ACIT (LTU) Vs. M/s WTI Advance Technology Ltd. (ITAT Mumbai)
ITAT Mumbai in case of ACIT v/s M/s WTI Advanced technology held that tax is to deducted u/s 194C for outsourcing of any service which do not require skilled staff.
The return of the assessee for AY 2012-13 was selected for scrutiny u/s 143(2) and AO disallowed expenditure of Rs.15,75,32,526/- u/s 40(a)(ia) as he is of the view that same should have been subject to 194J of IT Act.
Facts of the Case and Observation of Hon’ble ITAT are as follows:-
TCS had entered into an agreement with the assessee company for creation of Geographical Information system in the State of Maharashtra and Gujarat. As observed by the CIT(A), the execution of the project involved both technical and nontechnical work. Though the technical work was performed by the assessee through its employees who were technical personnel, but however, the nontechnical and non-skilled work involving the collection of data etc. was outsourced by the assessee to various vendors in the relevant locations for operational convenience.
The nature of such non-technical and supporting work that was outsourced by the assessee to the various vendors, involved the field survey for collection of names of major roads/base map features; collection of names/attributes of assets data from ledger available with utility companies’; collection of consumer data through contact survey by door-to-door survey etc.
The nature of such work which was provided by the vendors included DGPS Survey for GCP collection; field survey and mapping; indexing etc. ITAT further observed that hough the terminology used in the agreement such as “Technical audit of Distribution Transformer” would at the first blush give an impression that the same involved rendering of certain complex technical services by the vendor, but however, the same revealed the basic work of taking photographs of the transformers.
ITAT observed that the activities performed by the vendors did not require any technical or professional knowledge, and the vendors had only deployed semi-skilled personnel to carry out the said work.
We may further observe that the observations of the CIT(A) that the A.0 had relied mainly on the agreement and not on the actual work carried out by the vendors had also not been controverted by the department before us. We may herein observe that the fact as averred by the assessee before the CIT(A) that one of the contractor, i.e M/s Petro IT Pvt. Ltd was issued a certificate for deduction of tax at lower rate under Sec. 197 of the Act by the Income Tax officer, TDS Ward 51(1), Delhi in respect of the contract work, further supports the claim of the assessee that the revenue itself had accepted that the work done by the vendors was contractual in nature.
We find that as observed by the CIT(A) the nature of the nontechnical and supporting work carried out by the vendors i.e. (i) field survey of collection of names of major roads/base map features; (ii) collection of names/attributes of assets data from ledgers available with utility companies; and (iii) collection of consumer data through contact door-to-door survey etc. did not require any technical skill.
We are of the considered view that for carrying out the aforesaid work by the unskilled and semiskilled labourers, no technical skill or industrial science would be involved. We have given a thoughtful consideration to the facts before us and are of a strong conviction that the work executed by the vendors could safely be brought within the sweep of “carrying out any work through supply of labour” as contemplated in Sec. 194C of the Act.
We are persuaded to be in agreement with the view taken by the CIT(A) that as the payments made to the vendors for the work done by them by deploying semi-skilled personnel, did not involve any technical or professional knowledge on their part, the same could not be brought within the sweep of Sec. 194J and had rightly been subjected to deduction of tax at source by the assessee under Sec. 194C.
We thus being of the view that the assessee had correctly deducted tax at source on the payment made to the vendors, therefore, no disallowance under Sec.40(a)(ia) as regards the same was liable to be made in the hands of the assessee. We thus finding no infirmity in the order of the CIT(A), uphold the same in context of the issue under consideration.
Before parting, we may herein observe that the revenue had assailed before us the order of the CIT(A) only to the extent he had observed that the payments made to the vendors were to be subjected to deduction of tax at source under Sec.194C and not under Sec. 194J of Act.