TMI Blog2022 (7) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... o payment made, Shri. Chaitanya, on instructions from the BMRCL Officer present in the Court, submitted that all cheques have been issued in favour of BEML Ltd. As the specific case of the Revenue before the ITAT is that the Contract is a composite one. Shri.Chaitanya is right in his submission that the dominant purpose of the Contract is supply of the passenger rolling stock. Thus, having taken a specific stand before the ITAT that the Contracts is a composite one, the Revenue cannot be permitted to take a contradictory stand before this Court The total project cost is Rs.1672.50 Crores out of which, the service part in the form of training accounts for about Rs.19 Crores. Thus, the dominant purpose is supply of Rolling Stock. Thus the questions raised by the Revenue are not substantial questions for consideration for more than one reason. Firstly because, the Revenue has taken a specific stand before the ITAT that the Contract is a composite Contract. Secondly because, the dominant purpose of the Contract is for supply of Rolling Stocks and the cost towards service component is almost negligible. Thirdly because, the word assembly must include the manufacture/assemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a consortium consisting of M/s BEML Ltd., M/s Hyundai Rotem Company, Mitsubhishi Corporation and M/s Mitsubhishi Electric Corporation, of which, BEML Ltd., being the consortium leader, for design manufacture, supply, testing and commissioning of passenger Rolling Stock, including training of Personnel and Supply of spares and operation. The total cost of the Contract was Rs.1672.50 Crores. 5. The Income Tax Department conducted a survey under Section 133A of the Income Tax Act and observed that a sum of Rs.182 Crores had been paid by BMRCL to the consortium. The Department was of the view that assessee ought to have deducted tax at source before making the payment. Accordingly, a show cause notice Dated 27.12.2011 was issued calling upon the assessee to show cause as to why it should not be treated as an assessee in default under Section 201(1) of Income Tax Act4 for not deducting tax at source and remitting to the Government. Assessee submitted its reply contending inter alia that Contract was one for supply of Coaches and other activities such as design, testing, commissioning and training are only incidental to achieve the dominant object and therefore, it would constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Contract was in the nature of a composite package. He contended that the Departmental Representative has argued before ITAT that it is an indivisible Contract for supply, commissioning, testing etc. 11. Thus, in substance, Shri. Chaitanya argued that both the assessee and the Revenue have understood the Contract as an Indivisible Contract . Therefore, the Revenue cannot be permitted to improve its case at this stage. He has placed reliance on the following authorities: (a) Oil and Natural Gas Corporation Ltd., Vs. Commissioner of Income Tax, Dehradun (2010)322 ITR 180 (SC) (para 8); (b) Director of Income Tax Vs. AP Moller Maersk (2017)392 ITR 186 (SC) (para 15) A.S; (c) Japan Airlines Company Ltd., Vs. Commissioner of Income Tax, New Delhi (2015)60 Taxmann.com 71 (SC). 12. We have carefully considered rival contentions and perused the records. 13. All three questions of law are interlinked. Hence, they are considered together. 14. Explanation (2) to Section 9(1)(vii) of the Act reads as follows: Explanation[2]-For the purpose of this clause, fees for technical services means any consideration (including any lump sum consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is complete. In respect of 90% payment, the Revenue has not raised any objection with regard to non-compliance of Section 194J. 21. In para 14 of its order, the ITAT has recorded Revenue s contention and it reads as follows: 14. The learned DR also placed reliance upon the following decisions in support of his contention that the project being a composite contract, it has to be considered as one indivisible contract and the tax is to be deducted at source on such contracts having regard to the dominant nature of the contract. (Emphasis Supplied) 22. Thus, the specific case of the Revenue before the ITAT is that the Contract is a composite one. Shri.Chaitanya is right in his submission that the dominant purpose of the Contract is supply of the passenger rolling stock. Thus, having taken a specific stand before the ITAT that the Contracts is a composite one, the Revenue cannot be permitted to take a contradictory stand before this Court. In ONGC Ltd. (2010)322 ITR 180 (SC), cited by Shri. Chaitanya, it is held as follows: 8. At the outset, we may nothe that although in view of the orders passed by the Committee on disputes, advising the revenue not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any Ltd., the Revenue took a stand that deduction was required to be made under Section 194-I of the Act while making payment towards Landing and Parking the Aircrafts in Indira Gandhi International Airport. Under Section 194-I of the Act, any person responsible for paying to any other person, any income by way of rent , shall deduct Income tax at the rate of 15% in the case of individuals or HUF and 20% in other cases. The word rent has been described to mean any payment by whatever name called under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building (including factory building) together with furniture, fittings and the land appurtenant thereto, whether or not such building is owned by the payee. In that case, the Apex Court has held as follows: This reasoning is clearly fallacious. A bare reading of the definition of rent contained in explanation to Section 194-I would make it clear that in the first place, the payment, by whatever name called, under any lease, sub-lease, tenancy which is to be treated as rent . That is rent in traditional sense. However, second part is independent of the first part which gives muc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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