Amount Paid under Annual Maintenance Contract is not in the Nature of Fee for Professional & Technical Services: ITAT Mumbai

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A division bench of the Mumbai ITAT, in ITO v. Balabhai Nanavati Hospital, held that the expenditure on account of AMC of medical equipments etc., is not in the nature of fee for professional and technical services as construed u/s 194J of the Act and hence, not liable to deduct TDS under Section 194J of the Income Act.

Assessee, a hospital, has made payments under annual maintenance contract in respect to equipments like X-ray Machines, HD dialysis machines, CT Scanner, Olympus Endoscopes, MRI Scanner, Axiomo arties FC and other medical equipments and it is making payments as per regular AMC’s. Assessee deducted TDS in respect of such payments under section 194C of the Income Tax Act.

On appeal, assessee maintained that the practice of AMC and TDS on such payments is established fact that the assessee is deducting TDS u/s 194C of the Act and this position is duly recognized by the Revenue for passed several years.

After analysing the Annual Maintenance Contract, the bench noted that it is evident that AMC is necessary to keep medical equipments and other hospital equipments in good working condition and this process is normally carried out by skilled mechanics and not any qualified technician.

“We find that though these AMCs assessee is carry out routine normal maintenance which is covered by the provisions of section 194C and not as if technical services covered u/s 194J of the Act. This issue is covered by the decision of co-ordinate Bench of Mumbai Tribunal in the case of DCIT (TDS)-1(1) vs. Asian Heart Institute & Research Centre Pvt. Ltd. in ITA No. 7051 & 7177/Mum/2012 for the AY 2008-09 and others following the decision of Ahmedabad bench decision in the case of Nuclear Power Corporation Ltd and holding that the annual maintenance charges are payment in the nature of contractual payments and will fall under section 194 C of the Act.”

In view of the above facts and circumstances, we are of the view that the expenditure on account of AMC of medical equipments etc., is not in the nature of fee for professional and technical services as construed u/s 194J of the Act and hence, not liable to deduct TDS u/s 194J of the Act. The assessee has deducted TDS u/s 194C of the Act in regard to payments on AMC of medical equipments and machines etc.

Read the full text of the Order below.

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