Sundaram Fasteners Limited, CHENNAI V. ITO TDS Ward, Virudhunagar

ITA 2826/CHNY/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5592 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 23-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANAT KUMAR RAHA
• Assessee Lawyers: R VIJAYARAGHAVAN
• Section: 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI . . . , , ' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.2826/CHNY/2017 ( ( /ASSESSMENT YEAR: 2012-13 M/S.SUNDRAM FASTENERS LTD., 98-A, 7 TH FLOOR, DR.RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI-600 004. VS. THE INCOME TAX OFFICER, TDS WARD, VIRUDHUNAGAR-626 001. [PAN: AAACS 8779 D ] ( + /APPELLANT) ( ,-+ /RESPONDENT) + . / APPELLANT BY : MR.R.VIJAYARAGHAVAN, ADV. ,-+ . /RESPONDENT BY : MR.SANAT KUMAR RAHA, JCIT. . /DATE OF HEARING : 17.01.2019 . /DATE OF PRONOUNCEMENT : 30.01.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE COMPANY DI RECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-17, CHENNAI DATED 31.08.2017, FOR THE AY 2012-13, CONFIRMING TH E ORDER PASSED U/S.201 OF INCOME TAX ACT, 1961. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL: ITA NO.2826/CHNY/2017 :- 2 -: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ORDER PASSED U/S.201(3) & INTEREST CHARGED U/S.201(1A) OF THE ACT IN RESPECT OF TAX DEDUCTED AT SOURCE FOR PAYMENTS MADE FOR MAINTENANCE CONTRACTS. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE PAYMENTS MADE FOR ANNUAL MAINTENANCE CONTRACTS WERE UNDER CONTRACTS FOR PERIODICAL INSPECTION AND ROUTINE MAINTENANCE WORK AND SUCH SE RVICES DO NOT CONSTITUTE TECHNICAL SERVICES COMING UNDER THE PURVIEW OF SECTION 194J. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE PRIMARY DISTINCTION BETWEEN A PAYMENT MADE UNDER SECTION 19 4C AND A PAYMENT MADE UNDER SECTION 194J IS THAT THE FORMER ARISES OUT OF A CON TRACT FOR CARRYING OUT CERTAIN ITEMS OF WORK WHILE THE LATTER ARISES OUT OF SERVICES RENDER ED AND THAT THERE WAS CONTRACTOR- CONTRACTEE RELATIONSHIP BETWEEN THE ASSESSEE AND TH E PARTIES AND PAYMENTS WOULD BE COVERED U/S.194C. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE PERSONS RENDERING SERVICES HAD ONLY MAINTAINED MACHINERY, A ND THAT KNOWLEDGE WAS NOT VESTED WITH THE ASSESSEE BY WHICH ITSELF IT COULD NOT AMOU NT TO TECHNICAL WORK. 6. THE APPELLANT RELIES ON THE JUDGMENT OF TATA AIG GENERAL INSURANCE CO. LTD. 43 SOT 215 (MUMBAI-TRIBUNAL) WHEREIN IT HAD BEEN HELD THAT WHAT WAS RELEVANT WAS THE NATURE OF WORK FOR WHICH THE PAYMENT WAS MADE, AND NOT TO WHOM IT WAS MADE. ACCORDINGLY, PAYMENT FOR MAINTENANCE CONTRACT WAS FOR NORMAL WORK AND HENCE WAS CORRECTLY CLASSIFIED FOR WITHHOLDING UNDER SECTION 194C OF THE ACT. 7. THE APPELLANT SUBMITS THAT IT REMAINED UNDER A B ONA FIDE BELIEF THAT THE PAYMENTS MADE BY THEM TO THE CONTRACTORS WERE COVERED BY SECTION 194C AND NOT 194J AND, THEREFORE, IT HAD DEDUCTED TAX AT SOURCE UNDER SECTION 194C. SUCH BONA FIDE BELIEF ENTERTAINED BY THE ASSESSEE ALSO JUSTIFIES THE CANCELLATION OF DEMAND CREATED BY THE IMPUGNED ORDER UNDER SECTION 201 PASSED BY THE AO. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A COMPANY DULY INCORPORATED UNDER THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SUPPLY OF AUTO COMPONEN TS. DURING THE FY 2011-12, THE ASSESSEE DEDUCTED TAX AT SOURCE ON THE PAYMENT MADE TOWARDS ANNUAL MAINTENANCE CONTRACT OF PLANT & MACH INERY UNDER THE PROVISIONS OF SEC.194C. WHEREAS, THE TDS OFFICER W AS OF THE OPINION THAT THE SERVICE CHARGES WERE PAID IN RESPECT OF TECHNIC AL SERVICES AND THEREFORE, THE TAX SHOULD HAVE BEEN DEDUCTED UNDER THE PROVISIONS OF SEC.194J AND ACCORDINGLY, HE PASSED AN ORDER DATED 25.04.2013 U/S.201(3) R.W.S.201(1A) DEMANDING THE DIFFERENCE I N THE TDS AMOUNT. ITA NO.2826/CHNY/2017 :- 3 -: 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD.CIT(A) WHO VIDE IMPUGNED ORDER CONFIRMED THE VIEW OF THE AO. 5. BEING AGGRIEVED, THE ASSESSEE IS BEFORE US IN TH E PRESENT APPEAL. LD.COUNSEL CONTESTED THAT THE SUBJECT PAYMENTS WERE MADE TOWARDS ANNUAL MAINTENANCE CONTRACT, WHICH ARE IN NATURE OF WORKS CONTRACTS AND THEREFORE, THE APPLICABLE PROVISION ARE SEC.194C, A ND THESE PAYMENTS CANNOT BE TREATED AS PROVISION OF TECHNICAL SERVICE S. IT WAS FURTHER CONTENDED THAT THE ASSESSEE IS UNDER BONA FIDE BELIEF THAT THE SUBJECT PAYMENTS ARE COVERED BY SEC.194C AND THEREFORE, THE ACTION OF THE AO TREATING AS ASSESSEE IN DEFAULT FOR LOWER RATE OF T DS SHOULD BE QUASHED. ON THE OTHER HAND, LD.DR PLACED RELIANCE ON THE ORD ERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS PLACED ON RECORD. 7. THE ISSUE, WHETHER THE SERVICES ARE IN THE NATUR E OF WORKS CONTRACT OR TECHNICAL AND PROFESSIONAL SERVICES REQUIRES TO BE DETERMINED HAVING REGARD THE NATURE OF WORK UNDERTAKEN BY THE CONTRAC TOR. THE AO AS WELL AS THE LD.CIT(A) HAD NOT DISCUSSED THE ISSUE IN DET AIL WITH REFERENCE TO THE TERMS OF CONTRACT ENTERED INTO BY THE ASSESSEE, FOR WHICH THE PAYMENTS WERE MADE. IN THESE CIRCUMSTANCES, WE ARE OF THE C ONSIDERED OPINION THAT THE MATTER REQUIRES REMAND TO THE AO FOR ADJUDICATI NG THE ISSUE IN APPEAL ITA NO.2826/CHNY/2017 :- 4 -: WITH REFERENCE TO THE TERMS OF CONTRACT. ACCORDING LY, WE REMIT THE MATTER BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION I N ACCORDANCE WITH LAW AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE OF BEIN G HEARD. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 30 TH JANUARY, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER /CHENNAI, 4 /DATED: 30 TH JANUARY, 2019. TLN . , 56 76 /COPY TO: 1. + /APPELLANT 4. 8 /CIT 2. ,-+ /RESPONDENT 5. 6 , /DR 3. 8 ( ) /CIT(A) 6. ( /GF