TaxTMI 
TaxTMI 
2011 (3) TMI 598
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the TDS in respect of payments made to the contractors towards supply of materials 2. that the CIT(A) had failed to appreciate that the assessee cannot be regarded as an 'assessee in default' under section 201(1) as there was no obligation on the assessee to deduct TDS under any of the provisions of the Act; & 3. without prejudice, the CIT(A)-LTU ought to have appreciated that the recipients having paid the taxes on the amounts received from the assessee, the assessee was under no obligation to pay the tax under section 201(1) of the Act." II. ITA Nos. 361, 363 & 365/10 - AYs: 2007-08 to 2009-10 - Under section 201(1A) of the Act 3. Likewise, the assessee had raised three identical grounds for the AYs under challenge, out of which, ground No. 1 being general and no specific issue involved, it has become non-consequential. In the remaining grounds, the issues raised are reformulated as under: "1. the CIT(A) was not justified in sustaining the action of the Assessing Officer (TDS) in treating the assessee as an 'assessee in default' and demanding the interest on tax; & that he was not justified in upholding the stand of the Assessing Offi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hy contentions put-forth by the assessee's A.R., perusing the observations made by the Assessing Officer in his impugned orders under challenge, analyzing the provisions of section 194C of the Act, extensively quoting the rulings in the cases of (i) Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435/67 Taxman 346 (SC), (ii) Brij Bhushan Lal Parduman Kumar v. CIT [1978] 115 ITR 524 (SC), (iii) State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474 (SC), (iv) State of Gujarat (Commissioner of Sales-tax, Ahmedabad) v. Variety Body Builders [1976] 38 STC 176 (SC) and due perusal of Tender Notification floated by the assessee and also considering the case laws on which the assessee had placed strong reliance, the Ld. CIT (A) had observed thus: "4.11 The appellant contends that under the contract the equipments were to be delivered by the contractor to the appellant ex work i.e., at the work site of the contractor and the property in the equipments pass to the appellant as soon as they were delivered and, hence, it was a contract for sale/supply. There is no merit in the appellant's contention. It is clear from the above discussion that an equipment / materials....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f India Ltd. v. ACIT [2007] 112 TTJ 654 (Hyd. - ITAT). The facts of the case are that the assessee was involved in three projects for which contracts were awarded to different contractors. The appellant awarded contracts to various parties to construct/execute the transmission line substation. The categories of contracts entered into by the appellant with various contractors for the above purpose are purely supply contract, purely erection and supply-cum-erection contracts (but with separate agreement in respect of supply portion). A similar issue has already been discussed in paras 4.5, 4.6, 4.7, 4.10 and 4.11 (supra) and the facts of the appellant's case are distinguishable from the facts of the cases relied upon. Therefore, there is no assistance for the appellant from the cases relied upon. 4.13 Here, the last position of the special term in regard to the payment of the amount due under the contract also makes clear that it is only when the component parts are fitted into position at the sub-station that an equipment would be treated as complete and this equipment has to be to the satisfaction of the appellant and it is then to be handed over by the contractor to the appellant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....engineering structure, as a bridge or dock; workmanship; as, to do good work; a task or undertaking; as, one's life's work; a deed or act; In Encyclopedia Britannica, the word 'work' has been defined as Work, in physics, measure of energy transfer that occurs when an object is moved over a distance by an external force at least part of which applied in the direction of the displacement. If the force is constant, work may be computed by multiplying the length of the path by the component of the force acting long the path. Work done on a body is accomplished not only by a displacement of the body as a whole from one place to another, but also, for example, by compressing a gas, by rotating a shaft, and even by causing invisible motions of the particles within a body by an external magnetic force. In Oxford English Dictionary, the word 'work' has been defined as something to be done, or something to do; what a person (or thing) has or had to do; occupation, employment, business, task function. Stroud's Judicial Dictionary, 5th edition, the definition of "work" culled out from diverse decisions has been stated as follows: "The word 'work' may be used in two senses; it may mean eith....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k and labour. The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of materials, nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel (Halsbury's Laws of England, 3rd edition, vol. 34, 6-7)". The Hon'ble Supreme Court in the aforesaid case at page 481 held as under: "From the decisions earlier cited it clearly, emerges that such determination depends in each case upon its facts and circumstances. Mere passing of property in an article or commodity during the course of the performance of the transaction in question does not render it a transaction of sale. For, even in a contract purely of work or service, it is possible that articles may have to be used by the person executing the work and property in such articles or materials may pass to the other party. That would not necessarily convert the contract into one of sale of those materials. In ever....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ice is not the transfer of a chattel qua chattel, the contract is one of work and labour. The test is whether or not the work and labour bestowed and in anything that can properly become the subject of sale, neither the ownership of materials is conclusive although such factors may be relevant and be taken into consideration in ascertaining and determining whether the contract in question is in pith and substance a contract for work and labour or one for the sale of chattel. These principles have enunciated and culled out from Halsbury Laws of England, 3rd Edn., Vol. 34, 6-7." - Certain guidelines have been laid down by the Apex Court in the case of P.S. Company v. State of Andhra Pradesh 56 STC 283 to determine the true construction of a contract so as to determine in turn as to whether transaction covered by that contract is one of sale or of work and labour. Though these guidelines cannot be termed as infallible tests yet they provide valuable help and insights to arrive at correct decision. These guidelines are as under: (1) The essence of the contract or the reality of the transaction as a whole has to be taken into consideration in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y be summed up as under: 1. It is difficult to lay down any rule or inflexible rule applicable alike to all transactions so as to distinguish between a contract for sale and a contract for work and labour. 2. Transfer of property of goods for a price is the linchpin of the definition of sale. Whether a particular contract is one of sale of goods or for work and labour depends upon the main object of the parties found out from an overview of the terms of the contract, the circumstances of the transactions and the custom of the trade. It is the substance of the contract document/s, and not merely the form which has to be looked into. The Court may form an opinion that the contract is one whose main object is transfer of property in a chattel as chattel to the buyer, though some work may be required to be done under the contract as ancillary or incidental to the sale, then it is a sale. If the primary object of the contract is the carrying out, of work by bestowal of labour and services and materials are incidentaly used in execution of such work then the contract is one for work and labour. [see para ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 15 per cent is towards erection and civil works. 2. Further, it is submitted that, the erection work and civil work are carried on in furtherance to the supply of material. In other words, erection work and the civil works are incidental to supply of materials. The substance of the agreement or arrangement between the parties is to supply the materials and not carrying out the work. Installation or erection work and civil construction work can only be regarded as ancillary to the contract of supply. 3. Therefore, it is submitted that, the entire arrangement encompassing supply, erection and civil portion is to be regarded as a contract for supply of equipment on the basis that erection and civil portion of only ancillary and subservient to the supply portion. Applying the dominant test theory as canvassed and accepted in the aforesaid decisions, it is submitted that where the Respondent contends that, the entire arrangement between the Appellant and its contractors is regarded as one indivisible contract, the same should be regarded as a supply contract. In such case, the Appellant's case falls as the third category of contracts discussed i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n and answer reads as follows: Q 15: Whether section 194C would apply in respect of supply of printed material as per prescribed specifications? Ans: Yes. Thus, there was a conflict between Circular Nos. 681 and 715. The same was brought to the notice of the CBDT and in this regard, the CBDT issued Circular No. 13 of 2006, dated 13-12-2006, which reads as follows: 1. Representations have been received in the Board seeking clarification on the applicability of section 194C on such transactions, where the assessee has outsourced certain work relating to fabrication or manufacturing of article or thing in accordance with the specifications given by the assessee. Circular No. 681, dated 8-3-1994 of the Board clarifies in para 7(vi) that the provisions of section 194C would not apply to contracts for sale of goods and further clarifies that where the property in the article or thing so fabricated passes from the fabricator-contractor to the assessee only after such article or thing is delivered to the assessee, such contract would be a contract for sale and so outside the purview of section 194C. H....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of this section". As per the aforesaid paragraph, when the contractor undertakes to supply any article or thing fabricated according to the specifications given by the specified person and the property in such article or thing passes to the specified person only after such article or thing is delivered, the contract will be a contract for sale. Therefore, the case of Appellant falls within Paragraph 7(vi)(b) and not within Paragraph 7(vi)(a). The Ld. CIT (A) is not justified in stating that, 'there is no transfer of property in the equipments by the manufacturer to the customer as a chattel', despite the fact that, transfer of the title in respect of equipment and materials supplied by the contractor to the Appellant takes place in favour of Appellant pursuant to the terms of the Contract by way of negotiation of dispatch documents. He is not justified in ignoring the relevant clauses in the 'Instruction to Bidders' and wrongly stating that the property gets transferred to the Appellant only after the equipments, materials, component parts are fitted and installed at the works site premises. In this regard, the relevant extracts of the 'Instruction to Bidders' issued by the KPT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4C, the term 'work' has been defined in Explanation (iv). The sub-clause (e) deems contract manufacturing as work. However, the latter part of the aforesaid sub-clause clearly excludes manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer. On a close scrutiny, the aforesaid exclusion applies not only to manufacturing but also to supplying when such supply is according to be requirement or specifications of the customer and for such supply, the supplier has used material purchased from a person other than the customer. It is submitted that, the case of Appellant, squarely covered by the aforesaid exception for the reasons that the contractor has undertaken to supply to Appellant the equipment as per the specifications of Appellant and for the purpose of such supply, contractor has not used materials bought from Appellant. Applying the aforesaid exception, it could be said that the activity carried out by contractor for Appellant cannot be regarded as work at all. Even though, the aforesaid provision was newly introduced by the Finance Act, 2009, even prior to the aforesaid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te of the position that was reflected in the circulars issued by the Central Board of Direct Taxes since May 29, 1972. The judgment of the Supreme Court in Associated Cement gave an expansive definition to the expression "work" and rejected the attempt of the assessee in that case to restrict the expression "work" to "works contract". Both before and after the judgment of the Supreme Court the expansive definition of the expression "work" co-existed with the Revenue's understanding that a contract for sale would not be within the purview of section 194C. The Revenue always understood section 194C to mean that though a product or thing is manufactured to the specifications of a customer, the agreement would constitute a contract for sale, if (i) the property in the article or thing passes to the customer upon delivery; and (ii) the material that was required was not sourced from the customer/purchaser, but was independently obtained by the manufacturer from a person other than the customer. The rationale for this was that where a customer provides the material, what the manufacturer does is to convert the material into a product desired by the customer and ownership of the material ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pply', 'construction' and 'erection' part of the contract. The assessee has floated a tender for entire work as an indivisible contract. .... Accordingly, the Assessing Officer concluded the agreement between the Appellant and its contractor a composite contract on the basis that, Appellant has not issued separate notification for 'supply', 'construction' and 'erection'. (In page 10 of the Order) 14. Column 8 of the above Tender Notification on 'Bid documents' show that the documents accompany tender notification are divided into 'commercial requirements', 'technical requirements', and 'bid proposal sheets'. There are no divisions of the contract into 'supply', 'construction' and 'erection'. The entire bid process is a composite bid process for the commencement, issue, receipt and opening of bids. 15. In the above, circumstances, assessee company's contention of contract being 'divisible contract' is not borne out by the other terms of the contract. As per the aforesaid paragraphs, the Respondent concludes that the contract entered between Appellant and contractors is composite contract on the basis that, the bidding process invited by Appellant is a composite bidding process.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssly entered as such as a composite contract merely on the basis that all the contracts have been awarded through a single bidding process, that merely because the bidding process is a composite one it cannot be concluded the contract is a composite contract. It is also submitted that, the Assessing Officer has stated that, Appellant has neither issued separate tender notification nor divided the contract into supply, construction and erection, which is factually incorrect. The CIT(A) or the Assessing Officer has failed to appreciate that, the Appellant had never intended to treat the contract as composite contract. - As per the terms of the 'Instructions to Bidders' as retreated above, the Appellant has clearly laid out that once the contractor is found to be a successful bidder, the entire scope of the contract is divided into 3 separate contracts, i.e., for supply of materials, erection and civil engineering works; - Further, the terms of the 'Instructions to Bidders' also state that, the contract entered by Appellant with contractors has to be treated as a divisible contract resulting into three separate contracts; &n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egory." Even though, the above decision was rendered much before the 46th Amendment to the Constitution enabling the State to levy sales tax on works contract and therefore not relevant in the context in so far as it goes to say that there is no tax on works contract, its other observations regarding a contract being a combination of distinct contracts for sale of materials and for work are very relevant. Its observations that the sales tax authorities shall not proceed to take a single contract necessarily as such but it will be competent for them to examine the nature of the contract and if the circumstances permit, to split the same as that relating to sale of goods and that relating to work are also equally relevant. - The Supreme Court in the case of Builders Association of India v. Union of India [1989] 73 STC 370 observed at page 400 as follows : - "... After the 46th Amendment the works contract which was an indivisible one is by a legal fiction altered into a contract which is divisible into one for sale of goods and the other for supply of labour and services. After the 46th Am....
X X X X Extracts X X X X
X X X X Extracts X X X X
....overnment could not change the character of the sale. After declaring that Explanation 4(c) to section 2(xxi) of the Kerala Act had to be read down and does not apply to inter-State sales, the court directed the assessing authority to reconsider the matter. Similarly in this case, the contract was not indivisible. It contained two parts: the supply order and the service order. The Tribunal was not correct in holding that there was only one contract. The price was also shown separately. The right of the buyer to inspect the goods before they were transported was also preserved. So also, the goods were insured. When the goods were in transit, the petitioner transferred the title to the property to CBZL." In the case of Larsen & Toubro Ltd. v. Commr. of C.T. (A.P.) [2003] 132 STC 272 (AP), the Hon'ble Court considered the case of a Public Limited Company engaged in manufacturing, fabrication, supply, erection and commissioning of various projects. The nature of work carried out by the appellant is a works contract. During the assessment years 1986-87 and 1987-88 the appellant had entered into a contract with Visakhapatnam Steel Plant and other public sector undertakings. The contract....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hinery with the labour of the appellant and as such this contract is a divisible contract." When the above decision was challenged before the Supreme Court, their Lordships S.N. Variava and H.K. Sema, JJ., dismissed the State's special leave petition against the judgment and order dated 10-7-2003 of the Andhra Pradesh High Court in S.A. Nos. 54-55 of 1997 and T.R.C. No. 14 of 1999 reported in [2003] 132 STC 272 whereby the High Court allowed the appellant's appeal against the order of Commissioner of Commercial Taxes and held that the contract for manufacturing, fabrication, supply, erection and commissioning of project was divisible and that the supply of goods and equipment for project manufactured or purchased outside State was an inter-State transaction and not an intra-State transaction taxable under the Andhra Pradesh General Sales Tax Act, 1957 (in the case of Commissioner of Commercial Taxes v. Larsen & Toubro Ltd: S.L.P (Civil) Nos. 22445-22447 of 2003). The Hon'ble Supreme Court in the case of Ishikawajima-Harima Heavy Industries Ltd. v. DIT [2007] 288 ITR 408 held that the fact that the contract has been fashioned as a turnkey contract by itself may not be of much sign....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 194C could begin only after the supply portion is completed and therefore, the question of applying the aforesaid section on the supply portion does not arise. In the case of CIT v. Best and Co. (P.) Ltd. [1966] 60 ITR 11 (SC), the Hon'ble Court ruled that when a composite consideration may have to be split although such splitting may pose difficulties. In the above case, as compensation for transfer of the agency, the assessee was paid certain amounts calculated on the basis of the agreement between the parties. The assessee claimed that the amounts received were capital in nature. The Supreme Court held that the compensation agreed to be paid was not only in lieu of loss of agency but also for the assessee accepting a restrictive covenant for a specified period, the restrictive covenant was an independent obligation which came into operation only when the agency was terminated, and that part of the compensation attributable to the restrictive covenant was a capital receipt and hence not taxable. Referring to the decision in Gillanders Arbuthnot & Co. Ltd. v. CIT [1964] 53 ITR 283, the Supreme Court held that, that part of the compensation attributable to the restrictive covena....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; - The terms between the parties are amply clear in respect of the obligations to be discharged by the contractors and in respect of payment towards the work order; - In respect of supply portion, the parties to the contract are clear about the materials to be supplied, the quantity of materials to be supplied and the rate at which the materials would be supplied. In the case of erection portion and civil works portion, the parties to the contract are clear about the works to be performed by the either of the parties; Accordingly, the aforesaid three portions of the work order were independent of each other. In this regard, a reference is made to the comments of the Assessing Officer, which read as follows: (Refer Paras 19 & 20 in pages 26 & 29 of the Order) 19. In view of the above, the most important test for determining as to whether payments made in pursuance to contract are liable to deduct tax at source or not is to scrutinize the contract between the KPTCL and the contractor. Perusal of para 3.5 of the contract makes it absolutely clear that, the contract between the KPTCL and Contractor is a single composite contract and hence under secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....b-contractor for its own convenience should not influence the decision on the question whether the applicant has a PE in India. In other words, the Revenue wants to treat the workshop or place of manufacture of the sub-contractor as part of the permanent establishment of the applicant itself. If the duration of the work done by the sub-contractor at the workshop or the factory is taken into account, the duration will be much beyond six months which is the period stipulated in Clause (i) of Article 5.2 of the Treaty. That is why the Revenue has taken this stand. 9. The more crucial question that needs to be considered now is whether the work place set up by the sub-contractor to carry out the works entrusted to him by the applicant can be treated as the work place and the permanent establishment of the applicant. Does the fact that the sub-contractor is only a nominee of the applicant in carrying out the work which would have been otherwise performed by the applicant transform the sub-contractor's workshop into the PE of the applicant? In my view, the answer could only be in the negative unless the sub-contractor is treated as a dependent agent of the applicant as distinct from an ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is not relieved of the liabilities and obligations under the contract by reason of sub-contract and the fact that the applicant has to furnish performance security to TPT does not have much of bearing on the aspect whether the sub-contractor's establishment shall be deemed to be the PE of the applicant. In the case of Hyosung Corporation, In re [2009] 314 ITR 343 (AAR): [2009] 181 Taxman 270 (AAR-New Delhi), the facts of the case are that, in the year 2005, Power Grid Corporation of India Ltd. (hereafter referred to as 'POWERGRID') invited bids for the execution of the works related to 800KV/400KV Tehri Pooling Station Package associated with Koteshwar Transmission System. For the sake of brevity, the same has been described by the applicant as "400KV GIS Package". The applicant who submitted the bid, became the successful bidder. As per the terms and conditions of bid, the foreign bidder was authorized to assign the whole or part of the contract to an independent contractor subject to the approval of Power Grid. In view of such provision, the applicant, pursuant to the understanding reached with L&T, requested Power Grid to award the Off-Shore Contract to it and the On-Shore Su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ia Limited ("PGCIL") for off-shore supply of equipments, materials, etc., are liable to tax in India under the provisions of the Act and India-Korea Tax Treaty?" The Honourable Authority for Advance Ruling ruled as follows: "None of the above terms and stipulations, in our view, gives rise to formation of Association of Persons in the matter of execution of the contracts. Mere collaborative effort and the overall responsibility assumed by the applicant for the successful performance of the project is not, in our view, sufficient to constitute an AOP in the eye of law.... The first and foremost feature that assumes importance is that Power Grid awarded separate contracts to both the contractors - the first to the applicant and the other two to L&T. The assignment which was in terms of the MoU paved the way for such separate contracts and the same was accepted and acted upon by Power Grid. Each party performs the obligations under the respective contracts awarded to them separately and receives the monies payable under the contracts independent of each other. L&T, which was not a party to the bid, is recognized as an independent contractor in various documents. L&T is entitled to ra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ipal-to-principal basis in the overall interest of the Project. It is worthy to note that L&T in its turn gave a counter guarantee to the applicant for the reason that the applicant furnished the guarantees in respect of the contracts related to L&T also. Thus, the distinct identity of each Party was throughout maintained. The requisite cohesion, unity of action and above all, the common objective of sharing the revenue or profit are very much lacking in the present case. The Hon'ble AAR in Joint Stock Company Foreign Economic Association "Technopromexport" In re [2010] 322 ITR 409 (AAR), referred to the para 10.1 of the decision of the Hyosung Corporation, In re [2009] 314 ITR 343 (AAR), which is as under: 10.1 The above events would indicate that the title to goods stood transferred to Power Grid outside the territory of India. The title passed on to Power Grid well before the goods reached the Indian Port or the territorial waters of India. The bill of lading contains the name of Power Grid as the consignee. The documents were presented to the applicant's banker for negotiation soon after the goods were shipped FOB and bill of lading was issued. Two days later, the amount equi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... i.e., (i) Supply of materials, (ii) Erection Contract and (iii) Contract for civil work as one single contract. When parties have agreed on certain terms, unless it is proved sham, the agreed terms have to be respected as held by the Supreme Court in the case of CIT v. Motors & General Stores (P.) Ltd. [1967] 66 ITR 692. Relies on the following decisions with regard to TDS obligation in respect of composite contracts: In the case of Power Grid Corporation of India Ltd. v. Asstt. CIT [2007] 112 TTJ 654 (Hyd. - ITAT), the facts of the case are that, the assessee is a Central Government undertaking engaged in the activity of transmission and power distribution of electricity to various constituents across the country. During the year under consideration, the assessee was involved in three projects for which contracts were awarded to different contractors. The assessee awarded contracts to various parties to construct/execute the transmission line/sub-station. The categories of contracts entered into by the appellant with various contractors for the above purpose are pure supply contract, pure erection contract and Supply-cum-erection contracts (but with separate agreements in respe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....levant technical specification is specified by the 'purchaser'. The title in the goods passes as a chattel on delivery though certain obligations are still necessarily to be performed by the "supplier". Though the assessee claims that the design specification are not unique in the sense that the same specifications are used by many other concerns, to our mind, this is not a relevant test. The issue is as to the time and situs of passing of the property and as to whether the property passes "brick by brick" on the theory of accretion or as a chattel qua chattel. The mere fact that the supplier has to perform many other obligations cast on it by virtue of the contract after delivery of goods does not change the nature of transaction. The 'supply' portion of the contract are the predominant object and intention of the parties. Erection is relatively minor portion as compared to the supply portion. If the erection portion cannot be taken as the main object of these contracts, title in goods was transferred as movables prior to erection. If equipment are manufactured as per the design, engineering, etc., specified by the customer, it would not result in a works contract especially when ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng, engineering, manufacturing, supply, erection, testing and commissioning for retrofit of ESPs. The Honourable Income-tax Appellate Tribunal, Delhi Bench has held as follows: "... A bare perusal of the components of the consideration for the contract would clearly show that the primary or the dominant intention of the appellant was to purchase the material namely, two ESPs for its power plant at Panipat. Freight and insurance payable in respect of its supply and the cost of material constituted a major portion of the contract value. The cost of spares will also fall in this category. 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 Supreme Court in the case of State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474 in the case of a composite contract, one has to find out the primar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....c supply sub-station inclusive of power transformer and Auxiliary transformer is dated 22-9-1992, which is available at pages 174 to 213 of the paper book. The main features of this contract are also similar to the first agreement. Hence we are not required to repeat the same. 50. After considering the entire relevant material including the agreements, the vouchers and payment bills and also considering the nature of equipments supplied and ancillary work of supervision, designing etc. done by the supplier company, we are of the opinion that the composite character of the transactions involved in the three agreements was that of sale of goods. On perusal of the bills filed by the assessee which are available in the paper book at pages 242 to 368, it is found that these basically relate to supply of material by the said company and disclose the price of net sale relating to various parts, equipments and goods. The sale bills also include the amount of sales tax and excise duty etc. A reference, in this regard, may be made to the bill dated 30-3 -1994 (page 331), bill dated 31-10-1994 (page 332) bill dated 10-11-1994 (page 335) and other bills available from pages 335 to 368. In mos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....So, it cannot be said that the work done by G.E.C. India Ltd. was on 'turnkey job basis'. Under these circumstances, in our opinion, the ld. Commissioner (Appeals) was not justified in taking the contract/or setting up of project on turnkey basis. The ld. Commissioner (Appeals) has laid much emphasis on the affidavit of Shri R.K. Somani, Managing Director of the assessee company filed before the Hon'ble High Court in a writ petition and has tried to draw inference from that affidavit that the work was in the nature of turnkey project. The ld. Sr. DR has also made reference to that affidavit. In our opinion, it is extraneous material filed in different context and cannot be a valid and relevant criterion for deciding the nature of contract, particularly, in view of the main features or salient features, which have been recorded, by us in the body of this order. 59. Thus, in the totality of the circumstances, including the substance and the form of agreement, as well as the mode of payment, it is held that the work done by the company (GEC India Ltd.) was not on the basis of turnkey project, rather the work was for supply of goods. Hence, we are unable to concur with the findings re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enough to turn the transaction of sale into transaction of "work". Object and end result of the entire process through which that transaction passes shall be looked into. In the case before us, we are of the considered view in the backdrop of the object and end-result of the contract, that it was a contract of sale ultimately and finally. ...." Therefore, it was submitted that - (i) Three separate contracts entered into between Appellant and contractors cannot be regarded as one single indivisible contract; - The contract for supply does not come within the sweep of section 194C; - Even if all the three contracts are taken together, the supply portion constituting more than 80 per cent of the total value, the entire arrangement is in respect of supply of equipment and erection and civil works are only incidental and ancillary to the supply contract applying the dominant test theory. Accordingly, section 194C would not apply to all the three contracts. (ii) As regards allegation that there is collusion between the appellant and contractors for the tax evasion: - ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is an abuse of treaty provisions by so artificially contriving the affairs as to wrongfully entitle the assessee to treaty benefits. Unless that exercise is conducted, it cannot be open to disregard the claim of the assessee by simply making vague and generalized claims about artificial splitting of contracts and about the sham arrangements to defeat the treaty provisions. As regards, once the recipient has paid tax on the income there is no obligation on the Appellant: - Without prejudice to the above, the Learned Commissioner (Appeals) ought to have appreciated that the recipient having paid the tax on the amount received from the Appellant there was no obligation on the part of the Appellant to pay the tax under section 201(1). - that section 191 reads as follows: In the case of income in respect of which provision is not made under this Chapter for deducting income-tax at the time of payment, and in any case where income-tax has not been deducted in accordance with the provisions of this Chapter, income-tax shall be payable by the assessee direct. Explanation.-For the removal of doubts, it is hereby declared that if any pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e payee. It is to be borne in the mind that the tax being deducted at source by the assessee is the tax on the income of the deductee and not on the income of the assessee-deductor. Therefore, what section 191 provides for is that in case the deductor fails to make the requisite deduction of tax at source, the deductee would be liable to pay income-tax on the amount received by him as income section 191 does not cast a dual and simultaneous obligation on both the deductor and the deductee to pay tax on the said income in the hands of the deductee. Tax on the said income in the hands of the deductee is to be paid only once; primarily by the deductor and upon his failure, by the deductee. If the tax is deducted at source and paid by the deductor, the deductee gets credit for it and the amount deducted is treated as his income as per sections 198 and 199." - Mahindra & Mahindra Ltd. v. Dy. CIT [2009] 122 TTJ (Mum.) (SB) 577 - In the case of ITO, Bangalore v. M/s. Intel Tech India (P.) Ltd. (Dated: April 9, 2009), 2009-TIOL-355-ITAT-Bang., the Hon'ble ITAT, Bangalore Bench has held as follows: "Hence, in the instant case, the deducto....
X X X X Extracts X X X X
X X X X Extracts X X X X
....67 of 2004 whereby the High Court held that the explanation of the assessee that the tax was not deducted under bona fide belief that the amount spent towards accommodation and conveyance of non-resident consultants was not required to be treated as a part of their income and there was no intention to violate the provisions of section 195 was acceptable and set aside the order levying penalty under section 201(1) but confirmed the order levying interest under section 201(1A) of the Income-tax Act. The Supreme Court observed that the dismissal order would not prevent the Department from taking steps under section 220 read with section 156 of the Act. (iv) ITO, Bangalore v. Intel Tech India (P.) Ltd. (Dated: 9-4-2009) 2009-TIOL-355-ITAT-Bang.; (v) TRO, Bangalore v. Bharat Hotels Ltd. (Dated: 27-2-2009) 2009-TIOL-243-ITAT-Bang.; - Therefore, the submissions were that - - Three separate contracts entered into between Appellant and contractors cannot be regarded as one composite contract; - The contract for supply does not come within the sweep of section 194C; &nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... payments on civil works and erection portion, but, the assessee had failed to do so with regard to supply of materials portions. Brushing aside the assessee's explanation, the assessee was - (i) treated the assessee as 'assessee in default'; (ii) computed tax on payments made towards supply portion; & (iii) charged interest under section 201(1A) of the Act on the taxes so computed. (ii) On his part, the Ld. CIT (A), after elaborately discussing the issues at length, opined - in a nutshell - that "4.14.......It is therefore clear that the contract is one single and indivisible contract and the erection and installation of the equipment is as much fundamental part of the contract as the fabrication and supply..." and, thus, concurred with the stand of the Assessing Officer on twin points, namely, computation of tax on the payments made towards supply portion (without effecting TDS) and interest thereon under section 201(1A) of the Act. (iii) Stoutly rebutting the Revenue's philosophy, the assessee had advanced its submissions (as recorded supra in a summarized manner), namely: (i) applicability of the provisions of s.194C o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....word 'work' as explained by the Hon'ble Supreme Court in the case of Associated Cement Co. Ltd. (supra). Thus section 194C does not have any obligation in respect of the payment made by the assessee-firm to M/s. Khaitan Services Ltd.". (iii) Bombay Goods Transport Association v. CBDT [1994] 76 Taxman 334 (Bom.): It was ruled by the Hon'ble Bombay High Court that "To attract section 194C, it is, therefore, necessary that the payment should be made 'for carrying out any work'. If this condition is fulfilled, then and then only the next condition becomes relevant, i.e., such work should be carried out in pursuance of a contract between the contractor and the person concerned. The word 'contract' is a word and wide import and includes agreements, oral, or written". (iv) The Hon'ble jurisdictional High Court in its wisdom in the case of V.M. Salgaocar & Bros. Ltd. v. ITO [1999] 104 Taxman 29 (Kar.) had averred that "The word 'work' refers and comprehends the activities of the workmen and not the operation in the factory or on machines. It is the physical force which has comprehended in the word 'work'." (v) In ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the two is very often a fine one. This is particularly so when the contract is a composite one involving both a contract of work and labour and a contract of sale. Nevertheless, the distinction between the two rests on a clear principle. A contract of sale is one whose main object is the transfer of property in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where the principal object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one of work and labour. The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of materials, nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel (Halsbury's Laws of England, 3rd edition, vol. 34, 6-7)". The Hon'ble Court had further (on page 481) held thus : "From the decisions earlier cited it clearly, emerges that such determinatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the customer i.e., whether by transfer or accession. (iii) In the case of Andhra Pradesh State Road Transport Corpn. v. Dy. CIT [2001] 119 Taxman 73 (Hyd.) (Mag.), the Hon'ble Tribunal has held that - "...There may be many common characteristics in both the contract, some neutral in a particular contract and yet certain clinching terms in a given case may fortify the conclusion one way or the other. All that will depend upon the facts and circumstances of each case. This question to be answered is not an easy and has perplexed the jurists all over. Nevertheless, the distinction between the two rests on a clear principle. A contract of sale is one whose main object is the transfer of the property in and the delivery of the possession of a chattel as a chattel to the buyer. Where the dominant object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one of work and labour. The test is whether or not the work and labour bestowed and in anything that can properly become the subject of sale, neither the ownership of materials is conclusive although such factors may be relevant and be taken into consideration in ascertai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and some work is undoubtedly done, but it is done merely as incidental to the sale." (v) Yet an another ruling with regard to the nature of contract in respect of manufacture and supply of ships, the Hon'ble Supreme Court in the case of Hindustan Shipyard Ltd. V. State of Andhra Pradesh [2000] 119 STC 533 had laid down the following test: "14. The principles deducible from the several decided cases may be summed up as under: 1. It is difficult to lay down any rule or inflexible rule applicable alike to all transactions so as to distinguish between a contract for sale and a contract for work and labour. 2. Transfer of property of goods for a price is the linchpin of the definition of sale. Whether a particular contract is one of sale of goods or for work and labour depends upon the main object of the parties found out from an overview of the terms of the contract, the circumstances of the transactions and the custom of the trade. It is the substance of the contract document/s, and not merely the form which has to be looked into. The Court may form an opinion that the contract is one ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... work and labour not involving sale of goods. The third is a contract for sale where the goods are sold as chattels and the work done is merely incidental to the sale." 9.3 As has been averred by the assessee in the case on hand, 80 per cent to 85 per cent of the consideration was towards the supply of materials and barely 20 per cent to 15 per cent total was towards erection and civil works. 9.4 Further, there is considerable force in the assertion of the assessee that the erections work and civil works were carried out in furtherance to the supply of material. In other words, erection works and the civil works were incidental to supply of materials as is evident from the photographs furnished by the Ld. AR during the course of hearing. The substance of the agreement or arrangement between the parties was to supply the materials and not carrying out the work. Installation or erection work and civil construction work can only be categorized as ancillary to the contract of supply. 9.5 Taking into account the submission of the assessee and also the test laid down by the Hon'ble Apex court cited supra, we are of the firm view that the entire arrangement between the assessee and its....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er which a movable is fixed to another chattel or on the land where the intention plainly is not to sell the article but to improve the land or the chattel and the consideration is not for the transfer of the chattel, but for the labour and work done and the material furnished, the contract will be one of work and labour. In case of doubt whether a particular contract is a contract for work and labour or for sale, the matter should be decided in the light of the principles laid down by the Supreme Court in the above mentioned case." 9.7 During the course of hearing, it was advocated by the Ld. A.R that the provisions of section 194C of the Act would apply in respect of a contract for supply of any article or thing as per the prescribed specification only if it is a contract for work and not a contract for sale as per the principles in this regard laid down para 7(vi) of Board's Circular No. 681, dated 8-3-1994. 9.8 On a glimpse of the said Circular, we find that - "Paragraph 7(vi)(a) provides that, "....Similarly, contracts granted for processing of goods supplied by Government or any other specified person, where the ownership of such goods remains at all times with the Governm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s VIII & IX. The contractor shall be fully responsible for the safety of the goods while the same are under its custody as above. 37.4 The Contractor shall be fully responsible for the safety of all the Equipments/Materials while the same are under his custody as above until "Taking Over of the Stations and Transmission Lines" by the Owner in accordance with clause 9.0 of section-V, Special Conditions of Contract-SCC, volume-I." 9.11 It is clear from the 'Instruction to Bidders' that, the transfer of the title in respect of equipment and materials supplied by the contractor to the assessee takes place in favour of assessee pursuant to the terms of the Contract by way of negotiation of dispatch documents. As the title to equipments and materials already passed on to the assessee and assessee having become the owner of equipments and materials, issues the same to the contractors for carrying out civil works or erection works at the site location. For issuing such goods to the contractor, he had to execute an indemnity bond in favour of the assessee. This, as rightly argued the assessee, proves that, the title to equipments and materials gets transferred in favour of assessee much e....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... It may not be inappropriate to recall the ruling of the Hon'ble Bombay High Court in the case of CIT v. Glenmark Pharmaceuticals Ltd. [2010] 324 ITR 199/191 Taxman 455 [as stoutly relied on by the assessee], wherein the Hon'ble Court had held that the "work" as defined in the newly recast section 194C is clarificatory and, thus, retrospective in operation. The Court had, further, asserted that even before section 194C was recast, unless the contract involved use of goods supplied by the contractee, there cannot be "work" as understood by the Courts and the Revenue through its various circulars. The Hon'ble Court held thus: "(on page 217) Hence, what has weighed in the introduction of clause (e) to the Explanation was ongoing litigation on the question as to whether TDS was deductible on outsourcing contracts. Clause (e) was introduced "to bring clarity on this issue: or in other words, to remove the ambiguity on the question. Clause (e) as introduced contains a positive affirmation that the expression "work" will cover manufacturing or supplying a product, according to the requirement or specification of a customer, by using material purchased from such a customer. Clause (e) ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ard of Direct Taxes and judicially in the judgments of several High Courts to which a reference has been made earlier. Consequently, the principles underlying the applicability of section 194C as construed administratively and judicially in decided cases, find statutory recognition in the Explanation. The Explanation, therefore, as the Memorandum explaining the clauses of the Finance Bill of 2009 states, was in the nature of a clarification. Where an explanatory provision is brought to remove an ambiguity or to clear a doubt, it is reflective of the law as it has always stood in the past. Where, as in the present case, an Explanation is introduced statutorily to adopt an understanding of the law both in the form of the circulars of the Central Board of Direct Taxes and in judicial decisions, Parliament must be regarded as having intended to affirm that intent. In the present case, the intent has held the field for over three decades." 9.16 In taking into account the above deliberations and also drawing strength from various judicial pronouncements on the issue, we are of the considered view that the supply portion of the contract being for supply of equipment does not require dedu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... erection services and civil construction service. This may be observed from a number of judicial pronouncements with one of the most followed judgments of Supreme Court in the case of State of Madras v. Richardson & Cruddas Ltd. [1968] 21 STC 245. It goes to say that if there is a split of consideration towards material and labour, it cannot be said that the entire contract is an indivisible works contract. 10.3 To drive home his point, the Ld. AR had sought refuge to the various judicial pronouncements on the issue. On a score of case laws relied on by the assessee, some of the cases which are directly on the issue on hand are deliberated upon hereunder: (i) The Hon'ble Apex Court, in the case of Pandit Banarasi Das Bhanot v. State of Madhya Pradesh [1958] 9 STC 388, had observed thus: "The expression 'sale of goods' in Entry 48 of List II of Sch. VII to the Government of India Act, 1935 has the same meaning which it has in the Sale of Goods Act, 1930. In a building contract there is no sale of materials as such, and it is, therefore, ultra vires the powers of the Provincial Legislature to impose tax on the supply of materials. When a question arises as to whether....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt in the case of Bharat Sanchar Nigam Ltd. v. Union of India [2006] 145 STC 91/3 STT 245 has held as follows: "All the clauses of article 366(29A) serve to bring transactions where one or more of the essential ingredients of a sale as defined in the Sale of Goods Act, 1930 are absent, within the ambit of purchases and sales for the purposes of levy of sales tax. To this extent only is the principle enunciated in Gannon Dunkerly [See [1958] 9 STC 353 (SC)] Ltd. The amendment especially allows specific composite contracts, viz., works contracts clause (b), hire-purchase contracts clause (c), catering contracts clause (f) by legal fiction to be divisible contracts where the sale element could be isolated and be subjected to sales tax." (v) In Larsen & Toubro Ltd. v. Commissioner of Commercial Taxes [2003] 132 STC 272 (AP), the Hon'ble AP High Court considered the case of a Public Limited Company engaged in manufacturing, fabrication, supply, erection and commissioning of various projects. The nature of work carried out by the appellant is a works contract. During the AYs 1986-87 and 1987-88 the appellant had entered into a contract with Visakhapatnam Steel Plant and o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....upply of goods and the other is installation of machinery with the labour of the appellant and as such this contract is a divisible contract". (vi) In the case of CIT v. Hyundai Heavy Industries Co. Ltd. [2007] 291 ITR 482/161 Taxman 191, the Supreme Court held that the installation permanent establishment came into existence only after the transaction stood materialized. The installation permanent establishment came into existence only on conclusion of the transaction giving rise to the supplies of the fabricated platforms. The installation permanent establishment emerged only after the contract with the ONGC stood concluded. It is emerged only after the fabricated platform was delivered in Korea to the agents of the ONGC. Therefore, the profits on such supplies of fabricated platforms cannot be said to be attributable to the permanent establishment. Applying this analogy, it may be stated that the question of carrying out any work could arise only after the sale of equipment is completed. In other words, any work for the purpose of section 194C could begin only after the supply portion is completed and therefore, the question of applying the aforesaid section on the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esponsibility is a contractual matter which by itself would not alter the essence of the transaction of supply. In the following cases, although the applicant was made overall responsible for even the work awarded to sub-contractors, it has been held that the site of the sub-contractors cannot be regarded as site of the applicant. 10.4 Considering the facts and circumstances of the issue and also in conformity with the findings of various judiciary referred above, we are of the firm view that the three separate contracts, i.e., (i) Supply of materials, (ii) Erection Contract and (iii) Contract for civil work cannot be treated as one single contract. To arrive at such a view, we are drawing strength from the ruling of the Hon'ble Apex Court in the case of CIT v. Motors & General Stores (P.) Ltd. [1967] 66 ITR 692 wherein the Hon'ble Court in its wisdom had ruled that "When parties have agreed on certain terms, unless it is proved sham, the agreed terms have to be respected". 11. We shall now turn our attention to analyze as to whether the provisions of section 194C of the Act are applicable in respect of 'supply contract'. (i) In this connection, we recall the finding of the Hon'....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be seen from the annexure is lesser than the value of the supply contract. It cannot therefore control the interpretation of the contract, specifically when the property in the goods has passed ex-works on delivery and not on the theory of accretion. The assessee took possession of the goods and the title passed on to it as a chattel prior to commencement of the erection portion of the contract. 5.5 ... If the facts of the present case are tested by applying the principles laid down by the jurisdictional High Court and the Hon'ble Supreme Court, the obvious answer that would emerge is that this is a "supply contract" and not "works contract". The nature of a contract as to whether it is 'contract for sale' or "works contract" will depend on the terms of the contract and its execution. In the present case, the contractors have to fabricate towers as per tested quality of conformity with International Standard-(IS) : 2062. Further, the contractor has been given the option to use other equivalent grade of structural steel angle sections and plates conforming to latest International Standards. The contractor fabricates and manufactures the tower with steel sections as per Internation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....property of the purchaser. The title in the goods in respect of equipment/material to be supplied as per the terms of contract is to be transferred "ex-work" on dispatch as movable property. The critical test to be applied is as to when the title in the goods is transferred. Thus as the title in the goods were passed on to the assessee, before the commencement of the works or erection contract and as admitted by the assessee had treated these goods as its property and entered the same as such in its stock register before issuing the same for erection, it is a contract of sale and section 194C has no application. On erection portion as admitted TDS is made. ** ** ** 5.5. ...A plain reading of the section 194C along with CBDT circular referred above and applying the same to the facts of this case, where we find that the supplier does not work or process the material supplied by the purchaser and that the seller supplied goods the title in which passed on to the purchaser/assessee, as a chattel, on delivery ex-work dispatch and as the assessee has already deducted tax at source from the erection portion of the contract treating it as a separate contract, we have to hold that secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sum payable including the material and labour. The Assessing Officer held that it was a composite contract where the supply of material was only incidental to the execution of contract and TDS ought to have been deducted on the gross payments made to the contractor in pursuance of a composite contract. The Assessing Officer, accordingly, worked out the tax short deducted and also levied interest on such short deduction of tax at source. 2.6 On appeal by the appellant, the CIT(A) confirmed the order of the Assessing Officer. Hence, the present appeal by the appellant before the Tribunal. 3. We have heard the elaborated submissions of the learned counsel for the appellant and the learned Departmental Representative. We have already set out the important terms of the contract between the appellant and M/s. BHEL. A bare perusal of the components of the consideration for the contract would clearly show that the primary or the dominant intention of the appellant was to purchase the material namely, two ESPs for its power plant at Panipat. Freight and insurance payable in respect of its supply and the cost of material constituted a major portion of the contract value. The cost of spare....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct the Assessing Officer 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 section 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 v. Rishikesh Apartments Co-operative Housing Society Ltd. [2001] 171 CTR (Guj.) 288 : [2002] 253 ITR 310 (Guj.). We have considered the submissions of the appellant and we are of the view that the documents on record do not establish the case pleaded by the appellant. We, however, deem it fit and proper to direct the Assessing Officer to verify this aspect and in case it is found that the contractor has offered the sums received from the appellant to tax then in that event the appellant should not be proceeded against as an appellant in default under section 201 of the Act, as laid down by the Hon'ble Gujarat High Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on'ble Bench had observed thus - ".... the inescapable conclusion is that the contract entered into by the appellant-corporation with its fabricators was a contract for purchase/sale of bus bodies and cannot be construed as a contract of work and labour simplicitor. The dominant object and intention between the parties was to construct and sell as purchase the bus bodies in terms of the requirements and specifications indicated by the appellant-corporation and deliver them duly fitted on the chassis supplied. Whole exercise involved resulted into purchase and sale of bus bodies in fact. Merely because specifications are provided by the appellant-corporation to suit the bus bodies according to appellant's requirements, does not alter the basic crux and character of the contract, which in the instant case is nothing but the contract of sale and purchase. The materials involved in the construction of the bus bodies were to be procured by the fabricators and thereafter bus bodies were to be constructed and to be fitted on the chassis supplied by the appellant-corporation. At no point of time, appellant had any property or ownership in the material used in bus body building or in the b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the contractor(s) for carrying out the work of civil, erection, etc., - the contract between the assessee and the contractor was a 'contract for supply' and NOT for 'contract of work' and the Revenue had consistently refused to see the reason and to recognize the distinct meaning - Supply and Work; - it was wrongly visualized that the equipments, materials component parts were fabricated and installed at work site premises; - it was wrongly presumed that the contracts entered into between the assessee and the contractor were composite contract and an indivisible contract whereas there were three separate contracts, viz., (i) supply of materials; (ii) for erection & (iii) for civil work portion; - Instruction to Bidders (section -II -ITB) under clause 14. Taxes and duties (source P 123 of PB - AR) it has been made implicitly clear that - "14.1 As indicated in clause 35.2 of section ITB of the Bid Document, in case of Award of contract, a Divisible Contract covering the entire scope of the partial/total turnkey package will be entered into with the successful bidder, there shal....