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M/s Abhilash Garments & Estates Pvt. Ltd, Bangalore Versus The Asst. Commissioner of Income-tax Circle-16 (1) , Bangalore

2015 (7) TMI 774 - ITAT BANGALORE

Non deducting tax at source under section 194C - remuneration for comprehensive composite deal of setting up of windmill - Held that:- As per the definition of work as contained in the Explanation to clause-4(e) to sec.194C the value of the material purchased from such customer is required to be excluded if such value mentioned separately in the invoice. In the case in hand, there is no ambiguity about the fact that a separate consideration and value of the supply of goods/windmill turbine conve .....

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of the authorities below and decide the issue in favour of the assessee. - ITA Nos.1255 to 1257(B)/2014 - Dated:- 17-7-2015 - Shri Vijay Pal Rao and Shri Jason P Boaz, JJ. For the Petitioner : Smt R. Pratibha, Advocate For the Respondent : Dr. K. Shankar Prasad, JCIT ORDER PER BENCH: These appeals by the assessee are directed against the composite order of the CIT(A) dated 28-03-2014 arising from the orders passed u/s 201 & 201(1A) of the IT Act, 1961. 2. The assessee has raised common grou .....

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ocuments enclosed that contract entered by the appellant with M/s Enercon was a divisible contract and not composite or indivisible contract. 4. On the facts, the ld.CIT(A) ought to have accepted the explanation of the appellant and ought not to have confirmed the levy as made by the AO u/s201 & 201(1A) of the Act. 5. The ld.CIT(A) ought to have appreciated that case law relied by the department are distinguishable and not applicable to the appellant s case. 6. Without prejudice, the additio .....

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ore. A survey u/s 133A of the Act was conducted in the business premises of the assessee on 05-06-2008 which revealed that assessee has made payments to M/s Enercon (Ind.)Ltd amounting to ₹ 3,83,00,000/- without deducting tax at source. The said payment was made during the three assessment years from 206-07 to 2008-09. Consequently, the AO passed a common order u/s 201 & 201(1A) of the Act on 30-01-2009 holding that the payments made by the assessee to Ms/s Enercon (Ind.) Ltd were liab .....

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e to M/s Enercon (Ind.) Ltd., comprises three components namely., payment for supply of equipments and machinery, payment for supply of industrial construction work and payment for commissioning of Enercon (Ind.) Ltd., (Supra). The assessee also pointed out that as far as the payments for construction work as well as commissioning the assessee deducted TDS and paid to the department. As far as the payment for supply of windmill equipment the assessee contended that this payment does not fall und .....

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see submitted that though, there was only one contract between the parties however, the payment made to M/s Enercon…(Supra) are separately shown towards the supply of windmill equipment and accessories construction, supply of industrial/construction work as well as commissioning. He has referred to the invoices issued by M/s Enercon and submitted that the invoices categorically given the separate details of payment regarding supply of windmill turbines and other accessories. Even separate .....

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ct tax at source u/s 194C. Further, when the work contract is for supply of material, it cannot be a contract for work and labour. The learned AR, than relied upon the decision of the Hon ble Delhi High Court in case of CIT Vs Reebok India Co.306 ITR 124 and submitted that a similar view has been taken by the Hon ble Delhi High Court in the case by upholding the finding of the Tribunal that transaction between the assessee the manufacturer was that of purchase and sale of goods and not of work c .....

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e payment made for supply portion and consequently, there was no question of assessee be held liable to deduct tax u/s 201 and charging interest u/s 201(1A) of the Act. 6. The learned AR then relied upon the decision of the Hon ble jurisdictional High Court in case of CIT Vs KPTCL 208 Taxmann 73 wherein the finding of this Tribunal has been upheld by the Hon ble High Court. Thus, the learned AR has submitted that the payment made towards supply of equipments does not fall under the scope of sec. .....

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submitted that in the said case, the assessee got the work of rolling shutters erection and installation and therefore, the assessee was not liable to pay sales tax. Thus, the learned DR has submitted that the in the said case the Hon ble Supreme Court has held that the contract was a contract of work and labour and not a contract for sale. In the case in hand, the entire work was carried out by M/s Enercon India Ltd under the contract which is work and labour and not contract of sale. He has r .....

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e Of windmill from Enercon Ind.Ltd 1,15,50,000 30.1.2006 To Vysya Bank 0376 C No.259436 being adv.paid towards Purchase for windmill from Enercon 1,25,00,000 21.11.2006 To Vysya Bank 0083 C No.8586601 issued to Enercon 50,00,000 03.01.2007 To Vysya Bank ltd -0083 C No.858603 issued to Enercon 25,00,000 26.02.2007 To Vysya Bank ltd -0083 C No.858604 issued to Enercon 20,00,000 22.09.2007 To Vysya Bank 376 C No.607421 issued to above party towards supply of windmill balance paid Total payment&hell .....

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d industrial construction work and for commissioning of windmill. We further note that the assessee produced the invoices raised by M/s Enercon. The bills were raised separately for supply of wing turbine converter and other accessories and components. Therefore, there is a clear segregation of the payment as well as the consideration in respect of the supply of windmill and other components, civil and industrial construction work as well as the commissioning charges. Though, all these work and .....

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ards civil and industrial construction work as well as commissioning charges therefore, the only dispute before us is regarding the payment towards the supply of windmill equipment with its accessories of ₹ 3.37 Crores. It is manifest from the purchase order for wind energy converters and other equipment as well as the purchase order for civil and electrical work that the assessee placed separate orders for purchase of the equipment including the wind turbine converters and other accessori .....

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ply of windmill equipments and only a small part of payment is in respect of civil and industrial construction work and commissioning work. Therefore, the contract in question was more of supply of windmill equipment and turbine converter than the work of civil and industrial construction as well as commissioning. In the case of CIT Vs KPTCL (Supra) the Hon ble jurisdictional High Court consiered the question of law which is framed under para-7 as under; i) Whether the Tribunal was right in spli .....

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01(1A) of the IT Act, is not leviable, as the assessee was not liable to make any deductions in respect of the value of the material part of the contract, though the contract was one of whole contract? While deciding the question of law the Hon ble High Court has held in para-13 to 16 as under; 13. It is not in dispute that in respect of agreement for supply, which is a distinct contract, no TDS is deductible under section 194C as it is not a contract for carrying out any work. Carrying out any .....

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was introduced to bring clarity on the issue which reads as under; Clarification regarding work under section 194C. There is ongoing litigation as to whether TDS is deductible under section 194C on outsourcing contracts and whether outsourcing constitutes work or not. To bring clarity on this issue, it is proposed to prove that work shall not include manufacturing or supplying a product according to the requirement or specification of a customer by using raw material purchased from a person othe .....

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e value excluding the value of material purchased from such customer if such value is mentioned separately in the invoice. Where the material component has not been separately mention in the invoice, TDS shall be deducted on the whole of the invoice value. 14. When the statute was amended to clarify the word work under section 194C by introducing the aforesaid clause, it is obvious tht the amendment is only clarificatory in nature and therefore it is retrospective. The Parliament did not intend .....

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t is also clarified TDS shall be deducted on the invoice value excluding the value of material purchase from such customer, if such value is mentioned separately in the invoice. It is only in cases where the material component has not been separately mentioned in the invoice. TDS shall be deducted on the whole of the invoice value. Therefore, whatever ambiguity which prevailed earlier is clarified. When in a composite contract, if an invoice is raised, separately mentioning the value of the mate .....

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of material for carrying out work. In fact, the Tribunal by a detailed consideration of the statutory provisions, the various terms of the contract, the legal position as explained in the various judgments has rightly come to the conclusion that, the transaction in question is not a case of composite contract. It is a case of the distinct contracts and the contracts for supply of materials is a separate distinct contract in respect of which no deduction is permissible under section 194C of the A .....

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