2018 (1) TMI 841

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....ining to the details of payments made to developers/contractors and tax deducted thereon. From the details filed, the AO noticed that the assessee had entered into certain agreements and MOU's, with the developer/contractor M/s Jaya Surya Developers, for carrying out the above activities and had failed to deduct tax at source on payments made to these parties with whom it had entered into agreements for the acquisition of land and formation of residential layout for the benefit of its members (requiring the carrying out of civil work such as laying of roads, drainage, electrification, etc.); which were in the nature of composite work contracts. The AO, inter alia, noticed that the aforesaid layout is to be developed as per the assessee's specifications and the words procurement of land meant that the developer does not own any land as on the date of agreement. In that view of the matter, the AO held that the aforesaid work, carried out by the developer/contractor on behalf of the assessee, is the nature of works contract and therefore the provisions of Sec. 194C of the Act was attracted. Since the assessee has failed to deduct tax at source on payments its made to developers/contra....

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.... of 2006 and the TAT's order in the case of M/s. Kautilya House Building Co-Operative Society Limited in ITA No. 1324 to 1337/Bang/2015 dated 7.4.2016 while allowing the assessee's appeal which have been accepted by the Department only for low tax effect and not in principle. For these and other grounds that may be raised during the course of appeal and actual hearing it is prayed that the order passed by the AO u/s. 201(1) and 201(1A) be upheld and the order of the learned Commissioner of Income Tax (Appeals) may be set aside and cancelled." 3.2 The grounds raised (Supra) relates to the single issue pertaining to the deletion of the demands raised u/s 201(1) and 201(1A) of the Act by the ld CIT(A) by following the decision of the co-ordinate bench of this Tribunal in the case of Kautilya House Building Cooperative Society in ITA No.1334 to 1337/Bang/2015 dated 7/4/2016, which had in turn followed the decision of the Hon'ble High Court of Karnataka in the case of Karnataka State Judicial Department Employees House Building Co-operative Society Ltd., (Supra). 3.3 The ld DR for Revenue was heard in support of the grounds raised (Supra). It is the contention of ....

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....-agriculture status, etc., to the developer. However, the fact remains that the agreements essentially and basically relate to the purchase of land development and purchase of residential sites from the developer/contractors. The relevant portion of the agreement of the assessee society with M/s Jayasurya Developers i.e; developmental contractor is as under:- "A. Whereas the first party is a housing cooperative society and has been acting upon its objects by facilitating its members residential sites and other supports,' B. Whereas the second party is a land developer, promoter and in the line of business of formation of sites, layout development, land procurement and other land promotion business; and C. Whereas the first party approached the second party to produce certain lands and develop the same and hand over residential sites to the society or its members as the society intended to allot sites for its members; and D. Whereas in respect of the offer and acceptance of the parties, the first party and the second party, on mutual terms and conditions, have entered into an Agreement on 701 June 2004, uherein the second party had agreed to p....

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....ther 3 Acres of land which are adjacent to the lands being developed in PHASE - I AND PHASE -II and further they hereby assure and agree that they shall hand over sital area about 70,000 (seventy thousand) square feet to the SECOND PARY as they have agreed in their earlier agreements. 4. The SECOND PARTY hereby agree and assure the FIRST PARTY that they shall hand over approximately about 10,25,000(Ten lakhs twenty Jive thousand) sq. feet of sital area out of all the THREE PHASES including the 3-00 Acres land as agreed in clause 3 supra. The SECOND PARTY hereby further agree that they shall hand over or execute sale deeds in respect of aforesaid available sital area to the members of the SOCIETY/FIRST PARTY in whatever manner the FIRST PARTY requires or instructs about measurements of sites. In case any discrepancy find in allotment of sites in each Phases as mentioned in clause 2 supra, i.e. shortfall or excess of sq. feet any technical reasons the SECOND PARTY hereby assure the FIRST PARTY that they shall handover or deliver an aggregate of 10,25,000 sq. feet of sital area out of all three Phases, here or there. 5. The PARTIES hereby mutually decided about the r....

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....ated on sq. ft. area of the property and the amount was paid for the purchases of completed property and not for development work carried out. The ld CIT(A) found that the agreements were only for purchase of sites and does not involve any 'works contract'. In our view, the aforesaid conclusion/finding of the ld CIT(A) cannot be faulted and the same is a correct reading of the scope of the agreements; which has to be treated as a whole and not in piece meal manner. The mere fact that the contractor/developer were required to layout roads and undertake other activities before the delivery of the completed sites cannot be either determinative of the facts or need to mean that the agreements entered into by the assessee society is a composite contract and amounts to a works contract. Thus, in our considered opinion, the case of the assessee is squarely covered by the decisions of the Hon'ble Karnataka High Court in the case of Karnataka State Judicial Department Employees House Building Co-operative Society Ltd., (Supra); the relevant portion of which judgment is extracted hereunder:- "the short that fell for the consideration for the Assessing Officer, the Commissioner of In....