The ACIT, Ward-TDS-1, Surat V. Nuclear Power Corporation of India Ltd., Surat

ITA 3081/AHD/2009

• Counselvise Citation: 308120514 RSA 2009
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-09-2011
• Assessment Year: 2009-2010
• Appeal Filed On: 17-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KARTAR SINGH
• Assessee Lawyers: SANJOY R SHAH
• Keywords: Maximum Marginal Rate; Bonafide belief
• Section: 194C; 201(1)

Judgement Text

` , , . .. . . .. . , , , , . .. . . .. .!'#$ !'#$ !'#$ !'#$ , % % % % & & & & IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SHRI A.K.GARODIA, A.M.) . ITA NO. 3059/AHD./2009 : ' ()- 2007-2008 . ITA NO. 3060/AHD./2009 : ' ()- 2008-2009 . ITA NO. 3061/AHD./2009 : ' ()- 2009-2010 NUCLEAR POWER CORPORATION OF INDIA LTD., SURAT VS- ITO, TDS-I, SURAT (PAN : AAACN 3154F) (,- /APPELLANT) ( ./,- /RESPONDENT ) . ITA NO. 3081/AHD./2009 : ' ()- 2009-2010 ITO, TDS-I, SURAT -VS- NUCLEAR POWER CORPORATION OF INDIA LTD., SURAT (,- /APPELLANT) ( ./,- /RESPONDENT ) ' 01 2 3 / ASSESSEE BY : SHRI SANJOY R. SHAH, A.R. 4 2 3 / REVENUE BY : SHRI KARTAR SINGH, CIT,D.R. 5'6 2 1% / DATE OF HEARING : 01/09/2011 7'( 2 1% / DATE OF PRONOUNCEMENT : 30/09/2011 / ORDER PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THESE THREE APPEALS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10 AND ONE APPEAL FILED BY THE REV ENUE FOR THE ASSESSMENT YEAR 2009-10 ARE AGAINST THE ORDERS OF LEARNED COMMISSIO NER OF INCOME TAX(APPEALS)-I, SURAT ALL DATED 15-09-2009. AS THESE WERE HEARD ON THE SAME DAY AND ARGUED BY THE COMMON REPRESENTATIVE, THEREFORE, THESE ARE DECIDED BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL FOR THE ASSESSMENT YEAR 2007- 2008 ARE AS UNDER: ITA NOS. 3059 TO 3061 & 3081-AHD-09 2 THE APPELLANT COMPANY OBJECTS TO THE ORDER DATED 1 5 SEPTEMBER 2009 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, SURA T [CIT(A)] UNDER SECTION 250 OF THE INCOME TAX ACT, 1961 (THE ACT) ON THE FOLLOWING AMONGST OTHER GROUNDS: VEHICLE CHARGES 1. THE CIT(A) ERRED IN CONFIRMING THAT PAYMENTS MAD E BY THE APPELLANT COMPANY IN RESPECT OF VEHICLE CHARGES PAID TO M/S. MARUTI TRAVELS IS COVERED UNDER PROVISIONS OF SECTION 194I OF THE ACT AND NOT UNDER SECTION 194C OF THE ACT AS CLAIMED BY THE APPELLANT COMPANY. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING T HAT THE PAYMENTS MADE BY THE APPELLANT COMPANY TO M/S. MARUTI TRAVELS WERE S IMILAR TO THE PAYMENT MADE BY THE APPELLANT COMPANY TO ANOTHER TRAVEL AGE NT, M/S. BARODA TRAVELS, WHERE THE TAX DEPARTMENT HAS ISSUED THE CERTIFICATE UNDER SECTION 197 OF THE ACT STATING THAT PAYMENT IS COVERED BY PROVISIONS O F SECTION 194C OF THE ACT. REIMBURSEMENT OF FOOD EXPENSES 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THAT THE REIMBURSEMENT OF FOOD EXPENSES OF RS. 500 PER MONTH PAID TO THE EMPLOYEES IS A TAXABLE PERQUISITE AND CHARGEABLE TO TAX AS SALARY FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE UNDER SECTION 192 OF THE ACT CERTAIN ITEMS OF EXPENSES ON WHICH TAX IS DEDUCTED U/S 194C AS AGAINST U/S 194J OF THE ACT 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THAT THE PAYMENT MADE OF RS.272,742/-IN RESPECT OF CERTAIN ITEMS OF EXPENSES VIZ MAINTENANCE OF TELEPHONE CHARGES, AMC FOR POWER LINE CARRIER COMMU NICATION ('PLCC') SYSTEM ETC. ARE COVERED BY THE PROVISIONS OF SECTIO N 194J OF THE ACT INSTEAD OF SECTION 194C OF THE ACT AS CLAIMED BY THE APPELLANT COMPANY. BONAFIDE BELIEF 5. THE LEARNED. CIT(A) ERRED IN NOT CONSIDERING T HE SUBMISSIONS MADE BY THE APPELLANT COMPANY IN ITS CORRECT PERSPECTIVE. 6. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING T HAT THE APPELLANT COMPANY HAS NOT DEDUCTED TAX AT SOURCE / MADE THE DEDUCTION OF TAX UNDER SECTION 194C OF THE ACT UNDER A BONAFIDE BELIEF AND THEREFORE IT SHOULD NOT BE TREATED AS AN 'ASSESSEE IN DEFAULT' IN RELATION TO THE SAID PAYME NTS. INTEREST UNDER SECTION 201(1A) OF THE ACT 7. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE A PPELLANT COMPANY IS AN 'ASSESSEE IN DEFAULT' AND LIABLE TO INTEREST UNDER SECTION 201(1A) OF THE ACT. GENERAL 8. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WIT HOUT PREJUDICE TO THE OTHER. ITA NOS. 3059 TO 3061 & 3081-AHD-09 3 2.1 THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEA L FOR THE ASSESSMENT YEAR 2008- 2009 ARE AS UNDER: THE APPELLANT COMPANY OBJECTS TO THE ORDER DATED 1 5 SEPTEMBER 2009 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, SURA T [CIT(A)] UNDER SECTION 250 OF THE INCOME TAX ACT, 1961 (THE ACT) ON THE FOLLOWING AMONGST OTHER GROUNDS: VEHICLE CHARGES 1. THE CIT(A) ERRED IN CONFIRMING THAT PAYMENTS MAD E BY THE APPELLANT COMPANY IN RESPECT OF VEHICLE CHARGES PAID TO M/S. MARUTI TRAVELS IS COVERED UNDER PROVISIONS OF SECTION 194I OF THE ACT AND NOT UNDER SECTION 194C OF THE ACT AS CLAIMED BY THE APPELLANT COMPANY. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING T HAT THE PAYMENTS MADE BY THE APPELLANT COMPANY TO M/S. MARUTI TRAVELS AND M/ S.JAYDEV BAROT WERE SIMILAR TO THE PAYMENT MADE BY THE APPELLANT COMPAN Y TO ANOTHER TRAVEL AGENT, M/S. BARODA TRAVELS, WHERE THE TAX DEPARTMENT HAS I SSUED THE CERTIFICATE UNDER SECTION 197 OF THE ACT STATING THAT PAYMENT IS COVE RED BY PROVISIONS OF SECTION 194C OF THE ACT. REIMBURSEMENT OF FOOD EXPENSES 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THAT THE REIMBURSEMENT OF FOOD EXPENSES OF RS.500 PER MONTH (FROM APRIL 2007 TO JU LY 2007) AND RS.600 PER MONTH (FROM AUGUST 2007 TO MARCH 2008) PAID TO THE EMPLOYEES IS A TAXABLE PERQUISITE AND CHARGEABLE TO TAX AS SALARY FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE UNDER SECTION 192 OF THE ACT CERTAIN ITEMS OF EXPENSES ON WHICH TAX IS DEDUCTED U/S 194C AS AGAINST U/S 194J OF THE ACT 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THAT THE PAYMENT MADE OF RS.1,931,400/-IN RESPECT OF CERTAIN ITEMS OF EXPENS ES VIZ MAINTENANCE OF TELEPHONE CHARGES, AMC FOR IT SERVICES, FACILITY MA NAGEMENT AND AMC FOR POWER LINE CARRIER COMMUNICATION ('PLCC') SYSTEM ET C. ARE COVERED BY THE PROVISIONS OF SECTION 194J OF THE ACT INSTEAD OF SE CTION 194C OF THE ACT AS CLAIMED BY THE APPELLANT COMPANY. BONAFIDE BELIEF 5. THE LEARNED. CIT(A) ERRED IN NOT CONSIDERING T HE SUBMISSIONS MADE BY THE APPELLANT COMPANY IN ITS CORRECT PERSPECTIVE. 6. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING T HAT THE APPELLANT COMPANY HAS NOT DEDUCTED TAX AT SOURCE / MADE THE DEDUCTION OF TAX UNDER SECTION 194C OF THE ACT UNDER A BONAFIDE BELIEF AND THEREFORE IT SHOULD NOT BE TREATED AS AN 'ASSESSEE IN DEFAULT' IN RELATION TO THE SAID PAYME NTS. ITA NOS. 3059 TO 3061 & 3081-AHD-09 4 INTEREST UNDER SECTION 201(1A) OF THE ACT 7. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE A PPELLANT COMPANY IS AN 'ASSESSEE IN DEFAULT' AND LIABLE TO INTEREST UNDER SECTION 201(1A) OF THE ACT. GENERAL 8. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WIT HOUT PREJUDICE TO THE OTHER. 2.2 THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEA L FOR THE ASSESSMENT YEAR 2009- 2010 ARE AS UNDER: THE APPELLANT COMPANY OBJECTS TO THE ORDER DATED 1 5 SEPTEMBER 2009 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, SURA T [CIT(A)] UNDER SECTION 250 OF THE INCOME TAX ACT, 1961 (THE ACT) ON THE FOLLOWING AMONGST OTHER GROUNDS: VEHICLE CHARGES 1. THE CIT(A) ERRED IN CONFIRMING THAT PAYMENTS MAD E BY THE APPELLANT COMPANY IN RESPECT OF VEHICLE CHARGES PAID TO M/S. JAYDEV BAROT IS COVERED UNDER PROVISIONS OF SECTION 194I OF THE ACT AND NOT UNDER SECTION 194C OF THE ACT AS CLAIMED BY THE APPELLANT COMPANY. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING T HAT THE PAYMENTS MADE BY THE APPELLANT COMPANY TO M/S.JAYDEV BAROT WERE SIMI LAR TO THE PAYMENT MADE BY THE APPELLANT COMPANY TO ANOTHER TRAVEL AGENT, M /S. BARODA TRAVELS, WHERE THE TAX DEPARTMENT HAS ISSUED THE CERTIFICATE UNDER SECTION 197 OF THE ACT STATING THAT PAYMENT IS COVERED BY PROVISIONS OF SE CTION 194C OF THE ACT. REIMBURSEMENT OF FOOD EXPENSES 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THAT THE REIMBURSEMENT OF FOOD EXPENSES OF RS.600 PER MONTH PAID TO THE EMPLOYEES IS A TAXABLE PERQUISITE AND CHARGEABLE TO TAX AS SALARY FOR THE PURPOSE OF DEDU CTION OF TAX AT SOURCE UNDER SECTION 192 OF THE ACT CERTAIN ITEMS OF EXPENSES ON WHICH TAX IS DEDUCTED U/S 194C AS AGAINST U/S 194J OF THE ACT 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THAT THE PAYMENT MADE OF RS.4,964,850/-IN RESPECT OF CERTAIN ITEMS OF EXPENS ES VIZ MAINTENANCE OF TELEPHONE CHARGES, REPAIRS AND MAINTENANCE OF COMPU TERS, INSTALLATION, COMMISSIONING, SIMULATOR TESTING AND TRAINING, TEST ING OF IODINE FILTERS ETC. ARE COVERED BY THE PROVISIONS OF SECTION 194J OF THE AC T INSTEAD OF SECTION 194C OF THE ACT AS CLAIMED BY THE APPELLANT COMPANY. BONAFIDE BELIEF 5. THE LEARNED. CIT(A) ERRED IN NOT CONSIDERING T HE SUBMISSIONS MADE BY THE APPELLANT COMPANY IN ITS CORRECT PERSPECTIVE. ITA NOS. 3059 TO 3061 & 3081-AHD-09 5 6. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING T HAT THE APPELLANT COMPANY HAS NOT DEDUCTED TAX AT SOURCE / MADE THE DEDUCTION OF TAX UNDER SECTION 194C OF THE ACT UNDER A BONAFIDE BELIEF AND THEREFORE IT SHOULD NOT BE TREATED AS AN 'ASSESSEE IN DEFAULT' IN RELATION TO THE SAID PAYME NTS. INTEREST UNDER SECTION 201(1A) OF THE ACT 7. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AP PELLANT COMPANY IS AN 'ASSESSEE IN DEFAULT' AND LIABLE TO INTEREST UNDER SECTION 201(1A) OF THE ACT. GENERAL 8. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WIT HOUT PREJUDICE TO THE OTHER. 2.3 THE ONLY GROUND RAISED BY THE REVENUE IN THE AP PEAL FOR THE ASSESSMENT YEAR 2009-2010 IS AS UNDER: 1. THE LD.CIT(A) HAS ERRED ON FACTS AND LAW IN RESPECT OF VEHICLE CHARGE TO DIRECT THE A.O. TO VERIFY WHETHER RECIPIENT HAVE PA ID THE TAXES ON DUE INCOME FOR A.Y.2009-10 FOLLOWING THE DECISION OF THE HON'B LE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES PVT. LTD. VS. CIT (293 ITR 226). HOWEVER, ORDER U/S.201 WAS PASSED BY THE ON 10.2.20 09, IT IS CLEAR THAT TAXES DUE FOR A.Y.2009-10 HAVE NOT PAID BY THE DEDUCTEE A ND RATIO OF HON'BLE SUPREME COURT'S DECISION IN THE CASE OF HINDUSTAN C OCA COLA BEVERAGES PVT. LTD. VS. CIT(293 ITR 226] IS NOT APPLICABLE ON FACT S ON THIS CASE. 3. FIRST WE TAKE UP THE GROUND NOS.1 AND 2 OF ASSES SEES APPEALS IN RESPECT OF THREE ASSESSMENT YEARS I.E. 2007-08, 2008-09 AND 2009-10 AND ONLY GROUND OF REVENUES APPEAL FOR THE ASSESSMENT YEAR 2009-2010. IN RESPEC T OF THIS ISSUE, THE DISPUTE IS THAT THE ASSESSEE HAS DEDUCTED TDS IN RESPECT OF VEHICLE EXPENSES UNDER SECTION 194C WHEREAS, ACCORDING TO AO, THE ASSESSEE WAS REQUIRED TO DEDUCT TDS UNDER SECTION 194-I OF THE I.T. ACT, 1961. 4. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A) HELD THAT THE ASSESSEE IS REQUIRED TO DEDUCT TDS UNDER SECTION 194-I. THE LD. CIT(A) ACCORDINGLY UPHELD THE ACTION OF THE AO IN CHARGING TDS UNDER SECTION 201( 1) AS WELL AS INTEREST UNDER SECTION 201(1A). HOWEVER, FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCOA COLA BEVERAGES PVT. LTD . REPORTED IN 293 ITR 226, THE LD. CIT(A) HELD THAT IF THE ASSESSEE IS ABLE TO SHOW FR OM THE PROFIT & LOSS ACCOUNT AND INCOME-TAX RETURN OF THE PAYEE THAT THEY HAVE INDEE D INCLUDED THE ENTIRE INCOME RECEIVED FROM THE ASSESSEE IN THE PROFIT & LOSS ACC OUNT/RETURN, THEN THE AO WILL NOT ITA NOS. 3059 TO 3061 & 3081-AHD-09 6 CHARGE TDS UNDER SECTION 201(1). HOWEVER, THE ASSES SEE WOULD STILL BE LIABLE FOR INTEREST UNDER SECTION 201(1A) FROM THE PERIOD TDS WAS DEDUCTIBLE TO THE DATE WHEN THE PAYEE HAS MADE PAYMENT ON THE ENTIRE RECEIPT EI THER AS ADVANCE TAX OR BY WAY OF SELF-ASSESSMENT TAX OR REGULAR TAX. 5. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL IN RESPECT OF ALL THESE THREE ASSESSMENT YEARS AND FOR ONLY GR OUND FOR THE ASSESSMENT YEAR 2009- 2010, THE REVENUE IS IN APPEAL AGAINST THE DIRECTIO N OF THE LD. CIT(A) REGARDING RE- WORKING OF INTEREST LEVIABLE UNDER SECTION 201(1A) OF THE I.T. ACT, 1961. 6. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE ASSESSEE, SHRI SANJOY R. SHAH APPEARED AND POINTED OUT THAT IN RESPECT OF VEHICLE CHARGES, TDS IS REQUIRED TO BE DEDUCTED UNDER SECTION 194C AND NOT UNDER SECTION 1 94-I OF THE I.T. ACT, 1961. IN SUPPORT OF THIS, RELIANCE IS PLACED ON THE FOLLOWIN G DECISIONS: I. AHMEDABAD URBAN DEVELOPMENT AUTHORITY-VS- ACIT I N ITA NO.1637/AHD/2010 II. M/S. MUKESH TRAVELS CO. VS- ITO IN ITA NO.259 4/AHD/2010 III. ACIT(TDS)-VS- ACCENTURE SERVICES PVT. LTD. I N 2010-TIOL-618-ITAT(MUM) IV. ACIT(TDS)-VS- LOTUS VALLEY EDUCATION SOCIETY R EPORTED IN 20 TAXMANN.COM 46 (DELHI ITAT) V. CIT(TDS)-VS- SWAYAM SHIPPING SERVICES PVT. LTD. BEFORE THE HONBLE HIGH COURT AT AHMEDABAD IN TAX APPEAL NO.1037/2009 7. ON THE OTHER HAND, SHRI KARTAR SINGH, SR.D.R., A PPEARING ON BEHALF OF THE REVENUE, POINTED OUT THAT IN RESPECT OF VEHICLE HIR E CHARGES, TDS IS REQUIRED TO DEDUCTED UNDER SECTION 194-I AND NOT UNDER SECTION 194C BECAUSE IN THE PRESENT CASE, THIS IS NOT A SERVICE CONTRACT OR CARRYING PASSENGE R ALONE. IT IS A CONTRACT WHEREBY THE ASSESSEE HAS EFFECTIVELY TAKEN THE BUSES /LIGHT VEH ICLE ON LEASE. 7.1 IN REJOINDER, THE COUNSEL OF THE ASSESSEE POINT ED OUT THAT THE RELEVANT TERMS AND CONDITIONS OF THE CONTRACT FOR SUPPLY OF LIGHT VEHI CLE WITH CREW ON CONTRACT WITH M/S. ITA NOS. 3059 TO 3061 & 3081-AHD-09 7 M/S. JOYDEV BAROT AND M/S.BARODA TRAVELS ARE REPROD UCED BY THE LD. CIT(A) IN PARA 4.1 AT PAGE 14 OF THE IMPUGNED ORDER. FROM THE PERU SAL OF THE SAME, IT CAN BE SEEN THAT THE TERMS AND CONDITIONS IDENTICAL WITH THAT OF VAR IOUS DECISIONS, RELIED ON BY HIM (SUPRA). HE ACCORDINGLY POINTED OUT THAT SINCE THE MATTER IS SQUARELY COVERED, THE DEMAND CREATED UNDER SECTION 201(1) IN RESPECT OF V EHICLE HIRE CHARGES BE DELETED AND CONSEQUENTLY, IT MAY BE HELD THAT NO INTEREST UNDER SECTION 201(1A) IS PAYABLE. 8. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ITAT, AHMEDABAD A BENCH IN THE CASE OF AHMEDABAD URBAN DEVELOPMENT AUTHORITY ( SUPRA ) HELD THAT THE DEFINITION OF RENT UNDER SECTION 19 4-I DOES NOT PROVIDE ANY ITEM FOR VEHICLE HIRE CHARGES. SIMILAR VIEW IS TAKEN BY THE ITAT B BENCH, AHMEDABAD IN THE CASE OF M/S. MUKESH TRA VELS CO. ( SUPRA ) AND THE OTHER DECISIONS, RELIED ON BY THE LD. COUNSEL OF THE ASSE SSEE. WE, THEREFORE, FOLLOWING THE SAME, HOLD THAT THE ASSESSEE IS REQUIRED TO DEDUCT TDS IN RESPECT OF VEHICLE HIRE CHARGES UNDER SECTION 194C AND NOT UNDER SECTION 19 4-I. THEREFORE, THE DEMAND RAISED UNDER SECTION 201(1) IN RESPECT OF VEHICLE HIRE CHA RGES IS DELETED. CONSEQUENTLY, INTEREST CHARGED UNDER SECTION 201(1A) IN RESPECT O F THIS SHORT DEDUCTION, WHICH IS ALSO DELETED. RESULTANTLY, GROUND NOS.1 AND 2 OF ASSESSE ES APPEALS FOR ALL THE ASSESSMENT YEARS ARE ALLOWED AND APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2009-2010 IS DISMISSED. 9. GROUND NO.3 RAISED BY THE ASSESSEE IN ALL THE AS SESSMENT YEARS IS PERTAINING TO SHORT DEDUCTION. THE FACTS, RELATING TO CONTROVERSY INVOLVED IN THIS GROUND OF APPEAL FOR ALL THE ASSESSMENT YEARS, IS THAT THE COMPANY I S REIMBURSING FOOD EXPENSES TO ITS EMPLOYEES, AS PER REIMBURSEMENT OF CANTEEN SUBSIDY SCHEME, FOR WHICH A ONE TIME CERTIFICATE IS FURNISHED BY THE EMPLOYEE THAT HE/SH E HAS INCURRED AN AMOUNT OF RS.60/- PER EMPLOYEE PER MONTH TOWARDS LUNCH/BREAKFAST/TEA, ETC. A) AMOUNT OF CANTEEN SUBSIDY PAYABLE IS RS.500/- P ER MONTH. A CERTIFICATE IN PRESCRIBED FORMAT HAS TO BE FURNISHED ABOUT INCURRI NG OF EXPENDITURE. B) PAYABLE FOR THE ENTIRE MONTH IF THE EMPLOYEE IS ON LEAVE/ABSENCE IN A PARTICULAR MONTH, FOR A PERIOD OF 14 DAYS OR LESS I NCLUDING THE PERIOD OF PREFIX, SUFFIX, INTERVENING HOLIDAY, IF ANY. ITA NOS. 3059 TO 3061 & 3081-AHD-09 8 C) BEYOND THE PERIOD SPECIFIED ABOVE, THE CANTEEN SUBSIDY SHALL BE PAYABLE ON PRO-RATA BASIS. D) NOT ELIGIBLE WHILE UNDER SUSPENSION. E) SANCTIONED ON UNIFORM BASIS TO ALL THE ELIGIBL E EMPLOYEES . 9.1 BEFORE THE ITO,TDS-I, IT WAS CONTENDED THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON THIS REIMBURSEMENT OF FOOD EXPENSES BE CAUSE UNDER THE PROVISIONS OF SECTION 17(2) READ WITH RULE3, FOOD OR BEVERAGE PRO VIDED BY THE EMPLOYER TO ITS EMPLOYEES DURING OFFICE HOURS ARE NOT CHARGEABLE TO TAX IN INDIA. IT IS FURTHER SUBMITTED THAT FOOD ALLOWANCE PAID PER MEAL TO THE EXTENT OF RS.50/- PER DAY IS EXEMPT FROM TAX. THIS WAS NOT ACCEPTED BY THE AO AND FOR T HE DETAILED REASONS GIVEN IN ORDER UNDER SECTION 201(1)/201(1A), THE AO HELD THAT THE ASSESSEE OUGHT TO HAVE BEEN DEDUCTED TAX ON FOOD ALLOWANCE SHOWN AS REIMBURSEME NT UNDER SECTION 192 OF THE I.T. ACT, 1961. HE ALSO HELD THAT FOR ITS FAILURE TO DED UCT TAX UNDER THE PROVISIONS OF SECTION 192, THE ASSESSEE, UNDER SECTION 200 OF THE I.T. AC T, IS DEEMED TO BE IN DEFAULT AND HE ACCORDINGLY CHARGED TDS AND INTEREST UNDER SECTION 201(1) AND 201(1A) OF THE I.T. ACT, 1961. 10. ON APPEAL, THE LD. CIT(A) UPHELD THE ACTION OF THE AO FOR THE DETAILED REASONS GIVEN IN PARA 8.1 OF THE IMPUGNED ORDER, WHICH IS R EPRODUCED HEREUNDER: 81 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE A.O. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT THE FAC TS ARE NOT IN DISPUTE. THE APPELLANT HAS NOT PROVIDED FREE MEALS. THE APPELLANT HAS NOT PROVIDED PREPAID VOUCHERS WHICH ARE TO BE EXCHANGED FOR FOOD IN THE CANTEEN. THE APPELLANT HAS PROVIDED A LUMPSUM ALLOW ANCE OF FOOD. IT HAS TAKEN A CERTIFICATE AT THE END OF THE MONTH FROM EA CH EMPLOYEE THAT THE FOOD HAS BEEN PURCHASED FOR MORE THAN THE AMOUNT OF ALLO WANCE. ON THESE FACTS, IT IS CLEAR THAT THE APPELLANT IS NOT AT ALL COVERED B Y THE EXEMPTION MENTIONED IN RULE- 3 AS WELL AS PROVISIONS OF SECTION 17(2)(VI). THE APPELLANT HAS NOT GIVEN FREE FOOD AND THE APPELLANT HAS NOT GIVEN PAID VOUC HERS, THEREFORE, THE DECISION OF VARIOUS COURTS CITED BY THE APPELLANT A ND QUOTED ABOVE IN PARA- 6.7.1 TO PARA-6.7.9 ARE NOT APPLICABLE AS IN ALL OF THEM THE APPELLANT COMPANY HAD GIVEN FREE FOOD OR VOUCHERS. SIMILARLY THE DECISION OF THE HON'BLE ITAT DELHI IN THE CASE OF SAIPEM SPA QUOTED IN PARA-7.2. 1 ABOVE IS NOT APPLICABLE AS THE FACTS ARE TOTALLY DIFFERENT. SIMILARLY, THE DEC ISION OF THE HON'BLE DELHI TRIBUNAL IN THE CASE OF HYUNDAI HEAVY INDUSTRIES (S UPRA) IS NOT APPLICABLE AS ITA NOS. 3059 TO 3061 & 3081-AHD-09 9 THE ASSESSEE HAS NOT GIVEN FREE FOOD OR PAID VOUCHE RS. THEREFORE, IT IS VERY CLEAR THAT THE ALLOWANCES GIVEN BY THE APPELLANT IS A TAXABLE PERQUISITE ON WHICH TDS IS REQUIRED TO BE DEDUCTED. HOWEVER, I AG REE WITH THE APPELLANT THAT THE TDS HAS TO BE DEDUCTED AS PER THE INCOME S LAB OF EACH OF THE EMPLOYEE. THE A.O- CANNOT DEDUCT CHARGE TDS U/S.201 (1) ON A FLAT BASIS OF MAXIMUM MARGINAL RATE. THEREFORE, THE A.O. IS DIREC TED TO DO THE RECALCULATION AFTER OBTAINING THE SAME FROM THE APP ELLANT COMPANY SO THAT THE PERQUISITE IS ADDED TO EACH EMPLOYEE'S INCOME A ND TAX IS CALCULATED ACCORDING TO THEIR RESPECTIVE SLAB OF INCOME. 11. AGGRIEVED, THE ASSESSEE IS IN APPEAL FOR ALL TH E THREE ASSESSMENT YEARS BEFORE THE TRIBUNAL. 12. AT THE TIME OF HEARING, THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT THE PLANT OF THE ASSESSEE, LOCATED AT KAKRAPAR, NEARLY 150 KM S, AWAY FROM SURAT IN THE REMOTE, MOFUSSIL AND INTERIOR PART OF GUJARAT, WHERE NO GOO D FACILITIES FOR FOOD AND RESTAURANT ARE AVAILABLE. THE ASSESSEE IS WHOLLY OWNED GOVERNM ENT COMPANY. THE COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE COMPAN Y HAD INTRODUCED A SCHEME FROM 17.09.1994 CALLED NPCIL (REIMBURSEMENT OF CANTEEN S UBSIDY) SCHEME DETAILS WHEREOF ARE AVAILABLE AT PAGES 128 TO 132 OF PAPER BOOK FOR ASSESSMENT YEAR 2007-08 AND 2008-09 AND 58 TO 62 OF THE PAPER BOOK FOR ASSE SSMENT YEAR 2009-10. THE LD. COUNSEL ALSO SUBMITTED THAT ACCORDING TO THIS SCHEM E, THE CANTEEN IS RUN ON NO PROFIT OR NO LOSS BASIS. TO ADHERE TO THIS OBJECTIVE, THE EMPLOYEES WERE REIMBURSED RS.500/- PER MONTH TOWARDS CANTEEN SUBSIDY UPTO 31/ 7/2007 WHICH INCREASED TO RS.600/- PER MONTH FROM 1/8/2007. THIS AMOUNT WAS U TILISED BY THE EMPLOYEES FOR THEIR EXPENDITURE ON ONE BREAKFAST WITH TEA, ONE LU NCH AND ONE AFTERNOON SNACKS WITH TEA MEANING THEREBY WHILE THEY ARE ON DUTY DURING O FFICE HOURS. A CERTIFICATE FROM EACH EMPLOYEE IS OBTAINED TO THE EFFECT THAT HE IS SPENDING THIS AMOUNT PER MONTH ON THE INTENDED USE. A COPY OF SUCH CERTIFICATE IS ATT ACHED AT PAGE NO.133 OF THE PAPER BOOK FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 A ND AT PAGE NO.63 OF THE PAPER BOOK FOR THE ASSESSMENT YEAR 2009-10. THE LD. COUNS EL OF THE ASSESSEE FURTHER SUBMITTED THAT THE AO HAS CONSIDERED SUCH AMOUNT OF MONTHLY REIMBURSEMENT AS TAXABLE ON THE GROUND THAT IT IS NOT AN EXEMPT PERQ UISITE. AFTER NARRATING THE AFORESAID ITA NOS. 3059 TO 3061 & 3081-AHD-09 10 FACTS, HE POINTED OUT THAT THE AFORESAID PAYMENT OF RS.600/- IS EXEMPT ON THE FOLLOWING THREE GROUNDS. I) THIS IS NOT PERQUISITE AT ALL IF AN AMOUNT IS A MERE REIMBURSEMENT OF NECESSARY D ISBURSEMENT, THE SAME IS NOT PERQUISITE AT ALL. IN THE CASE OF THE ASSESSEE, THE WORK OF THE ASSESSEE, BEING IN REMOTE PLACE, ASSESSEE HAS TO PROVIDE SUCH SUBSI DIZED FOOD FACILITY OUT OF NECESSITY TO KEEP EMPLOYEES IN GOOD AND HEALTHY CON DITION DURING OFFICE HOURS, AS SUCH THIS AMOUNT CANNOT BE CONSIDERED AS PERQUIS ITE AT ALL. ASSESSEE RELIES ON FOLLOWING THREE DECISIONS: A) SAIPEM SPA V/S ITO 254 ITR 26 (AT) ITAT DELHI (S B) B) CIT V/S HYNDAI INDUSTRIES CO. LTD. 264 ITR 328 ( UTTARANCHAL HIGH COURT) C) CIT V/S SEDRO FOREX INTERNATIONAL DRILLING CO. L TD. 264 ITR 320 (UTTARANCHAL H.C.) II) EVEN IF IT IS CONSIDERED AS PERQUISITE, IT IS EXEMPT UNDER RULE 3 WHEN SUCH REIMBURSEMENT IS PROVIDED, IT IS AKIN TO PROVIDING FREE FOOD IN A REMOTE AREA DURING OFFICE HOURS AND THE SAME IS EXE MPT UNDER RULE-3 AS UNDER: A) FOR ASST. YEAR 2007-08 AND 2008-09 : RULE 3 (7) CLAUSE (III) REPORTED AT PAGE 1.41 (BOTTOM PORTION) OF I.T. RULE S 2011 EDITION OF TAXMANN B) FOR ASST. YEAR 2009-10 : UNDER RULE 3(7) CLAUSE (III) REPORTED AT PAGE 1.47 OF I.T. RULES 2011 EDITION OF TAXMANN III) BONA FIDE BELIEF THAT SUCH REIMBURSEMENT IS TA X FREE PERQUISITE IF AT ALL SUCH AMOUNTS ARE CONSIDERED AS TAXABLE PE RQUISITE, THE SCHEME WAS IN OPERATION FOR MORE THAN 12 YEARS AND IN PAST NO SUC H ISSUE HAD ARISEN. AS PER PROVISIONS OF SECTION 192, ASSESSEE IS TO ESTIMATE HIS EMPLOYEES' INCOME AND ARRIVE AT TAX LIABILITY FOR TDS PURPOSES. WHEN EMPL OYER BONA FIDE BELIEVED THAT SUCH REIMBURSEMENT WHICH IS NECESSARILY SPENT FOR T HE INTENDED PURPOSE IS NOT PERQUISITE, EVEN IF IT IS CONSIDERED AS TAXABLE PER QUISITE, EMPLOYER CANNOT BE MADE LIABLE TO PAY TAX U/S 201 (1) AND INTEREST U/S 201(1A). THE ASSESSEE IN THIS REGARD RELIES ON CASE LAWS MENTIONED AT SERIAL NO. 8 TO 11 AND 15 TO 16 OF THE PAPER BOOK ON CASE LAW FILED DURING HEARING . 13. ON THE OTHER HAND, THE LD. SR.D.R., APPEARING F OR THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). HE POINTED O UT THAT RULE 3 OF I.T. RULES, 1962 ITA NOS. 3059 TO 3061 & 3081-AHD-09 11 ONLY PRESCRIBES AS TO HOW TO ARRIVE AT THE VALUE OF FREE FOOD, IF PROVIDED. IN THE INSTANT CASE, NO FREE FOOD IS PROVIDED INSTEAD OF, EMPLOYEE S ARE PAID IN CASH. THEREFORE, THE VARIOUS DECISIONS, RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE, ARE NOT APPLICABLE BECAUSE FREE FOOD LITERALLY MEANS FREE FOOD ONLY AN D NOT CASH PAYMENT. IF NO FREE FOOD IS PROVIDED, THERE IS NO QUESTION OF FINDING THE VA LUE AND HENCE THE WHOLE AMOUNT IS TAXABLE, WHICH IS ONE KIND OF ALLOWANCE GRANTED TO THE EMPLOYEES, UNLESS IT IS EXEMPT UNDER SECTION 10(14)(I) OR 10(14)(II) OF THE I.T. ACT, 1961. WITH REGARD TO LEVY OF INTEREST UNDER SECTION 201(1A), THE LD. D.R. POINTE D OUT THAT IT IS NOT PENAL ONE BUT COMPENSATORY, IN VIEW OF JUDGEMENT OF THE HONBLE S UPREME COURT IN THE CASE OF ANJUMAN GHASWALA REPORTED IN 252 ITR 01 (SC) AND TH E CENTRAL PROVINCE MANGANESE CO. LTD. REPORTED IN 160 ITR 961 AND VARIOUS HIGH C OURT DECISIONS REPORTED IN 212 ITR 92 (BOM.), 245 ITR 13(KER.), 253 ITR 705 (DEL), 261 ITR 488 (CAL), 278 ITR 218 (CAL)L AND 272 ITR 95 (KER.) THEREFORE, THE BON AFIDE BELIEF OF THE ASSESSEE WOULD NOT BE OF ANY HELP AND ON COMPENSATORY GROUND, THE ASSESSEE HAD TO PAY INTEREST BECAUSE THE MONEY DUE TO GOVERNMENT, WAS UTILISED B Y THE ASSESSEE, UNTIL PAID EITHER BY THE ASSESSEE COMPANY OR BY ITS EMPLOYEE. SINCE T HE ALLOWANCE IN QUESTION IS NOT EXEMPT UNDER SECTION 10(14), THE VIEW TAKEN BY THE LD. CIT(A) BE UPHELD. 14. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSEE HAS NOT PROVIDED FREE MEALS. IT HAS ALSO NOT PROVIDED PRE-PAID VOUCHERS WHICH ARE TO BE EXCHANGE D FOR FOOD IN THE CANTEEN. THE ASSESSEE, IN THE PRESENT CASE, HAS PROVIDED A LUMP- SUM ALLOWANCE OF FOOD. IT HAS TAKEN A CERTIFICATE AT THE END OF THE MONTH FROM EACH EMP LOYEE THAT FOOD HAS BEEN PURCHASED FOR MORE THAN THE AMOUNT IN QUESTION. THEREFORE, TH E CASE OF THE ASSESSEE IS NOT COVERED BY EXEMPTION MENTIONED IN RULE 3 AS WELL AS PROVISIONS OF SECTION 17(2)(VI) OF THE I.T. ACT, 1961. WE ARE, THEREFORE, OF THE VI EW THAT BOTH THE DEPARTMENTAL AUTHORITIES BELOW ARE LEGALLY AND FACTUALLY CORRECT IN HOLDING THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AS PER INCOME SLAB OF EACH E MPLOYEE. SINCE THE AO HAS COMPUTED SHORT DEDUCTION UNDER SECTION 201(1) ON A FLAT BASIS OF MAXIMUM MARGINAL RATE, IN OUR OPINION, THE LD. CIT(A) IS FULLY JUSTI FIED IN DIRECTING THE AO TO RE-CALCULATE THE SHORT DEDUCTION UNDER SECTION 201(1), AFTER OBT AINING THE NECESSARY DETAILS FROM THE ITA NOS. 3059 TO 3061 & 3081-AHD-09 12 COMPANY SO THAT CORRECT AMOUNT OF SHORT DEDUCTION I S COMPUTED, ACCORDING TO THEIR RESPECTIVE SLAB OF INCOME. WITH REGARD TO LEVY OF I NTEREST UNDER SECTION 201(1A), WE FIND CONSIDERABLE FORCE IN THE SUBMISSIONS MADE BY THE LD. D.R. THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE P VT. LTD. VS- CIT REPORTED IN 293 ITR 226 (SC) THAT LEVY OF INTEREST UNDER SECTIO N 201(1A) IS MANDATORY. WE, THEREFORE, INCLINE TO UPHOLD THE ORDER OF THE LD. C IT(A) ON THIS ISSUE. RESULTANTLY, THIS GROUND OF APPEAL IN RESPECT OF ALL THE THREE ASSESS MENT YEARS IS REJECTED. 15. GROUND NO. 4 OF ALL THE ASSESSMENT YEARS PERTAI NS TO SHORT DEDUCTION OF TAX IN RESPECT OF CERTAIN ITEMS ON WHICH THE ASSESSEE DEDU CTED THE TAX AT SOURCE UNDER SECTION 194C, AS AGAINST THE VIEW OF REVENUE THAT IT SHOULD BE DEDUCTED THE TAX UNDER SECTION 194J OF I.T. ACT, 1961. ACCORDING TO THE AO, SECTIO N 194J INCLUDES FEES FOR TECHNICAL SERVICES, WHICH MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION) FOR RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTAN CY SERVICES (INCLUDING THE PROVISION OF TECHNICAL OR OTHER PERSONNEL). THE CBD T IN ITS CIRCULAR NO.715 DATED 08/08/1995 HAS CLARIFIED THAT IN CASE OF SERVICES O F THE ELECTRICIAN ARE PROVIDED BY A CONTRACTOR, OR PAYMENTS TO AN ELECTRICIAN, THE PROV ISIONS OF SECTION 194C WOULD APPLY BUT SPECIFICALLY FURTHER CLARIFIED THAT ROUTINE MAI NTENANCE CONTRACT WHICH INCLUDES SUPPLY OF SPARES WILL BE COVERED UNDER SECTION 194C BUT WHERE TECHNICAL SERVICES ARE RENDERED, THE PROVISION OF SECTION 194J WILL APPLY IN REGARD TO TAX DEDUCTION AT SOURCE. ON THIS BASIS, THE AO HELD THAT THE ASSESSEE WAS RE QUIRED TO DEDUCT TDS UNDER SECTION 194J IN RESPECT OF (I) MAINTENANCE OF TELEPHONE EX CHANGE, (II) AMC FOR VHF WIRELESS SET, (III) REPAIRS AND MAINTENANCE OF COMPUTERS, (I V) CONTRACT HYDR. BEMCO. HYDROLIC, (V) AMC FOR X-RAY MACHINE, (VI) SERVICE FEE/CHARGES, (VII) TESTING CHARGES FOR THE ASSESSMENT YEAR 2009-2010, IN RESPECT OF (I) MAINTENANCE FOR TELEPHONE EXCHANGE , (II) AMC OF IT SERVICES VARIOUS PAYMENTS MADE TO HCL INFOSYSTEM LTD., (III) AMC OF IT SERVICES- PAYMENT MADE TO P.C.S. TECHNOLOGY LTD. , (IV) AMC FOR PLCC SYSTEM PAID UNDER VOUCHER NO.5207BPV12194 GUJARAT ENERGY TRANSMISSION CORPORATION, ETC. FOR T HE ASSESSMENT YEAR 2008-09 AND IN RESPECT OF (I) MAINTENANCE FOR TELEPHONE EXCHANGE, (II) MAINTENANCE OF VHF WIRELESS ITA NOS. 3059 TO 3061 & 3081-AHD-09 13 BASE STATION, (III) AMC FOR STATION LIGHTING, (IV) AMC FOR CABLING, (V) AMC FOR PLCC SYSTEM, ETC. FOR THE ASSESSMENT YEAR 2007-2008. 16. ON APPEAL, THE LD. CIT(A) IN PARA 11.1 OF THE I MPUGNED ORDER HELD THAT VARIOUS COURTS HAVE DECIDED THAT MERE SERVICING AN EQUIPMEN T OF HIGH TECHNICAL NATURE WOULD NOT AMOUNT TO FEE FOR TECHNICAL SERVICES BUT STILL THE FACTS OF EACH CASE WOULD DECIDE WHETHER A PARTICULAR SERVICE IS A SERVICE CONTRACT OR FEES FOR TECHNICAL SERVICES. HE ACCORDINGLY DECIDED THESE ITEMS AS UNDER: A.Y. 2009-10 (I) PAYMENT OF RS.79,775/- FOR MAINTENANCE OF TELEP HONE EXCHANGE. THIS PAYMENT IS FOR MAINTENANCE OF THE TELEPHONE EXCHANG E. IT IS MENTIONED IN CLAUSE-02 THAT NECESSARY EXCHANGE PROGRAMMING IN TH E EXCHANGE SHALL BE DONE BY THE PARTY FOR CONNECTION AVAYA EXCHANGE THROUGH RADIO LINK OR OFC LINK. I AGREE WITH THE APPELLANT THAT NORMAL MAINTENANCE OF TELEPHONE EXCHANGE WOULD BE PART OF SERVICE CONTRACT U/S.194C BUT WHERE THE PROGRAMMING IS REQUIRED TO BE DONE AND IF RADIO LINKING UP OR OFC LINKING UP I S REQUIRED TO BE DONE THEN IT AMOUNTS TO PROVIDING TECHNICAL SERVICES. HENCE THIS PAYMENT IS SUBJECTED TO DEDUCTION U/S.194J. (II) PAYMENT OF RS.25,250/- FOR AMC FOR VHP WIRELES S SET. THE AMC IS CLEARLY A SERVICE CONTRACT COVERED BY THE PROVISIONS OF SEC TION 194C. THE PROVISIONS OF SECTION 194J WILL NOT BE APPLICABLE. (III) PAYMENT OF RS.4,97,436/- UNDER ACCOUNT CODE 7 4620 FOR REPAIR AND MAINTENANCE OF COMPUTERS. THIS PAYMENT IS FOR AMC A S WELL AS MANAGEMENT OF INFORMATION TECHNOLOGY SERVICES INCLUDING SOFTWARE CONFIGURATION OF SERVERS, LAN TROUBLE SHOOTING, CONFIGURATION OF ROUTERS, DEV ELOPING NEW APPLICATIONS FOR HOSING, COORDINATING WITH VENDORS, FOR TAKING UP MA INTENANCE OF WARRANTY EQUIPMENTS AND BACK-UP MANAGEMENT FOR SERVE-UPS. FR OM THE ABOVE DESCRIPTION, IT IS SEEN THAT THIS INVOLVES FEES FOR TECHNICAL SERVICES U/S.194J AND NOT MERE SERVICE CONTRACT. (IV) PAYMENT OF RS.48,670/- FOR CONTRACT HYDR.BEMCO .HYDROLIC. THIS IS FOR SERVICING OF MECHANICAL DEVICES, ELECTRICAL DEV ICES, HYDROLIC DEVICES, FILERS, ETC. THIS ALSO INCLUDES TRAINING OF PERSONNEL FOR S UCH PURPOSES. FROM THE DESCRIPTION ABOVE, THIS APPEARS TO BE CLEARLY A CON TRACT FOR SERVICES AND NOT FOR FEE FOR TECHNICAL SERVICES. HENCE THIS IS COVERED U /S.194C. (V) PAYMENT OF RS.67,344/- BEING AMC FOR X-RAY MACH INE. SINCE THIS IS AMC OF A MACHINE THIS CANNOT BE COVERED U/S.194J. IT IS CL EARLY A WORKS CONTRACT U/S.194C. ITA NOS. 3059 TO 3061 & 3081-AHD-09 14 (VI) PAYMENT OF RS.38,20,240/- UNDER ACCOUNT CODE 77764. THIS IS FOR INDEGRATION OF ECIL, INSTALLATION, COMMISSIONING, S TIMULATING TESTING AND TRAINING OF MODIFIED FHS COMPUTER SYSTEM. THE DESCR IPTION CLEARLY SHOWS THAT IT IS A CONTRACT OF TECHNICAL NATURE COVERED U/S.!9 4J. THE PAYMENT IS FEE FOR TECHNICAL SERVICES AND NOT FOR WORKS CONTRACT. HENC E THIS IS COVERED U/S.!94J. (VII) & (VIII) PAYMENT OF RS.4,52,249/- AND RS.1,15 ,150/- FOR TESTING CHARGES. THIS IS FOR INSPECTION, TESTING AND SUPPLY OF COMBI NED PARTICULATE AND IODINE FILTERS. THIS CANNOT BE CALLED WORKS CONTRACT BECAU SE THE PAYMENT IS FOR TESTING OF NEWLY PURCHASED IODINE FILTERS TO TEST TO DO THE RADIOGRAPHY TESTING OF PIPES. EVALUATION CHARGES FOR DISSOLVED GASES ETC. THE A.O . HAS POINTED OUT THAT FOR A.Y. 2008-09 THE ASSESSEE ITSELF HAS DEDUCTED TDS U /S.194J. I AGREE WITH THE A.O. THAT THE DESCRIPTION CLEARLY SHOWS THAT THE PA YMENT FOR FEE FOR TECHNICAL SERVICES COVERED BY SECTION 194J. A.Y. 2008-09 :- (I) THESE ARE VARIOUS PAYMENTS MADE FOR MAINTENAN CE OF TELEPHONE EXCHANGE. THIS IS SAME AS ITEM NO.(I) OF A.Y. 2009-10 ABOVE A ND HENCE THESE PAYMENTS ARE TREATED AS COVERED U/S.194J FOR THE REASONS DISCUSS ED ABOVE. (II) PAYMENT OF RS.4,46,380/- MADE TO HCL LTD. FOR AMC OF IT. SERVICES. THIS SEEMS TO BE SIMILAR TO ITEM NO.(III) OF A.Y.20 09-10 ABOVE AND HENCE THESE PAYMENTS ARE ALSO TREATED AS COVERED U/S.1943 FOR T HE REASONS DISCUSSED ABOVE. (III) PAYMENT OF RS.5,39,216/- MADE TO HCL LTD. FO R AMC OF I.T. SERVICES. THIS SEEMS TO BE SIMILAR TO ITEM NO.(IN) OF A.Y. 2009-10 AND ITEM NO.(II) ABOVE AND HENCE THESE PAYMENTS ARE ALSO TREATED AS COVERED U/ S.194J FOR THE REASONS DISCUSSED ABOVE. (IV) PAYMENT OF RS.5,59,360/- TO HCL LTD. THE A.O. HAS STATED THAT THE SCOPE OF CONTRACT IS FACILITY MANAGEMENT, COMPREHENSIVE H ARDWARE MAINTENANCE ETC. AND COVERS A WIDE RANGE AREA OF WORK SUCH AS SOFTWA RE CONFIGURATION FOR SERVERS, DESKTOPS, INSTALLATION SUPPORT FOR ALL PER IPHERALS, LAN TROUBLE SHOOTING, CONFIGURATION OF FOUTERS, MAINTENANCE OF INTERNET WEB, DEVELOPING NEW APPLICATIONS FOR HOSTING, DATA BASE MANAGEMENT MAINTENANCE OF IT EQUIPMENTS WHICH ARE NOT UNDER WARRANTY, PROVIDE SU ITABLE STANDY ITEMS IF THE ORIGINAL EQUIPMENT IS UNDER MAINTENANCE FOR UNINTER RUPTED SERVICE ETC. TO MENTION A FEW. THIS SEEMS TO BE SIMILAR TO ITEM NO. (III) OF A.Y. 2009-10 AND ITEM NO.(IT) ABOVE AND HENCE THESE PAYMENTS ARE ALS O TREATED AS COVERED U/S.194J FOR THE REASONS DISCUSSED ABOVE. (V) PAYMENT OF RS.2,40,141/- TO PCS TECHNOLOGY LTD. WORK EXECUTED SHOWS HARDWARE MAINTENANCE OF SERVER, HARDWARE MAINTENANC E OF DESKTOP, PRINTER MAINTENANCE DMP, PRINTER MAINTENANCE LASER, SCANNER FACILITY MANAGEMENT, ITA NOS. 3059 TO 3061 & 3081-AHD-09 15 SWITCH MAINTENANCE ETC. FROM THE DESCRIPTION IT APP EARS TO BE A WORK CONTRACT ONLY AS IT IS REGARDING MAINTENANCE OF MACHINES, ET C. (VI) TWO PAYMENTS OF AMC OF PLCC SYSTEM UNDER CODE 74800. THE DESCRIPTION HAS NOT BEEN GIVEN BY THE A.O. OR THE A PPELLANT. IN THE ABSENCE OF THE DESCRIPTION, THE A.O.'S FINDING IS UPHELD. A.Y. 2007-08 :- (I) PAYMENT OF RS.79,690/- FOR MAINTENANCE OF TELE PHONE EXCHANGE. THIS IS SAME AS ITEM NO.(I) OF A.Y. 2009-10 ABOVE AND HENCE THESE PAYMENTS ARE TREATED AS COVERED U/S.194J FOR THE REASONS DISCUSS ED ABOVE. (II) PAYMENT OF RS.49,590/- FOR MAINTENANCE OF VHP WIRELESS BASE STATION. THE AMC IS CLEARLY A SERVICE CONTRACT COVERED BY TH E PROVISIONS OF SECTION 194C. THE PROVISIONS OF SECTION 194J WILL NOT BE APPLICABLE. (III) PAYMENT OF RS.1,59,380/- FOR MAINT ENANCE OF TELEPHONE EXCHANGE. THIS IS SAME AS ITEM NO.(I) OF A.Y. 2009-10 ABOVE A ND HENCE THESE PAYMENTS ARE TREATED AS COVERED U/S.194J FOR THE REASONS DISCUSS ED ABOVE. (IV) PAYMENT OF RS.71,364/- BEING AMC FOR STATION L IGHTING. THE AMC IS CLEARLY A SERVICE CONTRACT COVERED BY THE PROVISIONS OF SEC TION 194C. THE PROVISIONS OF SECTION 194J WILL NOT BE APPLICABLE. (V) PAYMENT OF RS.53,622/- BEING AMC FOR CABLIN G. THE AMC IS CLEARLY A SERVICE CONTRACT COVERED BY THE PROVISIONS OF SECTI ON 194C. THE PROVISIONS OF SECTION 194J WILL NOT BE APPLICABLE. (VI) PAYMENT OF RS.33,672/- BEING PAYMENT FOR AMC F OR PLC SYSTEM. THE DESCRIPTION HAS NOT BEEN GIVEN BY THE A.O. OR THE A PPELLANT. IN THE ABSENCE OF THE DESCRIPTION, THE A.O.S FINDING IS UPHELD. 16.1 FURTHER, THE LD. CIT(A) HELD THAT THE ASSESSEE IS LIABLE TO PAY INTEREST UNDER SECTION 201(1A) FROM THE PERIOD TDS WAS DEDUCTIBLE TO THE DATE WHEN PAYEE HAS MADE THE PAYMENT ON THE ENTIRE RECEIPTS EITHER AS TDS, A DVANCE TAX OR BY WAY OF SELF- ASSESSMENT TAX OR REGULAR TAX. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 17. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT VARIOUS PAYMENTS MADE BY THE ASSESSEE ARE NOT COVERED UNDER SECTION 194J OF THE I.T. ACT, 1961. ELABORATING HIS ARGUMENT, THE COUNSEL OF THE ASSESSEE POINTED OUT THAT AS PER EXPLANATION (B) TO SECTION 194J FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME ITA NOS. 3059 TO 3061 & 3081-AHD-09 16 MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB- SECTION (1) OF SECTION 9. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE ITAT H BENCH, DELHI IN THE CASE OF DCIT-VS- PARASRAMPURIA SYNTHETICS LTD. REPO RTED IN [2008] 20 SOT 248 (DELHI), WHEREIN IT HAS BEEN HELD AS UNDER: THE TERM FEES FOR TECHNICAL SERVICES' AS PER EXPL ANATION (B) TO SECTION 194J MEANS AS DEFINED IN EXPLANATION 2 BELOW CLAUSE (VII ) OF SUB-SECTION (1) OF SECTION 9. AS PER SAID EXPLANATION 'FEES FOR TECHNICAL SERVICE S MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE REND ERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PR OVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL), BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDE RTAKEN BY THE RECIPIENT CHARGEABLE UNDER THE HEAD 'SALARIES'. THE MADRAS HI GH COURT IN THE CASE OF SKYCELL COMMUNICATIONS LTD. V. DY. CIT [2001] 251 ITR 53 HAS HELD THAT THE INSTALLATION AND OPERATION OF SOPHISTICATED EQUIPME NTS WITH A VIEW TO EARN INCOME BY ALLOWING CUSTOMERS TO AVAIL OF THE BENEFI T OF THE USER OF SUCH EQUIPMENT DOES NOT RESULT IN THE PROVISION OF TECHN ICAL SERVICE TO THE CUSTOMER FOR A FEE. IN THE INSTANT CASE, THERE MIGHT BE USE OF SERVICES OF TECHNICALLY QUALIFIED PERSONS TO RENDER THE SERVICES, BUT THAT ITSELF DID NOT BRING THE AMOUNT PAID AS 'FEES FOR TECHNICAL SERVICES' WITHIN THE ME ANING OF EXPLANATION 2 TO SECTION 9(1)(VII). THE AMOUNT PAID WAS TOWARDS ANN UAL MAINTENANCE CONTRACT OF CERTAIN MACHINERY OR FOR CONVERTING POY INTO TEX TURED/TWISTED YARN. THE TECHNOLOGY OR THE TECHNICAL KNOWLEDGE OF THE PERSON S WERE NOT MADE AVAILABLE TO THE ASSESSEE BUT ONLY BY USING SUCH TECHNICAL KN OWLEDGE, SERVICES WERE RENDERED TO THE ASSESSEE. THEREFORE, IT COULD NOT B E SAID THAT THE AMOUNT WAS PAID AS 'FEES FOR TECHNICAL SERVICES'. FURTHER, REN DERING SERVICES BY USING TECHNICAL KNOWLEDGE OR SKILL IS DIFFERENT THAN CHAR GING FEES FOR TECHNICAL SERVICES. IN THE LATTER CASE, THE TECHNICAL SERVICE S ARE MADE AVAILABLE DUE TO WHICH THE ASSESSEE ACQUIRED CERTAIN RIGHT WHICH CAN BE FURTHER USED. IN THE INSTANT CASE, IT WAS NOT SO. THE PERSONS RENDERING SERVICES HAD ONLY MAINTAINED MACHINERY OR CONVERTED YARN, BUT THAT KNOWLEDGE WAS NOT NOW VESTED WITH THE ASSESSEE BY WHICH ITSELF IT COULD DO RESEARCH WORK. THEREFORE, THE AMOUNT PAID IN QUESTION COULD NOT BE CONSIDERED AS FEES FOR TEC HNICAL SERVICES WITHIN THE MEANING OF SECTION 194J . 17.1 THE COUNSEL OF THE ASSESSEE POINTED OUT THAT T HE ASSESSEE HAS MADE VARIOUS PAYMENTS MADE UNDER CONTRACT OF MAINTENANCE OF TELE PHONE EXCHANGE, ANNUAL MAINTENANCE CONTRACT FOR VHF WIRELESS SET, REPAIRS AND ANNUAL MAINTENANCE OF COMPUTERS, ETC. AND ACCORDINGLY DEDUCTED TDS UNDER SECTION 194C OF THE I.T. ACT, 1961, WHICH IS LEGALLY CORRECT, KEEPING IN VIEW THE RATIO OF JUDGEMENT OF THE HONBLE ITA NOS. 3059 TO 3061 & 3081-AHD-09 17 MADRAS HIGH COURT IN CASE OF SKYCELL COMMUNICATIONS LTD. ( SUPRA ), FOLLOWED BY DELHI ITAT H BENCH IN THE CASE OF PARASRAMPURIA S YNTHETICS LTD. ( SUPRA ). 18. ON THE OTHER HAND, THE LD. D.R. APPEARING ON BE HALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDERS OF THE LD. CIT(A). THE LD. D.R. POINTED OUT THAT IN THE IMPUGNED ORDER, THE LD. CIT(A), AFTER CONSIDERING T HE RELEVANT CLAUSES OF ALL THE CONTRACTS, ONLY IN RESPECT OF TWO CONTRACTS, WHICH INVOLVED RENDERING MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES, HELD THAT THE AS SESSEE WAS REQUIRED TO DEDUCT TDS UNDER SECTION 194J OF THE I.T. ACT, 1961. THEREFORE , THE VIEW TAKEN BY THE LD. CIT(A) BE UPHELD. 19. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE HONBLE MADRAS HIGH COURT, I N THE CASE OF SKYCELL COMMUNICATION LTD. VS- DCIT ( SUPRA ), HELD THAT INSTALLATION AND OPERATION OF SOPHISTICATED EQUIPMENTS WITH A VIEW TO EARN INCOME BY ALLOWING CUSTOMERS TO AVAIL OF BENEFIT OF THE USER OF SUCH EQUIPMENT DOES NOT R ESULT IN THE PROVISION OF TECHNICAL SERVICE TO THE CUSTOMER FOR A FEE. KEEPING IN VIEW THE RATIO OF THIS DECISION, IN THE INSTANT CASE, THERE MIGHT BE USE OF SERVICES OF TEC HNICALLY QUALIFIED PERSONS TO RENDER FOR MAINTENANCE OF TELEPHONE EXCHANGE, ANNUAL MAINT ENANCE CONTRACT FOR VHF WIRELESS SET, REPAIRS AND ANNUAL MAINTENANCE OF COM PUTERS, ETC., BUT THAT ITSELF DID NOT BRING THE AMOUNT PAID AS 'FEES FOR TECHNICAL SERVIC ES' WITHIN THE MEANING OF EXPLANATION 2 TO SECTION 9(1)(VII). THEREFORE, THE AMOUNT PAID TOWARDS ANNUAL MAINTENANCE CONTRACT OF TELEPHONE EXCHANGE AND COMP UTERS BY THE ASSESSEE, IN THE PRESENT CASE, COULD NOT BE CONSIDERED AS FEE FOR TE CHNICAL SERVICES WITHIN THE MEANING OF SECTION 194J. WE, THEREFORE, FOLLOWING THE DECIS ION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF SKYCELL COMMUNICATIONS LTD. ( SUPRA ), WHICH IS FOLLOWED BY THE ITAT, DELHI BENCH H IN THE CASE OF PARASRAMPURIA SYNTHETICS LTD. ( SUPRA ), HELD THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TDS UNDER SECTI ON 194C AND NOT UNDER SECTION 194J OF THE I.T. ACT. CONSEQUENTLY, IT IS HELD THAT THE ASSESSEE CANNOT BE DEEMED TO BE ASSESSEE IN DEFAULT WITHIN THE MEANING OF SECTION 201(1) IN RESPECT OF SUCH TAX. ACCORDINGLY, IT IS HELD THAT THE ASSESSEE RIGHTLY D EDUCTED THE TDS UNDER SECTION 194C ITA NOS. 3059 TO 3061 & 3081-AHD-09 18 OF THE I.T. ACT, 1961. CONSEQUENTLY, NO INTEREST UN DER SECTION 201(1A) OF THE I.T. ACT IS LEVIABLE. HENCE, GROUND NOS. 4 OF THE ASSESSEES APPEALS FOR ALL THE THREE ASSESSMENT YEARS ARE ALLOWED. THE GROUND NOS. 5 AND 6 IN RESPE CT OF ALL THE ASSESSMENT YEARS NEED NO SEPARATE ADJUDICATION, IN VIEW OF OUR DECISION I N RESPECT OF EACH AND EVERY ITEM OF SHORTFALL ( SUPRA ). 20. IN THE RESULT, ALL THE THREE APPEALS FILED BY T HE ASSESSEE ARE PARTLY ALLOWED WHEREAS THE APPEAL FILED BY THE REVENUE IS DISMISSE D. 8 2 7'( #' ) 30 / 09 /2011 ' 9 2 !6 : THIS ORDER PRONOUNCED IN COURT ON 30/09/2011. SD/- SD/- (A.K.GARODIA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30/09/2011 2 22 2 .1; .1; .1; .1; <;(1) <;(1) <;(1) <;(1)- -- - 1. ,- 2. ./,- 3. 1 5@ 4. 5@- - 5. ;C! .1' , , : 6. !$ E8 , F/ 4 , : TALUKDAR/ SR. P.S.