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TMI Blog2012 (7) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that assessee is in default u/s 201(1) for not deducting tax at source u/s 194C on the payment made for supply of plant & machinery. (2) The Ld. Commission of Income Tax (Appeals) has erred on facts and in law in confirming the action of the Assessing Officer in raising demand of Rs. 47,124/- raised under section 201(1A) on alleged non deduction of tax at source on supply value of plant & machinery. He has further erred in upholding the levy of such interest for the period up to the date of filing of the return by recipient M/s. Enercon India Ltd. 3. The assessee purchased machines from M/s. Enercon India Ltd. totaling to Rs. 9.42 crores. Besides that, assessee has paid cost of service at Rs. 1.06 crores. On account of services rendered, the assessee has deducted TDS. The Assessing Officer treated the purchases of machinery and services rendered by M/s. Enercon India Ltd. as a composite contract and, therefore, he held that assessee has committed default in view of provisions of section 201 as assessee has not deducted TDS under section 194C on account of payment made for purchase of machinery. Accordingly he passed order under section 201(1) and 201(1A) of the Act fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal 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 Finance (no.2) Act 2009 has clarified the scope of work in the Explanation to section 194C so as to include manufacturing or supplying a product according to the requirement or specification of customer by using material purchased from such customer but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 supply of spare parts, is clearly separable from the other part of the contract relating to carrying out civil work, commissioning and erection of the power generators. The AO is thus directed to work out the short deduction of tax at source, if any, by excluding the payment towards supply of machinery, spare parts as well as freight and insurance. It was further held that the BHEL has already paid tax on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 deductible. In the present case itself, the supplier of the machinery is a separate component and on account of services rendered for commissioning machinery after civil work and electrical work is separate on which TDS has already been declared. Therefore, the cases on which reliance has been placed by Assessing Officer or Ld. CIT (A) support the case of the assessee. In view of these facts and circumstances, we hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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