TMI Blog2011 (3) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... against the consolidated order of the Ld. CIT (A)-LTU, Bangalore, in ITA Nos. 25 to 27/CIT(A) LTU/09-10, dated 9-12-2009 for the assessment years 2007-08 to 2009-10. I. ITA Nos: 360, 362 364/10 - AYs: 2007-08 to 2009-10 - Under section 201(1) of the Act: 2. The assessee had raised as many as nineteen identical grounds for the AYs under dispute in a narrative manner. On a close scrutiny of the same, the cruxes of the issues emerged are that - "1. the CIT (A) was not justified in sustaining the action of the Assessing Officer (TDS) in treating the assessee 'as assessee in default' and demanding the tax on the basis that the assessee ought to have deducted the TDS in respect of payments made to the contractors towards supply of materials 2. that the CIT(A) had failed to appreciate that the assessee cannot be regarded as an 'assessee in default' under section 201(1) as there was no obligation on the assessee to deduct TDS under any of the provisions of the Act; 3. without prejudice, the CIT(A)-LTU ought to have appreciated that the recipients having paid the taxes on the amounts received from the assessee, the assessee was under no obligation to pay the tax und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the assessee. 5.1 Brushing aside the assessee's detailed explanation, the Assessing Officer went ahead in concluding, after detailed reasons recorded in the impugned orders under challenge, that the assessee should have deducted tax at source on the supply portion also which it had failed to do so, the assessee was treated as an 'assessee in default' and, accordingly computed the taxes as well as interest thereon under section 201 and under section 201(1A) of the Act for the assessment years under dispute. 6. Aggrieved, the assessee took up the issues with the Ld. CIT (A)-LTU for solace. After due consideration of the lengthy contentions put-forth by the assessee's A.R., perusing the observations made by the Assessing Officer in his impugned orders under challenge, analyzing the provisions of section 194C of the Act, extensively quoting the rulings in the cases of (i) Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435/67 Taxman 346 (SC), (ii) Brij Bhushan Lal Parduman Kumar v. CIT [1978] 115 ITR 524 (SC), (iii) State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474 (SC), (iv) State of Gujarat (Commissioner of Sales-tax, Ahmedabad) v. Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of goods if it is otherwise a contract for work and labour. 4.12 In the written submissions, the appellant further stated that despite the aforesaid overall responsibility clause, it is impermissible to treat the three separate contracts i.e., (i) supply of materials contract, (ii) erection contract and (iii) contract for civil work as one single contract. When parties have agreed on certain terms, unless it is proved as sham the agreed terms have to be respected as held by the Hon'ble Supreme Court in the case of CIT v. Motors General Stores (P.) Ltd. [1967] 66 ITR 692. Reliance is also placed on the case of Power Grid Corporation of India Ltd. v. ACIT [2007] 112 TTJ 654 (Hyd. - ITAT). The facts of the case are that the assessee was involved in three projects for which contracts were awarded to different contractors. The appellant awarded contracts to various parties to construct/execute the transmission line substation. The categories of contracts entered into by the appellant with various contractors for the above purpose are purely supply contract, purely erection and supply-cum-erection contracts (but with separate agreement in respect of supply portion). A similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the statute does not define the term 'work' but recognizes certain transactions as 'work'. 3. In this regard, we may examine the meaning of the term 'work'. The meaning of the term 'work' in various dictionaries are as under: "In Webster's New Dictionary, 'work' has been defined as 'work', Exertion directed to produce or accomplish something; labour; toil; productive or operative activity; as, to make a machine do work; activity undertaken in return for payment, as in wages; that on which exertion or labour is expended, a product of activity of labour; as, a literary work; needlework or embroidery; an engineering structure, as a bridge or dock; workmanship; as, to do good work; a task or undertaking; as, one's life's work; a deed or act; In Encyclopedia Britannica, the word 'work' has been defined as Work, in physics, measure of energy transfer that occurs when an object is moved over a distance by an external force at least part of which applied in the direction of the displacement. If the force is constant, work may be computed by multiplying the length of the path by the component of the force acting long the path. Work done on a body is accomplished not only by a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contract is a composite one involving both a contract of work and labour and a contract of sale. Nevertheless, the distinction between the two rests on a clear principle. A contract of sale is one whose main object is the transfer of property in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where the principal object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one of work and labour. The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of materials, nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel (Halsbury's Laws of England, 3rd edition, vol. 34, 6-7)". The Hon'ble Supreme Court in the aforesaid case at page 481 held as under: "From the decisions earlier cited it clearly, emerges that such determination depends in each case upon its facts and ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll depend upon the facts and circumstances of each case. This question to be answered is not an easy and has perplexed the jurists all over. Nevertheless, the distinction between the two rests on a clear principle. A contract of sale is one whose main object is the transfer of the property in and the delivery of the possession of a chattel as a chattel to the buyer. Where the dominant object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one of work and labour. The test is whether or not the work and labour bestowed and in anything that can properly become the subject of sale, neither the ownership of materials is conclusive although such factors may be relevant and be taken into consideration in ascertaining and determining whether the contract in question is in pith and substance a contract for work and labour or one for the sale of chattel. These principles have enunciated and culled out from Halsbury Laws of England, 3rd Edn., Vol. 34, 6-7." - Certain guidelines have been laid down by the Apex Court in the case of P.S. Company v. State of Andhra Pradesh 56 STC 283 to determine the true construction of a contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tan Shipyard Ltd. v. State of Andhra Pradesh [2000] 119 STC 533. In this case, the Hon'ble Court had laid down the following test: "14. The principles deducible from the several decided cases may be summed up as under: 1. It is difficult to lay down any rule or inflexible rule applicable alike to all transactions so as to distinguish between a contract for sale and a contract for work and labour. 2. Transfer of property of goods for a price is the linchpin of the definition of sale. Whether a particular contract is one of sale of goods or for work and labour depends upon the main object of the parties found out from an overview of the terms of the contract, the circumstances of the transactions and the custom of the trade. It is the substance of the contract document/s, and not merely the form which has to be looked into. The Court may form an opinion that the contract is one whose main object is transfer of property in a chattel as chattel to the buyer, though some work may be required to be done under the contract as ancillary or incidental to the sale, then it is a sale. If the primary object of the contract is the carrying out, of work by bestowal of lab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l consideration is towards the supply of materials and only 20 per cent to 15 per cent is towards erection and civil works. 2. Further, it is submitted that, the erection work and civil work are carried on in furtherance to the supply of material. In other words, erection work and the civil works are incidental to supply of materials. The substance of the agreement or arrangement between the parties is to supply the materials and not carrying out the work. Installation or erection work and civil construction work can only be regarded as ancillary to the contract of supply. 3. Therefore, it is submitted that, the entire arrangement encompassing supply, erection and civil portion is to be regarded as a contract for supply of equipment on the basis that erection and civil portion of only ancillary and subservient to the supply portion. Applying the dominant test theory as canvassed and accepted in the aforesaid decisions, it is submitted that where the Respondent contends that, the entire arrangement between the Appellant and its contractors is regarded as one indivisible contract, the same should be regarded as a supply contract. In such case, the Appellant's case falls a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194C would apply in respect of supply of printed material as per prescribed specifications? Ans: Yes. Thus, there was a conflict between Circular Nos. 681 and 715. The same was brought to the notice of the CBDT and in this regard, the CBDT issued Circular No. 13 of 2006, dated 13-12-2006, which reads as follows: 1. Representations have been received in the Board seeking clarification on the applicability of section 194C on such transactions, where the assessee has outsourced certain work relating to fabrication or manufacturing of article or thing in accordance with the specifications given by the assessee. Circular No. 681, dated 8-3-1994 of the Board clarifies in para 7(vi) that the provisions of section 194C would not apply to contracts for sale of goods and further clarifies that where the property in the article or thing so fabricated passes from the fabricator-contractor to the assessee only after such article or thing is delivered to the assessee, such contract would be a contract for sale and so outside the purview of section 194C. However, in reply to question No. 15 in Circular No. 715, on the subject of applicability of section 194C, in respect of contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted according to the specifications given by the specified person and the property in such article or thing passes to the specified person only after such article or thing is delivered, the contract will be a contract for sale. Therefore, the case of Appellant falls within Paragraph 7(vi)(b) and not within Paragraph 7(vi)(a). The Ld. CIT (A) is not justified in stating that, 'there is no transfer of property in the equipments by the manufacturer to the customer as a chattel', despite the fact that, transfer of the title in respect of equipment and materials supplied by the contractor to the Appellant takes place in favour of Appellant pursuant to the terms of the Contract by way of negotiation of dispatch documents. He is not justified in ignoring the relevant clauses in the 'Instruction to Bidders' and wrongly stating that the property gets transferred to the Appellant only after the equipments, materials, component parts are fitted and installed at the works site premises. In this regard, the relevant extracts of the 'Instruction to Bidders' issued by the KPTLC for inviting bids, which read as follows: (Refer page 15 of the order) 37.3 For contractor supplied equipments/mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract manufacturing as work. However, the latter part of the aforesaid sub-clause clearly excludes manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer. On a close scrutiny, the aforesaid exclusion applies not only to manufacturing but also to supplying when such supply is according to be requirement or specifications of the customer and for such supply, the supplier has used material purchased from a person other than the customer. It is submitted that, the case of Appellant, squarely covered by the aforesaid exception for the reasons that the contractor has undertaken to supply to Appellant the equipment as per the specifications of Appellant and for the purpose of such supply, contractor has not used materials bought from Appellant. Applying the aforesaid exception, it could be said that the activity carried out by contractor for Appellant cannot be regarded as work at all. Even though, the aforesaid provision was newly introduced by the Finance Act, 2009, even prior to the aforesaid amendment, contract manufacturing was never considered as work. By virtue of the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Direct Taxes since May 29, 1972. The judgment of the Supreme Court in Associated Cement gave an expansive definition to the expression "work" and rejected the attempt of the assessee in that case to restrict the expression "work" to "works contract". Both before and after the judgment of the Supreme Court the expansive definition of the expression "work" co-existed with the Revenue's understanding that a contract for sale would not be within the purview of section 194C. The Revenue always understood section 194C to mean that though a product or thing is manufactured to the specifications of a customer, the agreement would constitute a contract for sale, if (i) the property in the article or thing passes to the customer upon delivery; and (ii) the material that was required was not sourced from the customer/purchaser, but was independently obtained by the manufacturer from a person other than the customer. The rationale for this was that where a customer provides the material, what the manufacturer does is to convert the material into a product desired by the customer and ownership of the material being of the customer, the contract essentially involves work of labour and not a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... floated a tender for entire work as an indivisible contract. .... Accordingly, the Assessing Officer concluded the agreement between the Appellant and its contractor a composite contract on the basis that, Appellant has not issued separate notification for 'supply', 'construction' and 'erection'. (In page 10 of the Order) 14. Column 8 of the above Tender Notification on 'Bid documents' show that the documents accompany tender notification are divided into 'commercial requirements', 'technical requirements', and 'bid proposal sheets'. There are no divisions of the contract into 'supply', 'construction' and 'erection'. The entire bid process is a composite bid process for the commencement, issue, receipt and opening of bids. 15. In the above, circumstances, assessee company's contention of contract being 'divisible contract' is not borne out by the other terms of the contract. As per the aforesaid paragraphs, the Respondent concludes that the contract entered between Appellant and contractors is composite contract on the basis that, the bidding process invited by Appellant is a composite bidding process. In this regard a reference may be made to the relevant extracts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis that all the contracts have been awarded through a single bidding process, that merely because the bidding process is a composite one it cannot be concluded the contract is a composite contract. It is also submitted that, the Assessing Officer has stated that, Appellant has neither issued separate tender notification nor divided the contract into supply, construction and erection, which is factually incorrect. The CIT(A) or the Assessing Officer has failed to appreciate that, the Appellant had never intended to treat the contract as composite contract. - As per the terms of the 'Instructions to Bidders' as retreated above, the Appellant has clearly laid out that once the contractor is found to be a successful bidder, the entire scope of the contract is divided into 3 separate contracts, i.e., for supply of materials, erection and civil engineering works; - Further, the terms of the 'Instructions to Bidders' also state that, the contract entered by Appellant with contractors has to be treated as a divisible contract resulting into three separate contracts; - Without prejudice to the above, a composite project could be regarded as divisible contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not relevant in the context in so far as it goes to say that there is no tax on works contract, its other observations regarding a contract being a combination of distinct contracts for sale of materials and for work are very relevant. Its observations that the sales tax authorities shall not proceed to take a single contract necessarily as such but it will be competent for them to examine the nature of the contract and if the circumstances permit, to split the same as that relating to sale of goods and that relating to work are also equally relevant. - The Supreme Court in the case of Builders Association of India v. Union of India [1989] 73 STC 370 observed at page 400 as follows : - "... After the 46th Amendment the works contract which was an indivisible one is by a legal fiction altered into a contract which is divisible into one for sale of goods and the other for supply of labour and services. After the 46th Amendment, it has become possible for the States to levy sales tax on the value of goods involved in a works contract in the same way in which the sales tax was leviable on the price of the goods and materials supplied in a building contract which had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter. Similarly in this case, the contract was not indivisible. It contained two parts: the supply order and the service order. The Tribunal was not correct in holding that there was only one contract. The price was also shown separately. The right of the buyer to inspect the goods before they were transported was also preserved. So also, the goods were insured. When the goods were in transit, the petitioner transferred the title to the property to CBZL." In the case of Larsen Toubro Ltd. v. Commr. of C.T. (A.P.) [2003] 132 STC 272 (AP), the Hon'ble Court considered the case of a Public Limited Company engaged in manufacturing, fabrication, supply, erection and commissioning of various projects. The nature of work carried out by the appellant is a works contract. During the assessment years 1986-87 and 1987-88 the appellant had entered into a contract with Visakhapatnam Steel Plant and other public sector undertakings. The contract entered into by the appellant for designing, manufacturing, fabrication, installation and commissioning specified project is composite in nature. The appellant, in order to discharge the obligation arising out of the contract into with various cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 10-7-2003 of the Andhra Pradesh High Court in S.A. Nos. 54-55 of 1997 and T.R.C. No. 14 of 1999 reported in [2003] 132 STC 272 whereby the High Court allowed the appellant's appeal against the order of Commissioner of Commercial Taxes and held that the contract for manufacturing, fabrication, supply, erection and commissioning of project was divisible and that the supply of goods and equipment for project manufactured or purchased outside State was an inter-State transaction and not an intra-State transaction taxable under the Andhra Pradesh General Sales Tax Act, 1957 (in the case of Commissioner of Commercial Taxes v. Larsen Toubro Ltd: S.L.P (Civil) Nos. 22445-22447 of 2003). The Hon'ble Supreme Court in the case of Ishikawajima-Harima Heavy Industries Ltd. v. DIT [2007] 288 ITR 408 held that the fact that the contract has been fashioned as a turnkey contract by itself may not be of much significance. Where the project is a turnkey project, the contract may also be a turnkey contract, but the same by itself would not mean that even for the purpose of taxability the entire contract must be considered to be an integrated one so as to make the appellant to pay tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site consideration may have to be split although such splitting may pose difficulties. In the above case, as compensation for transfer of the agency, the assessee was paid certain amounts calculated on the basis of the agreement between the parties. The assessee claimed that the amounts received were capital in nature. The Supreme Court held that the compensation agreed to be paid was not only in lieu of loss of agency but also for the assessee accepting a restrictive covenant for a specified period, the restrictive covenant was an independent obligation which came into operation only when the agency was terminated, and that part of the compensation attributable to the restrictive covenant was a capital receipt and hence not taxable. Referring to the decision in Gillanders Arbuthnot Co. Ltd. v. CIT [1964] 53 ITR 283, the Supreme Court held that, that part of the compensation attributable to the restrictive covenant was a capital receipt, not assessable to tax. The Supreme Court left to the determination of the assessing authorities as to how the compensation was to be apportioned. In that case, the Supreme Court observed as under: "If the compensation paid was in respect of two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials to be supplied and the rate at which the materials would be supplied. In the case of erection portion and civil works portion, the parties to the contract are clear about the works to be performed by the either of the parties; Accordingly, the aforesaid three portions of the work order were independent of each other. In this regard, a reference is made to the comments of the Assessing Officer, which read as follows: (Refer Paras 19 20 in pages 26 29 of the Order) 19. In view of the above, the most important test for determining as to whether payments made in pursuance to contract are liable to deduct tax at source or not is to scrutinize the contract between the KPTCL and the contractor. Perusal of para 3.5 of the contract makes it absolutely clear that, the contract between the KPTCL and Contractor is a single composite contract and hence under section 194C, payments made in pursuance to this contract are liable to deduct tax at source. .... 20. It may not be out of place to mention that, above mentioned para 3.5 is also part of the each of the Agreements, which are separately for 'Supply Portion', 'Civil Work' and 'Erection' between the KPTCL and Contractor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is taken into account, the duration will be much beyond six months which is the period stipulated in Clause (i) of Article 5.2 of the Treaty. That is why the Revenue has taken this stand. 9. The more crucial question that needs to be considered now is whether the work place set up by the sub-contractor to carry out the works entrusted to him by the applicant can be treated as the work place and the permanent establishment of the applicant. Does the fact that the sub-contractor is only a nominee of the applicant in carrying out the work which would have been otherwise performed by the applicant transform the sub-contractor's workshop into the PE of the applicant? In my view, the answer could only be in the negative unless the sub-contractor is treated as a dependent agent of the applicant as distinct from an independent agent. It is not possible to hold that the place of manufacture of the sub-contractor situated far away from the installation site should notionally be regarded as part of the applicant's permanent establishment. The language of the opening para of Article 5 itself furnishes a key to the correct understanding of the concept of PE. The fixed place of business referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2009] 181 Taxman 270 (AAR-New Delhi), the facts of the case are that, in the year 2005, Power Grid Corporation of India Ltd. (hereafter referred to as 'POWERGRID') invited bids for the execution of the works related to 800KV/400KV Tehri Pooling Station Package associated with Koteshwar Transmission System. For the sake of brevity, the same has been described by the applicant as "400KV GIS Package". The applicant who submitted the bid, became the successful bidder. As per the terms and conditions of bid, the foreign bidder was authorized to assign the whole or part of the contract to an independent contractor subject to the approval of Power Grid. In view of such provision, the applicant, pursuant to the understanding reached with L T, requested Power Grid to award the Off-Shore Contract to it and the On-Shore Supply and Services Contract to be performed in India to L T. This proposal was preceded by a Memorandum of Understanding dated 8-8-2005 between the applicant and the L T. As per para 12(c) of the MoU, the applicant was permitted to assign any portion of the Contract either in full or in part to L T, in which event L T will be permitted to work as an independent contractor an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mere collaborative effort and the overall responsibility assumed by the applicant for the successful performance of the project is not, in our view, sufficient to constitute an AOP in the eye of law.... The first and foremost feature that assumes importance is that Power Grid awarded separate contracts to both the contractors - the first to the applicant and the other two to L T. The assignment which was in terms of the MoU paved the way for such separate contracts and the same was accepted and acted upon by Power Grid. Each party performs the obligations under the respective contracts awarded to them separately and receives the monies payable under the contracts independent of each other. L T, which was not a party to the bid, is recognized as an independent contractor in various documents. L T is entitled to raise the bills for the work carried out by it separately and such bills shall be payable by Power Grid directly to L T without recourse to the applicant (vide para 3 of Assignment Deed). Thus, the individual identity of each party in doing the part of work entrusted to it is preserved, notwithstanding the coordination between the two and the overall responsibility of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e all, the common objective of sharing the revenue or profit are very much lacking in the present case. The Hon'ble AAR in Joint Stock Company Foreign Economic Association "Technopromexport" In re [2010] 322 ITR 409 (AAR), referred to the para 10.1 of the decision of the Hyosung Corporation, In re [2009] 314 ITR 343 (AAR), which is as under: 10.1 The above events would indicate that the title to goods stood transferred to Power Grid outside the territory of India. The title passed on to Power Grid well before the goods reached the Indian Port or the territorial waters of India. The bill of lading contains the name of Power Grid as the consignee. The documents were presented to the applicant's banker for negotiation soon after the goods were shipped FOB and bill of lading was issued. Two days later, the amount equivalent to 70 per cent of the value was transferred to the applicant's account on the same day. This modus operandi is in accordance with para 2.4.4 of the LoA. The bill of entry which was prepared about 15 days after shipment also shows Power Grid as the importer. Even in the insurance policy taken by the applicant Power Grid has been named as the beneficiary. The cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to TDS obligation in respect of composite contracts: In the case of Power Grid Corporation of India Ltd. v. Asstt. CIT [2007] 112 TTJ 654 (Hyd. - ITAT), the facts of the case are that, the assessee is a Central Government undertaking engaged in the activity of transmission and power distribution of electricity to various constituents across the country. During the year under consideration, the assessee was involved in three projects for which contracts were awarded to different contractors. The assessee awarded contracts to various parties to construct/execute the transmission line/sub-station. The categories of contracts entered into by the appellant with various contractors for the above purpose are pure supply contract, pure erection contract and Supply-cum-erection contracts (but with separate agreements in respect of supply portion). The Bench has held as follows: "In this case, as already stated, the assessee entered into contracts with various contractors for supply of conductors, insulators, transmission towers and sub-stations. The contracts were not only to supply equipment, but also by way of separate contract to erect the transmission towers and also the sub-stati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is is not a relevant test. The issue is as to the time and situs of passing of the property and as to whether the property passes "brick by brick" on the theory of accretion or as a chattel qua chattel. The mere fact that the supplier has to perform many other obligations cast on it by virtue of the contract after delivery of goods does not change the nature of transaction. The 'supply' portion of the contract are the predominant object and intention of the parties. Erection is relatively minor portion as compared to the supply portion. If the erection portion cannot be taken as the main object of these contracts, title in goods was transferred as movables prior to erection. If equipment are manufactured as per the design, engineering, etc., specified by the customer, it would not result in a works contract especially when all the material belong to the supplier, even though it produced a tailor-made product. The erection portion being subsequent to passing of title by execution of the supply portion, it cannot be said that the erection portion controls the supply portion, though the fulfilment of the conditions of the erection contract has a bearing on the fulfilment of the condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely, two ESPs for its power plant at Panipat. Freight and insurance payable in respect of its supply and the cost of material constituted a major portion of the contract value. The cost of spares will also fall in this category. As rightly contended by the learned counsel for the Appellant, before installing the plant, it was necessary to dismantle the existing plant and also to do the necessary civil work for erecting the new plant. This by itself would not mean that the contract in question was a composite contract for the erection and commissioning of the plant together with the materials required for such commissioning of the plant. As held by the Supreme Court in the case of State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474 in the case of a composite contract, one has to find out the primary object of the transactions and the intention of the parties while entering into it. On the facts of this case we find that the primary object of the appellant was to purchase the plant in question and the civil work, erection and commissioning was only incidental to purchase the material by the appellant. In other words, the contract for supply of the equipm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he vouchers and payment bills and also considering the nature of equipments supplied and ancillary work of supervision, designing etc. done by the supplier company, we are of the opinion that the composite character of the transactions involved in the three agreements was that of sale of goods. On perusal of the bills filed by the assessee which are available in the paper book at pages 242 to 368, it is found that these basically relate to supply of material by the said company and disclose the price of net sale relating to various parts, equipments and goods. The sale bills also include the amount of sales tax and excise duty etc. A reference, in this regard, may be made to the bill dated 30-3 -1994 (page 331), bill dated 31-10-1994 (page 332) bill dated 10-11-1994 (page 335) and other bills available from pages 335 to 368. In most of these bills, the amount of sales tax and excise duty has been shown separately and has been included which shows that the bills relate to sale of goods and for such sales, the sales tax and excise duty etc. was paid by the purchaser. If the total amount paid by the assessee is also examined and considered, then it is found that only a negligible or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor of the assessee company filed before the Hon'ble High Court in a writ petition and has tried to draw inference from that affidavit that the work was in the nature of turnkey project. The ld. Sr. DR has also made reference to that affidavit. In our opinion, it is extraneous material filed in different context and cannot be a valid and relevant criterion for deciding the nature of contract, particularly, in view of the main features or salient features, which have been recorded, by us in the body of this order. 59. Thus, in the totality of the circumstances, including the substance and the form of agreement, as well as the mode of payment, it is held that the work done by the company (GEC India Ltd.) was not on the basis of turnkey project, rather the work was for supply of goods. Hence, we are unable to concur with the findings recorded by the ld. Commissioner (Appeals) which are reversed by us. Consequently, Issue No. 3 is also decided against the revenue by holding that the agreements entered into by the assessee and the suppliers were not for doing the work on 'turnkey project' basis." In the case of Andhra Pradesh State Road Transport Corporation v. Dy. CIT [2001] 119 Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, it was submitted that - (i) Three separate contracts entered into between Appellant and contractors cannot be regarded as one single indivisible contract; - The contract for supply does not come within the sweep of section 194C; - Even if all the three contracts are taken together, the supply portion constituting more than 80 per cent of the total value, the entire arrangement is in respect of supply of equipment and erection and civil works are only incidental and ancillary to the supply contract applying the dominant test theory. Accordingly, section 194C would not apply to all the three contracts. (ii) As regards allegation that there is collusion between the appellant and contractors for the tax evasion: - Firstly, there is no liability on the Appellant to deduct tax at source in respect of the sums paid to the contractors towards purchase of equipment and secondly, Appellant cannot be held as an 'assessee in default' when the payee has paid tax in respect of the sums received by the Appellant. Further, it is also submitted that both the Assessing Officer and the Ld. CIT(A) have not held that the work order or the tender awarded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Without prejudice to the above, the Learned Commissioner (Appeals) ought to have appreciated that the recipient having paid the tax on the amount received from the Appellant there was no obligation on the part of the Appellant to pay the tax under section 201(1). - that section 191 reads as follows: In the case of income in respect of which provision is not made under this Chapter for deducting income-tax at the time of payment, and in any case where income-tax has not been deducted in accordance with the provisions of this Chapter, income-tax shall be payable by the assessee direct. Explanation. For the removal of doubts, it is hereby declared that if any person, including the principal officer of a company, (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or after so deducting fails to pay, or does not pay, the whole or any part of the tax, as required by or under this Act, and where the assessee has also failed to pay such tax directly, then, such person shall, without prejudice to any other consequences which he may incur, be deeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the deductee. If the tax is deducted at source and paid by the deductor, the deductee gets credit for it and the amount deducted is treated as his income as per sections 198 and 199." - Mahindra Mahindra Ltd. v. Dy. CIT [2009] 122 TTJ (Mum.) (SB) 577 - In the case of ITO, Bangalore v. M/s. Intel Tech India (P.) Ltd. (Dated: April 9, 2009), 2009-TIOL-355-ITAT-Bang., the Hon'ble ITAT, Bangalore Bench has held as follows: "Hence, in the instant case, the deductor was required to deduct the tax at source and therefore, the deductor was an assessee in default. Since a deductee has filed the return and has disclosed the transaction in the return of income and that shows no tax was payable on such transaction, the default will end on the date when the deductee has filed the return. Hence, the deductor will be liable to interest under section 201(1A) up to 1st November, 2004. However, there will be no deduction under section 201 since the deductee has filed the return and has disclosed the transaction and no tax is payable as per the return on such transaction by the deductee. Hence, order of learned CIT(A) in cancelling the demand under section 201 is upheld. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Three separate contracts entered into between Appellant and contractors cannot be regarded as one composite contract; - The contract for supply does not come within the sweep of section 194C; - Even if all the three contracts are taken together, the supply portion constituting more than 80 per cent of the total value, the entire arrangement is in respect of supply of equipment and erection and civil works are only incidental and ancillary to the supply contract applying the dominant test theory. Accordingly, section 194C would not apply to all the three contracts; - Reimbursement to contractor towards the compensation for cutting of trees or loss of crops to the farmers or landlords does not falling within the preview of section 194C; - The payments made towards survey work cannot be treated as fee for professional or technical services so as to make TDS under section 194J; - The sums paid towards testing charges do not fall either under section 194C or 194J; - When the contractors have paid the income-tax directly the Appellant cannot be treated as an 'assessee in default' and recover the tax on the same income altogether once aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), namely: (i) applicability of the provisions of s.194C of the Act (ii) contract for supply or 'contract of work" Applicability of the provisions of section 194C of the Act: Section 194C specifies that any person responsible for paying any sum to any contractor for carrying out any work was required to deduct tax at source. In section 194C, the very emphasis is any person responsible for paying any sum ...for carrying out any work (including supply of labour for carrying out any work). However, applying the meaning of the word 'work' doesn't mean to include supply of goods or materials as portrayed by the Revenue in its impugned order. Let us have a quick look at the judicial pronouncements on the word 'work' as envisaged in section 194C of the Act: (i) Birla Cements Works v. CBDT [2001] 248 ITR 216/115 Taxman 359 (SC): While dealing with the issue, the Hon'ble Supreme Court had considered the scope and ambit of section 194C of the Act, validity of Circular No. 681 and also taking cue from its earlier decision in the case of Associated Cements Co. Ltd. (supra) and ruled that - "The key words in section 194C are 'carrying out any work'. The word 'work' is to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument of the revenue that the service contracts between the petitioner hotel and its customers is covered under section 194C of the Act cannot be accepted because, neither such a contract constitutes 'work' within the meaning of section 194C of the Act nor those contracts are covered under service contracts specifically included by way of Explanation III to section 194C of the Act. If the contention of the revenue that the word 'any work' in section 194C is very wide enough to include all types of work is accepted, then it would mean that even the hair cutting work done by a barber would be a 'work' covered under section 194C and the person making payment to the barber would be covered under section 194C. Such a wider interpretation is uncalled for, especially when the revenue itself had considered since inception that section 194C is restricted to the works done by contractors/sub- contractors". With due respects to the rulings of the judiciaries cited supra , we are of the considered view that only when the activity qualifies to be regarded as 'work' the provisions of section 194C have come into play. For an activity to be regarded as 'work' there shall be an activity carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction of sale. For, even in a contract purely of work or service, it is possible that articles may have to be used by the person executing the work and property in such articles or materials may pass to the other party. That would not necessarily convert the contract into one of sale of those materials. In every case the court would have to find out what were the primary object of the transaction and the intention of the parties while entering into it. It may in some cases be that even while entering into a contract of work or even service, parties might enter into separate agreements, one of work and service and the other of sale and purchase of materials to be used in the course of executing the work or performing the service. But, then in such cases the transaction would not be one and indivisible, but would fall into two separate agreements, one of work or service and the other of sale". With highest regards, we would like point out that the ruling of the Hon'ble Court makes it apparent that when parties enter into two separate contracts, one for material and one for labour, the transaction would not be one and indivisible, but would fall into two separate agreements, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of P.S. Co. v. State of Andhra Pradesh [1984] 56 STC 283 to determine the true construction of a contract so as to determine in turn as to whether transaction covered by that contract is one of sale or of work and labour. These guidelines are as under: "(1) The essence of the contract or the reality of the transaction as a whole has to be taken into consideration in judging whether the contract is for a sale or for work and labour. (2) If the thing to be delivered has any individual existence before the delivery, as the sole property of the party who is to deliver it, then it is a sale. (3) If the main object of the contract is the transfer from A to B, for a price, of the property in a thing in which B had no previous property, then the contract is a contract of sale. (4) Where the main object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one for work and labour. (5) If the bulk of the material used in the construction belongs to the manufacturer who sells the end-product for a price that will be a strong pointer to a conclusion that the contract is in substance one for the sale of goods an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract is one for work and labour. 3. If the thing to be delivered has any individual existence before the delivery as the sole property of the party who is to deliver it, then it is a sale... 4. the bulk of material used in construction belongs to the manufacturer who sells the end-product for a price, then it is a strong pointer to the conclusion that the contract is in substance one for the sale of goods and not one for labour. However, the test is not decisive. It is not bulk of the material alone but the relative importance of the material qua the work, skill and labour of the payee which have to be weighed. If the major component of the end product is the material consumed in producing the chattel to be delivered and skill and labour are employed for converting the main components into the end products, the skill and labour are only incidentally used, the delivery of the end product by the seller to the buyer would constitute a sale. On the other hand, if the main object of the contract is to avail the skill and labour of the seller though some material or components may be incidentally used during the process of the end product being brought into existence by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods (a) Since contracts for the construction, repair, renovation or alteration of buildings or dams or laying of roads or airfields or railway lines or erection or installation of plant and machinery are in the nature of contracts for work and labour, income-tax will have to be deducted from payments made in respect of such contracts. Similarly, contracts granted for processing of goods supplied by Government or any other specified person, where the ownership of such goods remains at all times with the Government or such person, will also fall within the purview of this section. The same position will obtain in respect of contracts for fabrication of any article or thing where materials are supplied by the Government or any other specified person and the fabrication work is done by a contractor. (b) Where, however, the contractor undertakes to supply any article or thing fabricated according to the specifications given by Government or any other specified person and the property in such article or thing passes to the Government or such person only after such article or thing is delivered, the contract will be a contract for sale and as such outside the purview of this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all times with the contractee. Paragraph 7(vi)(b) provides that, "Where, however, the contractor undertakes to supply any article or thing fabricated according to the specifications given by Government or any other specified person and the property in such article or thing passes to the Government or such person only after such article or thing is delivered, the contract will be a contract for sale and as such outside the purview of this section". 9.9 As narrated in the aforesaid paragraph, when the contractor undertakes to supply any article or thing fabricated according to the specifications given by the specified person and the property in such article or thing passes to the specified person only after such article or thing is delivered, the contract will be a contract for sale. Therefore, as pleaded by the assessee, the assessee's case falls within paragraph 7(vi)(b) and not within Paragraph 7(vi)(a). 9.10 The Ld. CIT(A) in his impugned order had observed that "there is no transfer of property in the equipments by the manufacturer to the customer as a chattel". However, his view was contrary to the fact that transfer of the title in respect of equipment and materials supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors for using them in the erection and civil work portions. Therefore, it was evident that, the contract relating to supply of equipment was a separate and distinct 'contract for sale' and as advocated by the Ld. AR, the assessee's case falls within the paragraph 7(vi)(b) of the Board's circular (supra). 9.13 On a critical analyze of section 194C of the Act, we find that the term 'work' has been defined in Explanation (iv). The sub-clause (e) deems contract manufacturing as work. However, the latter part of the aforesaid sub-clause clearly excludes manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer. On a close scrutiny, the aforesaid exclusion applies not only to manufacturing but also to supplying when such supply is according to be requirement or specifications of the customer and for such supply, the supplier had used material purchased from a person other than the customer. Thus, the assessee's case is squarely covered by the aforesaid exception for a simple reason that the contractor had undertaken to supply to the assessee the equipment as per the specification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchaser is not regarded by the statute as being dispositive of the question as to whether a contract constitutes a contract of work or sale. What is of significance is whether material has been purchased from the customer, who orders the product. When the material is purchased from the customer who orders the product, it constitutes a contract of work while on the other hand, where the manufacturer has sourced the material from a person other than the customer, it would constitute a sale. What is significant is that in using the words which clause (e) uses in the Explanation, Parliament has taken note of the position that was reflected in the circulars issued by the Central Board of Direct Taxes since May 29, 1972. The judgment of the Supreme Court in Associated Cement gave an expansive definition to the expression "work" and rejected the attempt of the assessee in that case to restrict the expression "work" to "works contract". Both before and after the judgment of the Supreme Court the expansive definition of the expression "work" co-existed with the Revenue's understanding that a contract for sale would not be within the purview of section 194C. The Revenue always understood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Portion)' that the contractor is also responsible for the performance of the erection portion and civil works portion, that merely making the contractor responsible for performance of erection portion and civil works portion will not by itself make Supply portion any less a supply contract, that one should appreciate that assumption of overall responsibility is a contractual matter which by itself would not alter the essence of the transaction of supply; - that the separate contracts expressly entered into cannot be termed as a composite contract merely on the basis that all the contracts have been awarded through a single bidding process, that merely because the bidding process was a composite one it cannot be concluded the contract is a composite contract; - that the Assessing Officer had stated that the assessee had neither issued separate tender notification nor divided the contract into supply, construction and erection, which was factually incorrect; - that the authorities below have failed to appreciate that, the assessee had never intended to treat the contract as composite contract, that as per the terms of the 'Instructions to Bidders, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax is only in respect of contracts which are single and indivisible and not of contracts which are a combination of distinct contracts for sale of materials and for work, and nothing shall bar the sales tax authorities from deciding whether a particular contract falls within one category or the other and imposing a tax on the agreement of sale of materials, where the contract belongs to the latter category." (ii) The Supreme Court in the case of Builders Association of India v. Union of India [1989] 73 STC 370 observed thus- "... After the 46th Amendment the works contract which was an indivisible one is by a legal fiction altered into a contract which is divisible into one for sale of goods and the other for supply of labour and services. After the 46th Amendment, it has become possible for the States to levy sales tax on the value of goods involved in a works contract in the same way in which the sales tax was leviable on the price of the goods and materials supplied in a building contract which had been entered into in two distinct and separate parts as stated above..." (iii) In the case of State of Tamil Nadu v. Titanium Equipment Anode Mfg. Corpn. Ltd. [1998] 110 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The contracts specified separate prices for supply of various items required for execution of the project as well as the commissioning and installation charges. The manner and method to be followed by the appellant in the above case in execution of the works contract are as under: (a) Goods/equipments described in the contract of specific nature are manufactured in their Powai (Mumbai) Factory and dispatched directly in favour of contractee after inspection and approval by them. The turnover is liable for declaration in the State of Maharashtra as provided under section 3(a) of the Central Sales Tax Act, 1956. (b) Appellant also purchases goods/equipments from outside the State vendors and effect transfer of documents of title in favour of contractee. Such turnovers are claimed exemption being transit sales, not liable to be taxed in view of section 6(2) read with section 3(b) of CST Act. (c) For the above nature of transaction pertaining to contracts, contractees furnished "C" forms to the appellants and the same will be filed during assessment proceedings. (d) Appellants undertake installation/erection of such goods/equipments, which are handed over by the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply portion, the parties to the contract are clear about the materials to be supplied, the quantity of materials to be supplied and the rate at which the materials would be supplied. In the case of erection portion and civil works portion, the parties to the contract are clear about the works to be performed by the either of the parties; thus, the aforesaid three portions of the work order were independent of each other. - that the most important test for determining as to whether payments made in pursuance to contract are liable to deduct tax at source or not was to scrutinize the contract between the KPTCL and the contractor; - that one of the clauses in the 'Contract Agreement (Supply Portion)', which reads as follows: It is expressly agreed to by the Contractor that notwithstanding the fact that the Contract is termed as Supply Contract, for convenience of operation of the other Contracts namely Erection Contracts and Civil Contracts are also the integral parts of the contract on single source responsibility basis and the Contractor is bound to perform the total Contract in its entirety and non-performance of any part or portion of the Contract shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee with various contractors for the above purposes were (i) pure supply contracts, (ii) pure erection contracts and (iii) Supply-cum-erection contracts (but with separate agreements in respect of supply portion). The finding of the Hon'ble Bench was that - "5.2 (on page 17) In this case, as already stated, the assessee entered into contracts with various contractors for supply of conductors, insulators, transmission towers and sub-stations. The contracts were not only to supply equipment, but also by way of separate contract to erect the transmission towers and also the sub-stations. The contracts, though contained in the same document in some cases are in two parts. Simply because the supply and erection parts of the contract were entered into with the same party in some cases and in some other cases, were in two separate parts in the same agreement the nature of each part of the contract will not alter. In this connection, we may refer to the decision of the Bombay High Court in the case of CST v. Walchandnagar Industries [1985] 58 STC 89 in which the Hon'ble High Court referred to the judgment of the Hon'ble Supreme Court in the case of State of Madras v. Gannon Dunke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sense that the same specifications are used by many other concerns, to our mind, this is not a relevant test. The issue is as to the time and situs of passing of the property and as to whether the property passes "brick by brick" on the theory of accretion or as a chattel qua chattel. The mere fact that the supplier has to perform many other obligations cast on it by virtue of the contract after delivery of goods does not change the nature of transaction. The 'supply' portion of the contract is the predominant object and intention of the parties. Erection is relatively minor portion as compared to the supply portion. If the erection portion cannot be taken as the main object of these contracts, title in goods was transferred as movables prior to erection. If equipment are manufactured as per the design, engineering, etc., specified by the customer, it would not result in a works contract especially when all the material belong to the supplier, even though it produced a tailor-made product. The erection portion being subsequent to passing of title by execution of the supply portion, it cannot be said that the erection portion controls the supply portion, though the fulfilment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engineering, manufacturing, supply, erection, testing and commissioning for retrofit of ESPs. Considering the issue in detail, the Hon'ble Bench was of the view that - "2.5 Under the provisions of section 194C of the IT Act, any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract, shall at the time of credit of such sum or at the time of payment deduct tax at source at such percentage as is mentioned in section 194C. The chart of payment of TDS by the appellant has already been set out above. The Assessing Officer was of the view that the contract between the appellant and M/s. BHEL was a composite contract and therefore the appellant ought to have deducted tax at source in respect of payments for supply of materials as well as the payments for execution of civil work, erection, designing and commissioning and also the freight and insurance. According to the appellant, the contract in question was a divisible contract, comprising of one part of the contract for supply of equipments and the other two parts of the contract for dismantling the existing machinery and for clearing the site and making the necessary infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, one has to find out the primary object of the transactions and the intention of the parties while entering into it. On the facts of this case, we find that the primary object of the appellant was to purchase the plant in question and the civil work, erection and commissioning was only incidental to purchase the material by the appellant. In other words, the contract for supply of the equipments and the contract for erection and commissioning of the plant are two separable contracts, though there is only one common purchase order. We are, therefore, of the view that the Revenue authorities were not justified in considering the gross payments made by the appellant to BHEL for the purpose of determining the TDS by the appellant. We have also perused the decision of the Rajkot Bench of the Tribunal in the case of Essar Oil Ltd. (supra). We are of the view that the facts of the aforesaid case are clearly distinguishable from the facts of the present case. It was a case where the contract was for construction of a refinery and the contractor was to supply the material to be used for construction. In the present case, the supply of the power generator was an independent transaction an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein. We are in full agreement with the reasons recorded by the Delhi Bench. We are also of the similar view that the facts of the case before the Rajkot Bench were clearly distinguishable from the facts of the present case since it was a case where the contract was for construction of a refinery and the contractor was to supply the material to be used for construction. As the issue before us is relatively on a different footing, we are of the considered view - with due regards - the ratio laid down by the Hon'ble Rajkot Bench cannot be equated with the present case. As judiciously affirmed by the Hon'ble Delhi Bench, in each case the terms of the contract need to be analyzed before coming to a conclusion whether it was a composite contract or not. 11.2. The Hon'ble Lucknow Bench in the case of Principal Officer, Somani Iron Steel (P.) Ltd. v. ITO [2003] 86 ITD 750 had held that "in any case, on consideration of the entirety of the facts and circumstances and the composite character of agreements, dominant or predominant nature of contracts is found to be that of sale and not of work of contract." 11.3 We have also come across an occasion to peruse the finding of the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd-result of the contract that it was a contract of sale ultimately and finally. ....." 11.4 With regard to the sweeping remark on the part of the Revenue to the effect that there was alleged collusion between the assessee - a State Government Public Sector Company - and the contractors for tax evasion, we are of the considered view that it tends to leave a bad taste in the mouth as no documentary proof was brought on record even to remotely suggest that there was a likelihood of such an alleged collusion between the parties concerned to defraud the Government by indulging in a sordid affair of tax evasion etc. 11.5 The Hon'ble Bombay High Court in the case of CIT v. West Coast Paper Mills Ltd. in IT Appeal No. 389/2008 had candidly observed that when the other party is a statutory body, the question of evasion of tax does not arise. 11.6 In taking into account the facts and circumstances of the issues which have been meticulously analyzed and also extensively quoting the various judicial pronouncements on the issues in the fore-going paragraphs, we are of the considered view that the authorities below were not justified in treating the assessee - KPTCL - as an 'assessee in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tax deductor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee-assessee"; - When there was no obligation on the part of the assessee to deduct tax on supply portion, there was no question of charging interest under section 201(1A) of the Act; - We have also duly perused the case laws on which the Ld. CIT(A) had placed strong reliance. However, we are of the considered view that those decisions were clearly distinguishable to the facts and circumstances of the issues under consideration. 11.7 In a nutshell - (i) when the assessee was under no obligation to deduct tax under section 194C of the Act towards the payments made on supply portion, the assessee's case does not fall within the ambit of the provisions of section 201(1) of the Act and, thus, the assessee cannot be treated as an 'assessee in default'; and (ii) that when the assessee was not required to deduct tax towards the payment on supply portion, there was no question whatsoever in charging interest under section 201(1A) of the Act. It is ordered accordingly. 12. In the result, the assessee's appeals for the assessment years 2007-08, 2008-09 and 2009-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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