TaxTMI 
TaxTMI 
2011 (3) TMI 598
X X X X Extracts X X X X
X X X X Extracts X X X X
....e basis that the assessee ought to have deducted 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Ld. CIT (A)-LTU for solace. After due consideration of the lengthy 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TR 692. Reliance is also placed on the case of Power Grid Corporation of 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 appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....expended, a product of activity of labour; as, a literary work; needlework or embroidery; an 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 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 ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 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 ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Andhra Pradesh [2000] 119 STC 533. In this case, the Hon'ble Court 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 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 c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the sale." 1. It is submitted that, in the instant case, 80 per cent to 85 per cent of the total consideration is towards the supply of materials and only 20 per cent to 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... thing is delivered, the contract will be a contract for sale and as such outside the purview of this section. Circular No. 715, dated 8-8-1995, the relevant question 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or any other specified person and the property in such article or thing passes to the Government or such person only after such article or thing is delivered, the contract will be a contract for sale and as such outside the purview 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 pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the erection and civil work portions. Therefore,the contract relating to supply of equipment is a separate and distinct 'contract for sale' and the case of Appellant falls within the Paragraph 7(vi)(b) of the above circular. For the purpose of section 194C, 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 Appellan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ract of work while on the other hand, where the manufacturer has sourced the material from a person other than the customer, it would constitute a sale. What is significant is that in using the words which clause (e) uses in the Explanation, Parliament has taken note 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 independentl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation 13. For construing this contract, one Tender Notification dated 21-4-2006 may be perused. The notification is issued for 'Establishing sub-station and construction of 60KV lines'. The perusal of notification clearly show that no separate notifications are issued for 'supply', '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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not by itself make Supply portion any less a supply contract. He is not justified in failing to appreciate that assumption of overall responsibility is a contractual matter which by itself would not alter the essence of the transaction of supply. The CIT(A) was not justified in treating the separate contracts expressly 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 sepa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd not of contracts which are a combination of distinct contracts for sale of materials and for work, and nothing shall bar the sales tax authorities from deciding whether a particular contract falls within one category or the other and imposing a tax on the agreement of sale of materials, where the contract belongs to the latter category." 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 I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d and be subjected to sales tax." In the case of Siemens India Limited v. State of Kerala (Ker.) [2003] 132 STC 418 (Ker.), the Kerala High Court observed as follows: "In an earlier writ petition filed by the petitioner challenging Explanation 4(c) to section 2(xxi) of the Kerala Act, the court had held that by a deeming provision, the State Government 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 Publi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s contract could be presumed as a deemed sale within the State of Andhra Pradesh. Though the learned Special Government Pleader for Taxes submitted that it is an indivisible contract, we are afraid, this submission may not be appropriate, having regard to the fact that there are two facets of the contract, one is supply of goods and the other is installation of machinery 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 Pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rm 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 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsideration payable for the erection and civil construction. In the instant case, the Appellant has awarded the work order for the contractor, under three different segments: (i) Supply portion; (ii) Erection portion; and (iii) Civil works portion; - The terms in respect of each of the aforesaid portion are clear and the consideration for each of the portion is separate; - 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 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of the Revenue is that the sub-contractor is undertaking various activities which constitute the core of the contract work entrusted to the applicant. All the activities undertaken by the sub-contractor are on behalf of the applicant and in connection with the execution of the contract between the applicant and TPT. It is pointed out that the sub-contractor is a nominee of the applicant and the delegation of work to the sub-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 wor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....shop set up by him at a place far away from installation site and run by him independent of any control of the applicant. Such a place of business of sub-contractor cannot be regarded as the PE of applicant. In any case, the language of section 5(1) being clear and as the concept of PE does not take in the establishment of an independent contractor or agent, the contention of the Revenue must fail. 11.2. The fact that the applicant 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 "40....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gnment was executed by and between the applicant and the L&T on 8-5-2006. A formal contract in terms of the LoA was entered into between Power Grid and the applicant on 27-10-2006. Power Grid also entered into the contracts with L&T on the same day. One of the questions before the Authority for Advance Ruling was that, "whether the amounts received/receivable by the applicant i.e., Hyosung Corporation from Power Grid Corporation of India 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. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t being required to give performance guarantee not only in respect of its own contract but also in respect of L&T's contract and the vicarious liability for breach attached to the applicant in respect of all the three contracts were not in furtherance of a joint venture and a common design to produce income. But, these obligations and responsibilities were specially introduced by Power Grid while dealing with the contracting parties on principal-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 indi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hall continue to be responsible for the quality and performance of the goods until the final take over on testing of the equipment, it cannot be construed to be a condition which postpones the transfer of title to the goods till that time. It is more in the nature of warranty provision in the contract. Therefore, it is submitted that, despite the aforesaid overall responsibility clause, it is impermissible to treat the three separate contracts, 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 u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndards. The contractor fabricates and manufactures the tower with steel sections as per International Standards. The material is that of "the supplier" and not of "the purchaser". The "supplier" does not work on the material supplied by the "purchaser". There is no accretion of material to the purchaser, part by part, unit by unit. The rest of the equipment such as insulators, conductors, transformers, circuit breakers, etc., are standard equipments. The relevant 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 transactio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of the contract treating it as a separate contract, we have to hold that section 194C is not applicable to the supply contract in question." In the case of Senior Accounts Officer (O&M), Haryana Power Generation Corpn. Ltd. v. ITO [2007] 164 Taxman 64 (Delhi) (Mag.) the facts of the case are that, 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. 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 plan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ight and insurance." In the case of Somani Iron & Steel (P.) Ltd. v. ITO [2003] 86 ITD 750 (Luck. - ITAT), the Hon'ble Bench has held as follows: "32. Likewise, details of other electrical equipments have also been given in the Annexure to the above mentioned agreement. A perusal of these details indicates that each item or equipment has been mentioned with minute details and specifications. 36. The second contract, which is for installation of 220/33 KV Electric 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... judicial decisions, it is found that the agreements were agreements for sale and not for carrying out work so as to attract the provisions of section 194C. 58. In view of the above referred reply also, it is clear that the entire work of installation was not carried out by the company, rather the company provided the equipments, supplied the same and also undertook to install the same at the premises of the assessee, but the civil work, etc. was carried out by the assessee. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 bus body itself unless these were delivered to the appellant and approved by the appellant for final use. Property in the bus bodies was to pass on acceptance of bus bodies by the appellant. Purchase of any item which is constructed as per agreed specifications would involve labour and skill but these two elements by themselves alone are not 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....between the parties. The untrue statement about the agreed consideration is made only for the purpose of evasion of tax. When Government or any statutory body is a party to the transfer, the question of evasion of tax does not arise. (3) In the case of J Roy McDermott Eastern Hemisphere Ltd. v. Jt. CIT [ITA No. 8084/Mum./2004, dated 22-3-2010] (Mum. - ITAT) : [2010] 190 Taxman (BN - iv) Part 2, it was held that it is for the revenue authorities to establish beyond a reasonable degree of doubt that there 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ult. - Relies on the case laws: (a) Circular No. F. No. 275/201/95-IT(B), dated 29-1-1997; (b) Hindustan Coca Cola Beverages (P.) Ltd. v. CIT [2007] 293 ITR 226/163 Taxman 355 (SC) (c) CIT v. Adidas India Marketing (P.) Ltd. [2006] 157 Taxman 519 (Delhi) - A perusal of section 191 shows that where income-tax has not been deducted in accordance with the provisions of Chapter XVII, income-tax is to be paid by the assessee directly, i.e., the 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yee. Relies on the case laws: (i) CIT v. Eli Lily and Co. (India) (P.) Ltd. [2009] 312 ITR 225 (SC); (ii) CIT v. Trans Bharat Aviation (P.) Ltd. [2010] 320 ITR 671 (Delhi); (iii) CIT v. Karnataka Urban Infra. Dev. Fin. Corpn. S.L.P. (Civil) No. 11995 of 2009 [2009] 317 ITR (St.) 5, Their Lordships S.H. Kapadia and Aftab Alam JJ, dismissed the Department's special leave petition against the judgment dated August 4, 2008 of the Karnataka High Court in ITA No. 467 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thorities below require to be upheld in too. 9. We have meticulously considered the rival submissions, conscientiously perused the relevant records and also voluminous paper book furnished by the Ld. A.R. during the course of hearing to strengthen his sustained arguments on the issues. 9.1 We shall venture to address the issues chronologically in the following paragraphs: (i) On verification of the separate agreements entered into by the assessee for supply of materials, erection and for civil work etc., the Assessing Officer noticed that while deducting TDS for making 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thout manpower, it cannot be said that work has been carried out. Under section 194C each and every work/service is not covered, hence, the nature of work done or service performed is required to be seen" and concluded that - "9.....We can reasonably conclude that while providing package of facilities to the assessee-firm, M/s. Khaitan Services Ltd. Did not carry out any work nor provided any labour nor engaged any contractor etc., for carrying out any work, therefore, not covered in any way under the provisions of section 194C and also not covered within the meaning of 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t for supply of materials' or 'contract of work'? The only yardstick to determine as to whether the transaction between the assessee and its contractor a 'contract for work' or a 'contract for supply' was un-mistakenly the judicial view on the matter. (i) The Constitution Bench of the Hon'ble Supreme Court in the case of Associated Hotels of India Ltd. (supra) had observed thus - "The difficulty which the Courts have often to meet with in construing a contract of work and labour, on the one hand, and a contract for sale, on the other, arises because the distinction between 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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Elevators (India) Ltd. [2005] 3 SCC 389. While dealing with the issue of installation of lifts, the Hon'ble Court held that the contract is a "contract for sale". The Hon'ble Court while enumerating the tests to be considered in deciding the nature of contract emphasized the fact that the intention of the parties in the contract would to a large extent determine the issue. The Hon'ble Court laid down the following as the probable tests that should be conducted before determining the nature of contract: (1) Whether it was one for transfer of property or for work and labour; (2) How and when property of dealer passed 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 perplexe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d for supply of materials used in the execution of the work for a price; (b) it may be a contract for work in which the use of materials is accessory or incidental to the execution of work; or (c) it may be a contract for supply of goods where some work is required to be done as incidental to the sale; Where a contract is of the first type, it is a composite contract consisting essentially of two contracts, one for the sale of goods and the other for work and labour. The second type of work is clearly a contract for work and labour not involving sale of goods. While the third type is contract for sale where the goods are sold as chattels 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 in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....labour." It was further observed by the Hon'ble Court in para 15 of the judgment as under: "There may be three categories of contracts: (i) The contract may be for work to be done for remuneration and for supply of materials used in the execution of the work for a price; (ii) It may be a contract for work in which the use of the materials is ancillary or incidental to the execution of the work; & (iii)It may be a contract for supply of goods where some work is required to be done as incidental to the sale. The first contract is a composite contract consisting of two contracts one of which is for the sale of goods and the other is for work and labour. The second is clearly a contract for 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tels of India Ltd. [1972] 29 STC 474, the Supreme Court observed that where the principal objective of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, contract is 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 the materials nor the value of 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 of work and labour or one for the sale of a chattel. A building contract or a contract under 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....favour of the assessee pursuant to the terms of the contract by way of negotiation of dispatch documents. On a glimpse of the 'Instruction to bidders', we find - "37.3 For contractor supplied equipments/materials 37.3-1 Transfer of the title in respect of equipment and materials supplied by the contractor to the KPTCL pursuant to the terms of the contract shall pass on to the KPTCL with negotiation of dispatch documents. ** ** ** 37.3.4 In order to enable the contractor to carry out its obligation under the contract such as receipt at site, storage, erection, testing, etc., the owner (KPTCL) shall hand over (wherever applicable) the goods to the contractor against an Indemnity Bond in the format enclosed as Annexures 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 f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad not used materials bought from the assessee. Applying the afore-mentioned exception, it could be said that the activity carried out by contractor for the assessee cannot, at any stretch of imagination, be categorized as 'work' as alleged by the Revenue. 9.14 In this connection, we recall that though the aforesaid provision was introduced by the Finance Act, 2009, even prior to the said amendment, contract manufacturing was never considered as work. By virtue of the aforesaid amendment, although contract manufacturing was now deemed to be work, when the supply was according to specifications of the customer and for the purpose of supply, the supplier had not used the materials of customer; such supply was not to be regarded as work. 9.15 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctured 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 being of the customer, the contract essentially involves work of labour and not a sale. Parliament recognized the distinction which held the field both administratively in the form of circulars of the Central Board 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 clarificat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the 'Instructions to Bidders, the assessee had clearly laid out that once the contractor was found to be a successful bidder, the entire scope of the contract was divided into three separate contracts, i.e., for supply of materials, erection and civil engineering works. 10.1 On a critical perusal of the terms of the 'Instructions to Bidders' it states that, the contract entered by the assessee with the contractors had to be treated as a divisible contract resulting in, into three separate contracts. 10.2 There is a considerable force in the argument advanced by the assessee that it is an accepted practice for the parties to the contract to enter into a consolidated contract with the split up of consideration for various elements viz., supply of materials, 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 dr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate of Tamil Nadu v. Titanium Equipment & Anode Mfg. Corpn. Ltd. [1998] 110 STC 43 (Mad.), the Madras High Court reversing the decision of the Tribunal held that the contract was clearly a divisible contract, one for the supply of the titanium anodes and another for supervision and installation and undertaking recoating maintenance. The price payable for the supply of material was distinct from the consideration payable for the supervision of installation and commissioning and for recoating maintenance. The parties themselves had no doubt as to the nature of the arrangement they had entered into and had specifically provided for the payment of the excise duty, sales tax and all other statutory levies by the buyer. (iv) The Hon'ble Constitutional Bench of Supreme Court 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 enu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessment proceedings. (d) Appellants undertake installation/erection of such goods/equipments, which are handed over by the contractees along with other goods required for commissioning the project. The High Court observed as follows: ".... In view of the law laid down in various decisions referred to above, in particular, Gannon Dunkerley's case [1993] 88 STC 204 (SC), it is difficult for us to appreciate the stand taken on behalf of the department as to how this contract could be presumed as a deemed sale within the State of Andhra Pradesh. Though the learned Special Government Pleader for Taxes submitted that it is an indivisible contract, we are afraid, this submission may not be appropriate, having regard to the fact that there are two facets of the contract, one is supply 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of the other Contracts namely Erection Contracts and Civil Contracts are also the integral parts of the contract on single source responsibility basis and the Contractor is bound to perform the total Contract in its entirety and non-performance of any part or portion of the Contract shall be deemed to be a breach of the entire-Contract. The said clause in the 'Contract Agreement (Supply Portion)' clarifies that, the contractor is also responsible for the performance of the erection portion and civil works portion. It does not mention that all portions of the work order are interrelated or integrated with one another. By merely making the contractor responsible for performance of erection portion and civil works portion will not by itself make Supply portion any less a supply contract. Assumption of overall responsibility 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 circumst....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the contract will not alter. In this connection, we may refer to the decision of the Bombay High Court in the case of CST v. Walchandnagar Industries [1985] 58 STC 89 in which the Hon'ble High Court referred to the judgment of the Hon'ble Supreme Court in the case of State of Madras v. Gannon Dunkerley & Co. [1958] 9 STC 353 wherein it was held that 'the parties may enter into two contracts, one for the sale of goods and one for services. Even when such contracts are in one document they can be separate, for more so when they are in two separate documents.' Similar view was taken by the Hon'ble Apex Court in the case of Associated Hotels of India Ltd. [1972] 29 STC 474 ** ** ** 5.4. ... In the present case, where the contract of supply and erection is given to the same party, the value of the erection contract as can 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en all the material belong to the supplier, even though it produced a tailor-made product. The erection portion being subsequent to passing of title by execution of the supply portion, it cannot be said that the erection portion controls the supply portion, though the fulfilment of the conditions of the erection contract has a bearing on the fulfilment of the condition of supply portion of the contract, and though in some cases both the contracts are in the same document. The scope and object of each part of the contract is different. Though the supply portion and erection portion dovetail into each other, the erection portion does not control the supply portion and the supply contract does not become a works contract, just because there is an obligation cast on the supplier to erect the equipment which by that time has become the 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 commenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ellant, 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 respect of the supply of materials. The Assessing Officer, however, referred to the decision of the Rajkot Bench of the Tribunal in the case of Essar Oil Ltd. v. ITO [2001] 71 TTJ (Rajkot) 599 : [2001] 77 ITD 92 (Rajkot), wherein it was held that in the case of composite contract the deduction of tax at source has to be on the entire 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, wo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le from the facts of the present case. It was a case where the contract was for construction of a refinery and the contractor was to supply the material to be used for construction. In the present case, the supply of the power generator was an independent transaction and its erection was only ancillary or incidental to the purchase of the power generator. We are also of the view that in each case the terms of the contract need to be analyzed before coming to the conclusion whether it was a composite contract or not. As already stated, in the present case, the contract, insofar as it relates to supply of the material, freight insurance and supply of spare parts, is clearly separable from the other part of the contract relating to carrying out civil work, commissioning and erection of the power generators. 3.1 In view of the discussion above, we direct 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of the entirety of the facts and circumstances and the composite character of agreements, dominant or predominant nature of contracts is found to be that of sale and not of work of contract." 11.3 We have also come across an occasion to peruse the finding of the Hon'ble Hyderabad Tribunal reported in Andhra Pradesh State Road Transport Corpn. (supra) wherein the issue before the Hon'ble Bench was, in brief, that the assessee-Andhra Pradesh State Road Transport Corporation - was a Corporation established under the State enactment. The assessee was in the business of providing transport services to the public in the State and for that purpose, it owned fleet of buses. It purchased chassis and after the purchase of chassis handed over the same to the fabricators for constructing the body-building upon the chassis. After analyzing the issue in detail, the Hon'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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s which have been meticulously analyzed and also extensively quoting the various judicial pronouncements on the issues in the fore-going paragraphs, we are of the considered view that the authorities below were not justified in treating the assessee - KPTCL - as an 'assessee in default' under section 201(1) and also charging interest under section 201(1A) of the Act for the following reasons: - the assessee cannot be categorized as an 'assessee in default' when there was no obligation on the part of the assessee to deduct tax under section 194C of the Act for supply portion; - amendment of section 194C through Finance (No. 2) Act of 2009, clarify deduction does not extend to supply of materials (portion); - the materials in question were purchased from the suppliers by the assessee and given 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 -....