TaxTMI 
TaxTMI 
2016 (4) TMI 1269
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....d 'Works contract' which attracts provisions of Section 194C. 4. The Id. CIT (A) ought to have considered the fact that the agreement entered into by the assessee with the developer are in the nature of composite contracts for works for which provisions of Section 194C is clearly applicable. 5. The Id. CIT (A) erred in relying on the decision of the jurisdictional High Court in the case of M/s. Karnataka State Judicial Department Employees House Building Co-operative Societies while allowing the assessee's appeal. 6. Without prejudice to the above grounds, it is prayed that even if it is held that there is no element of contract for procurement of land whether there is no element of contract for developmental works also, especially when the supplemental agreement envisages the release of payment on a milestone basis which is typical of 'Contracts'? For these and other grounds that may be raised during the course of appeal and actual hearing it is prayed that the order passed by the AO u/s. 201(1) and 201(1A) be upheld and the order of the learned Commissioner of Income Tax (Appeals) may be set aside and cancelled. " 1. "The order of CIT(A) is opposed t....
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....were purchased from the developer and there was no contract for development of sites and therefore, the provisions of sec.194C were not applicable. In support of this contention, respondent-co-operative society relied upon the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. Karnataka State Judicial Department Employees House Bldg. Co-operative Society in ITA No.1260/2006. The ITO, TDS, Ward 2(1) has not accepted this contention of the respondent-co-operative society and held that the agreement entered into by the respondent-cooperative society is in the nature of works contract and therefore, the provisions of section 194C are applicable and the assessee is held to be in default for not deducting tax at source under the provisions of sec.194C and accordingly he passed orders u/s 201(1) of the Act demanding TDS on payments made and orders u/s 201(1A) demanding interest on such TDS amounts. 5. Being aggrieved by the order, the respondent-co-operative society filed appeal before the CIT(A) who, vide impugned orders dated 6/4/2015 held that there was no agreement between respondent-co-operative society and the developer to construct apartments or to undert....
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....s to operate only after the layout is formed and so can never be construed as an agreement in the nature of a works contract. A contractor is one who undertakes to do a particular work for a price. No such contract is envisaged in this agreement. This agreement envisages purchase of specified intermediate sites at a price after Sri. Lakshman completes the job of formation of a layout either in full or in part. We accordingly hold that the assessee was not required to deduct tax in this regard. 3.6 It is noted that facts in the case of the appellant are similar and identical to the facts in the case of Karnataka State Judicial Department Employees Housing Building Co-operative Society cited in para 3.5 (supra). Since judicial discipline requires decision of higher authorities prevail, and respectfully following the decision of Hon'ble High Court of Karnataka, it is held that the appellant was not required to deduct tax at source from payments made to the developer. Accordingly, demands raised u/s 201(1) of the Act are hereby deleted." The CIT(A), accordingly held that the respondent-co-operative society was not required to deduct tax at source on the payments made to Shri Lakshma....
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....t is needless to mention that the provisions of sec.194C are applicable only to works contract. Once it is established that payments made to Shri Lakshman are not in the nature of works contract, question of deducting tax at source under the provisions of sec.194C does not arise. To determine the character of payments, it is essential to look into terms of the contract. We have perused the agreement dated 11/4/2005 entered into by the respondent-co-operative society with Shri Lakshman as well as the sale deed entered into by Shri Lakshman with members of the society on 27/8/2014 placed at page 11 of the paper book. Clauses 2, 3 and 4 of the agreement dated 11/4/2005 are as under: "2. DEVELOPMENT OF LAYOUT & FORMATION OF SITES: The Second Party shall acquire the schedule property after securing conversion of the same from agriculture to non-agriculture residential use, apply for and obtain sanction from BMRDA/Competent Authority and develop the layout in accordance with the sanctioned plan confirming to the zonal regulations of the BMRDA; 3. FACILITIES & AMENITIES TO BE PROVIDED IN THE LAYOUT: (a) Wide Asphalted Roads ranging from 30 to 60 as per sanctioned plan. (b) Water....