ITO, Jaipur V. THE CONTROLLER FINANCE, Jaipur

ITA 471/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2017 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 24-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 05-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POONAM ROY
• Assessee Lawyers: P C PARWAL CA DHK
• Section: 194C

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPAN] YS[KK LNL; ] DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA- @ ITA NOS. 471 & 472/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 & 2013-14 INCOME TAX OFFICER, (TDS-2), JAIPUR. CUKE VS. THE CONTROLLER FINANCE, RAJASTHAN COUNCIL OF ELEMENTARY EDUCATION, 5 TH BLOCK, 3 RD FLOOR, RADHAKRISHNAN SHIKSHA SANKUL, JLN MARG, JAIPUR. PAN/TAN NO.: JPRR 01383 E VIHYKFKHZ@ APPELL ANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SMT. POONAM ROY (DCIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (CA). LQUOKBZ DH RKJH[K @ DATE OF HEARING : 28/06/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 30/06/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. BOTH THE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE COMMON ORDER DATED 24/02/2016 OF LD. CIT(A)-III, JAIPUR PERTAININ G TO THE ASSESSMENT YEARS 2012-13 AND 2013-14. IN BOTH THESE APPEALS, THERE A RE ONLY ONE COMMON ISSUE, WHICH IS AGAINST DELETING THE ADDITION MADE U/S 194J OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ITA 471 & 472/JP/2016_ ITO VS CONTROLLER FINANCE 2 2. SINCE, COMMON ISSUES ARE INVOLVED IN BOTH THE AP PEALS, THEREFORE, BOTH THE APPEALS ARE BEING HEARD TOGETHER AND FOR THE SA KE OF CONVENIENCE AND BREVITY, COMMON ORDER IS BEING PASSED. 3. THE BRIEF FACTS OF THE CASE ARE THAT UNDER THE FR AME WORK OF SARVA SHIKSHA ABHIHYAAN (SSA), THE RAJASTHAN COUNCIL OF E LEMENTARY EDUCATION, WHICH WAS A NODAL AGENCY FOR IMPLEMENTATION OF SARVA SHIKSHA ABHIHYAAN EXTENDED COMPUTER BASED EDUCATION IN 660 GOVERNMENT UPPER PRIMARY SCHOOLS IN 33 DISTRICTS OF RAJASTHAN. FOR THIS PURP OSE, CERTAIN AGENCIES WERE TO PROVIDE COMPUTER HARDWARE, SOFTWARE, CONNECTED ACCESS ORIES, CONSUMABLES, ONLINE MIS AND THE MANPOWER AND BIDS WERE INVITED FOR THIS WORK. THE ASSESSEE HAS GIVEN ONE SINGLE BUNDLED CONTRACT. FUR THER IT WAS ALSO CLAIMED THAT THE PERSONS TO WHOM THE PAYMENTS WERE MADE, HAS ALSO PAID TAXES AND SHOWS THE RECEIPTS IN THEIR RETURN OF INCOME, THEREF ORE, NO INTEREST U/S 201(1)(A) OF THE ACT CAN BE CHARGED. 4. THE LD. CIT(A) HAS DELETED THE ADDITION BY HOLDING AS UNDER:- 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, FINDINGS OF THE A.O. AND SUBMISSION OF THE APPELLANT. ON PERUSAL OF CONTRACT, IT IS SEEN THAT THE CONTRACT GIVEN BY THE ASSESSEE TO THESE PARTIES COMPRISES, OF CONTRACT FOR SUPPLY OF COMPUTER HARDWA RE, SOFTWARE, CONNECTED ACCESSORIES, CONSUMABLES AND MAN POWER ETC. THUS IT IS A SORT OF SUPPLY OF MATERIAL/IMPLEME NTATION SERVICES. THEREFORE, IT COMES UNDER THE DEFINITION O F WORK ITA 471 & 472/JP/2016_ ITO VS CONTROLLER FINANCE 3 CONTRACT RATHER THAN TECHNICAL SERVICES. THE ASSESSE E HAS ALREADY DEDUCTED TDS U/S 194C @ 2%. THEREFORE DEMAND RAISED BY A.O. BY CONSIDERING THE PAYMENT AS PAYMEN T FOR TECHNICAL SERVICES IS DELETED. THE LD. CIT(A) HAS CATEGORICALLY MENTIONED THAT CONTR ACT GIVEN BY THE ASSESSEE COMES UNDER THE DEFINITION OF WORK CONTRACT RATHER THAN TECHNICAL SERVICES, THEREFORE, THE ASSESSEE IS LIABLE TO DEDU CT TDS @ 2% U/S 194C OF THE ACT. THE ASSESSING OFFICER WRONGLY CONSIDERED THE PAYMENTS AS PAYMENTS MADE TO OTHER TECHNICAL SERVICES. 5. THE PLEADING ON BEHALF OF THE ASSESSEE, THE LD AR OF THE ASSESSEE HAS SUBMITTED AS UNDER:- 1. IT IS SUBMITTED THAT FROM THE TERMS AND CONDITIO NS OF BID DOCUMENTS IT IS CLEAR THAT THE CONTRACT IS GIVEN FOR PROCUREMENT OF HARDWARE AND SERVICES FOR COMPUTER BASED EDUCATION IN SCHOOLS AN D NOT FOR RENDERING OF ANY TECHNICAL SERVICES TO THE ASSESSEE AS SUCH. THIS IS CLEAR FROM THE FOLLOWING TERMS AND CONDITIONS OF BID DOCUMENT: I) CONTRACT FOR INSTALLATION AND COMMISSIONING OF C OMPLETE COMPUTER LABS AT SCHOOLS THE ABOVE ORDER WAS GIVEN TO M/S PEARSON EDUCATION SERVICES PRIVATE LIMITED AND THE DETAILS OF ORDER ARE AS UNDER: (A) INSTALLATION AND COMMISSIONING OF COMPUTER LAB WITH BRAND NEW EQUIPMENTS ON BOOT (BUILD, OWN, OPERATE AND TRANSFE R) BASIS. (B) TO MAINTAIN WORKING CONDITION OF THE HARDWARE, SOFTWARE AND NECESSARY INFRASTRUCTURE SUCH AS UPS, FURNITURE, ET C. ITA 471 & 472/JP/2016_ ITO VS CONTROLLER FINANCE 4 (C) STATIONARY AND CONSUMABLES SUPPLY. (D) SUPPLY OF PERSONNEL TO MANAGE PROJECT AS UNDER - ONE PROJECT MANAGER AT STATE LEVEL FOR COORDINATI ON AND IMPLEMENTATION OF THE PROJECT AND TO PROVIDE MONTHL Y FEEDBACK. - ONE DISTRICT COORDINATOR AT THE DISTRICT LEVEL FO R COORDINATION AND IMPLEMENTATION OF THE PROJECT AND TO PROVIDE MONTHL Y FEEDBACK. - ONE FULL TIME COMPUTER ASSISTANT TO MANAGE SCHOOL S. II) CONTRACT FOR SUPPLY OF COMPUTER HARDWARE, SOFTW ARE AND CONNECTED ACCESSORIES THE ABOVE ORDER WAS GIVEN TO M/S COMPUCOM SOFTWARE LTD. AND M/S NIIT LTD. WHICH HAS GIVEN ONE SINGLE BUNDLED CONTRACT AND THE DETAILS OF ORDER ARE AS UNDER: (A) SUPPLY OF COMPUTER HARDWARE, SOFTWARE AND CONNECTE D ACCESSORIES (MUST BE BRAND NEW) ON BOOT (BUILD, OWN , OPERATE AND TRANSFER) BASIS FOR A CONTRACT PERIOD OF 5 YEAR S. (B) TO PROVIDE AND MAINTAIN IN WORKING CONDITION TH E HARDWARE, SOFTWARE AND NECESSARY INFRASTRUCTURE SUCH AS UPS, FURNITURE, ETC. ON BOOT BASIS. (C) TO SUPPLY ADEQUATE STATIONARY AND CONSUMABLES A T EACH CENTER. (D) TO PROVIDE THE FOLLOWING PERSONNEL TO MANAGE TH E PROJECT - ONE PROJECT MANAGER FOR COORDINATION AND IMPLEMEN TATION OF THE PROJECT AND TO PROVIDE MONTHLY FEEDBACK AND REPORTI NG TO THE COMMISSIONER RCEE. ITA 471 & 472/JP/2016_ ITO VS CONTROLLER FINANCE 5 - ONE FULL TIME COMPUTER ASSISTANT (SCHOOL COORDINA TOR) TO MANAGE SCHOOLS. - THE COMPUTER ASSISTANT WILL PROVIDE CONTINUOUS TR AINING ON SITE JOB SUPPORT / MONITORING TO THE TEACHERS. FROM THE ABOVE TERMS AND CONDITIONS IT CAN BE NOTE D THAT THE ENTIRE CONTRACT IS FOR SUPPLY OF COMPUTER HARDWARE, SOFTWARE, CONNECTED ACCESSORIES, UPS, FURNITURE, STATIONARY, CONSUMABLES, ETC AND THIS CONTRACT IS TO BE CARRIED OUT BY THE C ONTRACTOR THROUGH ITS OWN PERSONNEL. THUS, IT IS A SIMPLE CON TRACT OF CARRYING OUT A WORK. SECTION 194J APPLIES TO A PERS ON RESPONSIBLE FOR PAYING TO ANY RESIDENT ANY SUM BY WAY OF FEES F OR PROFESSIONAL/ TECHNICAL SERVICES. IN THE PRESENT CA SE, THE CONTRACTOR HAS NOT MADE AVAILABLE ANY TECHNICAL SER VICES TO THE ASSESSEE BUT HAS ONLY PROVIDED THE COMPUTER HARDWAR E, SOFTWARE, ETC AND EMPLOYED HIS OWN PERSONNEL FOR IMPLEMENTING THE SAME IN VARIOUS SCHOOLS AS PER THE TERMS AND CONDITIONS OF THE CONTRACT. HENCE, SECTION 194J IS NOT APPLICABLE AND THE ASSES SEE HAS RIGHTLY DEDUCTED TAX AT SOURCE U/S 194C. 2. THE HONBLE PUNJAB AND HARYANA HIGH COURT IN CAS E OF PCIT VS. SENIOR MANAGER (FINANCE), BHARAT HEAVY ELECTRICALS L IMITED (2017) 390 ITR 322, WHERE CONTRACT WAS FOR ERECTION , INSTALLATION, COMMISSIONING, TESTING AND TRAIL OPERATIONS OF VARI OUS EQUIPMENTS AND OTHER RELATED MACHINERY AND THAT UNDER THE TERM S OF THE CONTRACT IT WAS THE DUTY OF THE CONTRACTOR TO PROVI DE ALL TYPE OF LABOUR, SUPERVISORS, ENGINEERS, INSPECTORS, ETC FOR EXECUTION OF THE PROJECT, THE AO HELD THAT SECTION 194J IS APPLICABL E AS THE LEVEL OF HUMAN INTERACTION WAS HIGH AND SOPHISTICATED. THE L D. CIT(A) HOWEVER HELD THAT THE SCOPE OF THE WORK GIVEN TO TH E SUB- CONTRACTOR DID NOT FALL IN THE SCOPE OF TECHNICAL S ERVICES MERELY ITA 471 & 472/JP/2016_ ITO VS CONTROLLER FINANCE 6 BECAUSE TECHNICAL PERSONS WERE EMPLOYED IN EXECUTIO N OF CONTRACT AND THEREFORE, TAX IS DEDUCTIBLE ONLY U/S 194C. THIS FINDING WAS CONFIRMED BY THE HONBLE IT AT. ON FURT HER APPEAL, THE HONBLE HIGH COURT BY A ELABORATE ORDER HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT THE CONTRACT ENT ERED INTO BETWEEN THE ASSESSEE AND EACH OF THE CONTRACTORS DID NOT IN VOLVE SUPPLY OF PROFESSIONAL OR TECHNICAL SERVICES AT LEAST WITHIN THE MEANING OF SECTION 194J OF THE INCOME TAX ACT, 1961. THEREFORE, THE CO NSIDERATIONS PAID UNDER THE CONTRACTS WERE NOT FOR PROFESSIONAL OR TE CHNICAL SERVICES RENDERED BY THE CONTRACTORS TO THE ASSESSEE AND SEC TION 194J WAS NOT APPLICABLE. THE TECHNICAL PERSONNEL WERE DEPLOYED N OT FOR AND NO BEHALF OF THE CUSTOMER, BUT FOR AND ON BEHALF OF THE CONTR ACTOR ITSELF WITH A VIEW TO ENSURING THAT THE CONTRACTOR SUPPLIED THE E QUIPMENT IN ACCORDANCE WITH THE CONTRACTUAL SPECIFICATIONS. THE NATURE OF HUMAN INTERVENTION WAS REFLECTED IN THE TERMS AND CONDITI ONS OF THE AGREEMENT ITSELF. THUS, THE CONSIDERATION WAS PAID NOT FOR PR OFESSIONAL OR TECHNICAL SERVICES RENDERED TO THE ASSESSEE 3. FURTHER RELIANCE IS PLACED IN CASE OF PRITHVI I NFORMATION SOLUTIONS LTD. VS. ITO 34 ITR (TRIB.) 28 (HYD.). IN VIEW OF ABOVE, THE LD. CIT(A) HAS RIGHTLY DELET ED THE DEMAND RAISED BY AO AND THUS, GROUND OF THE DEPARTMENT BE DISMISSED. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/06/2017. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ TK;IQJ TK;IQJ TK;IQJ@ @@ @ JAIPUR FNUKAD@ DATED:- 30 TH JUNE, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ITO, (TDS-2), JAIPUR. ITA 471 & 472/JP/2016_ ITO VS CONTROLLER FINANCE 7 2. IZR;FKHZ @ THE RESPONDENT- THE CONTROLLER FINANCE, RAJASTHAN COU NCIL OF ELEMENTARY EDUCATION, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 471 & 472/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR