Category: TDS

Dr. Balabhai Nanavati Hospital[2017] 86 taxmann.com 107 (Mumbai – Trib.) SEPTEMBER  8, 2017

AMC was necessary to keep medical equipments and other hospital equipments in good working condition and this process was normally carried out by skilled mechanics and not any qualified technician. Through these AMCs, the assessee was carrying out routine normal maintenance which was covered by the provisions of section 195C and these were not technical services covered under section 194J.

As per Q. No. 29 of CBDT Circular No 7 dated 8-8-1995, Routine, normal maintenance contracts which includes supply o spares will be covered tinder Section 194C. However, where technical services are rendered, the provision of Section 1 94J will apply in regard to the deduction at source.

Held in  Ultra Entertainment Solutions Ltd  where in the election was regarding the nature of payments made by the assessee to another person ,  who was engaged by the assessee is to carry out all operations connected with the selling of online lottery tickets on behalf of the assesse, that tax is deductible u/s 194J

ITAT, Ahmedabad in the case of Gujarat State Electricity Corporation Ltd. vs. ITO, 3 SOT 468 (Ahd), wherein it was held that the payments made by the assessee company to Gujarat Electricity Board for entire operation and maintenance 6r’Power plant under a comprehensive contract could not be treated as payment “fees for professional services as contemplated in section 194J but were covered by section 194C of the Act”.

Decision dated 30.09.2011 in ITA Nos. 3059 to 3061 & 3081/Ahd./2009 of Ahmedabad Tribunal in the case of Nuclear Power Corporation Ltd, it has been held that repairs and annual maintenance of computers do not involve services of technical nature so as to be assessable as “fees for technical services” u/s 9(1)(vii) of the Act and hence the assessee was required to deduct TDS under Section 194C of the Act and not under Section 194J of the Act.

Hon’ble Madras High Court in the case of Skycell Communications Ltd. 251 ITR 53 (where it was held that the installation and operation of sophisticated equipments with a view to earn income by allowing customers to avail of the benefit of the user of such equipment does not result in the provision of technical service to the customer for a fee)

Similar decisions by the Bench of Mumbai Tribunal in the case of Dy. CIT v. Asian Heart Institute & Research Centre (P.) Ltd. [2017] 82 taxmann.com 250

1.     A  circular was issued by the Government in Circular No.1 of 1944 V.No.26(43)-IT/43, dated 24.01.1944 in which the liability to tax on the fees received by the missionaries and subsequently made over to the society had been considered.

2. This Circular has been considered subsequently by the Central Board of Direct Taxes in the year 1977 in their proceedings dated 5th December, 1977. In that instructions, the question for consideration was whether the fees or other earnings when the same is made over to the Congregation to which they belong under the rules thereof is liable to be taxed. The Central Board of Taxes, has concluded as follows:

The Board have examined this issue and have decided that since the fees received by the missionaries are to be made over to the congregation concerned there is an over-riding title to the fees which would entitle the missionaries to exemption from payment of tax. Hence such fees of earning are not taxable in their hands.

3. When the Act came into force in 1971 as early as in 1963, the Government of India in a communication issued by the Commissioner of Income Tax, Bombay City in reference No.Dat/284 (287)/60, which is addressed to one of the Solicitors in Bombay, it has considered the claim made by the Rev. Fr. Valeria Godinho regarding exemption from payment of income tax for the Priests of the Archdiocese, Bombay. In that letter, it has been stated as follows:

It has been decided in the case of Rev.Fr.Valeria Godinho that the Departmental appeals  filed be withdrawn. Incase where amount received by Priests as salary are subject to an overriding title by their conditions and rules of service, to be passed over to the Church authorities (whose income is exempt from tax) such amounts will not be liable to be taxed.

4. Commissioner of Income Tax, Madras, in his proceedings in R.C.No.230..11(75), dated 30.01.1969 addressed to the Secretary, Madras Catholic Educational Council on the representation of the council for exemption of the emoluments drown by the Priests or Nuns employed in the religious educational institutions has categorically stated as follows:

It has been stated that in cases where the amount received by Priests and

Religious as salary are subject to an overriding title by their conditions, and

rules and service to be passed over to the chruch authorities (whose income

is exempted from tax) such amounts will not be liable to be taxed.

Madras High Court therefore Concluded that no TDS is required to be deducted on salary paid to Nuns and Priests subject to their providing affidavit that entire salary as a teacher/non teaching staff or in any other capacity has to be paid by the Government directly to the Congregation or Diocese, to which he belong. Also state that also state that all the payment made by the Government directly to the Congregation or Diocese is in full satisfaction of their salary as claimed by the schools and they will not have any further claim insofar as the payment of salary to them as it is directly made to the Congregation or Diocese. As according to them, it is the ultimate, final beneficiary which is receiving the salary

Madras High Court in Correspondent  v.Central Board of Direct Taxes 03-03-2016 [2016] 70 taxmann.com 85 (Madras)