The division bench of the High Court of Andhra Pradesh, in a recent decision, held that the payments made by the assessee in respect of operation and maintenance of the power plant under an agreement, is subject to TDS under section 194C and not under section 194J since these are clearly covered under the provisions of 194C of the Income Tax Act, 1961.
The assessee-Company, M/s. A.P. Gas Power Corporation Ltd, in the instant case, is engaged in the business of generation and sale of power. During the relevant assessment year, the assessee entered into an agreement with APGENCO for operation and maintenance of power plants. Thereafter, the assessee submitted its income tax returns by claiming deduction in respect of amount paid on repairs for maintenance of plant and machinery which was made pursuant to the said agreement.
The Assessing Officer treated the contract as one for providing technical and consultancy services, and passed an order by holding that the said amount is liable to be subjected to Tax Deductible at Source, under Section 194J instead of Section 194C. However, both the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal has set aside the impugned order by accepting the contentions of the assessee. Following this, the revenue approached the High Court.
Before the High Court, the Revenue contended that since there are different types of payments, which are specific and distinctive from each other, under the said contract, all the payments made cannot be termed as a comprehensive contract for works. They also pointed out that the service tax was paid and therefore, Section 194J is applicable in the instant case.
The division bench comprising of Justice V. Ramasubramanian and Justice Anis dismissed the appeal by deciding in favour of the assessee.
While concluding, the Court observed that “The primary distinction between a payment made under Section 194C and a payment made under Section 194J is that the former arises out of a contract for carrying out certain items of work while the latter arises out of services rendered. In the case on hand, even according to the Assessing Officer, the contract was for operation and maintenance of the power plant. This is why the Assessing Officer had to concede that the payments made by the respondent/assessee comprised of different categories and that only some of them related to services rendered. In the light of such a finding, the Appellate Commissioner as well as the Tribunal were right in holding that the case was one covered clearly by Section 194C and not Section 194J. Hence the appeal is devoid of merits and the same is accordingly dismissed.”
Read the full text of the Judgment here.
