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TMI Blog2019 (1) TMI 1294X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the State Government. 3. A survey/verification proceeding was carried out u/s 133A of the I T. Act, 1961("the Act") on 31.01.2011. During the course of assessment proceedings, the assessee was asked to provide details of total payments made to various parties/organizations for various jobs undertaken in connection with organizing the Winter Games and to furnish details of deduction of tax at source and payment into Central Government account of the same. It was observed during the course of assessment proceedings, that payments were also being made to certain foreign companies for EPC contract (Engineering Procurement and Construction) and technical consultancy contract. During the course of assessment proceedings, the Assessing Officer observed that no TDS was deducted by the assessee, against such payment. He, therefore, asked the assessee to show cause as to why it should not be held as an assessee in default u/s 201 and why short deduction should not be charged alongwith interest u/s 201(1 A). In response it was submitted by the assessee, that gross contractual payments had been made to the following companies as under - (i) M/s Pomagalski S.A. France - Rs. 8,54,550/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which included jobs/services covered under the definition of technical services as mentioned above and that such a contract could not by any stretch of imagination be considered a contract for sale of goods only. He, therefore, held that it was a contract in which the provisions of section 195 was applicable and TDS @ 10% should have been made in this case. He placed reliance on the decision of Hon'ble Supreme Court in the case of Transmission Corporation of A.P. Ltd. and another Vs. CIT (1999) 239 ITR 587 (SC). Thus, he calculated short deduction of tax of Rs. 17,90,031/- and interest thereon u/s 201(1A) at Rs. 7,80,099/- creating a demand of Rs. 25,70,130/- in this regard in respect of consortium head by M/s Polmagalski SA. 5. During the course of assessment proceedings Ld. A.O. also observed that the assessee deductor had engaged the services of various organizations such as M/s Garhwal Mandal Vikas Nigam and M/s Uttaranchal Jal Sansthan for development of sports faculties but had not deducted tax at source in respect of payments made to them. The assessee was requested to file copies of agreements/contracts with these companies along with details of payments made to them dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mand to the tune of Rs. 33,69,225/-, assessee preferred an appeal before the CIT(A). In so far as the applicability of Section 195 of the Act, and the short deduction of tax of Rs. 17,90,031/- and interest thereon to the tune of Rs. 7,80,099/- is concerned, learned CIT(A) while following the decision of his predecessor in assessee's own case for the Asstt. year 2010-11 held that since the assessee entered into contract with the consortium of one Indian party and two foreign companies formed under an agreement dated 22.7.2008 constituting AOP, the income has to be computed in the hands of the AOP and that since one of the members of AOP was an Indian company, it cannot be said that the control and management of the affairs of the consortium was constituted wholly outside India. On this premise, learned CIT(A) held that the payments made to the consortiums was situated wholly outside India. On this premise, learned CIT(A) held that the payments made to the consortium require deduction of tax u/s 194C of the Act and not u/s 195 of the Act. 8. So far as the payments to the public sector undertaking for work towards construction of sports facilities etc. are concerned, learned CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect to each of the parties. The foreign parties were only to supply various equipments and Indian party was to install those equipments. The assessee submitted the agreement of the consortium, which is placed at page No. 48 of the Paper book. According to the agreement, scope of the services by the various parties is described in Appendix A. On reading of the scope of services, it is apparent that Snow star SPA was to supply various equipments and 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 iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this ground No. 1 to 3 of the appeal of the assessee are allowed." 11. In so far as the payments made to various parties which are public sector undertakings, the Tribunal dealt with such an issue at length and reached a conclusion that the matter needs to be set aside to the file of the learned AO with a direction to assessee to produce the bills etc. before the learned AO , who will examine them. It is necessary to extract the relevant portion of the judgment which reads as follows: "17. Coming to the issue of various payments made by the assessee to various parties which are public sector undertaking such as i. Uttranchal Jal Sansthan, ii. Uttranchal Power Corporation Ltd, iii. Uttar Pradesh Nirman Nigam Ltd, iv. Winter Gems Federation of India, v. Gharwal Mandal Vikash Nigam Ltd. The assessee has made these payments 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:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and engaged by the other organization, however, the implementation and utilization is the sole responsibility of the assessee. Otherwise, there is no other reason for the formation of the above society. The society itself was registered on 06.02.2008. Further, the payments to above companies/ PSu have been made by the assessee. Therefore, it is clear that assessee is the person responsible for payments of sums to those PSUs. In view of this it is apparent that the contract is between the recipient of the income and the assessee. Hence, according to us the assessee is responsible for TDS u/s 194C of the act on payment made to these parties. 22. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisite prescribed detail in specified manner before the ld Assessing Officer and then ld AO may decide the issue and, if found in accordance with the law, shall not treat the assessee in default u/s 201 of the Act. With respect to the interest u/s 201(1A) of the Act similar proviso is also added and AO may work out, based on the details furnished by the assessee, appropriate interest in accordance with law. In view of this ground No. 4 and 5 of the appeal is allowed accordingly. 26. With respect to the payment of the State Trading corporation (STC), it is apparent that the equipment have been purchased by the assessee as identified by it through STC. The STC has incurred certain expenditure with respect to import of those goods. The assessee has placed correspondence at page No. 122 and 123 of the paper book. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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