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DCIT, Circle-3 (1) (TDS) , Vijayawada Versus National Highways Authority of India and Vica-Versa

2016 (8) TMI 1036 - ITAT VISAKHAPATNAM

TDS u/s 194C OR 194H - contract for supply of labour - Held that:- The contract between the assessee and the agencies is a mere contract for supply of labour for execution of work contract as defined under the provisions of section 194C, but not a commission as defined under the provisions of sec. 194HAs decided in assessee’s own case for the assessment year 2009-10, we are of the view that the impugned payments are covered under the provisions of section 194C of the Act, but not under the provi .....

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For The Respondent : Shri P. Bala Srinivas, AR ORDER PER G. MANJUNATHA, Accountant Member: These appeals filed by the revenue and cross objections filed by the assessee are directed against separate, but identical orders of CIT(A), Vijayawada dated 11.11.2013 for the assessment year 2010-11 & 2011-12. Since, the facts are identical and issues are common, they are heard together and disposed off, by this common order for the sake of convenience. 2. Brief facts of the case is that the assessee .....

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f user fee and engaged the services of six agencies for collection of Toll fees. 3. A survey operation under sec. 133A of the Income Tax Act, 1961 was conducted in the business premises of the assessee on 24.03.2011. During the course of survey operation, it was noticed that the assessee is engaged the services of contractors for collection of Toll fees and deducted TDS @ 2.266% under sec. 194C of the Income Tax Act, 1961. The A.O. was of the opinion that the contract between NHAI and the Agenci .....

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ission dated 30-03-2011 and contends that the nature of work entrusted to contractors is a mere supply of labour for execution of work as defined under sec. 194C of the Act, accordingly the payments are covered under sec. 194C and it has rightly deducted TDS u/s 194C of the Act. The assessee further submitted that it has followed the guidelines issued by Central Govt. from time to time including that of the form, method and manner of agreement and the rates of TDS under such agreements. It was f .....

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cannot be considered as commission within the meaning of sec. 194H of the Income Tax Act, 1961. 4. The A.O. after considering the explanation of the assessee, held that the services provided by the agencies is in the nature of principle and agent relationship, consequently, any payments made in pursuance of the said contract is of agency, partakes the nature of commission within the meaning of section 194H of the Act, and accordingly, tax is deductible under the said section at the rate prescri .....

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f the commission is paid on a different yardstick. The facts and circumstances of the instant case are found to be falling within the definition of commission as mentioned in section 194H. Therefore, held that the assessee as an assessee in default under sec. 201(1) and 201(1A) of the Income Tax Act 1961 and computed short deduction of tax and interest. 5. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submiss .....

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Act. It was further submitted that it has engaged the services of agencies to provide manpower for Toll fee collection in designated Toll Plazas of national Highways. As per the terms of agreement, the agencies required to provide as many as required number of persons on their own terms and conditions without any obligation to the NHAI. It is the responsibility of the agencies to appoint their staff and complete the work. The agencies have been paid consideration on the basis of total wages/sal .....

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nciple to agent basis. With these observation, held that the impugned payments are covered under the provisions of sec. 194C, but not under the provisions of sec. 194H of the Income Tax Act, 1961. Aggrieved by the CIT(A), the Revenue is in appeal before us. 6. At the time of hearing, the Ld. A.R. for the assessee submitted that the issue involved in these appeals is squarely covered by the decision of ITAT, Visakhapatnam bench in assessee s own case for the assessment year 2009-10. The A.R. furt .....

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one through the orders of the authorities below. The Ld. A.R. for the assessee submitted that the issue involved in these appeals is squarely covered by the decision of ITAT, Visakhapatnam bench in assessee s own case for the assessment year 2009-10. We find that the coordinate bench of this Tribunal, in ITA No.69/Vizag/2013 dated 10.6.2016 held that the contract between the assessee and the agencies is a mere contract for supply of labour for execution of work contract as defined under the prov .....

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collecting entity is having power under its business rules to provide services on contract basis through its personnel. The Collecting agency is liable to provide its services of Toll fees collection work under its own organizational structure and on deployment of personnel as per clause 11 of the agreement without binding on the NHAI for the said employees under clause 12 of the agreement. As per clause 17 of the agreement, a service charge of 14% shall be paid on total remuneration payable to .....

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