TMI Blog2018 (10) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... for TDS u/s 194C of the act on payment made to these parties. Merely because the assessee is provided grant for onward distribution to these parties does not exclude the assessee from the liability for deduction of tax at source u/s 194 C of the act, as the assessee is responsible for making payments to these parties and in fact, undeniably assessee has made the payments and obtained utilization certificates. It cannot be a reason for non-deduction of tax at source that recipient of the income have onward distributed the work to the sub contractors and recipient of the income have in turn deducted the tax at source on payment made by them to those sub- contractors. According to the provision of 194C of the Act even, the contractor is also required to deduct tax at source on payment made to their sub contractors. Thus we hold that payment made to the above parties are subject to tax deduction at source u/s 194C of the Act and assessee is liable to deduct tax at source u/s 194C of the Act. Therefore, to this extent we uphold the order of lower authorities. We set aside the order u/s 201 of the Act with a direction that assessee may submit the requisite prescribed detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271C of the Act in absence of any finding to show contumacious conduct on the part of the assessee - Decided in favour of assessee. - ITA No. 798 & 799/Del/2013, ITA No. 626 & 627/Del/2013 And ITA No. 1576/Del/2015 - - - Dated:- 15-10-2018 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Revenue : Shri Amit Jain, Sr. DR For The Assessee : Shri Ashwani Taneja, Advocate Shri Somil Agarwal, AdvShri Saurabh Goyal, CA ORDER PER PRASHANT MAHARISHI, A. M. 1. These are the five appeals pertaining to the same assessee. In four appeals for two assessment years preferred by assessee and revenue are concerning short deduction of tax u/s 201(1) and Interest u/s 201 (1A) of the Income Tax Act involving similar issues and one appeal preferred by assessee against confirmation of penalty u/s 271C of the act for AY 2010-11 . These appeals are argued issue wise by both the parties together and, hence, these are disposed of by this common order. 2. ITA No. 626 and 627/Del/2013 are filed by the assessee against the order of the ld Commissioner of Income Tax ( CIT(A)) dated 03.11.2012 for Assessment Year 2009-10 and 2010-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the form of grants based on utilization of funds. Hence, it was contended that no tax was required to deduct. The ld AO rejected the contention of the assessee holding that payments are made by the assessee for construction work of various infrastructure facilities. He further held that grants are not shown that it has been transferred without any control etc. He further held that the payments made to various concerns are subject to TDS u/s 194C of the Act. He therefore, held that TDS @2% should have been deducted and worked out short deduction of ₹ 2806886/- and interest thereon of ₹ 1018645/-. 5. In the above payment, assessee has also made payment of ₹ 8.69 crores to State Trading Corporation India Ltd., for which assessee submitted that payment are for import of equipments along with installation and commissioning charges and no tax is required to be deducted thereon. AO also rejected this argument holding that assessee has imported material/ equipment from other through STC and it has acted as agent of the assessee and incurred various incidental expenses such as duty, clearance charges, freight and other expenses , which are covered u/s 194 C of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and held that assessee is required to deduct tax on the payment made to these entities as the payment is for the consideration for work actually done by these parties. He further held that the contractor engages the services of sub-contractor for getting work done and deduct tax on the payment made to sub-contractor, cannot absolve the original payee from tax deduction on payment made to contractor. He therefore, upheld the applicability of provisions of section 194C of the Act. Assessee aggrieved has filed appeal before us. 10. The next issue was with respect to payment made to State Trading Corporation of India for supply of material. As the invoices raised by STC showed that the payment has been made for import of equipment along with incidental jobs including custom clearance, handling charges etc, AO held that on the whole payment tax is required to be deducted u/s 194C of the Act. Assessee submitted before the ld CIT (A) that STC has undertaken to import and supply the equipment as per the requirement of the assessee and the assessee has purchased the material on which no tax is required to be deducted, as it is a contract for sale of goods. The ld CIT (A) held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in these cases. 13. He also submitted that all these concerned agencies have already included the above amount in their income and already paid taxes on these incomes. He therefore, stated that if in such a situation, if tax is recovered from the assessee, it would be an exercise in futility as on the one hand the assessee is required to pay the tax and on the other hand, the payee would be required to claim the refund. He vehemently relied upon the decision of the Hon'ble Supreme Court in Hindustan Coca Cola Beverages pvt. Ltd Vs. CIT 293 ITR 226 for this proposition. He further relied upon his submissions made at page No. 1 to 15 of the paper book also. 14. The ld Departmental Representative (DR) vehemently supported the order of the ld AO and submitted that with respect to the payment to the foreign party stated to be made towards purchase of goods is in fact payment made to an Indian party which is an AOP for the complete work and not only for sale of goods, then payments made such consortium should have been subjected to TDS. AOP circular is for AO of AOP to decide how it is to be taxed; it has no relevance as far as the liability of assessee for TDS is concerned. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the scope of services of Pomagamsky SA was to supply various equipments and warranty for equipments. The Indian party Spaceage Power Ltd was to install and perform the civil work. The payment was also specified separately as per clause 7 of the agreement. Each of the party was also responsible for the work carried out by them. The services are also specified in clause 1 of the agreement. The responsibility is also mentioned at page No 78 to 80 of their agreement. In such a contract, it was an issue whether the consortium constitutes and association of person i.e. a separate entity for charging of the tax or whether each of the members is liable on their individual share of the contract. This aspect has been clarified by the CBDT by issuing Circular No. 7/ 2016 dated 07.03.2016 wherein, para NO. 3 it has laid down certain conditions and on fulfilling such conditions the consortium will not be treated as an AOP. In the present case all the members are independently responsible for executing their work. The foreign parties are required to supply the equipments only along with the warranty. Further, the payments have been made directly to those parties and naturally, each of them ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as an advance to the parties for carrying out various works with respect to the Winter games 2009. These payments are required to be tested u/s 194C of the Act and whether tax is required to be deducted at source on such payments. According to the provisions of section 194C of the Act, tax is required to be deducted under following circumstances:- i. Tax is required to be deducted by the person who is responsible for payment to any resident. ii. Such payment has to be for the sum for carrying out any work as defined under explanation (iv) of the Act. iii. The payment has to be in pursuance with the contract between the contractor and specified person. Specified person has been defined under explanation (i) of the section. iv. The tax is required to be deducted at the earliest point of time of credit to the account of contractor or the payment. v. The provisions specify the prescribed percentage of tax deduction. vi. It is deduction of tax on gross sums paid unless otherwise specified u/s 194C (3) of the act. 18. On plain reading of the above section it is clear that assessee is a specified person covered under explanation (i)(g) being a society registered und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he act, as the assessee is responsible for making payments to these parties and in fact, undeniably assessee has made the payments and obtained utilization certificates. 23. Furthermore, it cannot be a reason for non-deduction of tax at source that recipient of the income have onward distributed the work to the sub contractors and recipient of the income have in turn deducted the tax at source on payment made by them to those sub- contractors. According to the provision of 194C of the Act even, the contractor is also required to deduct tax at source on payment made to their sub contractors. 24. In view of this we hold that payment made to the above parties are subject to tax deduction at source u/s 194C of the Act and assessee is liable to deduct tax at source u/s 194C of the Act. Therefore, to this extent we uphold the order of lower authorities. 25. Next clinching, alternative argument made by the assessee is that all the recipient of the income has already confirmed that they have received the grant. Such certificates are placed in the paper book from page No. 126 to 179 of the paper book. We have perused the same. The argument of the assessee is that if tax is recovere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to that correspondence, the state trading corporation has facilitated import of certain equipment for the assessee and for clearance of the equipment has incurred certain expenditure. The ld CIT (A) has held that no tax is required to be deducted on the above sum. On careful consideration of the orders of the lower authorities, the STC had undertaken to import and supply the equipment as per the requirement of the assessee. For the purpose of import of these goods, the STC incurred certain expenditure such as installation commissioning charges, handling charges, insurance, and other payments. In this case, it is not the claim of the assessee that STC has supplied the goods. In fact, STC has arranged for the import of the goods as per requirement of the assessee. In view of this, it is apparent that assessee has given work to the STC for import of the material. Hence, according to us it is apparent that such payment falls under the provisions of section 194C(3) of the Act and tax is required to be deducted on the basis of the invoice value stated therein. The invoices are not place before us. Hence, we set aside this matter back to the file of the ld Assessing Officer with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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