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2017 (4) TMI 778 - HC - Indian LawsCancellation of work contract awarded to the petitioner - Nature of contract - consultancy contract or works contract - TDS on consultancy services provided - whether deduction of TDS 194C of the Income Tax Act, would help to determine the nature of contract - Held that:- The response of the Income Tax Officer indicates that as the assessee filed its return of income for the annual year 2010-11 on 24.09.2010 showing taxable income of ₹ 99,210/- and total tax paid ₹ 30,656/- and no other tax remained payable. Thus, a perusal of the letter reveals that not only was no tax payable to the Income Tax Office in view of the return of income shown by the assessee, as a Contractor, but the Petitioner also failed to substantiate his argument that the full tax liability for the year i.e. for Consultancy services, was made good by him, by filing any document in this regard to fortify his claim. In fact, the Petitioner made a feeble attempt at justifying the above deduction of tax @ of 1% by stating that it had come to his knowledge that the department itself and more particularly BRPD-II, Chungthang, had been deducting Income Tax under Section 194C i.e. @ 2% for consultancy works, similar to the work for which NIT No.01 had been issued and not under Section 194J @ 10%. This statement however is a bald, statement not buttressed by any document and is therefore, not acceptable before any Court of law. Thus, what transpires from the above is that the consultancy works were awarded to the Petitioner by the Respondents on the basis of the Certificate of M/s Vraj & Vaj Constructions. To gauge whether the Petitioner had indeed provided consultancy works in view of the letter of the ITO informing to the contrary, as no other documents were forthcoming from the Petitioner, the Respondent No.4 had to fall back on the income tax deducted at source. The correspondence discussed hereinabove clarifies that the TDS was for contract works and not for consultancy services. Apart from the Agreement documents between M/s Vraj and Vaj Constructions and the Certificate issued by the said Company, no other documents have been furnished to establish that the Petitioner offers consultancy services. In such a situation, it has to be stated that obviously tax would be deducted on the basis of the Income and if the income of the Petitioner was only as a contractor then deductions so made would be for contract works and not for consultancy work. Added to this is the fact that although the Petitioner alleges that all balance tax was paid, the letter of the Income Tax reveals no such fact, in as much it has been stated therein that “in this case the assessee filed its return of income for A.Y. 2010-11 on 24.09.2010 showing income of ₹ 99,210/- and total tax paid ₹ 30,656/- and no any (sic) other tax remain payable.” This fortifies that the services provided by the Petitioner to M/s Vraj & Vaj Constructions was in the capacity of contractor and not consultant. Merely because three weeks time was allowed to file response does not mean that even after response is filed Respondents are obliged to wait further. That apart, consideration is to be taken of the fact that the impugned letter was only issued on 8.12.2016, much after 01.12.2016, hence the allegations that the order of this Court was flouted has no legs to stand, nor can it be said that the Respondents had a predetermined mind to cancel the work awarded to the Petitioner, which to my mind appears to be a baseless unsubstantiated allegation made by the Petitioner. W.P. dismissed.
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