TaxTMI 
TaxTMI 
2018 (10) TMI 1174
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....of Income Tax ( CIT(A)) dated 03.11.2012 for Assessment Year 2009-10 and 2010-11 respectively , wherein, he has held that the assessee is required to deduct tax at source u/s 194C of the Act on payment made to different parties. The assessee contested before him that the order passed by the ld Assistant Commissioner of Income tax (TDS) (ACIT(TDS)) , Dehradun passed u/s 201(1) read with section 201(1A) of the Act on 30.03.2011 is not sustainable. The ld AO has also filed appeals for two assessment years contesting the finding of the ld CIT (A) that the assessee is not required to deduct tax at source of payment made to foreign companies' u/s 195 but u/s 194C of the Act. The ld AO further aggrieved against the finding of the ld CIT (A) that the assessee is not required to deduct tax at source on payment to the State Trading Corporation of India Ltd u/s 194C as the contract was for supply of the equipment and not for work. 3. Briefly stated the facts are that the assessee is engaged in organizing SAF winter games, 2009( games) in Uttrakhand and is involved in development of infrastructure facilities such as stadiums, ice skating rink, development of Ice skiing slopes, ancillary spo....
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....reight and other expenses , which are covered u/s 194 C of the act. 6. Consequently, orders u/s 201(1) and 201(1A) of the Act were passed on 30.03.2011 for AY 2009-10. Identical are the facts for AY 2010-11. 7. Aggrieved assessee preferred appeal before the ld CIT (A) for both the years and the ld CIT (A) also passed orders in both the cases on the same date. 8. The ld CIT (A) with respect to the payment to foreign parties, he considered the submission of the assessee that along with the foreign companies and the Indian company a consortium was formed where the clear responsibilities were laid down. The foreign company was to supply the equipment for which separate invoices were raised therefore, according to the assessee it is payment for sale of goods, hence, contract for sale and not contract for work. The assessee further stated that consortium is an association of person and foreign party has merely sold goods to the assessee tax was not required to be deducted on that. In view of this, the ld CIT (A) held that as the payment is made to a consortium and the whole payment was to be made for the purpose of the work, tax is required to be deducted at source on the paymen....
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.... as it is a contract for sale of goods. The ld CIT (A) held that as the Assessing Officer himself held that tax was required to be deducted with reference to only incidental expenses but computed the TDS on the supply of material also. In view of this, he held that no tax is required to be deducted on this sum. The revenue aggrieved with this finding, has preferred appeal before us. 11. The ld Authorised Representative vehemently submitted that when the payments have been made to a foreign party for purchase of the goods, no tax is required to be deducted. He further referred to the decision of Hon'ble Supreme Court in DIT Vs. Linde AG Linde Engineering Division 73 Taxmann.com 212 (SC) and submitted that per circular No. 7 of 2016 dated 07.03.2016, no tax is required to be deducted as the consortium fulfills the conditions as laid down in para 3 of that circular. In view of this, he submitted that the ld CIT (A) has wrongly held that tax is required to be deducted u/s 194C of the Act. In short his argument was that tax is not at all required to be deducted either u/s 195 or u/s 194C of the Act. He further relied on several decisions. He further stated that property in the eq....
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....ance as far as the liability of assessee for TDS is concerned. With respect to the other payment, he submitted that assessee is the party who got the work executed and made the payment. Therefore, provisions of section 194C of the Act are clearly applicable to the facts of the case. He submitted that even if the recipients has deducted tax on the works contract executed by sub-contractors cannot absolve the assessee from its duty to deduct tax at source on payment made to them. He further stated that in case of STC the tax should have been deducted by the assessee on total sum including the payment for purchase of goods as STC has incurred several expenditure on behalf of assessee, which amounts to carrying on of the work as per provisions of section 194C of the Act. 15. We have carefully considered the rival contentions and perused the orders of the lower authorities. The brief facts of the case are that assessee is a body registered under The Societies Registration Act set up for organizing the South Asian Winter Games 2009. It is implementing agency for the games. The ld AO has conducted survey u/s 133A of the Act and found that on several payments assessee has failed to dedu....
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.... made directly to those parties and naturally, each of them individually charged to tax on their profits or losses. It is apparent that the common management is only for administrative convenience. Assessee has also made payment directly to the foreign equipment suppliers. It is not shown to us that any of the conditions stated in that circular are not fulfilled. In view of this, we hold that assessee has made payment to the foreign parties independently, directly and it shall be chargeable to tax in their own hands. Now the issue arises is that whether payment made to them is subject to deduction of tax u/s 195 in the hands of those parties or not. The assessee has shown bills raised by those parties placed at page No. 99 to 100 of paper book. The custom duty has also been paid by the assessee. The bills have also been raised by those parties on the assessee itself. The payments are also made as advances through letter off credits. On looking at the various bills, it is found that goods have been shipped by those parties from outside India. It is not shown by the revenue that title of the goods has passed in India. Contrary to that, it is consistently claimed by the assessee that ....
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....lear that assessee is a specified person covered under explanation (i)(g) being a society registered under the Societies Registration Act 1860. Therefore, the liability for deduction of tax rests on the assessee. 19. Further, all the parties to whom payment have been made are residents and therefore, they are the recipients and receipts by them is subject to deduction of tax at source. 20. The assessee has made payment to all the parties, to some of them as advance and to some of them on various letters issued by the assessee. Therefore, the fact of the payment is also proved. 21. The payment to the various parties has been made on account of carrying on of certain work by them. The assessee is also specifically form for the object of preparation for and holding the South Asian Federation Winter Games in February 2009 allotted to Indian Olympic Association. The functions of the assessee are to collect funds through grants for furtherance of the aims and objectives of the society. Assessee has stated that grants are received by the assessee and in turn, it are disbursed to the various recipients who were appointed as executing agencies to get the work done through contracto....
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....179 of the paper book. We have perused the same. The argument of the assessee is that if tax is recovered from the assessee it becomes refundable in the hands of the recipient. To mitigate such an impact the proviso has been added u/s 201 of the Act w.e.f. 01.07.2012 which provides that any person who fails to deduct tax in accordance with chapter XVII of the Act, shall not be deemed to be an 'assessee in default' on fulfillment of certain condition. The above amendment is on similar line as argued by the appellant. Though the above amendment has come in to effect from /7/2012 but Honourable Delhi high court has held in Ansal Landmark Townships Limited in 161 /2015 held that "11. The first proviso to Section 210 (1) of the Act has been inserted to benefit the Assessee. It also states that where a person fails to deduct tax at source on the sum paid to a resident or on the sum credited to the account of a resident such person shall not be deemed to be an assessee in default in respect of such tax if such resident has furnished his return of income under Section 139 of the Act. No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain....
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....re not place before us. Hence, we set aside this matter back to the file of the ld Assessing Officer with a direction to assessee to produce the bills of STC etc before ld AO who will examine them. If the invoice value shows the value of the material separately then assessee is required to deduct tax at source only on the invoice value excluding the value of material. Findings given by us with respect to the payment to the PSU with respect to Proviso to section 201 shall also apply mutatis mutandis to this payment also. Accordingly, the ground no. 2 of the appeal of the revenue is set aside to the file of the ld AO. 27. In the result the appeal of the assessee and the revenue for AY 2009-10 and 2010-11 on the issue of demands raised on the assessee by order u/s 201(1) and 201(1A) of the Act for both the years are disposed off with above direction. 28. Now we come to the appeal of the assessee against the order of the CIT(A), Dehradun dated 24.12.2014 passed for AY 2010-11 wherein, the penalty u/s 271C of the Act of Rs. 1152461/- levied by the JCIT, TDS, Dehradun vide order dated 25.03.2013 is confirmed. 29. The assessee submits that it has a bonafide belief that payment ma....