Tribunal rules bus body contracts are for sale, not works contracts,

Andhra Pradesh State Road Transport Corpn. Versus Deputy Commissioner of Income-Tax

Andhra Pradesh State Road Transport Corpn. Versus Deputy Commissioner of Income-Tax - [2002] 74 TTJ 531, Issues Involved:

1. Delay in filing the appeals.
2. Applicability of section 194C for TDS on payments to fabricators.
3. Determination of whether the contract is for sale or work and labour.

Summary:

1. Delay in Filing the Appeals:
The learned counsel for the assessee argued that there was no delay in filing the appeals, and the confusion arose due to a typographical error in Form No. 36. The order of the CIT(A) was dated 23rd Oct., 1998, and the appeal was filed on 24th Dec., 1998, which was within the permissible time frame.

2. Applicability of Section 194C for TDS on Payments to Fabricators:
The main contention was whether the assessee was required to deduct tax at source u/s 194C for payments made to fabricators for bus body building contracts. The Assessing Officer treated the assessee as 'assessee in default' u/s 201 for not deducting TDS and raised a demand for tax and interest.

3. Determination of Whether the Contract is for Sale or Work and Labour:
The assessee argued that the bus body building contracts were transactions of purchase and sale, not works contracts, and thus, section 194C was not applicable. The CIT(A) disagreed, holding that the contracts were works contracts, making the assessee liable for TDS.

Upon review, the Tribunal examined the nature of the contracts, considering various legal precedents and guidelines. It concluded that the contract was for the purchase/sale of bus bodies, not a contract for work and labour. The Tribunal emphasized that the dominant object and intention of the parties were to construct and sell bus bodies, which were delivered to the assessee as finished products.

The Tribunal referenced several legal decisions, including those of the Supreme Court, to support its conclusion that the contracts were for sale. It noted that the property in the bus bodies passed to the assessee only upon delivery and acceptance, indicating a sale transaction. The Tribunal also highlighted that the payment of sales tax on the bus bodies further supported this view.

Conclusion:
The Tribunal quashed the orders of the lower authorities, holding that the appellant-corporation was not liable to deduct tax at source u/s 194C. Consequently, the assessee was not to be treated as 'assessee in default,' and the demand for tax and interest was deleted. The appeals were allowed.