TaxTMI 
TaxTMI 
2006 (4) TMI 194
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....g interest on tax so short deducted in terms of s. 201(1A) of the Act. 2. The facts giving rise to the aforesaid appeal are as follows: The appellant is a company incorporated under the Companies Act, 1956. It came into existence on 17th March, 1997 with the object of generation of power in the State of Haryana. The appellant had two thermal plants-one at Faridabad and another at Panipat. The Panipat thermal plant entered into an agreement with M/s BHEL for designing, engineering, manufacturing, supply, erection, testing and commissioning for retrofit of ESPs. A copy of the agreement between the appellant and the BHEL is placed at pp. 1 to 10 of the appellant's paper book. The contract is in the form of purchase order dt. 29th Jan., 19....
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.... Total 1910.1766 lakhs 2.2 Another important clause is cl. 3 of the terms and conditions of the contract, which reads as follows: Delivery Commissioning of (a) Guaranteed delivery period for site from the date of acceptance of tender Unit-I: 18 months from the date of receipt of PO by BHEL along with advanced. (b) Time required for complete erection, testing and commissioning of the equipment from the date of supply Unit-II: 24 months from the date of receipt of PO by BHEL along with advance. 2.3 Clause 10 of the contract with regard to terms of payment is also very material and it reads as follows: "Terms of Payment: The following terms of payment shall be applicable for the retrofit of EPS as observed for Panipat stag....
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....th order. (ii) 30 per cent on completion of civil foundation for first unit. (iii) 30 per cent on completion of civil foundation for 2nd unit. (iv) 20 per cent on completion of control room construction. (v) 5 per cent on completion of floor of ESP area. (vi) 5 per cent on commissioning against bank guarantee of equivalent amount valid for one year from date of commissioning." 2.4 The appellant had made payments to M/s BHEL with reference to the aforesaid contract in various financial years commencing from financial year 1988-89 to financial year 2001-02. The details of the aforesaid payments are as follows: Details of year-wise payment and TDS paid against the work order upto 31st March, 2002 F.Y. A. Supply and PVC B. Civil ....
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....t to have deducted tax at source in respect of payments for supply of materials as well as the payments for execution of civil work, erection, designing and commissioning and also the freight and insurance. According to the appellant, the contract in question was a divisible contract, comprising of one part of the contract for supply of equipments and the other two parts of the contract for dismantling the existing machinery and for clearing the site and making the necessary infrastructure for installation of the machinery. According to the assessee, it is only in respect of the consideration attributable to the civil as well as erection, designing and commissioning, the appellant was under an obligation to deduct tax at source and not in r....
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....ategory. As rightly contended by the learned counsel for the appellant, before installing the plant, it was necessary to dismantle the existing plant and also to do the necessary civil work for erecting the new plant. This by itself would not mean that the contract in question was a composite contract for the erection and commissioning of the plant together with the materials required for such commissioning of the plant. As held by the Hon'ble Supreme Court in the case of State of Himachal Pradesh & Ors. vs. Associated Hotels of India Ltd. 29 STC 474 (SC), in the case of a composite contract, one has to find out the primary object of the transactions and the intention of the parties while entering into it. On the facts of this case, we ....
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....lating to carrying out civil work, commissioning and erection of the power generators. 3.1 In view of the discussion above, we direct the AO to work out the short deduction of tax at source, if any, by excluding the payments towards supply of machinery, spare parts as well as freight and insurance. 3.2 In one of the grounds of appeal, the appellant has stated that the contractor, namely, M/s BHEL has already paid tax on the amounts paid by the appellant to it and, therefore, the appellant cannot be treated as an appellant-in-default in terms of s. 201 of the Act. In this connection, our attention was drawn to the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Rishikesh Apartments Co-operative Housing Society Ltd. (2....