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2015 (12) TMI 1621 - AT - Income TaxTDS u/s 194C - contract of supply of material - nature of Composite contract - Held that:- In the present case we have three contracts, one for supply of goods/equipment, another for erection and another for civil engineering works. The dispute in the present case also is with respect to the deduction of tax with respect to the contract pertaining to supply of goods. The examination of the general terms and conditions of the contract here also proves that after the bid offered by the contractor is accepted and the assessee decides to award the contract to the successful bidder, a divisible contract covering the entire scope of the partial/total turnkey has to be entered into with the successful bidder. Upon careful consideration of the facts and circumstances of the present case, in our considered opinion, the same is identical to the issue dealt with in the case of CIT vs. Karnataka Power Transmission Corporation Ltd. [2012 (6) TMI 204 - Karnataka High Court ]. Learned D.R. could not point out any feature in the contract in the present appeal whether distinguish it from the facts mentioned in above appeal dealt by the Hon’ble High Court. Hence following the above decision, we hold that the contract of supply of material is a separate distinct contract and on which no deduction is permissible u/s 194C. We further find that in the present case the assessee is not liable to deduct tax at source on the supply portion as per Explanation (iv) (e) to section 194C. Section 194C mandates that a person responsible for paying any sum for carrying out any work in pursuance of the contract between the contractor and a specified person shall at the time of credit of such sum with the account of the creditor or at the time of payment thereof deduct a specified sums as incometax. The Hon’ble jurisdictional High Court in the case of CIT vs. Glenmark Pharmaceutical Ltd. [ 2010 (3) TMI 289 - BOMBAY HIGH COURT ] has clearly expounded that if the property in the product manufactured passes to the customer upon delivery and the material that was required was not sourced from the customer/purchaser but was independently obtained by the manufacturer from a person other than customer, the contract entered into by the assessee was not a contract for carrying on work within the meaning of section 194C.Considered from this point of view also the assessee is not liable for deduction of tax at source on the equipment good supply contract. - Decided in favour of assessee
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