In Gowtham Academy of General & Technical Education Secunderabad v. DCIT, the ITAT, Hyderabad ruled that the assessee can adopt different rates of TDS in case of composite services when each services are different and distinguishable.
Assessee is a society engaged in the business of running educational institutions, entered to a composite agreement with M/s. K12 Techno Services Pvt. Ltd for availing various services from it for running of the educational institutions.On scrutiny of returns, the AO observed that they include both ‘works contracts’ as well as ‘professional and technical services’ and the assessee has affected the TDS by treating its services partly as professional u/s 194J and partly as works contracts under section 194C of the Income Tax Act.
The bench observed that the entire services are rendered by one single entity i.e M/s K12 Techno Services Pvt. Ltd, and therefore, by virtue of single contract involving various services, the assessee ought to have deducted TDS for all the services at 10% as required u/s 194J of the Income Tax Act.
The assessee,relied upon the relevant clauses of the agreement and submitted details of the services rendered along with the relevant bills and vouchers relating to the said services.
The bench noted that M/s K12 Techno Services Pvt. Ltd, has rendered various services to theassessee for the efficient and effective running of the educational institution.It was further noted that it is not a lump sum payment by the assessee to M/s. K12 Techno Services Pvt. Ltd. for all the services being rendered under the agreement but it is a payment on the basis of each of the services and per person.
“The TDS is to be made on the payment made and the TDS rates are fixed on the basis of nature of the services or contract and not on the basis of the number of recipients of the payment. When the intention of both the parties is clear that the payments shall be made for each of the service independently, then, the services are clearly ascertainable and divisible. The TDS rates for each of the services would therefore vary.”
Perusing the details of the payment, the bench noted that the services rendered by M/s K12 Techno Services Pvt. Ltd. are distinguishable from each other and though the recipient of all the payments is a single party, the nature of the services are discernible and different.
“If the contention of the Revenue was to be accepted, then why should the TDS be deducted u/s 194J and not u/s 194C for all the payments treating the entire agreement as a work contract?. When the basket of services is filled with different and distinguishable services, we are of the opinion that the assessee was correct in adopting different rates of TDS for different types of payments.”
Read the full text of the order below.
