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Judgment
Both the appeals are directed against the order dated 30.06.2017 of the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur, consisting of two members, in ITA Nos.84 & 85/JP/2017. These appeals were admitted by this court vide order dated 03.07.2018 for hearing on the following substantial questions of law:-
"In D.B. Income Tax Appeal No.32/2018
Whether the ld. ITAT has acted on total misconception of law in uploading TDS liability of the appellant u/s. 194J instead of u/s.194C of the Income Tax Act, 1961 on the full value of invoice raised towards supply of Solar Photo Voltaic Panels including supply of manpower and labour for the installation and commissioning thereof?
Whether on the facts and in the circumstances of the case and in law, the order of the ITAT passed in case of appellant needs remand being violative to the judicial discipline taking view contrary to the judgment and order dated 30.06.2017 (Annexure-4) passed by it in identical facts and circumstances in case of ITA Nos.471&472/JP/2016 for the A-Ys 2012-13 & 2013-14 titling ITO (TDS-2), Jaipur Vs. the Controller Finance, Rajasthan Council of Elementary Education?"
In D.B. Income Tax Appeal No.33/2018
Whether the ld. ITAT has acted on total misconception of law in uploading TDS liability of the appellant u/s. 194J instead of u/s.194C of the Income Tax Act, 1961 on the full value of invoice raised towards supply of computer hardware, UPS, consumables, stationary or Solar Photo Voltaic Panels including supply of manpower and labour for the installation and commissioning thereof?
Whether on the facts and in the circumstances of the case and in law, the order of the ITAT passed in case of appellant needs remand being violative to the judicial discipline taking view contrary to the judgment and order dated 30.06.2017 (Annexure-4) passed by it in identical facts and circumstances in case of ITA Nos.471&472/JP/2016 for the A-Ys 2012-13 & 2013-14 titling ITO (TDS-2), Jaipur Vs. the Controller Finance, Rajasthan Council of Elementary Education?"
Learned counsel for the appellant has invited attention of the court towards the judgment dated 30.06.2017 passed by the ITAT, Jaipur Bench (SMC), Jaipur, in ITA Nos.471&472/JP/2016, consisting of different member, which passed the impugned order. Both the orders were passed on the same date, i.e., 30.06.2017, however, in a contrary view was taken therein. The view taken in ITA Nos.84 & 85/JP/2017 reads thus:-
"8.3. We have heard rival contentions and perused the material available on record. The AO observed that on perusal of bills and vouchers and copy of agreement with Pearson Education Services Pvt. Ltd. and Compucom Software pvt. Ltd., it is evident that the aforesaid companies have to provide computers along with the installation and commission of the computer labs, and also to provide technical manpower and all the technical and management assistance in successful implementation of the above programme at the State level. Thus the nature of work and services as per the AO is covered under the category of Technical Services as described under the provisions of section 194J of the Act. This view was affirmed by the ld.CIT(A). There is no dispute that the assessee entered into a contract. The terms of the contract is for supply of computers, installation, commissioning of computer lab with brand new equipments on BOOT (Build, Own, Operate and Transfer) basis to maintain working condition of the hardware, software and necessary infrastructure such as UPS, furniture, etc., supply of personnel to manage project. For the sake of clarity, it would be appropriate to reproduce the definition of Technical Service as per section 9(1)(vii) of the Act read with Explanation 2.:
"Fee for Technical Services" means any consideration for 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 construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries".
In the present case, admittedly, the contract includes the supply of personnel to manage project. Therefore, the contract also included managerial services, which clearly falls under the category of "Fee for Technical Services". Under these facts, we are unable to accept the contention of the ld. Counsel for the assessee that the contract did not include managerial services since the managerial service falls under the category of Technical Services. The tax ought to have been deducted under section 194J of the Act. We do not find any infirmity in the order of ld. CIT(A). Same is hereby affirmed. The ground raised by the assessee is dismissed."
The view taken in ITA Nos.471&472/JP/2016 reads thus:-
From the above terms and conditions it can be noted 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 contractor through its own personnel. Thus, it is a simple contract of carrying out a work. Section 194J applies to a person responsible for paying to any resident any sum by way of fees for professional/technical services. In the present case, the contractor has not made viable any technical services to the assessee but has only provided the computer hardware, 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 assessee has rightly deducted tax at source u/s 194C.
The Hon'ble Punjab and Haryana High Court in case of PCIT Vs. Senior Manager (Finance), Bharat Heavy Electricals Limited (2017) 390 ITR 322, where contract was for erection, installation, commissioning, testing and trail operations of various equipments and other related machinery and that under the terms of the contract it was the duty of the contractor to provide all type of labour, supervisors, engineers, inspectors, etc. for execution of the project, the AO held that Section 194J is applicable as the level of human interaction was high and sophisticated. The Ld. CIT (A) however held that the scope of the work given to the sub-contractor did not fall in the scope of technical services merely because technical persons were employed in execution of contract and therefore, tax is deductible only u/s 194C. This finding was confirmed by he Hon'ble ITAT. On further appeal, the Hon'ble High Court by a elaborate order held as under:-
"Held, dismissing the appeal, that the contract entered into between the assessee and each of the contractors did not involve supply of professional or technical services sat least within the meaning of Section 194J of the Income Tax Act, 1961. Therefore, the considerations paid under the contracts were not for professional or technical services rendered by the contractors to the assessee and Section 194J was not applicable. The technical personnel were deployed not for and on behalf of the customer, but for and on behalf of the contractor itself with a view to ensuring that the contractor supplied the equipment in accordance with the contractual specifications. The nature of human intervention was reflected in the terms and conditions of the agreement itself. Thus, the consideration was paid not for professional or technical services rendered to the assessee."
Further reliance is placed in case of Prithvi Information Solutions Ltd. Vs. ITO 34 ITR (Trib.) 28 (Hyd.).
In view of above, the Ld. (CIT(A) has rightly deleted the demand raised by AO and thus, ground of the department be dismissed."
It is submitted that in both the sets of cases, the supplier was common and the recipient was also the same department. The appeals were therefore admitted by this court, apart from the question as to attractability of Section 194C or Section 194J of the IT Act, also on the question whether in the facts of the case the matter deserves to be remanded to the Tribunal being violative of the judicial discipline.
In response to the pointed query by the court, the learned counsel appearing for revenue was unable to make a categorical statement whether the appeals were filed against the contrary judgment by the Tribunal in ITA Nos.471&472/JP/2016 before this court by filing appeal. The learned counsel for the appellant is also unable to give a categorical answer as to in what manner the supply made by the aforementioned supplier has been dealt with by the IT authority in respect of the other district.
We are, therefore, persuaded to allow the appeals on question no.2 setting aside the impugned order of the ITAT and remand the matter to the ITAT to decide it afresh. Ordered accordingly. It would be open to the parties to apprise the ITAT about the aforementioned aspects.
With that direction, the appeals are disposed of.
Office to place a copy of this order in connected file.