directed to pay the demand of Rs. 39,63,414/, vide orders dated 11-03-2013 in second round of litigation by the AO giving effect to the learned CIT(A) orders dated 24.10.2012.
8 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 4. Aggrieved by the order dated 11.03.2013 passed by the A.O. giving effect to the learned CIT(A) orders dated 24.10.2012, the assessee carried the matter before the ld. CIT(A) in second round of litigation and submitted as under :
“ In order to undertake work systematically ,a proper investigation of the rock was undertaken. It is further submitted that contract for excavation of rock from Mithi River , M/s DBM Geotechnics Construction Pvt. Ltd. is also charging Work Contract Tax(WCT) as per the Maharashtra Value Added Tax Act. Accordingly it is a contract for excavating rock, hence the provisions of section 194C is applicable and not 194J.
In view of the above, the finding of the AO that provisions of section 194J is applicable is not correct as the appellant has already deducted TDS as per the provisions of section 194C.
We rely on the recent decision of the Hon. Gujarat High court in the case of Essar Oil Ltd. V. ITO-262 ITR 63(Guj).”
The learned CIT(A) confirmed the order of the A.O. vide appellate orders dated 16.07.2014 in second round of litigation by observing as under:-
“I have considered the facts of the case, submission of the appellant, order u/s 201(1) and 201(1A) r.w.s 250 of the I.T. Act, 1961 and the order of my Ld. Predecessor. My Ld. Predecessor has set aside this issue to the file of the A.O. to verify the correctness of the fact and accordingly take a decision holding inter-alia as under:-
"That if the contract to DBM Geotechnics Construction Pvt. Ltd., has been given for rock excavation work, the A.O. shall not treat the appellant to be in default and shall accordingly delete the demand raised. However, if as observed by the A.O. the contract is for marine geo- technical investigation for the purposes of rock excavation in Mithi river, the AO's decision in this regard shall be upheld".
9 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 4.4 I have perused the contract document filed by the appellant. The name of work for the contract is "Marine Geotechnical Investigation for Rock Excavation in Mithi River Approach Chanel". The nature of work defined in Schedule B is as under:
• Item No. 1: Establish on site rotary core drilling rig and other equipments with mounted a floating craft, for sinking marine bore hole complete with all accessories and transport to the site fixing laying in position etc. complete and including demobilization.
• Item No. 2: Move core drilling rig and other equipments mounted on floating craft with all accessories into position at first borehole and from borehole to borehole including accurate mounting of craft and jacking up at each bore hold, hire of tugs, survey work etc. complete.
• Item No. 3: Boring 100mm/150 mm dia in all type of soils including boulders including use of all material such as ceasing pipe and accessories consumable etc. as required [including conveying the material to site of work] carrying out set at 1.5m. interval and taking undisturbed samples of cohesive soil, preparing the loose samples serially in glass/plastic jars, on site of work and conveying the same to Headquarters of concerned office as directed by Engineer-in-charge includes geotechnical logging of the samples and carrying ·out field tests using pocket penetro meter and handshear vane.
• Item No. 4: Coring 'NX' size using triple tube core barrel of 100/150mm as dia. In weathered and unweathered basalt rock by diamond drilling including preservation of cores in standard core box taking core photographs etc., complete.
• Item No. 5: Providing core boxes of jungle wood of size 1.25m x 0.55m x 0.15m for preserving core samples with all fixtures to fastening handles locking arrangements with lock and key etc. complete.
10 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 • Item No. 6: Preparation of factual and interpretive report and submission of one copy draft report and six copies of final report along with C. D.
• Item No. 7: Laboratory tests (i) Moisture content. (ii) Specific gravity. (iii) Consistency Limits [L.L.P.L.S.L.] (iv) Gravel and fine sieve analysis. (v) Hydro meter analysis. (vi) Consolidation. (vii) Direct Shear test. (viii) Triaxial(UU). (ix) UDS all above test. ROCK Samples. (x) Specific gravity. (xi) Water absorption. (xii) Porosity, (xiii) Crushing strength. (xiv) Tensile Test. (xv) Modulus of elasticity and Pission's Ratio. (xvi) Chemical analysis of soil to determine chloride and sulphare content. (xvii) Chemical analysis of ground water to determine chloride and sulphate content and P. H.
4.5 Thus, from the above, it is clear that the contract to DBM is not given for simple rock excavation work but is given for 'Marine Geo Technical Investigation' for rock excavation in Mithi river. Therefore, respectfully following the decision of the Ld. Predecessor, the action of the A.O. is upheld.”
11 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 4.6 The reliance of the Ld. A. R. on the decision of Essar Oil (Supra) cannot come to his rescue. In that case, the assesse had entered into 3 contracts In the instant case, there is a single contract. On analysis of the said contract, it has been held to be technical in nature. Hence, the action of the A.O. is upheld and the argument of the A.R. is dismissed.”
Thus, in nutshell, the ld. CIT(A) observed that the services rendered by M/s DBM Geotechnics Construction Pvt. Ltd. were for marine geo technical investigation for rock excavation in Mithi river which are technical in nature and are covered u/s 194J of the Act for deductibility of tax at source and the assessee should have deducted tax at source as per rates applicable u/s 194J instead of Section 194C of the Act as deducted by the assessee and the assessee was held to be assessee in default as contemplated u/s 201(1) and 201(1A) of the Act, and hence the appeal of the assessee was dismissed by learned CIT(A) vide appellate orders dated 16-07-2014 in the second round of litigation.
Aggrieved by the appellate order dated 16-07-2014 passed by the ld. CIT(A) in second round of litigation , the assessee filed further appeal before the tribunal.
Before the tribunal, the assessee has placed on record the copy of tender document of DBM Geotechnics Construction Pvt. Ltd..(pb/page 39- 145) . The learned counsel for the assessee reiterated its submissions as were made before the authorities below . Thus, the learned counsel for the assessee justified the deduction of tax at source u/s 194C of the Act on payments made to DBM Geotechnics Construction Pvt. Ltd..being payments towards work contract instead of deductibility of tax at source u/s 194J of the Act as contemplated by Revenue. The learned counsel for the assessee also drew our attention to the copy of Form 26A dated 31.10.2013 and 14.2.2014 ( pb/page 159/160 and also pb/174-176 in another pb) for
12 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 furnishing the accountant certificate as per first proviso to sub-section (1) of section 201 of the Act to evidence that the DBM Geotechnics Construction Pvt. Ltd., has received the amount from the assessee and has duly paid the taxes to the Revenue.
The ld. D.R. has contended that this contract is not covered u/s 194C of the Act as these are services rendered by DBM Geotechnics Construction Pvt. Ltd. to the assessee which are technical services as are covered u/s 194J of the Act. The ld. D.R. relied upon the order of the authorities below.
We have considered the rival contentions and also perused the material available on record. We have also carefully gone through the tender documents running from pages 39 to 145 in the paper book filed with the tribunal. We have observed that the tender was floated by the assessee for marine geotechnical investigation for rock excavation in Mithi river approach channel (2.14 Km) situated at sea side of Mahim causeway . M/s DBM Geotechnics Construction Pvt. Ltd. was the successful bidder in the tender. We have observed that the tender was not floated for excavation of rocks in Mithi river rather the tender was for marine geotechnical investigation for rock excavation in Mithi river and the work was mainly towards rendering of technical services involving marine geotechnical investigation for rock excavation which were technical in nature which are covered u/s 194J of the Act for deduction of tax at source. The authorities below have rightly concluded that these services are technical services which are covered u/s 194J of the Act for deduction of tax at source and not u/s 194C of the Act for deduction of tax at source . We have also gone through the various items of work reflected in tender documents as contained in Chapter VIII(e), schedule – B which are placed on record in paper book /page 139-142 and also detailed item wise specification in tender document placed in paper book/page 143-145 , which clearly lead to the irresistible conclusion that
13 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 these are technical services rendered by M/s DBM Geotechnics Construction Pvt. Ltd. to the assessee for ‘Marine Geo Technical Investogation’. The learned AO vide orders dated 11-03-2013 in para 2 as well learned CIT(A) in his appellate orders dated 16-07-2014 in para 4.4/4.5 have rightly concluded that services rendered by M/s DBM Geotechnics Construction Pvt. Ltd. to the assessee are technical in nature and duly covered u/s 194J of the Act for deductibility of tax at source, which orders of the authorities below we are not inclined to interfere. In our considered view these are technical services rendered by the DBM Geotechnics Construction Pvt. Ltd. to the assessee for ‘Marine Geo Technical Investigation for which payments were made by the assessee which are covered u/s 194 J of the Act for deductibility of tax at source. Section 194J of the Act as applicable for impugned assessment year is reproduced below:-
[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] [(c) royalty, or (d) any sum referred to in clause (va) of section 28,] 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 : Provided that no deduction shall be made under this section— (A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or (B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed— (i) twenty thousand rupees, in the case of fees for professional services referred to in clause (a), or (ii) twenty thousand rupees, in the case of fees for technical services referred to in [clause (b), or]
14 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 [(iii) twenty thousand rupees, in the case of royalty referred to in clause (c), or (iv) twenty thousand rupees, in the case of sum referred to in clause (d) :] [Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum by way of fees for professional services or technical services is credited or paid, shall be liable to deduct income-tax under this section :] [Provided also that no individual or a Hindu undivided family referred to in the second proviso shall be liable to deduct income-tax on the sum by way of fees for professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family.] (2) [***] (3) [***] 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) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;] (c) where any sum referred to in sub-section (1) is credited to any account, whether called “suspense account” or by any other name, in the books of account of the person liable to pay such sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of this section shall apply accordingly.
The fee for technical services has been defined in in Explanation 2 to clause (vii) of sub-section (1) of section 9; which is reproduced hereunder:-
“Explanation [2].—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 construction72, assembly, mining or like project undertaken by the recipient or
15 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 consideration which would be income of the recipient chargeable under the head “Salaries”.]”
In our considered view these are technical services rendered by the DBM Geotechnics Construction Pvt. Ltd. to the assessee for ‘Marine Geo Technical Investigation for which payments were made by the assessee which are covered u/s 194 J of the Act for deductibility of tax at source. The decision of the Hon’ble Gujarat High Court in the case of Essar Oil Ltd. V. ITO [2013] 30 taxmann.com 39 (Guj HC) as relied upon by the assessee is distinguishable and not applicable in the instant case as in that case three different agreements entered into by the tax-payer were held to be composite contract being held to be single integrated agreement for construction of refinery plant which was held to be work contract liable for deduction of tax at source u/s 194C of the Act . However, the assessee has placed on record Form 26A to contend that the amount received has been duly considered in the return of income filed by M/s DBM Geotechnics Construction Pvt. Ltd. and all taxes were duly paid by the said M/s DBM Geotechnics Construction Pvt. Ltd. to the Revenue . This contention of the assessee needs verification by the authorities below and we are inclined to set aside this issue to the file of the AO for verification and if the contention of the assesee are found to be correct, the AO shall grant relief keeping in view ratio of decision of Hon’ble Supreme Court in the case of Hindustan Coca-Cola Beverages Private Limited (supra) 293 ITR 226(SC). The assessee is directed to appear before the AO and file necessary evidences to support its contentions, as per our above direction . Needless to say that proper and adequate opportunity of being heard shall be provided by the AO in accordance with principles of natural justice in accordance with law. This appeal is partly allowed for statistical purposes.We order accordingly.
16 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 Now, we shall take up assessee’s appeal in ITA No. 6030/Mum/2014 for assessment year 2011-12.
The assessee has raised the following grounds of appeal in memo of appeal filed with the tribunal:-
“1. The learned CIT (Appeals) erred in holding that contract to M/s. DBM Geotechnics Construction Pvt. Ltd. has not been given for simple rock excavation work but is given for Marine Geo Technical Investigation for rock excavation in Mithi River. Therefore, it is covered by the provisions of section 194J and not as per the provisions of section 194C for deduction of TDS on total payment amounting to Rs. 31,32,05,876/- made to M/s. DBM Geotechnics Construction Pvt. Ltd.
The learned CIT (Appeals) further erred in holing that Interest u/s. 201 (1A) is chargeable on lesser deduction of TDS from date on which tax is deductible till the date of filing return of income by the deductee.
3.The appellant craves to add to , alter or amend the foregoing grounds, which are without prejudice to on another, at the time of hearing.”
The assessee has also raised additional ground of appeal vide communication dated 02-11-2016 (placed in file) , which is reproduced as under:
“4. The Learned Commissioner of Income-tax (Appeals) erred in holding that the payment made to M/s DBM Geotechnics Construction Pvt Ltd during AY 2011-12 was towards contract awarded for Marinee Geo Technical investigation for rock excavation in Mithi river while the payment was towards contract given for construction of retaining wall along the bank of Mithi river and therefore the provisions of section 194C of the Income tax Act 1961 are applicable for deduction of TDS and not the provisions of section 194J.”
The brief facts of the case are that a survey action u/s 133A of the Act was conducted by Revenue on 04-07-2008 at the assessee’s premises at
17 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 Bandra Kurla Complex, Bandra (E), Mumbai. It was observed by the AO that the assessee has made payment of Rs. 31,32,05,876/- to M/s DBM Geotechnics Construction Pvt. Ltd. during the previous year relevant to the impugned assessment year with respect to the marine geographical investigation for rock excavation in Mithi river on which tax has been deducted at source u/s 194C of the Act. On enquiry, it was observed by the A.O. that the taxes should have been deducted at source u/s 194J of the Act as the nature of the services rendered by DBM Geotechnics Construction Pvt. Ltd. to the assessee was professional/technical in nature. On appeal, the ld. CIT(A) confirmed the orders of the A.O. passed u/s 201(1) and 201(1A) of the Act by following the decision of his predecessor for the assessment year 2008- 09 vide appellate orders dated 21-07-2014.
Aggrieved by the appellate orders dated 21-07-2014 passed by the ld. CIT(A), the assessee is in appeal before the Tribunal.
The ld. Counsel for the assessee has produced additional evidences before the tribunal with the request for admission of the additional evidences vide paper book page 221-516 . The learned counsel submitted that these additional evidences goes to the root of the matter as inadvertently the assessee has submitted the wrong tender documents before the authorities below for which the work was undertaken by M/s DBM Geotechnics Construction Pvt. Ltd. The correct tender documents are for the construction of retaining wall along the bank of Mithi river from channel 3500.0m to channel 5883.0m towards LBS Marg including Service road and construction of retaining wall along the bank of Mithi river from channel 2600.0m to channel 5883.0m towards BKC side including service road for which total payment of Rs. 32,47,68,465/- was made by the assessee during the assessment year 2011-12 and since the order framed by the A.O. and confirmed by the ld. CIT (A) was on the evaluation of the wrong tender
18 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 document viz. tender for marine geotechnical investigation for rock excavation in Mithi river approach channel (2.14 Km) situated at sea side of Mahim causeway submitted by the assessee inadvertently of which the work was completed way back in the previous year relevant to the assessment year 2008-09. Thus the ld. Counsel prayed that these additional evidences running pages from 221 to 516 be admitted as the same goes to the root of the matter so that the correct decision can be taken instead of perpetuating the mistake.
The ld. D.R. submitted that he has no objection in the admission of additional evidences but the matter should be restored to the file of the A.O. for evaluation and verification of the additional evidences on merit..
We have considered the rival submission and also perused the material available on record. We have observed that the assessee has paid an amount of Rs. 32,47,68,465/- to M/s DBM Geotechnics Construction Pvt. during the previous year relevant to the assessment year 2011-12 on which tax was deducted at source u/s 194C of the Act by the assessee. The assessee has contended that the authorities below have framed the orders based on evaluation of a wrong tenders/order which was also awarded to the assessee earlier being marine geotechnical investigation for rock excavation in Mithi river approach channel (2.14 Km) situated at sea side of Mahim causeway of which work was completed way back in the previous year relevant to the assessment year 2008-09. Thus, the assessee admitted its mistake of submitting wrong tender documents before the authorities below for evaluation of the applicability of Section 194C of the Act vis-à-vis payments made. It is also seen that further fresh tenders were awarded by the assessee to M/s DBM Geotechnics Construction Pvt Ltd. for the construction of retaining wall along the bank of Mithi river from channel 3500.0m to channel 5883.0m towards LBS Marg including Service road and construction of
19 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 retaining wall along the bank of Mithi river from channel 2600.0m to channel 5883.0m towards BKC side including service road , which are placed as additional evidences before the tribunal(page 221-516 and it is claimed that the payment has been made by the assessee of Rs. 32,47,68,465/- to DBM Geotechnics Construction Private Limited towards these tenders viz. for the construction of retaining wall along the bank of Mithi river from channel 3500.0m to channel 5883.0m towards LBS Marg including Service road and construction of retaining wall along the bank of Mithi river from channel 2600.0m to channel 5883.0m towards BKC side including service road and not towards the earlier tender i.e. marine geotechnical investigation for rock excavation in Mithi river approach channel (2.14 Km) situated at sea side of Mahim causeway which was stated to be completed in the previous year relevant to the assessment year 2008-09. These new tenders are now placed as additional evidences before the tribunal (page 221-516/pb) which in our considered view goes to the root of matter and in the interest of substantial justice these additional evidences need to be admitted as we have also observed that the authorities below erred in passing the orders by relying on the earlier tender viz. tender for marine geotechnical investigation for rock excavation in Mithi river approach channel (2.14 Km) situated at sea side of Mahim causeway which was a small order stated to be completed in the previous year relevant to the assessment year 2008-09. However, these additional evidences placed in paper book page 221-516 needs verification by the A.O. and accordingly we set aside this matter to the file of the A.O. for re- determination of the issue on merits after evaluation of the tender documents and co-relating the same with the payments made by the assessee. Needless to say that proper and adequate opportunity of being heard shall be provided by the AO to the assessee in accordance with principles of natural justice in accordance with law and the assessee be allowed to submit evidences and explanations to support its contentions in its defense. Thus, this appeal is allowed for statistical purposes. We order accordingly.
20 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014
Now, we shall take up the appeal filed by the Revenue in ITA No. 5950/Mum/2014 for the assessment year 2011-12.
The Revenue has raised the following grounds of appeal in memo of appeal filed with the tribunal:-
“(i) "On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the short deduction determined u/s. 194J by the A.O and holding that the provisions of section 194C are applicable as claimed by the assessee, thereby deleting the consequent interest levied u/s. 201(1A) without appreciating the fact that to carry out the maintenance work of Air Conditioners, lifts, Electrical fittings, Fire hydrants and Pest Control requires highly qualified specialized technical competency which falls within the purview of section 194J & not u/s. 194C of the I. T. Act, 1961".
In this appeal, the Revenue has challenged the relief granted by the ld. CIT(A) in its appellate orders dated 21.07.2014 with respect to the annual maintenance work of air conditioners, lifts, electrical fittings, fire hydrants and pest control etc. The ld. CIT(A) allowed the appeal of the assessee by following the decision of his predecessor who allowed the claim of the assessee , observed as under vide appellate orders dated 21.07.2014:-
“I have considered the facts of the case, submission of the appellant and order u/s.201(1 )/201 (1A). This issue has already been decided by my Predecessor in his order dated 24.10.2012 for A.Y. 2008-09 8: 2009-10 holding inter-alia as under:-
"I hold that the expenditure on account of Annual Maintenance Contracts (AMC) of air conditioners, lifts, electrical fittings, fire hydrants and pest control etc. is not in the nature of professional or technical services as construed under the provisions of section 194J of the Act and hence provisions of section 194J of the Act are not applicable. The appellant has correctly deducted TDS u/s
21 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 194C of the Act in respect of payments on such Annual Maintenance Contracts (AMC). Accordingly, the demands of tax u/s 201(1) and of interest u/s 201(1A) raised by the A.O. in respect of the A.Ys under consideration are deleted."
Aggrieved by the appellate orders dated 21.07.2014 passed by the ld. CIT(A), the Revenue has filed appeal before the tribunal.
At the outset, both the parties fairly conceded that this issue is squarely covered in favour of the assessee by the decision of the tribunal in assessee’s own case in ITA No. 496 to 502/Mum/2013 for the assessment years 2008-09 and 2009-10 vide orders dated 10-04-2015 wherein the tribunal has held as under:-
“The second issue relate to A. Yrs 2008-09 and 2009-10 wherein the AO has applied the provisions of Sec. 194J whereas the assessee has deducted tax u/s. 194C of the Act. We find that the payments have been made by the assessee only in respect of annual maintenance contract which relates to minor repairs, replacement of some spare parts, oiling and greasing of the machineries. In our understanding of the fact, these services do not require any technical expertise and therefore cannot be categorized under the head "technical services". We, therefore, decline to interfere with the findings of the Ld. CIT(A). The appeal filed by the Revenue for this issue is also dismissed.”
We have considered the rival contentions and also perused the material available on record including the afore-stated tribunal order dated 10-04- 2015 (supra). The dispute between the rival parties is within narrow compass wherein the assessee has made payments for maintenance work of AC, lifts, electrical fittings, fire hydrants and pest control etc and deducted tax at source u/s. 194C of the Act while Revenue is contemplating bringing the said payments within ambit of deductibility of tax at source u/s 194J of the Act. We have observed that the assessee had made payment for maintenance work of AC, lifts, electrical fittings, fire hydrants and pest control etc. which do not
22 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 require any technical expertise. Respectfully following the afore-stated decision of the tribunal dated 10-04-2015 in assessee’s own case in ITA No. 496 to 502/Mum/2013 for the assessment years 2008-09 and 2009-10 we dismiss the instant appeal of the Revenue , wherein the tribunal has held in the aforesaid orders dated 10-04-2015 as under:-
“The second issue relate to A. Yrs 2008-09 and 2009-10 wherein the AO has applied the provisions of Sec. 194J whereas the assessee has deducted tax u/s. 194C of the Act. We find that the payments have been made by the assessee only in respect of annual maintenance contract which relates to minor repairs, replacement of some spare parts, oiling and greasing of the machineries. In our understanding of the fact, these services do not require any technical expertise and therefore cannot be categorized under the head "technical services". We, therefore, decline to interfere with the findings of the Ld. CIT(A). The appeal filed by the Revenue for this issue is also dismissed.”
Based on our above discussions and reasoning, we find no merit in the appeal filed by the Revenue, hence, we dismiss the appeal filed by the Revenue. We order accordingly.
In the result, appeal of the assessee in ITA No. 6029/Mum/2014 for assessment year 2008-09 is partly allowed for statistical purposes. While appeal of the assessee in ITA No. 6030/Mum/2014 for assessment years 2011-12 is allowed for statistical purposes and appeal in filed by the Revenue in ITA No. 5950/Mum/2014 for assessment year 2011-12 is dismissed.
Order pronounced in the open court on 30th January, 2017. आदेश क� घोषणा खुले �यायालय म� �दनांकः 30-01-2017 को क� गई ।
Sd/- sd/- (JOGINDER SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER मुंबई Mumbai; �दनांक Dated 30-01-2017 [
23 ITA 6029/Mum/2014, ITA 6030/Mum/2014 & ITA 5950/Mum/2014 व.�न.स./ R.K. R.K. R.K., Ex. Sr. PS R.K.
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT(A)- concerned, Mumbai 4. आयकर आयु�त / CIT- Concerned, Mumbai �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai “B” Bench 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai