Submissions on TDS Deduction u/s 194J or u/s 194C on Payments to X-Ray and CVC Machine Maintenance not considered: ITAT directs Fresh Adjudication [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has ordered a reconsideration, directing fresh adjudication. This decision comes as submissions regarding Tax Deducted at Source ( TDS ) deductions under Sections 194J or 194C for payments related to X-Ray and CVC machine maintenance were not considered.

The assessee made certain payments towards ambulance rent, maintenance of X-ray machine and CVC machine. The assessee deducted TDS on X-ray machine and CVC machine @ 1% under Section 194C of the Income Tax Act, 1961. However, the Assessing Officer (for short referred as the “AO”) was of the view that the assessee should have deducted TDS under Section 194J at 10% on payments made for maintenance of X-Ray and CVC machines as fees paid for professional and technical services.

The AO passed order under Section 201(1) and 201(1A) treating the payments made towards maintenance of x-ray machine and CVC machine as charges for professional services and deducted TDS @10% under Section 194J of the Income Tax Act.

 The bench noticed that the contention of the assessee that the payments made for maintenance of X-ray machine and CVC machine attracts TDS under Section 194C and not under Section 194J as professional charges was rejected and was treated as fee for professional and technical services as per section 194J of the Act attracting TDS @10% as against 1% made by the assessee under Section 194C of the Income Tax Act. Further observed that the contentions and the case laws relied on by the assessee were not considered by the CIT (A) in proper perspective.

It was also noticed that in the course of appellate proceedings in the paper book the assessee submitted that the assessee furnished return of income filed by the payee to show that the income has been accounted for in their returns and paid the tax dues on income declared by them and assessee is in the process of furnishing of certificate to this effect from an Accountant in Form No. 26A, however, the CIT (A) has not considered the submissions of the assessee.

Furthermore, as per the mandate of the Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. Vs. CIT if the payee has taken into consideration the amounts received by payer in their return of income and paid taxes on such amounts the assessee cannot be treated as an assessee in default under Section 201(1) of the Income Tax Act.

The bench of G.S.Pannu ( Vice President ) and C.N.Prasad ( Judicial member ) restored this matter to the file of AO for fresh adjudication in accordance with law. The assessee is at liberty to file all the evidence to support their contentions before the AO. All the issues in the appeal are left open for fresh adjudication in accordance with law after providing adequate opportunity of being heard to the assessee. Accordingly, the appeal for AY 2019-20 is also restored to the file of the AO for fresh adjudication and appeals of the assessee are allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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