TMI Blog2012 (7) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... t of services rendered the provisions of section 194C are not applicable on account of purchase of machinery - in favour of assessee. - ITA NO. 66 to 69/JP/2012 - - - Dated:- 25-5-2012 - R K Gupta, Sanjay Arora, JJ. For Appellant : Shri PC Parwal For Respondent : Shri D K Meena ORDER These are four appeals by assessee against the order of Ld. CIT (A) relating to assessment years 2005-06, 06-07, 08-09 and 10-11. 2. Common issues are involved in all these appeals, therefore, they are being disposed off together. 3. The assessee is objecting through ground nos. 1 to 1.2 in confirming the action of the Assessing Officer in holding that assessee s independent and separate contract with Enercon (India) Ltd. for supply of plant and machinery of windmill, for civil/electrical works and erection and commission of windmill, is a composite work contract liable for deduction of tax at source under section 194C on entire value including the payment made for supply of plant and machinery and, therefore, confirmed the action of the Assessing Officer that assessee is in default under section 201(1) for not deducting tax at source under section 194C of the IT Act. 4. Brief f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntractor which proves that the entire work was awarded on turnkey basis. Further, assessee company has treated the transaction as a composite order by placing all orders on same day making the payment without apportioning it according to different order value. (iv) Assessee ignored Circular No. 13 of 2006 dt. 13.12.2006 which clarifies that before taking a decision on applicability of TDS u/s 194C on a contract, it would have to be examined whether the contract in question is a contract for work or a contract for sale. (v) The fact that supply has been recognized as sales under the Sales Tax so it is contract for sale, has no relevance because what is treated as sales or not is decided by the respective laws of the State Government which has no relevance with deduction of tax at source under the IT Act. (vi) Supreme Court in various cases as mentioned on Page 12-16 of the order held that erection, installation commissioning are fundamental integral part of contract. Thus, installation of windmill is a common composite work order. (vii) Assessee by relying on CBDT Circular No. 275/201/95-IT(B) misinterpreted that if deductee assessee has no liability of payment of tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumventing the relevant provisions of the law, through artificially dividing such work contract in piecemeal orders. Thus, it is concluded that the erection, installation and commissioning aspects of the Windmill project are integral part of composite contract of such project, thus, the separate work orders placed in this regard are far all practical and technical purposes, forms the part of the single work contact only. Accordingly, I find the AO is justified in holding that the appellant was at fault u/s 201, while not deducting TDS u/s 194C of the Act, towards the payment made far machinery, parts and other materials, as otherwise deducted on the payment made towards service charges related to such composite work contract of the appellant. However, in view of the ratio of Hon ble Supreme Court given in the case of M/s Hindustan Coca Cola Beverage P. Ltd., the appellant s liability, i.r.o., non deduction of TDS u/s 201(1) was rightly held by the AO, as not enforceable as such. Accordingly, the demand of Rs. 81,682/-, Rs. 1,05,872/-, Rs. 34,874/- Rs. 2,000/- for A.Y. 05-06, 06-07, 08-09 10-11 respectively raised u/s 201(1A), towards interest aspect on such TDS default i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s committed default under section 201(1) and, therefore, an order under section 194C was passed. Matter came before the Tribunal and Tribunal discussing the issue in detail has confirmed the finding of Ld. CIT (A) which are in consonance with the order of Tribunal decided in ITA No. 474 525/JP/2009 (supra). The findings of the Tribunal in this case have been recorded in para 9 and 10 of the order of the Tribunal are as under :- 9. Considering the above submission, we note that the assessee has placed two separate orders to BHEL, one for design, engineering, manufacturing and supply of steam generator and steam turbine generator packages along with their auxiliaries, power cycle piping and valves and controls for boiler and TG for 2 * 250 MW coal based Thermal Power Plant and another for erection, testing and commissioning of the same. The value of the supply order is Rs. 780 crores whereas the value of the erection and commissioning order is Rs. 81 crores. The equipment manufactured are as per the design, engineering etc. supplied by the supplier. All the material belongs to supplier. The erection process is subsequent to passing of title by execution of supply portion. The F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight 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 the category. As rightly contended by the ld. Counsel for the appellant that before installing the plant, it was necessary to determine 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 was for the erection and commissioning of the plant together with the materials required for such commissioning of the plant. The primary object of the appellant was to purchase 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. Therefore, 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. The contract, in so far as it relates to supply of the material, freight insurance and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it by the provisions of section 194C. Accordingly the issue has been decided in favour of the assessee. Copy of the order is placed on record which was decided in ITA Nos. 360 to 365/Bangalore/2010 vide order dated 17.3.011. 8.1. In the case in hand, the facts are identical with the case of Rajasthan Rajya Vidhyut Utpadan Nigam Ltd. and in case of Karnataka Power Transmission Corporation Ltd., Bangalore. In the present case the assessee purchased machinery and the supplier was supposed to erect the machinery at the factory premises of the assessee after completing the civil work and erection work. The assessee has already deducted TDS on account of services rendered for civil work/electrical work and erection of the machinery. Therefore, in our view the provisions of section 194C are not applicable on account of purchase of machinery. The cases on which reliance has been placed by Assessing Officer and Ld. CIT (A) are distinguishable. In those cases also a composite contract was there. However, the material was supplied by the assessee on which there was no question of deducting any TDS or on the remaining part of service etc. This was on account of contract work the TDS was dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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