TMI Blog2017 (10) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... ould only be liable to be deducted on the value of professional services of installation, deployment and redeployment availed by the appellant company u/s 194J of Income Tax Act 1961 which the Assessee has already deducted and deposited. It is also clear that assessee is not liable to deduct TDS on the said transaction of supplying of equipments as per the provisions of Section 194C of the Act. In the view of the clear provisions of Section 194C of the Act, we are of the view that the assessee is not liable to deduct TDS amounting to ₹ 6,64,00,359/- on the supply of equipments by M/ s HCL Infosystems Ltd., therefore, the Ld. CIT(A) under the circumstances has rightly held that the action of Assessing Officer of holding assessee company as in default for amount of ₹ 6,64,00,359/- was without any cogent basis. Accordingly, Ld. CIT(A) has rightly gave the relief to the assessee in respect of the total amount, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute and reject the grounds raised by the Revenue. - I.T.A. No.4715/DEL/2015 - - - Dated:- 1-9-2017 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHAN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply of equipments and services as no such evidence was submitted during the appellate proceedings or during the original assessment proceedings before the ITO(TDS), Ward 50(4), Delhi. 7. The appellant craves leave to, add to, alter, amend or vary from the above grounds of appeal at or before the time of hearing. 3. The brief facts of the case are that in this case, information was received that the Deductor assessee had awarded contract works to M/s HCL Infosystems Ltd. connected with the project of Common Wealth Games, 2010, held in New Delhi. In order to verify the compliance by the deductor assessee with reference to the TDS provisions under Chapter XVII-B of the Income Tax Act, 1961, a query letter was issued to the assessee on 26.3.2013 vide which some information was called from the assessee. The assessee was required to furnish the details of TDS deducted on the above payments. The assessee was also required to submit the copies of acknowledgements of filing quarterly e-TDS on the payments made. The assessee was also required to submit the copies of acknowledgements of filing quarterly e-TDS returns for the concerned financial years. As per the AO, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest chargeable u/s. 201(1A) is estimated at ₹ 1,99,20,107/- @1% p.m. for a period of 30 months. Thus total demand of ₹ 8,63,20,466/- was raised against the assessee. Accordingly, an order dated 30.3.2013 passed u/s. 201(1)/201(1A) of the Income Tax Act, 1961 by the Assessing Officer. Against the assessment order, assessee appealed before the Ld. CIT(A)-18, New Delhi, who vide his impugned order dated 23.3.2015 has allowed the appeal of the assessee. Aggrieved with the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal. 4. Ld. DR relied upon the Order of the AO and reiterated the contentions raised in the grounds of appeal. 5. On the contrary, Ld. Counsel of the assessee has relied upon the order of the Ld. CIT(A) and stated he has passed a well reasoned order which does not need any interference. 6. We have heard both the parties and perused the relevant records, especially the impugned order. We find that in this case the Assessing Officer had sent notice dated 26/03/2013 as per which details with regard to TDS deducted on the contract were asked for immediately to be filed i.e. on 30/03/2013 which (being Saturday was a holiday for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply of equipments ii) Services of installation, deployment, redeployment The contract awarded to M/s HCL Infosystems Ltd. on turnkey basis would include the supply of equipments like P Router, Dispersion Compensation Unit, etc. and for the services in relation to installation, deployment, redeployment, etc. 6.2 It is also noted that MTNL in the relevant year had entered into agreement with M/s. HCL Infosystems Ltd. to supply equipments connected with the project of Common Wealth Games 2010. However, the equipments supplied were as per the specifications of the assessee but the same have not been purchased from MTNL. M/s. HCL Infosystems Ltd. has purchased the said equipments from person other than such customer i.e. not from MTNL. Further, there was separate billing for the purchase of equipments from that of services provided by M/s. HCL Infosystems Ltd. to MTNL; invoices raised in that regard have also been submitted by the assessee. 6.3 In this regard, relevant provisions of Section 194C of the Income Tax Act 1961 have been reproduced hereunder- 194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 6.5 We further note that Hon ble Andhra High Court in the case of P.S. Company vs. State Of Andhra Pradesh on 13 September, 1983 has held as under:- The ferry as a whole now has individual existence ready to be delivered and therefore on delivery the seller becomes entitled to the remaining payment of 25 per cent of cost price and on such payment, the transaction becomes complete. The aforesaid process is a strong pointer in favour of the contract being one for sale and nothing else. Hence, it is a contract of sale for transfer of the property, and the delivery of possession with title to the buyer, which is the essence of contract of sale. 6.5.1 The Hon ble Andhra Pradesh High Court P.S. Company v. State of Andhra Pradesh 56 STC 283 issued guidelines on a conspectus of the decisions of the Supreme Court to determine whether a contract is 'works contract' or 'contract for sale of goods': (e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chattel. 6.8 In the case of CIT-vs-Glenmark Pharmaceuticals Ltd 324 ITR 199(Bom), the Hon ble Bombay High Court has observed as under:- In this case, assessee entered in to a contract with other party under which the other was required to supply the goods as per its requirements and specification. The other party purchased the material from the market and then manufactured the desired item. No TDS was made while making the payments. AO was of the view that assessee should have deducted the tax u/s 194C. The court held:- The court held The expression carrying out any work in section 194C would not include a case where (i) where the property in the article or thing passes to the customer upon delivery, and (ii) the material that was required was not purchased/ sourced from the purchaser/customer, but was purchased or independently obtained by the manufacturer from a person other than the customer. The rationale behind this was that where a customer provides the material, what the manufacturer does is to convert the material in to a product desired by the customer, the contract essentially involves work of labour and not a sale. 6.9 The Hon ble D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the facts and circumstances of the case and on the basis of above case laws, circulations and clarifications, it is clear that in respect of agreement for the supply of equipments, no TDS is deductible u/s 194C of the Income Tax Act 1961 as it is amounts to a contract of sale. We note that M/ s. HCL Infosystems Ltd. supplied equipments as per the specifications of the assessee but the same have not been purchased from MTNL. M/s. HCL Infosystems Ltd. has purchased the said equipments from person other than such customer i.e. not from MTNL. Hence, TDS provisions would not fall applicable on the supply of equipments. Further since billing for the supply of equipments is separate from that of the services, TDS would not be deducted on the supply of equipments. Thus, TDS would only be liable to be deducted on the value of Professional services availed by the assessee u/s 194J of the Income Tax Act 1961. The assessee has duly complied with the law by deducting TDS on services provided by M/s. HCL Infosystems Ltd. Thus based on the above mentioned facts, provisions of law, case laws, circulations and clarifications it is clear that MTNL is not liable to deduct TDS on the said tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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