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2022 (7) TMI 336 - HC - Income TaxTDS u/s 194C OR 194J - assessee entered into a Contract with a consortium - Whether contract can be segregated to attract TDS? - Whether the Tribunal was correct in holding that the contract as supply contract while the services rendered such as design and testing, are covered by explanation 2 to Sec.9(1)(vii) of the Income-Tax Act? - Tribunal held that the contract as composite contract and no segregation possible - HELD THAT:- A careful perusal of the explanation shows that fee for Technical services does not include construction, assembly and mining operation etc. In the instant case, the Contract is one for designing, manufacturing, supply, testing, commissioning of passenger rolling stock and training Personnel. The total Contract is for Rs.1,672.50 Crores whereas, the training component is about Rs.19 Crores. Though the consortium consists of different Companies, BEML Ltd., is the consortium leader. To a query made by the Court with regard to payment made, Shri. Chaitanya, on instructions from the BMRCL Officer present in the Court, submitted that all cheques have been issued in favour of BEML Ltd. As the specific case of the Revenue before the ITAT is that the Contract is a composite one. Shri.Chaitanya is right in his submission that the dominant purpose of the Contract is supply of the passenger rolling stock. Thus, having taken a specific stand before the ITAT that the Contracts is a composite one, the Revenue cannot be permitted to take a contradictory stand before this Court The total project cost is Rs.1672.50 Crores out of which, the service part in the form of training accounts for about Rs.19 Crores. Thus, the dominant purpose is supply of Rolling Stock. Thus the questions raised by the Revenue are not substantial questions for consideration for more than one reason. Firstly because, the Revenue has taken a specific stand before the ITAT that the Contract is a composite Contract. Secondly because, the dominant purpose of the Contract is for supply of Rolling Stocks and the cost towards service component is almost negligible. Thirdly because, the word ‘assembly’ must include the manufacture/assembly of the Rolling Stocks by BEML Ltd., being the Consortium leader. Fourthly because, the entire payment has been made in favour of BEML Ltd. Fifthly because, Revenue has not raised any objection with regard to payment of 90% of the Project costs, so far as deduction under Section 194J is concerned. Thus questions No.1 and 2 are answered in the affirmative in favour of the assessee. Question No.3 is whether the work taken up is ancilliary to supply of Rolling Stock or a part of it is rendering professional and technical services. For the reasons recorded herein above, we are of the view that the work taken up is ancilliary to supply of Rolling Stock and does not amount to professional or technical service.
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