TaxTMI 
TaxTMI 
2017 (1) TMI 312
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....t appreciating that the whole contract is a composite contract 3. On the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate that on works contract TDS has to be made in view of CBDT circular No. 13 of 2006 dt. 13-12-2016. 4. On the facts and in the circumstances of the case the Ld. CIT(A) erred in following the decision of the Hon'ble ITAT, Nagpur in appeal No. 110, 11 & 112/Nag/2011, dt. 18-12-2015 in the case of MSPGL, Nagpur without appreciating that the facts of the present case are distinguishable from the facts of the case relied on by him. 2. At the outset in this case learned counsel of the assessee submitted that the issue is covered in favour of the assessee by the decision of this ITAT in assessee's own case in ITA Nos. 110,111&112/Nag/2011 dated 18-12-2015. Learned counsel submitted that this fact is pointed out in the ground No. 4 itself. Learned counsel submitted that there is no distinction whatsoever in the facts of the present case and the facts of the aforesaid case. 3. Per contra learned D.R. relied upon the order of the AO, but he could not point out any distinguishing feature in the facts of the present case a....
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....Appeals)' order that the Revenue is in appeal before us. 7. Upon careful consideration we deem it appropriate to refer to the ITAT order as mentioned above, wherein it was held as under : "18. We find that it is a plea of the assessee that the assessee has entered into distinct/separately identifiable contracts for three clearly distinguishable portions viz. supply equipment, erection and civil works. It is the assessee's plea that on the contract for supply equipment no tax is to be deducted. The authorities below have opined that the three contracts as mentioned above were part of a composite contract. For this proposition authorities below have held that this was a composite contract as the bid specification document mentioned that the intention of this specification is to enter into single point responsibility contract. Further it was held that contract for supply of equipment and subsequent erection, commissioning and testing were awarded based on a single bid. That the main object or intention of the owner was to set up main power plant of thermal unit. That as per award of the contract the responsibility of the contractor for successful completion of plant/equipm....
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....herefore, section 194C was not attracted. The Assessing Officer, however, held that the performance and execution of contract was as a composite contract and, therefore, the tax was deductible by the assessee on the entire consideration paid under the three contracts treating same as a composite contract. Therefore, he assessed tax payable on the supply portion and also levied interest on the said amount. On appeal, the Commissioner (Appeals) affirmed the order of the Assessing Officer. On second appeal, the Tribunal held that the entire arrangement between the assessee and its contractors could, at best, be called as divisible contract and that it should be characterized as a supply contract. Ultimately, the Tribunal held that the assessee could not be characterized as the assessee in default, when there was no obligation on the part of the assessee to deduct tax under section 194C for supply portion. On the revenue's appeal: HELD A harmonious reading of the general terms and conditions of the contract makes it clear that after the bid offered by the contractor is accepted and the assessee decides to award the contract to the successful bidd....
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....tractor to carry out its obligation under the other contracts hand over the goods so supplied to them. The moment the materials are supplied under the agreement of supply and title passes to the assessee, the agreement for supply comes to an end. In order to see that the ultimate object of entering into contract is achieved, it is made clear in the agreement for supply, that the obligation under the contract would not come to an end. The moment the machinery and the material is supplied under the agreement of supply, the obligation of the contract continues till the work entrusted to them is complete. That, by itself, would not ma ke it a composite contract. It is clearly expressed in the contract, how these contracts have to be construed. The three agreements are separate and, therefore, the transaction in question cannot be construed as a case of composite contract and the assessing authority as well as the appellate commissioner were not justified in holding that it is a composite contract and TDS ought to have been deducted from the entire consideration under section 194C. [Para 12] It is not in dispute that in respect of agreement for supply, which is a distinct contr....
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....the statutory provisions, the various terms of the contract, the legal position as explained in the various judgments, has rightly come to the conclusion that the transaction in question is not a case of composite contract. It is a case of the distinct contracts and the contract for supply of materials is a separate distinct contract in respect of which no deduction is permissible under section 194C. [Para 14} In that view of the matter, there is no merit in this appeal and same is to be dismissed. [Para 15]" 20. Now we examine the present case on the anvil of above said exposition. In the present case also we have three contracts, one for supply of goods/equipment, another for erection and another for civil engineering works. The dispute in the present case also is with respect to the deduction of tax with respect to the contract pertaining to supply of goods. The examination of the general terms and conditions of the contract here also proves that after the bid offered by the contractor is accepted and the assessee decides to award the contract to the successful bidder, a divisible contract covering the entire scope of the partial/total turnkey has to be entered....
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....tract. No division is, therefore, permissible in respect of a contract for supply of materials for carrying out the work. It is in a case of distinct contracts. The contract for supply of material being a separate and distinct contract, no division is permissible under Section 194C of the Act. Section 194C has sufferedan amendment also with effect from October 1, 2009 and the provision has been made very clear without any ambiguity. 8.Thus, we can conclude safely that if a person executing the work, purchases the materials from a person other than the customer, the same would not fall within the definition of 'work' under Section 194C of the Act." 23. We further find that in the present case the assessee is not liable to deduct tax at source on the supply portion as per Explanation (iv) (e) to section 194C. Section 194C mandates that a person responsible for paying any sum for carrying out any work in pursuance of the contract between the contractor and a specified person shall at the time of credit of such sum with the account of the creditor or at the time of payment thereof deduct a specified sums as income-tax. The term "work" mentioned in the contract....