TMI Blog2012 (5) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee to M/s. Devshree Network Pvt. Ltd. for providing cable transmission, therefore, no other person is involved in the transaction/oral contract. Thus, the assessee did not act as a sub-contractor in this case. Assessee is not liable to deduct TDS - Decided in favor of assessee. - ITA No. 2920/Ahd/2009 - - - Dated:- 5-10-2011 - G.D. Agarwal, Bhavnesh Saini, JJ. S.N. Soparkar, AR, for the Appellant Vinod Tanwani, Sr. DR, for the Respondent ORDER Bhavnesh Saini: This appeal by the assessee is directed against the order of the learned CIT(A)-IV, Surat dated 28th July, 2009 for the assessment year 2006-07, challenging the order of the learned CIT(A) in confirming the addition of Rs.33,27,188/- being the disallowance u/s 40(a) (ia) read with section 194C (2) of the IT Act. 2. The facts as noted in the impugned order are that the assessee in his a proprietary capacity of Balaji Cable Network made a contract with Devshree Network Pvt. Ltd. for Rs.33,27,188/- for giving cable transmission. The modus operandi has been detailed by the AO in Para 5.2 of the assessment order. In nutshell the AO's argument is that Devshree Network is asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me by way of 'fee for technical services'. Therefore brushing aside the case as not being very helpful in deciding the issue, I come to the next argument that section 40 (i) (a) is applicable to only 'payable' amounts. Nothing can be more for fetched than this argument. The payable include paid. The scheme of TDS expected that as and when the amounts were paid to the contractors TDS had to be effected. The scheme of presumptive taxation presupposes an element of taxable profit in every payment. Therefore, to distinguish payable from paid would lead to very absurd situation. That means that taxability (as per TDS) is being fastened to the status of payment which is not correct. Therefore, agreeing with A. O., I see no merit in AR's arguments. That brings us to next question as who is the contractor and who is subcontractor. In the present case my own view is that subscribers will have to be kept out to ascertain the correct picture. The appellant is in business of cable services. But it does not have its own software to be broadcast and signal. Therefore Devshree Network who supplies him the same is contractor and the appellant is only a subcontractor. As a matter of fact even Devsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 194C (1) of the IT Act, as stood for the assessment year under appeal do not apply to the cases of individual. The assessee being an individual was, therefore, not responsible for deduction of tax at source. He filed the provisions of section 194 C of the IT Act as were applicable to the assessment year under appeal and submitted that amended provisions of section 194 C of the IT Act through which the cases of individuals have been incorporated and these provisions are applicable from 01-06-2007. He has, therefore, submitted that as per the law applicable for assessment year under appeal, there was no liability of an individual to deduct tax. Later on, by the amendment an individual has also been made responsible for TDS if his total sales have exceeded the monetary limits prescribed u/s 44AB of the IT Act. He has submitted that though there was no formal contract between the assessee and M/s. Devshree Network Pvt. Ltd. for giving cable transmission but in terms of oral agreement the assessee paid the amount in question to M/s. Devshree Network Pvt. Ltd. He has submitted that the provisions of section 194 C (2) of the IT Act would not be applicable in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee subscriber is availing is the receipt of 'telecasting signals' from the licensor or the company. The expression 'service' has also been referred to mean the TV channel which is dealt with by the licensor or the company. Therefore, what the assessee has transacted for with the licensor or company certainly includes within its ambit broadcasting and telecasting facility. The essence of the contract is to obtain broadcasting and telecasting of TV channels and thereafter its distribution amongst ultimate customers through the cable network of the assessee. What the assessee subscriber is looking for is to obtain the telecast signals from the licensor, which is enough to deduce that the impugned contract involves broadcasting and telecasting of TV signals. Moreover, the licensor or the company, as is evident from the specimen agreement on record is, in the business of distribution of satellite based TV channels and has exclusive rights to market and distribute said services in India, the service that is referred to in the agreement is the broadcasting and telecasting of TV signals. For the reasons recorded above, the Tribunal was correct in holding that the assessee was required to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, 6[deduct an amount equal to -(i) one per cent in case of advertising,(ii) in any other case two per cent, of such sum as income-tax on income comprised therein.] (2) Any person (being a contractor and not being an individual or a Hindu undivided family) responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax on income comprised therein: [Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diting such sum, in the prescribed form and verified in the prescribed manner and within such time as may be prescribed, if such sub-contractor is an individual who has not owned more than two goods carriages at any time during the previous year: Provided also that the person responsible for paying any sum as aforesaid to the sub-contractor referred to in the second proviso shall furnish to the prescribed income-tax authority or the person authorised by it such particulars as may be prescribed in such form and within such time as may be prescribed; or] (ii) any sum credited or paid before the 1st day of June, 1972; or] [(iii) any sum credited or paid before the 1st day of June, 1973, in pursuance of a contract between the contractor and a co-operative society or in pursuance of a contract between such contractor and the sub-contractor in relation to any work (including supply of labour for carrying out any work) undertaken by the contractor for the co-operative society.] [Explanation:- For the purposes of clause (i), "goods carriage" shall have the same meaning as in the Explanation to sub-section (7) of section 44AE.] (4) [***] (5) [***]]" 8. In the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in the assessment year under appeal, the contract between the contractor and individual would not cast any obligation on the individual to deduct TDS on the payment made to the contractor. Since in this case, payment is made by the assessee to M/s. Devshree Network Pvt. Ltd. for providing cable transmission, therefore, no other person is involved in the transaction/oral contract. Thus, the assessee did not act as a sub-contractor in this case. Since the assessee has not acted as a contractor and no payment is made to the sub-contractor, therefore, the findings of the authorities below are based on wrong premise and assumption of certain facts which are not relevant to the matter in issue. ITAT Ahmedabad Bench in the case of Prashant H. Shah (supra) in Para 7 and 8 held as under: "7. We have heard both the sides at some length. We have also perused the material placed before us in the light of the provisions of the Act as also the case law cited. Before we proceed further, we may like to point out that the provisions of section 194C of the Act had undergone certain vital changes in the recent past. The main purpose of introduction of this section in the Act is to make provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e carried out by the assessee, therefore pertained to construction of peripheral approach roads. To carry out the above work, the assessee had to purchase construction material, viz. Sand, gravels, etc. In order to bring the construction material at the construction site at Dahej, the assessee has availed the services of several transporters. The assessee had made payment under the head "transport charges". The view of the AO was that on payment of "transport charges", the assessee being a sub-contractor was required to deduct the tax at source as prescribed under sub-section (2) of Section 194C of the Act. On the other hand, the assessee's contention is that although the assessee could be a sub-contractor M/s.A.N.S. Construction Ltd., but vis- -vis transporters the assessee has not acted as a sub-contractor but only as a contractor. As per assessee's contention it was a principal to principal arrangement of transportation of goods, so not covered by any of the said contracts. In support of this submission, the assessee has placed reliance on a Board's Circular No.715 dated 8/08/1995 [215 ITR (Statute 12)] wherein the changes introduced in the provisions regarding tax deduction at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is assessee was not further sub-contracted to the lorry owners. In a subcontract, a prudent contractor generally include the clauses of liability which were undertaken by him while accepting the execution of the work from the main contractor. We may like to clarify that a condition of passing of the liability can not exhaustive and can not be said to be the only criteria to decide whether there was an existence of contract or sub-contract. The catalog of criterion must include certain other clauses as well, yet in this case this criteria can be determinative considering the nature of work assigned by the assessee to transporters. It is not the case of the A.O. that he happened to be in possession of some material to allege that there existed a specific contract between the assessee and the transporters. Whether the goods were transported in pursuance of any sub-contract so as to apply the provisions of Sec.194C (2)? Nothing has been brought on record. So it was not established that the lorry owners have undertaken any part of the impugned sub-contract which was found to be risk associated videlicet this assessee. We, therefore, conclude that in the absence of transfer or pass-over ..... X X X X Extracts X X X X X X X X Extracts X X X X
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