TaxTMI 
TaxTMI 
2017 (10) TMI 227
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....d in law, Ld. CIT(A) has erred in concluding that section 194C(3)(i) of the IT Act is applicable in the case of the assessee, while it is section 194C(3)(ii) which is applicable in the case as the value of the material supplied to the MTNL was not mentioned separately in the invoices of MIs HCL Infosystems Ltd. 4. On the facts and circumstances of the case and in law, Ld. CIT(A) has erred in concluding that the assessee had produced all invoices with regard to the purchase of equipments from MIs HCL Infosystems Ltd. while the Annexure- II of the additional evidence submitted by the assessee during the appellate proceedings had only one invoice - for RS.1,03,56,79,324/- while the assessment order of ITO(TDS) dated- 30/03/2013 mentions the total contract amount of RS.3,32,00,17,942/- and assessment order clearly mentions that the assessee had not furnished any information regarding the above contract work during the assessment proceedings. 5. On the facts and circumstances of the case and in law, Ld. CIT(A) has erred in concluding that MIs HCL Infosystems Ltd. had purchased the equipments supplied to the assessee from third parties as no such evidence was submitted ....
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.... 645,202,907/- 12,904,058/- 62,642,406/- 1,252,848/- 1,094,693,562/- 21,893,871/- 224,900,000/- 4,498,000/- 77,411,895/- 1,548,238/- 2,597,188/- 51,944/- Total 3,320,017,942/- 6,64,359/- 3.1 In the absence of any response from the assessee, it was assumed by the AO that the assessee has paid / credited all the above mentioned contract amount during FY 2010-11 and accordingly the assessee was liable to deduct tax at source amounting to Rs. 6,64,00,359/- in accordance with the provisions of section 194C/194J from these amounts credited/ paid. As there is no evidence brought before the AO to establish that this tax was deducted at source, the assessee was deemed to be in default for this amount of Rs. 6,64,00,359/-. Further the assessee was also liable to pay interest u/s. 201(1A) on this amount. As full details are not available, the amount of inter....
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....ased and that the additional evidences furnished under Rule 46A may not be admitted. It was stated that: "If the contract was only for the supply of material as claimed by the assessee, why the contractors was required to do pre-study planning, design POC for planning, network design etc. All this shows that this was a work contract. Hence payment made for purchasing equipments is clearly covered u/s 194C and the assessee was liable to deduct tax as source on the amount paid for supply of equipment keeping in view the object, nature of the infrastructure provided by the Contractor. Hence the additional evidence furnished by the assessee before your goodself on this account may not be admitted under Rule 46A of Income tax Rules, 1962." 6.1 We further note that MTNL strongly objects the findings of the concerned Assessing Officer. During the year under consideration, MTNL has awarded contract to M/s. HCL Infosystems Ltd. connected with the project. As evident from the contract, it was a contract on turnkey basis for supply of equipments and for installation services, deployment, redeployment etc., thus it involves two aspects which are as follows: i) Supply of eq....
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....broadcasting or telecasting: (h) carriage of goods or passengers by any mode of transport other than by railways: (i) catering; j) 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 person, other than such customer. As per sub-clause (e) of clause (iv) of the Explanation to Section 194C of the Income Tax Act 1961, work does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from person, other than such customer. 6.4 Further, relevant extracts of circular issued by the department which states that Section 194C would not cover a contract for the sale of goods: CIRCULAR: NO. 681, DATED 8-3-1994 SECTION 194C PAYMENTS TO CONTRACTORS AND SUBCONTRACTORS " .... 7. (vi)The provisions of this section will not cover contracts for sale of goods- (b) Where, however, the contractor undertakes to supply any article ....
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....Act vide Finance (No.2) Act, 2009, with effect from 1st October, 2009, which defines "work" to include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer. In fact, it is clarified that the definition of the word "work" will 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." 6.7 In the case of the State of Himachal Pradesh vs. Associated Hotels of India Ltd. (SC) [1972] 29 STC 474, the Hon'ble Supreme Court of India has observed as under:- "If the main object underlying the contract is to transfer property in or delivery of possession of a chattel as chattel, then the contract is one for sale. The test, observed their Lordships, is whether or not the work and labour bestowed ended in anything that can properly become the subject matter of a sale. Neither the ownership of the 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 wheth....
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....rugated boxes." 6.11 We further note that clarification regarding the word 'work' in section 194C in the Memorandum explaining the. provisions of the Finance Bill 2009 (page 216-17 of 324 ITR) read as under: "To bring clarity on this issue, it is proposed to provide that "work" shall not include manufacturing or supplying a product according to the requirement or specification of a customer by using raw material purchased from a person other than such customer as such a contract is a contract for 'sale'. This will however not apply to a contract which does not entail manufacture or supply of an article or thing (e.g., a construction contract). It is also proposed to include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, within the definition of 'work'. It is further proposed to provide that in such a case TDS shall be deducted on the invoice value excluding the value of material purchased from such customer if such value is mentioned separately in the invoice. Where the material component has not been separately mentioned in the invoice, TDS shall be....