Maharashtra State Power Generation Co.,Ltd., V. The Assistant Commissioner of Income-Tax (TDS),Circle-2, Nagpur

ITA 110/NAG/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1550 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 10-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: J D MISTRI
• Keywords: Advance ruling
• Section: 194C; 201(1)

Judgement Text

1 ITA NOS.110, 111 & 112/NAG/2011 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO S . 110, 111, 112 & 113 /NAG/201 1 ASSESSMENT YEAR S : 200 8 - 09, 2009 - 10 & 2010 - 11. . MAHARASHTRA STATE POWER ASSTT. COMMISSIONER OF GENERATION CO. LTD., MUMBAI. VS. INCOME - TAX (TDS), CIRCLE - 2, PAN AAECM 2935R NAGPUR. APPELLANT. RESPONDENT. APPELLANT BY : SHRI J.D. MISTRI. RESPONDENT BY : S HRI NARENDRA KANE. DATE OF HEARING : 0 2 - 1 1 - 2015. DATE OF PRONOUNCEMENT : 18 TH DEC., 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . ITA NOS. 110,111 & 112/NAG/2011 ARE APPEALS BY THE ASSESSEE DIRECTED AGAINST THE COMMON ORDER OF LEARNED CIT(APPEALS) - II, NAGPUR DATED 28 - 03 - 2011 AND PERTAIN TO ASSESSMENT YEAR 2008 - 09, 2009 - 10 AND 2010 - 11. ITA NO. 113/NAG/2011 IS DIRECTED AGAINST SEPARATE ORDER OF LEARNED CIT(APPEALS) OF EVEN DATE AND PERTAINS TO ASSESSMENT YEAR 2010 - 11. COMMON GROUNDS ARE RAISED IN THESE APPEALS READ AS UNDER : 1:0 RE .: CONSIDERING THE APPELLANT AS AN ASSESSEE IN DEFAULT U/S 201(1) R.W.S. 194C OF THE INCOME - TAX ACT, 1961: 1.1 THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF HOLDING THAT THE PROVISIONS OF SECTION 194C ARE APPLICABLE TO THE PAYMENTS MADE BY THE APPELLANT T O BGR ENERGY SYSTEM (INDIA) LTD. (BGR) AND BHARAT HEAVY ELECTRICALS LTD. (BHEL) (FOR AY 2010 - 11 IN ITA 113 TO LARSEN & TUBRO LTD. L&T) FOR SUPPLY OF EQUIPMENTS AND THEREBY HOLDING THAT THE APPELLANT WAS AN ASSESSEE IN DEFAULT SINCE IT HAS NOT DEDUCT ED TAX AT SOURCE WHILE MAKING 2 ITA NOS.110, 111 & 112/NAG/2011 PAYMENTS IN TERMS THEREOF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 194C. 1.2 THE APPELLANT SUBMITS THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF ITS CASE AND THE LAW PREVAILING ON THE SUBJECT THE CONTRACTS IN QUESTION WERE C ONTRACTS FOR SUPPLY OF EQUIPMENTS AND NOT A CONTRACT FOR CARRYING OUT ANY WORK AND HENCE THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE THERETO AND THE STAND TAKEN BY THE ASSESSING OFFICER IN THIS REGARD IS MISCONCEIVED, INCORRECT AND ERRONEOUS AND THE COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE HELD AS SUCH. 1.3 THE APPELLANT SUBMITS THAT THE IMPUGNED ORDER PASSED BY THE ASSESSING OFFICER TREATING IT AS AN ASSESSEE IN DEFAULT BE STRUCK DOWN AS BAD IN LAW. 2: 0 RE: GENERAL 2.1 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE AND/OR MODIFY IN ANY MANNER WHATSOEVER ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. SINCE FACTS ARE IDENTICAL WE ADJUDICATE THE ISSUE BY REFERRING TO THE FACTS AND FIGURES OF LEARNED CIT(APPEALS) COMMON ORDER MENTIONED ABOVE. 2. BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE APPELLANT COMPANY IS WHOLLY OWNED BY THE GOVERNMENT OF MAHARASHTRA THROUGH MSEB HOLDING CO. LTD. ENGAGED IN THE ACTIVITY OF GENE RATION OF ELECTRICITY. DURING THE F.YRS. 2007 - 08, 2008 - 09 AND 2009 - 10, THE APPELLANT COMPANY WAS SETTING UP A POWER PLANT AT KHAPARKHEDA AND HAD INTER - ALIA ENTERED INTO THE FOLLOWING AGREEMENTS: A) AGREEMENT DT. 03 - 07.2007 BEING THE LETTER OF AWARD FOR SUPPL Y OF EQUIPMENTS FOR BALANCE OF PLANT ENTERED INTO WITH GEA ENERGY SYSTEM (INDIA) LTD.. (GEA) NOW KNOWN AS BGR ENERGY SYSTEM (INDIA) LTD. (BGR) AND B) AGREEMENT DT. 27 - 06 - 2007 BEING THE CONTRACT AGREEMENT ENTERED INTO BY THE APPELLANT WITH BHARAT HEAVY ELECT RICAL LTD. (BHEL). 3.1 IN ADDITION TO THE ABOVE, THE APPELLANT HAS ALSO ENTERED INTO OTHER CONTRACTS WITH BGR AND BHEL AND FOR ERECTION, TESTING AND COMMISSIONING OF THE PLANTS PURCHASED BY IT FOR BGR AND BHEL AND FOR CARRYING OUT THE CIVIL AND STRUCTURAL WORKS REQUIRED FOR THE SAID PLANTS. NO T A X WAS DEDUCTED ON THE PAYMENT MADE FOR THE FIRST CONTRACT ON THE GROUND THAT THIS WAS A PURELY PURCHASE/SUPPLY CONTRACT. HOWEVER, TAX WAS 3 ITA NOS.110, 111 & 112/NAG/2011 DEDUCTED ON THE PAYMENTS MADE FOR OTHER TWO CONTRACTS ON THE GROUND THAT THEY WERE FOR ERECTION AND TESTING AND ALSO FOR CARRYING OUT THE CIVIL AND STRUCTURAL WORKS REQUIRED FOR THE SAID PLANT. 3.2 DURING THE COURSE OF SPOT VERIFICATION CARRIED OUT BY THE DCIT(TDS) ON 30.12.2009, IT WAS NOTICED BY THE DCIT(TDS) THAT THE APPELLANT H AS NOT DEDUCTED TAX AT SOURCE ON THE PAYMENTS MADE BY IT TO BGR AND BHEL ON THE GROUND THAT IT ONLY PERTAINED TO SUPPLY OF EQUIPMENT. 3.3 THE AO HAS, DURING THE COURSE OF PROCEEDINGS U/S 201 & U/S 201(1A), VERIFIED THE CONTRACTS AND HELD THAT THERE WAS A C OMPOSITE CONTRACT ON WHICH TAX IS DEDUCTIBLE AT SOURCE AS PER PROVISIONS OF SECTION 194C. THE A.O. HAS ARRIVED AT THIS CONCLUSION BASED ON THE TERMS AND CONDITIONS IN THE VARIOUS AGREEMENTS ENTERED INTO BY THE APPELLANT AND BHEL AND BGR SYSTEMS. 3.4. THE A O HAS ALSO CONSIDERED THE BID SPECIFICATION FOR THE KHAPARKHEDA TPS EXPANSION PROJECT 1X500 MW ISSUED BY APPELLANT AND OBSERVED AS FOLLOWS: THE INTENT OF THIS SPECIFICATION IS TO ENTER INTO SINGLE POINT RESPONSIBILITY CONTRACT. HOWEVER, WITH SINGLE POINT RESPONSIBILITY TWO SEPARATE CONTRACTS, ONE FOR DESIGN, ENGINEERING, MANUFACTURE, TESTING AT WORKS, SUPPLY AND THE OTHER FOR INSTALLATION, ERECTION, TESTING AND COMMISSIONING OF MAIN PLANT COMPRISING OF STEAM GENERATOR, STEAM TURBINE GENERATOR AND OTHER ASS OCIATED AUXILIARIES AND BALANCE OF PLANT EQUIPMENT FOR KHAPARKHEDA TPS EXPANSION PROJECT 1X500W COVERING COMPLETELY THE SCOPE OF WORK SPECIFIED IN THE ACCOMPANIED SPECIFICATION FORMING COMPLETELY COORDINATED AND ENGINEERED MAIN PLANT PACKAGE ALL IN ACCOR DANCE WITH THE SPECIFICATIONS AS DETAILED OUT IN THE VARIOUS SECTIONS OF THIS BID DOCUMENT. 3.5 THE AO HAS CONSIDERED THE PROVISIONS OF SECTION 194C OF THE I.T. ACT AND HELD THAT THERE WAS A WORKS CONTRACT BETWEEN THE APPELLANT MAHAGENCO ON THE ONE HAND AND BHEL AND BGR SYSTEMS ON THE OTHER HAND. THE SUPPLY CONTRACT AND THAT OF ERECTION WERE IN ESSENCE A COMPOSITE CONTRACT, WHICH ATTRACTED THE PROVISIONS OF SECTION 194C. THE AO HAS THUS LEVIED AN INTEREST U/S 201(1A) OF RS.96,88,494/ - , RS.2,89,56,270/ - A ND RS.13,10,98,180/ - . 4 ITA NOS.110, 111 & 112/NAG/2011 4. BEFORE THE LEARNED CIT(APPEALS) THE ASSESSEE RAISED COMMON GROUNDS FOR ALL THE THREE YEARS. FURTHER MORE THE ASSESSEE RAISED THE FOLLOWING ADDITIONAL GROUND BEFORE THE LEARNED CIT(APPEALS): THE APPELLANT SUBMITS THAT THE RECIPIEN T VIZ. BGR ENERGY SYSTEMS (INDIA) LTD. (BGR) AND BHARAT HEAVY ELECTRICALS LTD. (BHEL) HAVE ALREADY MADE PAYMENT OF ADVANCE TAXES ON THE AMOUNT RECEIVED BY THEM FROM THE APPELLANT DURING THE YEAR UNDER CONSIDERATION AND HENCE THE TAX DEDUCTIBLE BY THE APPEL LANT ON THE SAID PAYMENTS CANNOT BE RECOVERED FROM THE APPELLANT. THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(APPEALS) THAT THOUGH THE BID WAS A COMPOSITE BID THE SAME HAD DISTINCTLY/SEPARATELY IDENTIFIABLE CONTRACTS FOR THE THREE CLEARLY DISTINGUISHAB LE PORTIONS : I) SUPPLY OF EQUIPMENT; II) ERECTION AND III) CIVIL WORKS. NO TAX IS REQUIRED TO BE DEDUCTED ON THE CONTRACT FOR SUPPLY OF EQUIPMENT. ON THE ERECTION AND CIVIL WORKS COMPONENT, TDS HAS BEEN DONE AS PER PROVISIONS OF SECTION 194C. APPELLANT HAS ALSO RELIED ON THE FOLLOWING DECISIONS : I) SENIOR ACCOUNTS OFFICER (O&M), HARYANA POWER CORPORATION LTD. VS. ITO [2006] 103 TTJ 584 (DEL). II) POWER GRID CORPORATION OF INDIA LTD. VS. ACIT [2007] 112 TTJ 654 (HYD). III) ACIT VS. ANDHRA PRADESH POWER GENERATION CORPORATION LTD. [2009] TIOL 346 ITAT (HYD). THE ASSESSEE FURTHER COUNTERED THE VARIOUS OBSERVATIONS OF THE AO. CONSIDERING THE ABOVE LEARNED CIT(APPEALS) OPINED THAT THE CONTRACTS AWARDED TO BGR SYSTEMS LTD. AND BHEL WERE COMPOSITE CONTRACTS. FOR THIS PROPOSITION T HE LEARNED CIT(APPEALS) REFERRED TO THE FOLLOWING AOS REASONING : I) THE CONTRACTS FOR SUPPLY OF EQUIPMENT AND SUBSEQUENT ERECTION, COMMISSIONING AND TESTING WITH BHEL FOR THE BOILER TURBINE GENERATOR WERE AWARDED BASED ON A SINGLE BID. II) THE MAIN OBJE CT OR INTENTION OF THE OWNER WAS TO SET UP MAIN PLANT OF THERMAL POWER UNIT AT KHAPARKHEDA. THE A.O. HAS RELIED ON THE INTENT 5 ITA NOS.110, 111 & 112/NAG/2011 OF BID SPECIFICATIONS AND POINTED OUT THAT SUBSEQUENT TO THE SINGLE BID AN ORDER WAS PLACED WITH BHEL FOR SUPPLY AND INSTALLATION OF 500 MW CAPACITY, MAIN PLANT BTG PACKAGE WITH PROJECT COMPLETION SCHEDULE. THE BALANCE OF PACKAGE CONTRACT WAS ENTERED INTO WITH BGR SYSTEMS FOR AN EPC CONTRACT ON TURNKEY BASIS, SO THAT ALL INPUTS ARE MADE AVAILABLE TO BHEL BY BOP CONTRACTOR AS PER REQU IREMENT OF THE MAIN PLANT BTG PACKAGE IN THE PROJECT COMPLETION SCHEDULE. III) AS PER THE AWARD OF THE CONTRACT, THE RESPONSIBILITY OF THE CONTRACTOR FOR THE SUCCESSFUL COMPLETION OF THE PLANT / EQUIPMENT AS PER SPECIFICATION AND A BREACH IN ONE CONTRACT S HALL AUTOMATICALLY BE CONSTRUED AS A BREACH OF OTHER CONTRACT WHICH WILL CONFER A RIGHT ON THE OWNER TO TERMINATE THE OTHER CONTRACT ALSO AT THE RISK AND THE COST OF THE CONTRACTOR. 5. CONSIDERING THE ABOVE, LEARNED CIT(APPEALS) AGREED THAT THE ENTIRE SPE CTRUM OF ACTIVITIES FROM SUPPLY OF EQUIPMENT TO ERECTION AND COMMISSIONING OF BTG WITH BHEL AND BGR SYSTEMS HAVE THE ELEMENTS OF A COMPOSITE CONTRACT. LEARNED CIT(APPEALS) OBSERVED THAT THE INTENTION OF THE MAHAGENCO IS TO PUT UP A POWER PLANT AS SPECIFIED IN THE BID DOCUMENT. THAT T HE CONTRACT WAS AWARDED TO BHEL TO SET UP THE BTG PLANT. BHEL IS A PUBLIC SECTOR ENTERPRISE WHICH IS ENGAGED IN ENGINEERING AND MANUFACTURING IN THE POWER SECTOR. IN RESPECT OF THE BTG CONTRACT DATED 27 - 06 - 2007 WITH BHEL, AO HAS POINTED OUT THAT ALTHOUGH THE SUPPLY OF MACHINERY WAS BY TE R MS OF A SEPARATE CONTRACT THERE WERE NO EXPLICIT CLAUSES REGARDING TRANSFER OF TITLE OF MACHINERY. THAT O N T HE CONTRARY, THE AO HAS OBSERVED IT WAS ONLY FROM DATE OF SUCCESSFUL COMPLETION OF THE TRIAL OPERATION OF THE UNIT THAT THE PLANT SHALL BE TAKEN OVER BY THE OWNER. THAT A S FAR THE BOP CONTRACT WITH BGR SYSTEMS, IT IS NOTICEABLE FROM THE AGREEMENT CLAUSE I N THE CONTRACTORS OBLIGATION/LIABILITIES ITSELF SPECIFIES THAT THE CONTRACT SHALL BE A TURNKEY CONTRACT ON THE BASIS OF SUPPLY CUM ERECTION ON A SINGLE SOURCE RESPONSIBILITY. THAT T HUS THE TERMS AND CONDITIONS OF THE CONTRACT AGREEMENT AND THE OBLIGATION S AND LIABILITIES OF THE CONTRACTOR, CLEARLY INDICATE THAT THERE IS A COMPOSITE CONTRACT. 6. LEARNED CIT(APPEALS) FURTHER OBSERVED THAT THE APPELLANT HAS RELIED ON EXPLANATION (IV)(E) TO SECTION 194C FOR SUPPORTING HIS DEFINITION OF WORK, WHICH ESSENTIALL Y CONTEMPLATES MANUFACTURE OR SUPPLY OF A PRODUCT. THAT A PPELLANT HAS FURTHER EMPHASIZED THAT IN THIS CASE, NO MATERIAL WAS PURCHASED FROM MAHAGENCO BY 6 ITA NOS.110, 111 & 112/NAG/2011 EITHER BHEL OR BGR SYSTEMS. THEREFORE, CLAUSE (E) TO EXPLANATION (IV) TO SECTION 194C IS APPLICABLE. IN THIS CONNECTION LEARNED CIT(APPEALS) REFERRED TO CLAUSE (E) OF EXPLANATION (IV) TO SECTION 194C AND OBSERVED THAT SINCE THE RELEVANT CLAUSE OF THE EXPLANATION IS APPLICABLE ONLY IN THE CONTEXT OF MANUFACTURING OR SUPPLYING A PRODUCT, IT WAS NECESSARY TO APPRECIATE WHETHER THE SETTING UP OF A POWER PLANT CAN BE EQU A TED WITH MANUFACTURING OR SUPPLY OF A PRODUCT. LEARNED CIT(APPEALS) IN THIS REGARD REFERRED TO THE DEFINITION OF MANUFACTURE IN THE DICTIONARY AND OPINED HAT SETTING UP OF A POWER PLAN T CANNOT BE APPROPRIATELY DESCRIBED BY THE WORD MANUFACTURE LEARNED CIT(APPEALS) FURTHER REFERRED TO THE ASSESSEES CONTENTION THAT WHEN THE EXPLANATORY NOTES TO THE FINANCE BILL EXCLUDED CONSTRUCTION CONTRACT FROM AMENDED EXPLANATION (IV) (E) , IT ONLY REFERS CONSTRUCTION OF BUILDING. HOWEVER, LEARNED CIT(APPEALS) WAS NOT CONVINCED. SHE OBSERVED AS UNDER : THE CHAMBERS 20 TH CENTURY DICTIONARY DEFINES CONSTRUCTION AS ACT OF CONSTRUCTING ANYTHING PILED TOGETHER, BUILDING. THE DEFINITION THUS ENVISAGES THE EMERGENCE OF A STRUCTURE. THUS ALTHOUGH THE DEFINITION INCLUDES THE BUILDING , ERECTION OF A POWER PLANT CAN BE REASONABL Y HELD TO BE AN ACTIVITY OF CONSTRUCTION. IT IS THUS EVIDENT THAT TERM CONSTRUCTION IS MORE SUITABLE TO THE ACT OF PUTTING UP A POWER PLANT THAN THE TERM MANUFACTURING. THEREFORE, APPELLANTS ARGUMENT THAT A POWER PLANT IS MERELY SET UP AND NOT CONSTR UCTED IS SPECIOUS. 7 . LEARNED CIT(APPEALS), THEREFORE, REJECTED THE RELIANCE OF THE ASSESSEES COUNSEL ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GLENMARK PHARMACEUTICALS LTD. 324 ITR 199. LEARNED CIT(APPEALS) PROCEEDED TO CONCLUDE AS UNDER : THE APPELLANTS CASE IS THAT THERE IS NO CONSTRUCTION OF A POWER PLANT. RATHER THE ACTIVITY FALLS WITHIN THE AMBIT OF WORKS CONTRACT. AS THE SUPPLY OF EQUIPMENT WAS NOT FROM THE CUSTOMER, TAX HAD TO BE DEDUCTED ONLY ON THE EREC TION, COMMISSIONING AND TESTING CONTRACT. HOWEVER, AS DISCUSSED IN PARA 6.4 ABOVE THE CONTRACTS ENTERED INTO THE APPELLANT CAN BE HELD TO BE COMPOSITE CONSTRUCTION CONTRACTS. IT IS FURTHER CLEAR THAT A CONSTRUCTION CONTRACT IS OUTSIDE THE PURVIEW OF CLAUSE (E) OF EXPLANATION (IV) TO SECTION 194C. IT IS ALSO THE APPELLANTS ARGUMENT THAT THE CONTRACTOR HAS NOT SOURCED THE MATERIAL FROM A PERSON OTHER THAN THE CUSTOMER AND THE CONTRACTOR ITSELF HAS SUPPLIED THE EQUIPMENT TO PUT UP THE POWER PLANT AS PER THE T ERMS OF THE 7 ITA NOS.110, 111 & 112/NAG/2011 CUSTOMER. AS POINTED OUT BY THE A.O. AND AS EVIDENT FROM THE EXPLANATORY NOTES TO THE AMENDED SECTION 194C, THIS WAS A CLARIFICATION INTRODUCED IN RESPECT OF OUTSOURCING CONTRACTS. APPELLANT HAS ITSELF STATED VIDE SUBMISSION DT. 14.02.2011 THAT THE CONTRACT IN QUESTION WAS NOT AN OUTSOURCING CONTRACT. FURTHER, AS HELD BY A.O., THE CONTRACT FOR SUPPLY AND THE CONTRACT FOR ERECTION, COMMISSIONING AND TESTING OF THE POWER PLANT CANNOT BE ARTIFICIALLY BISECTED AND A COMPOSITE CONTRACT EXISTS FOR C ONSTRUCTION OF A POWER PLANT. THEREFORE, THE NEED FOR LOOKING THE SOURCE OF SUPPLY OF THE COMPONENTS WOULD NOT ARISE IN THE APPELLANTS CASE BECAUSE THE EXPLANATORY NOTE ITSELF EXCLUDES THE CONSTRUCTION CONTRACT FOR SUPPLY OF EQUIPMENTS AND ERECTION, COMMI SSIONING AND TESTING IS A COMPOSITE CONTRACT, THE INTENTION OF WHICH IS TO SET UP OR CONSTRUCT A POWER PLANT. 8. LEARNED CIT(APPEALS) FURTHER HELD THAT THE DECISION OF THE TRIBUNAL RELIED UPON BY THE AO IN THE CASE OF ESSAR OIL LTD. VS. ITO 77 ITD 92 WAS ENTIRELY APPLICABLE. LEARNED CIT(APPEALS) FURTHER FOUND FAULT WITH THE ASSESSEES DISTINGUISHING THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF ANSALDO ENERGIA SPA VS. ITAT 310 ITR 237. LEARNED CIT(APPEALS) FURTHER FOUND THAT FOLLOWING CASE LAWS RELIED UPON BY THE ASSESSEE DISTINGUISHABLE: A) HARYANA POWER GENERATION CORPORATION 103 TTJ (DEL). B) POWER GRID CORPORATION VS. ACIT 112 TTJ 654. C) ACIT VS. ANDHRA PRADESH POWER GENERATION CORPORATION [2009] TIOL 346 ITAT HYDERABAD. 9. LEARNED CIT(APPEALS ) CONCLUDED AS UNDER : IT IS EVIDENT THAT A.O. HAS CONSIDERED THE ENTIRETY OF THE FACTS AND HELD THAT IT IS A COMPOSITE CONTRACT COMPRISING OF DIFFERENT ELEMENTS. THE DIFFERENT ELEMENTS FROM SUPPLY OF EQUIPMENT TO THE ERECTION, COMMISSIONING AND TESTI NG IS THUS CONSTITUTES A SEAMLESS AND INTEGRATED ACTIVITY IN TERMS OF THE COMPOSITE CONTRACT. A.O. HAS ALSO RIGHTLY RELIED ON THE FACT THAT A SINGLE SOURCE RESPONSIBILITY AND CROSS BREACH CLAUSES SPELT OUT IN THE TERMS OF THE CONTRACT TO PUT UP THE POWER PLANT AND THE INTENTION OF THE APPELLANT WAS TO CONSTRUCT A POWER PLANT. FURTHER THERE WAS NO TRANSFER OF CHATTEL AS THE TITLE OF GOODS WAS NOT PASSED ON TO THE APPELLANT BY THE CONTRACTORS. THEREFORE, THE A.O. RIGHTLY HELD THAT, THE ASSESSEE HAS COMM ITTED A DEFAULT BY NON DEDUCTION OF TAX ULS.194C ON THE FOLLOWING AMOUNTS: F.YRS. CONTRACTUAL PAYMENTS TO BHEL CONTRACTUAL PAYMENTS TO BGR 2007 - 08 2008 - 09 2009 - 10 RS.L,39,59,15,583/ - RS.5,52,44,55,338/ - RS.324,51,97,895/ - RS. 1 0,40,00,0001 - RS.2,09 ,06,11,083/ - RS.307,19,33,656/ - 8 ITA NOS.110, 111 & 112/NAG/2011 I, THEREFORE, UPHOLD THE FINDINGS OF THE A.O. THAT INTEREST IS LEVIABLE U/S, ULS.201(IA) OF LT.ACT. / AS REGARDS THE ADDITIONAL GROUND RAISED FOR A.YR.2010 - 11, THE APPELLANT HAS POINTED OUT THAT THE RECIPIENT BGR ENERGY SYSTEM INDIA LTD. AND BHEL HAVE ALREADY MADE PAYMENTS OF ADVANCE TAX ON THE AMOUNTS RECEIVED BY THEM. THEREFORE, THEY ARE NOT LIABLE TO TDS ON THE SAID PAYMENTS. THIS GROUND IS COVERED IN FAVOUR OF THE APPELLANT BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S. HINDUSTAN COCA C OLA BEVERAGE PVT.LTD. VS. CIT 293 ITR 226, THE HON'BLE SUPREME COURT HAS HELD AS FOLLOWS: 'BE THAT AS IT MAY, THE CIRCULAR NO. 275/201/95 - IT(B) DATED 29.01.1997 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, IN OUR CONSIDERED OPINION, SHOULD PUT AN END T O THE CONTROVERSY. THE CIRCULAR DECLARES 'NO DEMAND VISUALIZED UNDER SECTION 201 (1) OF THE INCOME TAX ACT SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER - IN - CHARGE OF TDS, THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE - ASSESSEE. HOW EVER, THIS WILL NOT ALTER THE LIABILITY TO CHARGE INTEREST UNDER SECTION 201 (1 A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE - ASSESSEE OR THE LIABILITY FOR PENALTY UNDER SECTION 271 C OF THE INCOME TAX ACT . A. O . MAY VERIFY T HE FACTUAL POSITION AND GIVE RELIEF ACCORDINGLY. THIS GROUND IS ALLOWED. 10 . AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. 1 1 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SHRI J.D. MISTRI, VEHEMENTLY ARGUED THAT THE REVENUE AUTHORITIES HAVE TOTALLY ERRED IN TREATING ALL THE CONTRACTS AS COMPOSITE CONTRACTS. HE SUBMITTED THAT BOTH THE BID S W ERE A COMPOSITE BID. THE SAME HAD DISTINCTLY/SEPARATELY IDENTIFIABLE CONTRACTS FOR THE THREE CLEARLY DI STINGUISHABLE PORTIONS VIZ. S UPPLY EQUIPMENT, ERECTION, CIVIL WORKS. HE SUBMITTED THAT NO TAX IS REQUIRED TO BE DEDUCTED ON THE CONTRACT FOR THE SUPPLY OF EQUIPMENT. LEARNED COUNSEL FURTHER SUBMITTED THAT LEARNED CIT(APPEALS) HAS ERRED IN DISTINGUISHING T HE DECISIONS RELIED UPON BY THE ASSESSEE. LEARNED COUNSEL TOOK US THROUGH THE PAPER BOOK AND REFERRED TO THE AGREEMENTS UNDER BIDE SPECIFICATION TO SUPPORT THE POINT CANVASSED BY HIM. LEARNED COUNSEL FURTHER PLACED RELIANCE UPON THE FOLLOWING DECISIONS : 1 ) M /S VIVEK PHARMACHEM (INDIA) LTD. VS. ITO ITA NO. 66 TO 69 /JP/2012 OF ITAT, JAIPUR BENCH ORDER DATED 25 - 05 - 2012 9 ITA NOS.110, 111 & 112/NAG/2011 2) CIT VS. EXECUTIVE ENGINEER (HONBLE HIGH COURT OF KARNATAKA) I.T. APPEAL NO. 92 TO 97 OF 2014 ORDER DATED AUGUST 18, 2015. 3) NTPC VS. ITO IN ITA NO. 68, 101 & 69 /V/2012 VIDE ORDER DATED 22 - 07 - 2013 OF ITAT VISAKHAPATNAM BENCH. 4) SENIOR ACCOUNTS OFFICER (O&M), HARYANA POWER GENERATION CORPN. LTD . VS. ITO (2006) 103 TTJ 584 (DEL.). 5. POWER GRID CORPORATION OF INDIA LTD. VS. ACIT (2007) 108 I TD 340 (HYD.). 6. ACIT VS. ANDHRA PRADESH POWER GENERATION CORPORATION LTD. (2009) TIOL 346 - ITAT - HYD. 7. ISHIKAWAJMA - HARIMA HEAVY INDUSTRIES CO. LTD. VS. DIRECTOR OF INCOME - TAX (2007) 288 ITR 408 (SC). 8. CIT VS. HUNDAI HEAVY INDUSTRIES CO. LTD. (2007) 291 ITR 482 (SC). 9. DIT VS. LG CABLE LTD. (2011) 197 TAXMAN 100 (DELHI). 10. DECISION OF THE AUTHORITY FOR ADVANCE RULINGS (INCOME - TAX), NEW DELHI IN THE CASE OF JOINT STOCK COMPANY FOREIGN ECONOMIC ASSOCIATION TECHNOPROMEXPORT 322 ITR 409. 11. TE CHNIP ITLAY SPA VS. ADD.CIT (2011) 43 SOT 488 (DELHI). 12. CIT VS. GLENMARK PHARMACEUTICALS LTD. (2010) 324 ITR 199. 13. KARNATAKA POWER TRANSMISSION CORPORATION LTD. VS. ITO (2011) 11 TAXMANN.COM 313 (BANG. - ITAT). L EARNED COUNSEL CONTENDED THAT THESE CASE LAWS ARE APPLICABLE AND FULLY SUPPORT THE CASE OF THE ASSESSEE. 10 ITA NOS.110, 111 & 112/NAG/2011 12 . LEARNED COUNSEL FURTHER REFERRED TO THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF ESSAR OIL LTD. VS. ITO AND SUBMITTED THAT THE SAME WAS DISTINGUISHABLE ON FACTS AND HENCE NOT APPLICABLE. 1 3 . PER CONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 1 4 . WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. 1 5 . FIRST WE DEAL WITH THE ADDITIONAL GROUND ADJUDICATED BY THE LEARNED CIT(APPEALS). (THIS IS NOT APPLICABLE TO ITA 11 3 ). IN THE ADDITIONAL GROUND LEARNED CIT(APPEALS) HAS HELD THAT THE ASSESSEE HAS CLAIMED THAT THE RECIPIENTS BGR ENERGY SYSTEM (INDIA) LTD. AND BHEL HAVE ALREADY MADE PAYMENT OF ADVANCE TAX ON THE AMOUNT RECEIVED BY THEM. THEREFORE, THEY ARE NOT LIABLE TO TDS ON THE SAID PAYMENT. IN THIS REGARD LEARNED CIT(APPEALS) CONCLUDED THAT THIS GROUND WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE P. LTD. VS. CIT 293 ITR 226. LEARNED CIT(APPEALS) HELD THAT THE AO MAY VERIFY THE FACTUAL POSITION AND GIVE RELIEF ACCORDINGLY. 1 6 . NOW WE FIND THAT IN THE ABOVE REFERRED DECISION OF THE HONB LE APEX COURT IT WAS EXPOUNDED THAT IF THE DEDUCTOR HAS SATISFIED THE AO THAT TAX DUE HAD BEEN PAID BY THE DEDUCTEE - ASSESSEE, THEN TAX DEDUCTOR WILL NOT BE LIABLE. HOWEVER, HONBLE APEX COURT HAS CLARIFIED THAT THIS WILL NOT ALTER THE LIABILITY TO CHARGE I NTEREST U/S 201(1A) OF THE ACT TILL THE DATE OF PAYMENT OF TAXES BY THE DEDUCTEE - ASSESSEE. 1 7 . WHEN ENQUIRED IN THIS REGARD BY THE BENCH, BOTH THE COUNSEL WERE NOT IN A POSITION TO FURNISH THE ACTUAL POSITION OF TAX LIABILITY FASTENING UPON THE ASSESSEE A FTER CONSIDERING THE ABOVE DECISION OF HONBLE APEX COURT. HENCE WE ARE OF THE OPINION THAT TO THE EXTENT THE ASSESSEE GETS RELIEF AS ABOVE, THE ISSUE 11 ITA NOS.110, 111 & 112/NAG/2011 RAISED BY THE ASSESSEE BEFORE US WILL BE OTIOSE. BE AS IT MAY, WE ADJUDICATE HEREIN BELOW THE ISSUE ON M ERITS. 1 8 . 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. I T IS THE ASSESSEES PLEA THAT ON THE CONTRACT FOR SUPPLY EQUIPMENT NO TAX IS TO BE DEDUCTED. T HE 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 CONT RACT A S THE BI D 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 WE RE 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/EQUIPMENT AS PER SPEC IFICATION AND A BREACH IN ONE CONTRACT SHALL AUTOMATICALLY BE CONSTRUED AS BREACH OF OTHER CONTRACT WHICH WILL CONFER A RIGHT OF A OWNER TO TERMINATE THE OTHER CONTRACT ALSO AT A RISK AND COST OF THE OTHER CONTRACTOR. THESE FACTORS HAVE BEEN TAKEN INTO ACC OUNT BY THE AUTHORITIES BELOW IN HOLDING T HAT THE ENTIRE SPECTRUM OF ACTIVITIES HAVE THE ELEMENTS OF THE COMPOSITE CONTRACTS. 19. WE FIND THAT IDENTICAL ISSUE WAS CONSIDERED BY HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. KARNATAKA POWER TRANSM ISSION CORPORATION LTD. [2012] 21 TAXMANN.COM 473 (KAR.). WE MAY GAINFULLY REFER TO THE EXPOSITIONS OF THE HONBLE HIGH COURT AS UNDER : FACTS THE ASSESSEE WAS A STATE GOVERNMENT PUBLIC SECTOR COMPANY CARRYING ON BUSINESS OF TRANSMISSION OF ELECTRICITY FROM THE ELECTRICITY GENERATING POINT TO VARIOUS ELECTRICAL SUB - STATIONS IN THE STATE THROUGH ITS NETWORK OF / 12 ITA NOS.110, 111 & 112/NAG/2011 TRANSMISSION LINES AND SUB - STATIONS. IT HAD ENTERED INTO CONTRACT AGREEMENTS ON TOTAL TURNKEY BASIS OR PARTIAL TURNKEY BASIS WITH VARIOUS CONTRACTORS FOR SETTING UP OF ITS ELECTRICAL SUB - STATIONS. IN TOTAL TURNKEY CONTRACTS, THE CONTRACTOR WAS REQUIRED TO ESTABLISH ELECTRIC SUB - STATIONS AND L INES USING HIS OWN MATERIAL INCLUDING THE ELECTRICAL TRANSFORMER , WHEREAS IN PARTIAL TURNKEY CONTRACTS, THE ASSESSEE SUPPLIED ELECTRICAL TRANSFORMER WHILE CONTRACTOR USED HIS OWN OTHER MATERIAL TO EXECUTE THE CONTRACT . IN TOTAL TURNKEY CONTRACT , AS THE CON TRACTOR USED HIS OWN TRANSFORMER, VALUE OF SUPPLY PORTION WAS HIGHER AND IN PARTIAL TURNKEY CONTRACT, VALUE OF SUPPLY PORTION WAS RELATIVELY LOWER AS TRANSFORMER WAS SUPPLIED BY THE ASSESSEE. IN EITHER EVENT, 80 TO 85 PER CENT OF THE CONSIDERATION WAS TOWA RDS THE SUPPLY OF MATERIALS AND BARELY 20 TO 15 PER CENT WAS TOWARDS ERECTION AND CIVIL WORKS . THE ASSESSEE - COMPANY HAD ENTERED INTO THREE INDEPENDENT CONTRACTS WITH THE CONTRACTORS, VIZ. , AGREEMENT FOR SUPPLY, AGREEMENT FOR CIVIL WORK, AND AGREEMENT FOR E RECTION WORK . WHILE TAX WAS BEING DEDUCTED AT SOURCE FOR CIVIL WORK AND ERECTION WORK, THE TAX WAS NOT DEDUCTED AT SOURCE TOWARDS PAYMENTS MADE ON SUPPLY PORTION. THE ASSESSEE CONTENDED THAT SECTION 194C DEALS WITH DEDUCTION OF TAX AT SOURCE ON COMPOSITE CONTRACTS FOR ERECTION AND INSTALLATION OF PLANT AND MACHINERY BUT IN ITS CASE THERE WERE SEPARATE CONTRACTS FOR SUPPLY OF GOODS AND ERECTION/INSTALLATION CHARGES AND, THEREFORE, 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 PAYABL E 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 CONTRACTO RS 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 BIDDER, A DIVISIBLE CONTRACT COVERING THE ENTIRE SCOPE OF THE PARTIAL / TOTAL TURNKEY HAS TO BE ENTEREA INTO WITH THE SUCCESSFUL BIDDER . THE ASSESSEE HAS TO ENTER INTO 13 ITA NOS.110, 111 & 112/NAG/2011 THREE SEPARATE CONTRACTS, ONE FOR SUPPLY OF GOODS; SECONDLY FOR ERECTION WORKS AND THIRDLY, FOR CIVIL ENGINEERING WORKS AND CLAUSE 14.0 DEALS WITH TAXES AND DUES AND IT RESERVES TO THE DIVISIBLE CONTRACT, I.E., THE THREE SEPARATE CONTRACTS AND ANY TAXES AND DUTIES WHICH ARE PAYABLE ARE IN RESPECT OF THESE THREE SEPARATE CONTRACTS . HOWEVER, CLAUSE 3 . 5 OF THE PROFORMA OF CONTRACT AGREEMENT MAKES IT CLEAR THAT NOTWITHSTANDING THE FACT THAT THREE SEPARATE CONTRACTS HAVE ENTERED INTO, ALL THE THREE ARE INTEGRAL PARTS OF THE COMPOSITE CONTRACT O N SINGLE SOLE RESPONSIBLE BASIS. THE CONTRACTOR IS BOUND TO PERFORM THE TOTAL CONTRACTS IN ITS ENTIRETY. NO PERFORMANCE OF ANY PART OR PORTION OF THE CONTRACT WOULD BE TREATED AS BREACH OF ENTIRE CONTRACT. IT IS BECAUSE OF ITS INCONSISTENT CLAUSE WHERE AT ONE PLACE IT IS MENTIONED AS THREE SEPARATE AGREEMENTS AND AT OTHER PLACE ALL THE THREE ARE REFERRED TO AS THE COMPOSITE AGREEMENT , THAT IN ORDER TO CLARIFY WHAT EXACTLY THE PARTIES MEANT IT BECOME NECESSARY TO INTRODUCE CLAUSE 7.0 PROVIDING HOW THE CONTR ACT IS TO BE CONSTRUED. CLAUSE 7 . 1 EXPRESSLY STATE THAT NOTWITHSTANDING ANYTHING STATED ELSEWHERE IN THE BID DOCUMENTS , THE CONTRACT TO BE ENTERED INTO WOULD BE TREATED AS DIVISIBLE CONTRACT RESULTING IN THREE SEPARATE CONTRACTS, ONE FOR SUPPLY OF GO ODS, T HE SECOND FOR ERECTION AND THE THIRD FOR THE CIVIL ENGINEERING WORKS COVERING THE ENTIRE SCOPE OF THE PARTIAL / TOTAL TURNKEY PACKAGE. THEREFORE , THE INTENTION IS CLEAR. THERE IS NO AMBIGUITY IN THE LANGUAGE. THE CONTRACT THAT IS ENTERED INTO IS NOT A COMPOSITE CONTRACT . IT IS A DIVISIBLE CONTRACT . THREE CONTRACTS ENTERED INTO ARE SEPARATE CONTRACTS. THOUGH THE WORK, THAT IS ENTRUSTED TO THE CONTRACTOR IS TO BE COMPLETED BY HIM BY PERFORMING ALL THE THREE SEPARATE CONTRACTS , THE CONTRACT AS SUCH IS DIVI SIBLE CONTRACT. THEREFORE, THE PARTIES HAVE ENTERED INTO THREE SEPARATE CONTRACTS ON THE VERY SAME DAY. [PARA 11] FROM THE TERMS OF THE CONTRACT IT IS CLEAR THAT THE MOMENT THERE IS NEGOTIATION OF DISPATCH DOCUMENTS, THE EQUIPMENTS / MATERIALS ARE SUPPLIED UNDER THE AGREEMENT OF SUPPLY FROM THE CONTRACTOR TO ASSESSEE, THE TITLE IN THE GOODS PASSES. IT IS, THEREFORE, ASSESSEE IN ORDER TO ENABLE THE CONTRACTOR 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 F OR 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 14 ITA NOS.110, 111 & 112/NAG/2011 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 CO NTRACT 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 CONTRACT, NO TDS IS DEDUCTIBLE UNDER SECTION 194C AS IT IS NOT A CONTRACT FOR CARRYING OUT ANY WORK . CARRYING OUT ANY WORK IS A SINE QUO NON TO ATTRACT SECTION 194C. A CONTRACT UNDER WHICH A CONT RACTOR AGREES TO SUPPLY MATERIAL WHICH MAY BE USED BY HIM LATER IN CARRYING OUT THE WORK WILL NOT RENDER THE AGREEMENT TO SUPPLY A CONTRACT FOR CARRYING OUT ANY WORK . IN FACT , THE AMENDMENT IN 2009 EXPLAIN THIS POSITION, WHEN THEY AMENDED THE DEFINITION 0) 'WORK' AS CONTAINED IN EXPLANATION TO CLAUSE 4 SUB - CLAUSE (E) . [PARA 13] WHEN THE STATUTE WAS AMENDED TO CLARIFY THE WORD 'WORK' UNDER SECTION 194C BY INTRODUCING THE AFORESAID CLAUSE, IT IS OBVIOUS THAT THE AMENDMENT IS ONLY CLARIFICATORY IN NATURE AND, THEREFORE, IT IS RETROSPECTIVE. THE PARLIAMENT DI D NOT INTEND TO CHANGE THE LAW BECAUSE OF CONCLUSION WHICH RESULTED IN LITIGATION . THE PARLIAMENT THOUGHT IT FIT TO CLARIFY BY WAY OF AMENDMENT SO THAT THE LITIGATION COULD BE AVOIDED . IN VIEW OF THE AFORESAID CLARIFICATION AND THE STATUTORY PROVISION, IT IS CLEAR THAT 'WORK' DID NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT UPON SPECIFICATION OF A CUSTOMER BY USING RAW MATERIALS PURCHASED FROM A PERSON OTHER THAN SUCH C USTOMER , AS SUCH A CONTRACT IS A CONTRACT FOR SALE . FURTHER, IT IS ALSO CLARIFIED THAT TDS SHALL BE DEDUCTED ON THE INVOICE VALUE EXCLUDING THE VALUE 0) MATERIAL PURCHASED FROM SUCH CUSTOMER, IF SUCH VALUE IS MENTIONED SEPARATELY IN THE INVOICE. IT IS ONLY IN CASES WHERE THE MATERIAL COMPONENT HAS NOT BEEN SEPARATELY MENTIONED IN THE INVOICE, TDS SHALL BE DEDUCTED ON THE WHOLE OF THE INVOICE VALUE. THEREFORE, WHATEVER AMBIGUITY WHICH PREVAILED EARLIER IS CLARIFIED. WHEN IN A COMPOSITE CONTRACT, AN INVOICE IS RAISED SEPARATELY MENTIONING THE VALUE OF THE MATERIAL SUPPLIED, NO DEDUCTION IS PERMISSIBLE UNDER SECTION 194C. IN A CASE WHERE THREE SEPARATE AGREEMENTS ARE ENTERE D INTO AND ON E SUCH AGRE E MENT IS AGREEMENT FOR SUPPLY OF MATERIAL , MERELY BECAUSE THE SAID AGREEMENT IS A PART OF A COMPOSITE TRANSACTION , SECTION194C CANNOT BE PRESSED INTO SERVICE TO DEDUCT TAX AT SOURCE . THE WHOLE OBJECT 0) INTRODUCING THE SECTION IS THAT IT SHOULD DEDUCT TAX IN RESPECT OF PA Y MENTS MADE FOR A WORKS CONTRACT. NO DEDUCTI ON IS PERMISSIBLE IN RESPECT OF 15 ITA NOS.110, 111 & 112/NAG/2011 CONTRACT FOR SUPPLY OF MATERIAL FOR CARRYING OUT WORK . IN FACT , THE TRIBUNAL, BY A DETAILE D CONSIDERATION OF 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 C OMPOSITE CONTRACT . IT IS A CASE OF THE DISTINCT CONTRACTS AND THE CONTRACT FOR SUPPL Y OF MATERIALS IS A SEPARATE DISTINCT CONTRACT IN RESPECT OF WHICH NO DEDU CTION 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 SUPP LY 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 COVERI NG THE ENTIRE SCOPE OF THE PARTIAL/TOTAL TURNKEY HAS TO BE ENTERED INTO WITH THE SUCCESSFUL BIDDER. THE TERM OF CONTRACT AS MENTIONED IN THE ABOVE CASE DEALT WITH BY THE HONBLE HIGH COURT IS ALSO SIMILAR HERE. THE HONBLE HIGH COURT IN THE ABOVE CASE L AW HAS DEALT UPON THE OBJECTIONS OF THE REVENUE THAT BREACH OF ONE CONTRACT SHALL AUTOMATICALLY BE CONSTRUED AS BREACH OF OTHER CONTRACT. THE HONBLE HIGH COURT EXPOUNDED THAT THIS WAS DONE IN ORDER TO SEE THAT THE OBJECT OF ENTERING INTO CONTRACT IS ACHIE VED, IT IS MADE CLEAR IN THE AGREEMENT FOR SUPPLY THAT OBLIGATION UNDER THE CONTRACT WOULD NOT COME TO AN END. THAT THE MOMENT THE MACHINERY AND THE MATERIAL IS SUPPLIED UNDER THE AGREEMENT OF SUPPLY THE OBLIGATION OF CONTRACT CONTINUES TILL THE WORK EXTEN DED TO THEM IS COMPLETE. THE HONBLE HIGH COURT HAS EXPOUNDED THAT THIS BY ITSELF WOULD NOT MAKE IT TO A COMPOSITE CONTRACT. IT IS CLEARLY EXPRESSED IN THE CONTRACT HOW THE CONTRACTS HAVE TO BE CONSTRUED. 16 ITA NOS.110, 111 & 112/NAG/2011 2 1 . UPON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, IN OUR CONSIDERED OPINION, THE SAME IS IDENTICAL TO THE ISSUE DEALT WITH BY THE HONBLE KARNATAKA HIGH COURT AS ABOVE. LEARNED D.R. COULD NOT POINT OUT ANY FEATURE IN THE CONTRACT IN THE PRESENT APPEAL WHETHER DISTINGUIS H IT FROM THE FACTS MENTIONED IN ABOVE APPEAL DEALT BY THE HONBLE HIGH COURT. HENCE FOLLOWING THE ABOVE DECISION, WE HOLD THAT THE CONTRACT OF SUPPLY OF MATERIAL IS A SEPARATE DISTINCT CONTRACT AND ON WHICH NO DEDUCTION IS PERMISSIBLE U/S 194C. 2 2 . SIMIL AR VIEW WAS EXPRESSED BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. EXECUTIVE ENGINEER IN I.T. APPEAL NOS. 92 TO 97 OF 2014 VIDE ORDER DATED AUGUST 18, 2015. THE HONBLE HIGH COURT IN PARA 7 AND 8 OF THE ABOVE DECISION HAS HELD AS UNDER : 7. WE ARE, ALSO, OF THE OPINION THAT THE CLAUSES OF THE CONTRACT PARTICULARLY , CLAUSE 3.5 OF THE CONTRACT AGREEMENT , MAKE IT C LEAR THAT THREE SEPARATE CONTRACTS HAVE BEEN ENTERED INTO, BUT ALL THE SEPARATE CONTRACTS WERE INTEGRAL PARTS OF A COMPOSITE CONTRACT ON SINGLE SALE RESPONSIBLE BASIS. THE INVOICES RAISED ON THE BASIS OF THE SAID COMPOSITE CONTRACT SEPARATELY MENTIONING THE VALUE OF THE MATERIAL SUPPLIED , NO DEDUCTION IS PERMISSIBLE UNDER SECTION 194C OF THE ACT . SECTION 194C OF THE ACT CANNOT BE PRESSED INTO SERVICE TO DEDUCT TAX AT SOURCE. THE WHOLE OBJECT OF INTRODUCTION OF THAT SECTION IS TO DEDUCT TAX IN RESPECT OF PAYMENTS MADE FOR WORKS CONTRACT. 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, 2 009 AND THE PROVISION HAS BEEN MADE VERY CLEAR WITHOUT ANY AMBIGUITY . 8.THUS, WE CAN CONCLUDE SAFELY THAT IF A PERSON E X ECUTING 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 . 17 ITA NOS.110, 111 & 112/NAG/2011 2 3 . 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 PAYI NG 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 INCOM E - TAX. THE TERM WORK MENTIONED IN THE CONTRACT HAS BEEN DEFINED IN EXPLANATION (IV) AS UNDER: (IV) WORK SHALL INCLUDE - (A) ADVERTISING; (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTION OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; (C) CARRIAGE OF GO ODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS; (D) CATERING; (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. NOW WE EXAMINE THE FACTUAL MATRIX OF THE PRESENT CASE ON THE ANVIL OF AFORESAID PROVISIONS. IN THE PRE SENT CASE IT IS UNDISPUTED THAT THE ASSESSEE IN THIS CASE IN CARRYING OUT THE WORK ASSIGNED HAS NOT USED ANY MATERIAL SOURCE FROM THE CUSTOMERS. LEARNED CIT(APPEALS) HAS NOT DISPUTED THIS PROPOSITION. HOWEVER, LEARNED CIT(APPEALS) HAS HELD THAT RELEVANT CL AUSE OF THE EXPLANATION IS APPLICABLE ONLY IN THE CONTEXT OF MANUFACTURING OR SUPPLYING A PRODUCT. LEARNED CIT(APPEALS) HAS REFERRED TO THE DICTIONARY MEANING OF MANUFACTURING AND HAS OBSERVED THAT THE SETTING UP A POWER PLANT CANNOT BE DESCRIBED BY THE WORD MANUFACTURE. LEARNED CIT(APPEALS) HAS FURTHER OBSERVED THAT ERECTION OF A 18 ITA NOS.110, 111 & 112/NAG/2011 POWER PLANT CAN BE REASONABLY HELD TO BE AN ACTIVITY OF CONSTRUCTION. SHE HELD THAT THE TERM CONSTRUCTION IS MORE SUITABLE TO THE ACT OF PUTTING UP A POWER PLANT THAN THE T ERM MANUFACTURING. 2 4 . WE FIND THAT THE ABOVE DISTINCTION BROUGHT OUT BY THE LEARNED CIT(APPEALS) IS NOT CORRECT. ON THE CONTRACT FOR SUPPLY OF MATERIALS PARA 51.0 OF THE CONTRACT CLEARLY MENTIONS THAT ONCE THE EQUIPMENTS ARE SUPPLIED BY BGR AND BHEL, THE PROPERTY WAS IN POSSESSION TO THE ASSESSEE. THE RELEVANT CLAUSE READ AS UNDER : 51.0 OWNERSHIP OF PLANT THE PLANT AND EQUIPMENT SUPPLIED BY THE CONTRACTOR PURSUANT TO THE CONTRACT SHALL BECOME THE PROPERTY OF THE OWNER AT WHICHEVER IS EARLIER OF THE FOLLOWING TIMES VIZ: I. WHEN THE PLANT AND EQUIPMENT IS DELIVERED /DISPATCHED PURSUANT TO THE CONTRACT. II. WHEN THE CONTRACTOR HAS BEEN PAID ANY SUM TO WHICH HE MAY BECOME ENTITLED IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACT. III. PLANT IS OTHERWISE TAKEN OVER BY THE OWNER IN TERMS OF CONTRACT. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GL E NMARK PHARMACEUTICAL LTD. 324 ITR 199 HAS CLEARLY EXPOUNDED THAT IF THE PROPERTY IN THE PRODUCT MANUFACTURED PASSES TO THE CUSTOMER UPON DELIVERY AND THE MATERIAL THAT WAS REQUIRED WAS NOT SOURCE D FROM THE CUSTOMER/PURCHASER BUT WAS INDEPENDENTLY OBTAINED BY THE MANUFACTURER FRO M A PERSON OTHER THAN CUSTOMER, THE CONTRACT ENTERED INTO BY THE ASSESSEE WAS NOT A CONTRACT FOR CARRYING ON WORK WITHIN THE M EANING OF SECTION 194C. CONSIDERED FROM THIS POINT OF VIEW ALSO THE ASSESSEE IS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE ON THE EQUIPMENT GOOD SUPPLY CONTRA CT. 2 5 . AS REGARDS RELIANCE OF THE REVENUE ON THE DECISION OF HONBLE GUJRAT HIGH COURT IN THE CAS E OF ESSAR OIL LTD VS. ITO INCOME TAX APPEAL NO. 33 19 ITA NOS.110, 111 & 112/NAG/2011 OF 2000 VIDE ORDER DATED SEPTEMBER 3, 2000, WE FIND THAT WHEN ON IDENTICAL ISSUE THERE ARE CONTRADICTORY DECISIONS OF DIFFERENT HIGH COURTS AND THERE IS NO DECISION OF HONBLE JURISDICTIONAL HIGH COURT , THE DECISION THAT IS FAVOURABLE TO THE ASSESSEE HAVE TO BE APPLIED. THIS PROPOSITION DRAW SUPPORT FROM THE EXPOSITION OF HONBLE APEX COURT IN THE CASE OF VEGETABLE PRODUCTS (1973) 88 ITR 192. 2 6 . IN THE LIGHT OF ABOVE DISCUSSION AND PRECEDENTS, RESPEC TFULLY FOLLOWING THE PRECEDENT FROM HONBLE ANDHRA PRADESH HIGH COURT IN THE DECISION CITED ABOVE, WE HOLD THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT THE TDS ON THE SUPPLY CONTRACT. 27. IN THE RESULT THE APPEALS BY THE ASSESSEE STAND ALLOWED. ORDER PRONOU NCED IN THE OPEN COURT ON THIS 18 TH DAY OF DEC., 2015. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 18 TH DEC., 2015. 20 ITA NOS.110, 111 & 112/NAG/2011 COPY FORWARDED TO : 1. MAHARASHTRA STATE POWER GENERATION CO. LTD., PLOT NO. G - 9, PRAKASHGAD, 2 ND FLOOR, ANANT KANEKAR MARG, STATION ROAD, BANDRA (EAST), MUMBAI - 400 051 2. A.C.I.T. (TDS), CIRCLE - 2, NAGPUR. 3. C.I.T. , NAGPUR.. 4. CIT(APPEALS) - I I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE.