ITO(TDS),Wd-58(4),Kolkata, Kolkata V. M/s. Paceman Sales Promotion Pvt Ltd., Kolkata

ITA 1296/KOL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4864 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 22-04-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 10-09-2012
• Court: TRIBUNAL
• Department Lawyers: T ANUJ KR NEOGI JCIT LD
• Assessee Lawyers: RAJARAM CHOUDHURY CA LD
• Keywords: Recovery proceedings; Non-deduction of tax
• Section: 133A; 194C; 10B; 201(1)

Judgement Text

ITA NO. 1296/KOL/20 12 & & CO NO.12/KOL/2013 C-AM M/S.PACEMAN SALES PROMOTION PVT. LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, K OLKATA BEFORE : SHRI N.V. VASUDEVAN, JUDICIAL MEMBER , AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 1296/KOL/2012 A.Y: 2006-07 I.T.O (TDS), WARD 58(4), KOLKATA VS. M/S. PACEMAN SALES PROMOTION PVT. LTD PA N: AABCP 5021A (APPELLANT/DEPARTMENT) (RESPONDENT/ASSESSEE) C.O NO. 12/KOL/2013 [ ARISING OUT OF ITA NO. 1296/KOL/2012 A.Y : 2006-0 7 ] M/S.PACEMAN SALES PROMOTION VS. I.T.O (TDS), WAR D 58(4), KOLKATA PVT. LTD (CROSS OBJECTOR/ASSESSEE) (DEPARTMENT) FOR THE APPELLANT/DEPARTMENT: SHRI T ANUJ KR. NEOGI, JCIT, LD.SR.DR FOR THE RESPONDENT/ASSESSEE: SHR I RAJARAM CHOUDHURY, CA, LD.AR DATE OF HEARING: 22-04-2016 DATE OF PRONOUNCEMENT: 11 -5 -2016 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARISE OUT OF THE ORDER OF THE LEARNED CIT(A)-1, KOLKATA IN APPEAL NO . 50/CIT(A)-I/WD-58(4)/11-12 DATED 29.6.2012 AGAINST THE ORDER PASSED BY THE LEA RNED AO FOR THE ASST YEAR 2006-07 UNDER SECTION 201(1) / 201(1A) OF THE INCOME TAX AC T, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL I S AS TO WHETHER THE PROVISIONS OF SECTION 194C OF THE ACT COULD BE MADE APPLICABLE IN THE FACTS OF THE INSTANT CASE AND ITA NO. 1296/KOL/20 12 & & CO NO.12/KOL/2013 C-AM M/S.PACEMAN SALES PROMOTION PVT. LTD 2 CONSEQUENTLY WHETHER THE ASSESSEE COULD BE INVITED WITH THE LEVY OF TAX AND INTEREST U/S 201(1) AND 201(1A) OF THE ACT IN THE FACTS AND CIRC UMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASS ESSEE IS A PRIVATE LIMITED COMPANY CARRYING ON THE BUSINESS OF GENERATION OF POWER THR OUGH WINDMILL AFTER INSTALLATION OF WIND ENERGY CONVERTERS DURING THE FINANCIAL YEAR 20 05-06 RELEVANT TO ASST YEAR 2006- 07. A SURVEY OPERATION U/S 133A OF THE ACT WAS CO NDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 21.4.2009 AND DURING THE SURVEY, IT WAS NOTICED THAT THE TAX DEDUCTOR COMPANY (I.E ASSESSEE COMPANY) INSTALLED TWO WIND ENERGY CONVERTERS IN THE STATE OF MAHARASHTRA, ONE HAS BEEN SUPPLIED BY M/S ENERCON I NDIA LTD AND OTHER BY M/S SUZLON ENERGY LTD. IT WAS ALSO NOTICED THAT ASSES SEE IS BASICALLY MANUFACTURER OF EDIBLE OIL AND IS ALSO A NON-BANKING FINANCE COMPAN Y ENGAGED IN THE BUSINESS OF LENDING. THE ASSESSEE ENTERED INTO NEW BUSINESS O F WIND POWER GENERATION AFTER INSTALLATION OF WIND ENERGY CONVERTERS BY THE ABOVE STATED COMPANIES. DURING SURVEY OPERATION AND ITS SUBSEQUENT PROCEEDINGS, IT WAS NO TICED THAT THE ASSESSEE MADE SEVERAL AGREEMENTS WITH ITS SUPPLIER COMPANIES FOR SUPPLY, ERECTION AND COMMISSIONING, ARRANGEMENT OF SUITABLE LAND AND FOR ITS DEVELOPMEN T. THE TWO SEPARATE AGREEMENTS WERE MADE WITH M/S ENERCON INDIA LTD , ONE FOR SUPP LY OF WIND ENERGY CONVERTER (WEC) AND ANOTHER FOR INSTALLATION, ERECTION, COMMI SSIONING AND ARRANGEMENT AND DEVELOPMENT OF SUITABLE LAND FOR INSTALLATION. IN CASE OF SUZLON ENERGY LTD MAKE WEC, IT WAS NOTICED THAT THREE SEPARATE AGREEMENTS WERE MADE AS BELOW:- (I) WITH M/S SUZLON ENERGY LTD FOR SUPPLY OF WEC (II) WITH M/S SUZLON INFRASTRUCTURE LTD FOR INSTALL ATION, ERECTION & COMMISSIONING (III) WITH M/S SARJAN REALITIES PVT LTD FOR ARRANGE MENT OF SUITABLE LAND AND FOR ITS DEVELOPMENTS. THE ASSESSEE HAD DULY DEDUCTED TAX AT SOURCE ON THE INSTALLATION, ERECTION AND COMMISSIONING CONTRACTS AND REMITTED THE SAME TO TH E ACCOUNT OF THE CENTRAL ITA NO. 1296/KOL/20 12 & & CO NO.12/KOL/2013 C-AM M/S.PACEMAN SALES PROMOTION PVT. LTD 3 GOVERNMENT ON WHICH FACT THERE IS NO DISPUTE. THE LEARNED AO OBSERVED THAT THE SUPPLY OF WIND ELECTRIC GENERATORS WOULD BE LIABLE FOR LEVY OF SALES TAX AND ASESSEE HAD NOT PAID ANY VAT IN THE SALE BILL. HENCE THE SUPPL Y OF WIND ELECTRIC GENERATOR CANNOT BE TREATED AS SALE TRANSACTION AND HENCE TDS PROVIS IONS ARE APPLICABLE. ACCORDING TO THE LEARNED AO , THE ASSESSEE HAD ENTERED INTO A CO MPOSITE / INDIVISIBLE CONTRACT AND HENCE THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SO URCE ON THE VALUE OF ALL THE CONTRACTS INCLUDING SUPPLY OF WIND ELECTRIC GENERAT ORS AND PURCHASE OF LAND. ACCORDINGLY, THE LEARNED AO TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT IN TERMS OF SECTION 201(1) OF THE ACT AND LEVIED TAX THEREON AN D ALSO CHARGED INTEREST U/S 201(1A) OF THE ACT. 4. ON FIRST APPEAL, THE LEARNED CIT(A) DECIDED T HE APPEAL IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER :- AFTER CAREFUL CONSIDERATION OF THE ASSESSMENT ORDE R AND WRITTEN SUBMISSION ALONG WITH PAPER BOOK, IT IS NOTICED THA T 1 ST CONTRACT WAS ENTERED WITH M/S SUZLON ENERGY LTD FOR SUPPLY OF WI NDMILL COMPONENTS FOR GENERATION OF ELECTRICITY AND 2 ND CONTRACT WAS ENTERED WITH M/S SUZLON INFRASTRUCTURE LTD FOR THE ERECTION AND INSTALLATIO N OF WINDMILL. SIMILARLY, TWO SEPARATE CONTRACTS WERE ENTERED WITH M/S ENERCO N INDIA LTD , ONE FOR SUPPLY OF WIND ENERGY CONVERTER AND 2 ND FOR FOUNDATION WORD. ASSESSEE HAD PRODUCED THE RELEVANT TAX INVOICES TO SUPPORT I TS CLAIM THAT PROVISIONS OF SECTION 194C WERE NOT APPLICABLE FOR PAYMENTS MA DE TO M/S SUZLON ENERGY LTD AND M/S ENERCON INDIA LTD TO SUPPORT ITS CLAIM THAT THESE PAYMENTS WERE IN THE NATURE OF SUPPLY OF GOODS AS P ER PRESCRIBED SPECIFICATIONS. IN RESPECT OF THE ERECTION AND FO UNDATION WORK, ASSESSEE HAD DEDUCTED TDS AS PER PROVISIONS OF SECTION 194C IN RESPECT OF CONTRACTS WITH ABOVE COMPANIES. ASSESSEE HAD RELIE D UPON THE CBDT CIRCULAR NO. 681 TO SUPPORT ITS CONTENTION. ASSESS EE FURTHER PRODUCED A CERTIFICATE AND EVIDENCE OF FILING OF INCOME TAX RE TURN FROM M/S ENERCON INDIA LTD AND FURTHER RELIED UPON JUDGEMENT OF SUPR EME COURT IN 293 ITR 226 IN SUPPORT OF ITS CONTENTION. KEEPING IN VIEW THE ABOVE FACTS AND CIRCUMSTANCES, GROUND NO.1 TO 6 ARE ALLOWED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NO. 1296/KOL/20 12 & & CO NO.12/KOL/2013 C-AM M/S.PACEMAN SALES PROMOTION PVT. LTD 4 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US O N THE FOLLOWING GROUND :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(APPEAL)-I, KOLKATA ERRED IN CONSIDERING THE PAYMENT MADE FOR S UPPLY OF WIND ENERGY CONVERTER AS PURCHASE AND IGNORING THE FACT THAT IT IS A CASE OF COMPOSITE JOB CONTRACT INCLUDING SUPPLY, ERECTION, COMMISSIONING & MAINTENANCE. FURTHER, IT IS NOT A CASE OF OUTRIGHT SALE BUT SUPPLY OF TURBINES ON PRESCRIBED SPECIFICATION, WHICH EMPHASI ZES THE FACT THAT IT IS A WORK CONTRACT. 6. THE LEARNED DR ARGUED THE RELEVANT PORTIONS OF FINDINGS OF THE LEARNED AO FROM THE ASSESSMENT ORDER AND HELD THAT THE ASSESSEE HAD MERELY ENTERED INTO A WORKS CONTRACT AND HENCE TDS IS APPLICABLE U/S 194C OF TH E ACT ON THE WHOLE AMOUNTS AND NOT CONFINED ONLY TO ERECTION /COMMISSIONING CONTRA CT. IN RESPONSE TO THIS, THE LEARNED AR ARGUED THAT ASSESSEE HAD ENTERED INTO ON LY DIVISIBLE CONTRACTS AND REFERRED TO THE FINDINGS RECORDED BY THE LEARNED CIT(A) IN P AGE 13 OF THE APPELLATE ORDER. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILED PAPER BOOK FILED BY THE ASSE SSEE CONTAINING THE WORK ORDERS PLACED WITH M/S SUZLON ENERGY LTD AND ENERCON INDIA LTD, TAX INVOICES FROM M/S SUZLON ENERGY LTD AND ENERCON INDIA LTD, SEPARATE ERECTION/ COMMISSIONING CONTRACT WITH M/S SUZLON INFRASTRUCTURE LTD AND ENE RCON INDIA LTD, PURCHASE ORDER FOR M/S SARAJAN REALITIES P LTD FOR PURCHASE OF LAN D , DEBIT NOTES FROM M/S SARAJAN REALITIES P LTD, TAX PAYMENT CERTIFICATE FOR ASST YEAR 2006-07 OF M/S SUZLON ENERGY LTD AND M/S ENERCON INDIA LTD, AMONG OTHERS. WE FIND THAT THE ONLY DISPUTE IS THAT THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE IN RESP ECT OF PAYMENTS MADE TO M/S ENERCON INDIA LTD AND M/S SUZLON ENERGY LTD ON ACCO UNT OF SUPPLY OF WIND ELECTRIC CONVERTER TREATING IT AS CONTRACT OF SALE AND NOT C ONTRACT FOR WORK. THE LEARNED AO HAD OBSERVED THAT NO SALES TAX OR VAT IS FOUND TO H AVE BEEN PAID IN RESPECT OF SO CALLED SALE OF WIND ELECTRIC CONVERTERS EFFECTED BY RESPECTIVE COMPANIES TO ASSESSEE. IN THIS REGARD, WE FIND FROM THE TAX INVOICE OF M/S SU ZLON ENERGY LTD ENCLOSED IN PAGES ITA NO. 1296/KOL/20 12 & & CO NO.12/KOL/2013 C-AM M/S.PACEMAN SALES PROMOTION PVT. LTD 5 21 & 22 OF PAPER BOOK, THERE IS A NOTE APPENDED AT THE BOTTOM OF THE INVOICE AS BELOW:- WE HEREBY DECLARE THAT SALES OF GOODS EVIDENCED BY THIS INVOICE IS EXEMPT FROM PAYMENT OF VALUE ADDED TAX IN OUR HANDS ON ACCOUNT OF EXEMPTION DULY GRANTED TO US AND AS SUCH, OUR IMMED IATE PURCHASER SHALL NOT BE ENTITLED TO CLAIM ANY INPUT TAX CREDIT IN RE SPECT OF THIS TRANSACTION UNDER ANY PROVISION OF DAMAN AND DIU VALUE ADDED TA X REGULATION, 2005 OR THE RULES MADE THEREUNDER AND THAT TRANSACT ION SHALL BE ACCOUNTED FOR IN THE TURNOVER OF SALES WHILE FILING OUR RETURN . WE ALSO FIND FROM THE TAX INVOICE OF M/S ENERCON IN DIA LTD ENCLOSED IN PAGE 54 OF THE PAPER BOOK, IT HAS BEEN CLEARLY STATED THAT CST NI L AGAINST FORM C. HENCE IN VIEW OF THESE UNDISPUTED FACTS , THE ALLEGATION RAISED B Y THE LEARNED AO THAT NO VAT WAS PAID IS NOT WELL FOUNDED AND CONTRARY TO EVIDENCES AVAILABLE ON RECORD. WE FIND THAT THE LEARNED AO CONTRARY TO VARIOUS EVIDENCES AVAILA BLE ON RECORD IN THE FORM OF SEPARATE CONTRACTS / AGREEMENTS ENTERED INTO WITH V ARIOUS PARTIES FOR VARIOUS ACTIVITIES, PROCEEDED TO DECIDE THE ENTIRE ISSUE BASED ON THE D ATA AVAILABLE IN THE WEBSITE OF M/S SUZLON ENERGY LTD AND M/S ENERCON INDIA LTD FOR PRO VIDING END TO END SOLUTIONS ON TURNKEY BASIS. WE FIND THAT THE DATA AVAILABLE IN WEBSITE IS MEANT FOR MARKETING OF THE PRODUCTS OF THE COMPANY AND TO ATTRACT THE CUSTOMER S FOR IMPROVING THEIR BUSINESS AND THE SAME CANNOT BE USED AS AN EVIDENCE AGAINST THE ASSESSEE IN THE FACTS OF THE INSTANT CASE. 7.1. WE FIND FROM THE DOCUMENTS AVAILABLE ON RECOR D THAT FIRST CONTRACT WAS ENTERED BY THE ASSESSEE WITH M/S SUZLON ENERGY LTD FOR SUPPLY OF WINDMILL COMPONENTS FOR GENERATION OF ELECTRICITY : (A) SUPPLY OF ROTOR BLADES OF SUZLON WTG 1.25 MW S7 0 TUB TOWER 72M HT-SCS WIND TURBINE GENERATOR ; ITA NO. 1296/KOL/20 12 & & CO NO.12/KOL/2013 C-AM M/S.PACEMAN SALES PROMOTION PVT. LTD 6 (B) SUPPLY OF SUZLON WTG 1.25 MW S70 TUB TOWER 72M HT-SCS WIND TURBINE GENERATOR. WE FIND THAT THE ASSESSEE HAD ENTERED SECOND CONTRA CT WITH M/S SUZLON INFRASTRUCTURE LTD FOR CIVIL WORK CONSTRUCTION OF WINDMILL FOUNDAT ION, TRANSFORMER PLINTH & ELECTRICAL YARD FENCING , ROAD FOR MOVEMENT OF CRANE AND PREPA RATION OF CRANE PLATFORM AND ONE FOR ERECTION & INSTALLATION OF WINDMILL TOWER AND W IND TURBINE GENERATOR CONSISTING OF UNLOADING SAFE KEEPING OF MATERIALS AND ASSEMBLY . SIMILARLY WE FIND THAT THE ASSESSEE HAD ENTERED FIR ST CONTRACT WITH M/S ENERCON INDIA LTD FOR COMPLETE SUPPLY OF ENERCON MAKE WIND TURBIN E CONVERTER, 800KW, TYPE E- 48, WITH 56 METERS HEIGHT TUBULAR STEEL TOWER AND T OWER MOUNTED 950 KVA TRANSFORMER, INCLUDING PACKAGING, HANDLING, LOADING , TRANSPORTATION, UNLOADING, INSURANCE COVER UPTO COMMISSIONING AT SITE. WE FI ND THAT THE ASSESSEE HAD ENTERED SECOND CONTRACT WITH M/S ENERCON INDIA LTD FOR EART H WORK AND FOUNDATION FOR ENERCON MAKE WIND TURBINE CONVERTER, 800KW, TYPE E-48 , INC LUDING CONSTRUCTION OF APPROACH AND INTERNAL / EXTERNAL LINES INCLUDING DP STRUCTURE POLES AT SITE AND FOR ERECTION AND COMMISSIONING OF ENERCON MAKE WIND TUR BINE CONVERTER, 800KW, TYPE E-48, ALONG WITH 950KVA TRANSFORMER ON WECS TOWER AT SITE. WE FIND THAT FIRST CONTRACT WAS FOR COMPLETE SUPPLY OF GOODS AND SECOND WAS TOWARDS WORKS CONTRACT. THE SCOPE OF BOTH THE CONTRACTS EN TERED BY THE ASSESSEE WITH THE ABOVE MENTIONED PARTIES ARE PRECISELY DIVISIBLE AND DISTI NGUISHABLE. UNDER CONTRACT OF SALE, THE MAIN OBJECT IS THE TRANSFER OF PROPERTY AND DELIVERY OF POSSESSION OF THE PROPERTY, WHEREAS UNDER CONTRACT OF WORK, THE MAI N OBJECT IS NOT THE TRANSFER OF THE PROPERTY, BUT IT IS ONE FOR WORK AND LABOUR. 7.2. WE FIND THAT THE PROVISIONS OF SECTION 194C O F THE ACT SPECIFY THAT ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY CONTRACTOR FO R CARRYING OUT ANY WORK WAS ITA NO. 1296/KOL/20 12 & & CO NO.12/KOL/2013 C-AM M/S.PACEMAN SALES PROMOTION PVT. LTD 7 REQUIRED TO DEDUCT TAX AT SOURCE. HENCE THE VERY E MPHASIS IS ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED PERSON SHALL. . THE PROVISIONS OF SECTION 194 C OF THE ACT DEFINES THE TERM WORK AS BELOW- WORK SHALL INCLUDE (A) . (B) .. (C) .. (D) (E) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO T HE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER, BUT DOES NOT INCLUDE MANUFACTURING O R SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER. THE ASSESSEE HAD ONLY PURCHASED WIND ELECTRIC CONVE RTERS FROM M/S SUZLON ENERGY LTD AND M/S ENERCON INDIA LTD FOR GENERATION OF POWER . THE ASSESSEE HAD NOT SUPPLIED ANY MATERIALS/ COMPONENTS TO THEM AS COULD BE EVID ENT FROM THE WORK ORDERS PLACED WITH THEM BY THE ASSESSEE. HENCE THE TRANSACTIONS OF THE ASSESSEE ARE SQUARELY OUT OF THE AMBIT OF DEFINITION OF WORK AS PER SECTION 19 4C OF THE ACT. HENCE IT CAN BE SAFELY CONCLUDED THAT THE CONTRACTS ENTERED INTO BY THE ASSESSEE CANNOT BE CATEGORIZED AS A WORKS CONTRACT. WE FIND THAT THE RELIANCE PLACED BY THE LEARNED AR ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS KARNATAKA POWER TRANSMISSION CORPORATION LTD REPORTED IN (2012) 21 TAXMANN.COM 473 (KAR) IS WELL FOUNDED. THE HEAD NOTES OF THE SAID DECISION IS RE PRODUCED HEREUNDER:- SECTION 194C OF THE INCOME-TAX ACT, 1961 - DEDUCTIO N OF TAX AT SOURCE - CONTRACTORS/SUB-CONTRACTORS, PAYMENTS TO - ASSESSME NT YEAR 2004-05 - ASSESSEE- COMPANY WAS CARRYING ON BUSINESS OF TRANS MISSION OF ELECTRICITY FROM ELECTRICITY GENERATING POINT TO VARIOUS ELECTR ICAL SUB-STATIONS IN STATE THROUGH ITS NETWORK OF TRANSMISSION LINES AND SUB-S TATIONS - IT HAD ENTERED INTO CONTRACT AGREEMENTS WITH VARIOUS CONTRACTORS F OR SETTING UP OF ITS ELECTRICAL SUB-STATIONS - THEREAFTER, ASSESSEE ENTE RED INTO THREE SEPARATE ITA NO. 1296/KOL/20 12 & & CO NO.12/KOL/2013 C-AM M/S.PACEMAN SALES PROMOTION PVT. LTD 8 CONTRACTS WITH CONTRACTOR ONE FOR SUPPLY OF GOODS; SECONDLY, FOR ERECTION WORKS; AND THIRDLY, FOR CIVIL ENGINEERING WORKS - W HILE TAX WAS BEING DEDUCTED AT SOURCE FOR CIVIL WORK AND ERECTION WORK , TAX WAS NOT DEDUCTED AT SOURCE TOWARDS PAYMENTS MADE ON SUPPLY PORTION O N GROUND THAT SECTION 194C WAS NOT ATTRACTED ON PAYMENT FOR SUPPLY OF MAT ERIAL - ASSESSING OFFICER HELD THAT PERFORMANCE AND EXECUTION OF CONT RACT WAS AS A 'COMPOSITE CONTRACT AND, THEREFORE, TAX WAS DEDUCTI BLE BY ASSESSEE ON ENTIRE CONSIDERATION PAID UNDER THREE CONTRACTS TREATING SAME AS A COMPOSITE CONTRACT - WHETHER WHEN FROM TERMS AND CONDITIONS O F CONTRACT, INTENTION OF PARTIES WAS CLEAR THAT CONTRACT TO BE ENTERED INTO WOULD BE TREATED AS DIVISIBLE CONTRACT RESULTING IN THREE SEPARATE CONT RACTS, ONE FOR SUPPLY OF GOODS, SECOND FOR ERECTION AND THIRD FOR CIVIL ENGI NEERING WORKS, MERE FACT THAT OBLIGATION OF CONTRACTOR UNDER CONTRACT CONTIN UED TILL WORK ENTRUSTED TO IT WAS COMPLETE, BY ITSELF, WOULD NOT MAKE IT A COM POSITE CONTRACT - HELD, YES - WHETHER CARRYING OUT ANY WORK IS A SINE QUA N ON TO ATTRACT SECTION 194C AND, THEREFORE, NO TDS WAS DEDUCTIBLE UNDER SE CTION 194C IN RESPECT OF AGREEMENT FOR SUPPLY OF MATERIAL HELD, YES [IN FAVOUR OF ASSESSEE] WORDS AND PHRASES : WORD 'WORK' AS OCCURRING IN SEC TION 194C OF THE INCOME-TAX ACT, 1961. 7.3. WE FIND THAT THE LEARNED CIT(A) HAD ALSO PLA CED RELIANCE ON THE CBDT CIRCULAR NO. 681 DATED 8.3.1994. WE FIND THAT THE ISSUE UN DER DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF CO-ORDINATE BENCH OF BANGALORE TRIBUNAL IN THE CASE OF ABHILESH GARMENTS & ESTATES PVT LTD VS ACIT REPORTED IN (2015) 44 CCH 426 BANGTRIB IN ITA NOS. 1255 TO 1257(B)/ 2014 DATE D 17.7.2015 THE HEAD NOTES OF THE SAID DECISION IS REPRODUCED HEREUNDER:- TDS-CONSEQUENCES OF FAILURE TO DEDUCT TDS-ASSESSEE PRIVATE LTD. COMPANY DERIVING INCOME FROM LEASE AND POWER GENERA TION CHARGES HAD FILED AN APPLICATION SEEKING CERTIFICATE OF EXEMPTI ON FROM DEDUCTING TDS IN RESPECT OF THE RENT PAID TO ONE 'N' - ASSESSEE H AD ALSO ENTERED INTO AN AGREEMENT WITH 'E' FOR SUPPLY ERECTION AND COMMISSI ONING OF WINDMILL FOR A TOTAL CONSIDERATION OF RS. 3.83 CRORES AND PAYMEN T WAS SPREAD OVER FOR THREE A/Y'S 2006-07 TO 2008-09-PURSUANT TO SURVEY C ONDUCTED U/S 133A IN THE BUSINESS PREMISES OF THE ASSESSEE AO HAD THAT A SSESSEE HAS MADE PAYMENTS TO 'E' AMOUNTING TO RS.3,83,00,000/- WITHO UT DEDUCTING TAX AT SOURCE-CONSEQUENTLY, THE AO PASSED A COMMON ORDER U /S 201 & 201(1A) HOLDING THAT THE PAYMENTS MADE BY THE ASSESSEE TO ' E' WERE LIABLE TO TAX DEDUCTED AT SOURCE - ASSESSEE CLAIMED THAT HE HAD A LREADY DEDUCTED THE ITA NO. 1296/KOL/20 12 & & CO NO.12/KOL/2013 C-AM M/S.PACEMAN SALES PROMOTION PVT. LTD 9 TAX AND PAID THE SAME TO THE GOVERNMENT IN RESPECT OF THE REMAINING AMOUNT OF RS.46.00 CRORES TOWARDS CIVIL AND INDUSTR IAL CONSTRUCTION WORK AS WELL AS COMMISSIONING CHARGES AND NOT LIABLE TO TDS DEDUCTION IN RESPECT OF THE PAYMENT TOWARDS THE SUPPLY OF WINDMI LL EQUIPMENT WITH ITS ACCESSORIES OF RS.3.37 CRORES-REJECTING ASSESSEE'S VERSION, AO QUANTIFY THE AMOUNT OF TDS AND THE INTEREST U/S 201 & 201(1A )-CIT(A) HAD REJECTED THE CONTENTION OF THE ASSESSEE AND HELD TH AT THE CONTRACT UNDER WHICH THE PAYMENTS WERE MADE WAS AN INDIVISIBLE AND COMPOSITE CONTRACT AND THE ASSESSEE PAID THE REMUNERATION FOR COMPREHE NSIVE COMPOSITE DEAL OF SETTING UP OF WINDMILL-CIT(A) HAD HELD THAT THE ENTIRE VALUE OF CONTRACT WAS LIABLE FOR TDS AT THE RATE OF 2 PERCENT-HELD, E VEN IN THE CLARIFICATION AS PER THE DEFINITION OF WORK AS CONTAINED IN THE E XPLANATION TO CLAUSE- 4(E) TO SECTION 194C, THE VALUE OF THE MATERIAL PUR CHASED FROM SUCH CUSTOMER WAS REQUIRED TO BE EXCLUDED IF SUCH VALUE MENTIONED SEPARATELY IN THE INVOICE-IN THE INSTANT CASE IT WAS CLEAR FRO M EVIDENCE ON RECORD THAT SEPARATE PAYMENTS WERE MADE BY THE ASSESSEE FOR PUR CHASE OF WINDMILL FOR CIVIL AND INDUSTRIAL CONSTRUCTION WORK AND FOR COMM ISSIONING OF WINDMILL- ALL THESE WORK AND SUPPLY OF WINDMILL ARE COVERED U NDER THE SINGLE CONTRACT, HOWEVER, EACH AND EVERY ITEM OF WORK AS W ELL AS SUPPLY HAS BEEN SEPARATELY VALUED AND PRICED-IN FACT SEPARATE INVOI CES WERE ISSUED FOR SUPPLY OF WIND MILL DEVICE AND CIVIL AND INDUSTRIAL CONSTRUCTION-CONTRACT IN QUESTION WAS MORE OF SUPPLY OF WINDMILL EQUIPMEN T AND TURBINE CONVERTER THAN THE WORK OF CIVIL AND INDUSTRIAL CON STRUCTION AS WELL AS COMMISSIONING-THUS, WHERE THE VALUE/CONSIDERATION O F SUPPLY OF WINDMILL TURBINE CONVERTERS AND OTHER EQUIPMENT WAS SEPARATE LY GIVEN IN THE INVOICES AND RATHER SEPARATE INVOICES ARE PLACED BY THE SUPPLIER, THEN THE ASSESSEE WAS NOT LIABLE TO DEDUCT ANY TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194C SO FAR THE PAYMENT WAS MADE FOR SUPPLY OF THE WINDMILL TURBINE AND OTHER EQUIPMENT'S -ORDERS OF THE AUTHOR ITIES BELOW WAS SET ASIDE-ASSESSE'S APPEAL ALLOWED. WE FIND THAT THE ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH DECISION OF DELHI TRIBUNAL IN THE CASE OF HAR YANA POWER GENERATION CORPORATION LTD VS ITO REPORTED IN (2006) 103 TTJ 5 84 (DELHI- TRIB.) WHEREIN IT WAS OBSERVED THAT : ON THE FACTS OF THIS CASE, WE FIND THAT THE PRIMARY OBJECT OF THE APPELLANT WAS TO PURCHASE THE PLANT IN QUESTION AND THE CIVIL WORK, ERECTION AND COMMISSIONING WAS ONLY INCIDENTAL TO P URCHASE THE MATERIAL BY THE APPELLANT. IN OTHER WORDS, THE CON TRACT FOR SUPPLY OF THE ITA NO. 1296/KOL/20 12 & & CO NO.12/KOL/2013 C-AM M/S.PACEMAN SALES PROMOTION PVT. LTD 10 EQUIPMENTS AND THE CONTRACT FOR ERECTION AND COMMIS SIONING OF THE PLANT ARE TWO SEPARABLE CONTRACTS. HELD THAT IN EACH CASE THE TERMS OF THE CONTRACT NEED TO BE ANALYSED BEFORE COMING TO THE CONCLUSION WHETHER IT WAS A COMPOSITE CONTRACT OR NOT. AS ALREADY STATED, THE PRESENT CASE, THE CONTRACT, IN SO FAR AS IT RELATES TO SUPPLY OF THE MATERIAL, FREIGHT, INSURAN CE AND SUPPLY OF SPARE PARTS, IS CLEARLY SEPARABLE FROM THE OTHER PA RT OF THE CONTRACT RELATING TO CARRYING OUT CIVIL WORK, COMMISSIONING AND ERECTION OF THE POWER GENERATORS. IN VIEW OF THE ABOVE DISCUSS ION ABOVE, WE DIRECT THE A.O. TO WORK OUT THE SHORT DEDUCTION OF TAX AT SOURCE, IF ANY, BY EXCLUDING THE PAYMENTS TOWARDS SUPPLY OF MA CHINERY, SPARE PARTS AS WELL AS FREIGHT AND INSURANCE. IN VIEW OF THE AFORESAID FACTS AND FINDINGS GIVEN H EREINABOVE AND VARIOUS JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE FIND NO INFI RMITY IN THE ORDER PASSED BY THE LEARNED CIT(A). ACCORDINGLY, THE GROUNDS RAISED B Y THE REVENUE ARE DISMISSED. 8. CO (NO. 12/KOL/2013 ARISING OUT OF ITA NO.1296/ KOL/2012 A.Y 2006-07) OF ASSESSEE THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN IT S CROSS OBJECTIONS :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER WAS WRONG IN MAKING THE ORDER OF NON DEDUCT ION OF TAX DEDUCTION AT SOURCE U/S 194C OF THE INCOME TAX WHEN TAX HAS ALREADY BEEN PAID BY THE PAYEE. 2. THAT ON FACT AND CIRCUMSTANCES OF THE CASE THERE IS NO QUESTION OF LEVYING INTEREST U/S 201(1A) FOR FAILURE TO DEDUCT TAX U/S 194CBY THE ASSESSEE COMPANY WHICH WERE PAYABLE HAD BEEN ALREAD Y PAID BY THE PAYEE. 3. THAT OVERSIGHT OF THE PROVISION OF SECTION 191 O F THE INCOME TAX ACT AND ACCORDINGLY APPLICATION OF SECTION 201(1A) AFFORDING THE ADDED ALTERNATIVE SUPPORT AS TO NO LIABILITY OF PAY MENT OF TDS U/S 194C AND PAYMENT OF INTEREST THEREON. ITA NO. 1296/KOL/20 12 & & CO NO.12/KOL/2013 C-AM M/S.PACEMAN SALES PROMOTION PVT. LTD 11 WE FIND THAT THERE IS DELAY IN FILING CROSS OBJECT IONS BY THE ASSESSEE BY 42 DAYS WHICH IS CONDONED WITH THE CONSENT OF THE LEARNED DR. WE FIND THAT THE CROSS OBJECTIONS OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGES P LTD VS CIT REPORTED IN (2007) 293 ITR 226 (SC) , WHEREIN IT WAS HELD THAT WHERE THE PAYEE HAS ALR EADY PAID THE TAX ON THE INCOME ON WHICH THERE WAS A SHORT DEDUCTION OF TAX AT SOUR CE, RECOVERY OF TAX CANNOT BE MADE ONCE AGAIN FROM THE TAX DEDUCTOR. HOWEVER, WE FI ND THAT IN VIEW OF OUR AFORESAID FINDINGS AND DECISION THAT NO TAX NEED TO BE DEDUCT ED ON THE PURCHASE CONTRACT FOR WIND ELECTRIC GENERATOR AND PURCHASE OF LAND, THE ADJUDICATION OF CROSS OBJECTIONS OF THE ASSESSEE BECOMES INFRUCTUOUS. HENCE THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED AS INFRUCTUOUS. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 11-5 - 2 016 1.. THE APPELLANT/DEPARTMENT: THE I T O (TDS) WARD 58(4), 10B MIDDLETON ROW, 8 TH FLOOR,KOLKATA 700 071. 2 THE RESPONDENT/ASSESSEE: M/S. PACEMAN SALES PROMO TION PVT. LTD 14 N.S ROAD, 4 TH FLOOR, KOLKATA-700 001. 3 /THE CIT, 4.THE CIT (A) SD/- ( N.V.VASUDEVAN, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE: DATE 11-5- -2016 COPY OF THE ORDER FORWARDED TO:- ITA NO. 1296/KOL/20 12 & & CO NO.12/KOL/2013 C-AM M/S.PACEMAN SALES PROMOTION PVT. LTD 12 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS