AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 955
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....he sub- contractors have already offered the payments to tax ignoring that the proviso was inserted by the Finance Act, 2012 with effect from 01.07.2012 to Section 201(1) of the Income Tax Act, 1961 which cannot be made applicable to the case of the respondent-assessee as the issue in the present case relates to the assessment years 2012-13? (ii) Whether on the facts and in the circumstances of the case, the Ld. ITAT is right both on facts and law in holding that the nature of work carried out by sub-contractors to be mere a work within the meaning of Section 194C and the work carried does not fall under professional and technical service provided within the meaning of Section 194J read with Explanation 2 to section 9(1)(vii) of the Income Tax Act, 1961? (iii) Whether on the facts and in the circumstances of the case, the Ld. ITAT was right in law in applying the case of Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT reported as [2007] 293 ITR 226 (SC) which has no application in as much as even if the sub-contractors have offered the payments received from the respondentassessee to tax in that eventuality also the respondent-assessee cannot escape from levy of interest and pena....
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....(i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income tax on income comprised therein. Explanation - For the purposes of this section - (i) "specified person" shall mean - (c) any corporation established by or under a Central, State or Provincial Act; or (iv) "work" shall include - (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include 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. Fees for professional or technical services. 194-J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of- (b) fees for technical services, or Explanation - For the purposes of this section - (b) "fees for technical services" shall have the same meaning as in Expl....
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....f the Act for having failed to deduct the tax at source and invoked the provisions of Sections 200 and 201 read with Rule 30 of the Income Tax Rules, 1962. 8. The CIT (Appeals) construed the provisions of the contract and came to the conclusion that it was in the nature of a contract for work and labour to be carried out under the supervision of the respondent's officers and employees. It was further held as follows. The scope of the work given to the sub-contractors is for erection, testing, commissioning and trial operation and handing over of boiler units, electrostatic precipitators etc which involved construction work, welding, erection, alignment, transportation of equipment and materials with the help of machines which did not fall within the scope of technical services as defined in Explanation - 2 to Section 9(1)(vii) of the Act. The services of qualified engineers and skilled manpower were utilized for this purpose which was inevitable. What the respondent was to get from the contractor was a physical output, the tangible structure and not merely the services of the qualified engineers/staff. The word 'merely' appears to be inadvertent. What was meant is that the service....
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....tisfaction of the respondent and within the period stipulated in the contract. The relevant provisions of the General Conditions of Contract are also relevant in this regard. A rate schedule is also for the material and not for the supply of any technical services. There is a schedule for the deployment of manpower. Many of them we will assume are technical personnel. What is important is that the schedule is one of deployment of these personnel at the site for executing the work, namely, the work of erection, testing, commissioning and trial operation. In other words, their services were not engaged per-se for the benefit of the respondent. They were in fact engaged by the contractor itself for its own benefit for executing the contract as required by the terms and conditions thereof. 11. The Special Conditions of Contract are also relevant. They also enumerate the list of major tools and plants to be provided by the contractor at its own cost. There is no reference to the contract being for one of providing technical services. There is a detailed reference in clause 40 which again enumerates the equipment that is to be supplied. There is no similar clause in respect of the depl....
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....ot to enable the respondent to run the machinery on its own, but to enable the contractor to supply the requisite equipment. 15. Clause 19.17, relied upon by Mr. Putney, reads as follows:- "19.17 'WORK' or 'CONTRACT WORK' shall mean and include supply of all categories of labour, specified consumables, tools and tackles required for complete and satisfactory site transportation, handling, stacking, storing, erecting, testing and commissioning of the equipment to the entire satisfaction of BHEL." Thus, the supply of labour, material and equipment is for the satisfactory site transportation, handling, stacking, storing, erecting, testing and commissioning of the equipment to the respondent's satisfaction. In other words, the labour, employees, tools and tackles are not supplied under the contract, but for the purpose of executing the contract as per the contractual stipulations. 16. Mr. Putney then relied upon clause 27.4 which reads as under:- "27.4 All electrical equipment, connections and wiring for construction power, it's distribution and use shall conform to the requirements of Indian Electricity Act and Rules. Only electricians licensed by the appropriate statutory author....
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....nduction heating machines for P/T-91 welding. 39.5 The contractor shall deploy the necessary number of qualified and approved full time electricians at his cost to maintain his temporary electrical installation till the completion of work. 39.11 The Contractor has to ensure deployment of qualified Level-2 NDT Engineers and Welding Engineers exclusively for the welding works envisaged under the Package works." 19. By clause 39.1, the respondent required the contractor to deploy skilled workmen and technicians not under a contract for the supply of technical services, but, as the clause itself states, 'to carry out the works as per the specifications'. The contractor was bound to carry out the work as per the specifications to safeguard against any defective work and to ensure that the work is of the requisite quality. The respondent was entitled to insist upon the contractor carrying it out in the correct manner which would include the work of the contractor itself being done and supervised by qualified personnel. By clause 39.2, the respondent required the contractor to depute supervisory staff including qualified engineers not under a contract for the supply of such staff, but....
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....ntractor shall carry out any other tests as desired by BHEL engineers on erected equipment covered in the scope of this contract during testing and commissioning to demonstrate the satisfactory completion of any part or whole of work performed by the contractor. 46.16 During this period though the BHEL's/client's staff will also be associated in the work, the contractor's responsibility will be to arrange for the complete requirement of supervision, consumables, labour, T&P and IMTEs required till such time the commissioned units are taken over by the BHEL's customer. 46.18 It shall be the responsibility of the contractor to provide workmen of various categories in sufficient numbers alongwith Engineers/Supervisors including necessary consumables, T&P, IMTEs etc. during pre-commissioning, commissioning and post commissioning period to assist in commissioning of equipment and attending any problem in equipment erected by the contractor till handing over. The rates Quoted shall include all these contingencies also. Association of BHEL's/Client's staff during above period will not absolve contractor from above responsibilities." 21. These are usual clauses in such contracts. The t....
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....ider whether the contract falls within the ambit of Section 194C. As the respondent has accepted that it falls within Section 194C and has complied with its obligations thereunder, we refrain from deciding the issue as to whether it falls within Section 194C. 24. Faced with this, Mr. Putney relied upon the judgement of the Supreme Court in Commissioner of Income Tax Vs Bharti Cellular Ltd., (2011) 330 ITR 239 (SC), where the Supreme Court held as under:- "11. Before concluding, we are directing CBDT to issue directions to all its officers, that in such cases, the Department need not proceed only by the contracts placed before the officers. With the emergence of our country as one of the BRIC countries and with the technological advancement matters such as present one will keep on recurring and hence time has come when Department should examine technical experts so that the matters could be disposed of expeditiously and further it would enable the Appellate Forums, including this Court, to decide legal issues based on the factual foundation. We do not know the constraints of the Department but time has come when the Department should understand that when the case involves revenue ....