I.T.O.((TDS) WARD -2(3), Chandrapur V. MAHARASHTYRA STATE POWER GENERATION COMPANY LTD., Chandrapur

ITA 380/NAG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1296 (ITAT-NAGPUR)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 08-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Assessee Lawyers: P B CHHAPGAR
• Section: 194C; 201(1)

Judgement Text

1 ITA NOS. 380 & 381/NAG/2016 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER.. I.T.A. NO. 380 & 381/NAG/2016 ASSESSMENT YEARS : 2009 - 10 & 2010 - 11. THE INCOME - TAX OFFICER (TDS), MAHARASHTRA STATE POWER WARD - 2(3), CHANDRAPUR. VS. GENERATION CO. LTD. CHANDRAPUR. T AN NGPMO5395F. APPELLANT. RESPONDENT. APPELLANT BY : SHRI A.R. NINAWE. RESPONDENT BY : SHRI KETAN VED & SHRI P.B. CHHAPGAR DATE OF HEARING : 2 4 - 11 - 2016 DATE OF PRONOUNCEMENT : 28 TH DEC., 2016 O R D E R. PER SHAMIM YAHYA, A.M. : THESE ARE APPEALS BY THE REVENUE AGAINST RESPECTIVE ORDERS OF LEARNED CIT(APPEALS) - II, NAGPUR FOR ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 IN THE CASE OF THE SAME ASSESSEE. SINCE THE ISSUES ARE COMMON AND CONNECTED, THEY HAVE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. COMMON GROUNDS OF APPEAL READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E TH E LD. CIT(A) ERR E D IN HOLDING THAT TDS NEED NOT BE MADE ON THE AMOUNT OF RS.198,38,20,000/ - FOR AY 2009 - 10 AND RS. 315,43,91,259/ - FOR AY 2010 - 11 AND DELETING THE DEMAND. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAST H LD. CIT(A) ERR E D IN HOLDING THAT THE AMOUNT PAID IS TOWARDS SUPPLY CONTRACT WITHOUT APPRECIATING THAT THE WHOLE CONTRACT IS A COMPOSITE CONTRACT 2 ITA NOS. 380 & 381/NAG/2016 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) FAILED TO APPREC IATE THAT ON WORKS CONTRACT TDS HAS TO BE MADE IN VIEW OF CBDT CIRCULAR NO. 13 OF 2006 DT. 13 - 12 - 2016. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN FOLLOWING THE DECISION OF THE HONBLE ITAT, NAGPUR IN APPEAL NO. 110, 11 & 112/ NAG/2011, DT. 18 - 12 - 2015 IN THE CASE OF MSPGL, NAGPUR WITHOUT APPRECIATING THAT THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE RELIED ON BY HIM. 2. AT THE OUTSET IN THIS CASE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS ITAT IN ASSESSEES OWN CASE IN ITA NOS. 110,111&112/NAG/2011 DATED 18 - 12 - 2015. LEARNED COUNSEL SUBMITTED THAT THIS FACT IS POINTED OUT IN THE GROUND NO. 4 IT S ELF. LEARNED COUNSEL SUBMITTED THAT THERE IS NO DISTINCTION WHATSOEVER IN THE FACTS OF THE PRESENT CASE AND THE FACTS OF THE AFORESAID CASE. 3. PER CONTRA LEARNED D.R. RELIED UPON THE ORDER OF THE AO, BUT HE COULD NOT POINT OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THE PRESENT CAS E AND THE FACTS OF THE CASE DEALT BY THE ITAT ABOVE. 4. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT THE LEARNED CIT(APPEALS) HAS CONSIDERED THE ISSUE AND FOUND THE FACTS OF THE CASE IDENTICAL TO THE ONE DEALT WITH BY THE ITAT AS ABOVE. WE MAY GAINFULLY REFER TO THE OBSERVATION OF THE LEARNED CIT(APPEALS) AS UNDER : I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF THE APPELLANT. THERE IS SUBSTANTIAL MERITS IN THE SUBMISSIONS MADE. THE APPELLANT HAS MADE PAY MENT TO BHEL FOR SUPPLY OF MAIN PLANT AT CHANDRAPUR TPS EXTENSION PROJECT. THE APPELLANT HAS ALSO SUBMITTED THE CONTRACT AGREEMENT DTD. 30 TH MARCH, 2010 ENTERED INTO BY THE APPELLANT WITH BHEL AND HAS ALSO SUBMITTED PARTS OF THE BID SPECIFICATION FOR CHAND RAPUR TPS EXPANSION PROJECT. THE APPELLANT HAS ALSO SUBMITTED COPY OF ITAT ORDER IN THE CASE OF APPELLANT FOR ASSESSMENT YEAR 2008 - 09 TO 2010 - 11 WHEREIN ON IDENTICAL FACTS, THE HONBLE ITAT NAGPUR BENCH, AFTER CONSIDERING THE VARIOUS ASPECTS OF THE MATTER, HELD THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT TDS ON THE SUPPLY CONTRACT. ON PERUSAL OF THE CONTRACT AGREEMENT AND THE BID SPECIFICATIONS FOR THE YEAR UNDER CONSIDERATION, IT BECOMES EVIDENT THAT THE CONTRACT FOR THE YEAR UNDER 3 ITA NOS. 380 & 381/NAG/2016 CONSIDERATION IS IDENTIC AL TO THE CONTRACTS ENTERED INTO BY THE APPELLANT WHICH WERE THE SUBJECT MATTER OF ADJUDICATION BY THE HONBLE ITAT NAGPUR BENCH FOR THE ASSESSMENT YEARS 2008 - 09. 2009 - 10 AND 2010 - 11 VIDE ITA NOS. 110, 111 & 112/NAG/2011. 5. THEREAFTER LEARNED CIT(APPEALS ) REFERRED TO THE RELEVANT PORTION OF THE ITAT ORDER AND CONCLUDED AS UNDER : AS STATED ABOVE, THE CONTRACT FOR THE YEAR UNDER CONSIDERATION IS IDENTICAL TO THE CONTRACTS ENTERED INTO BY THE APPELLANT, THAT WERE THE SUBJECT MATTER OF ADJUDICATION BY THE HONBLE ITAT NAGPUR BENCH REPRODUCED ABOVE. IN VIEW OF THE FACTS OF THE CASE AND THE ABOVE BINDING DECISION OF THE HONBLE ITAT NAGPUR BENCH IN THE CASE OF THE APPELLANT IT IS HELD THAT APPELLANT WAS NOT REQUIRED TO DEDUCT TDS ON THE PAYMENTS MADE TO BHEL IN TERMS OF AGREEMENT IN QUESTION AND CONSEQUENTLY THE ACTION OF THE LD. AO OF HOLDING THE APPELLANT TO BE AN ASSESSEE IN DEFAULT FOR NOT DEDUCTING TDS ON PAYMENT OF RS. 198.38 CRORES IS HEREBY CANCELLED AND CONSEQUENTLY THE TAX LIABILITY U/S 201(1) & 201(1A) IS ALSO HEREBY CANCELLED. 6. IT IS AGAINST THIS PART OF LEARNED CIT(APPEALS) ORDER THAT THE REVENUE IS IN APPEAL BEFORE US. 7. UPON CAREFUL CONSIDER ATION WE DEEM IT APPROPRIATE TO REFER TO THE ITAT ORDER AS MENTIONED ABOVE, WHEREIN IT WAS HELD AS UNDER : 18. WE FIND THAT IT IS A PLEA OF THE ASSESSEE THAT THE ASSESSEE HAS ENTERED INTO DISTINCT/SEPARATELY IDENTIFIABLE CONTRACTS FOR THREE CLEARLY DISTIN GUISHABLE PORTIONS VIZ. SUPPLY EQUIPMENT, ERECTION AND CIVIL WORKS. IT IS THE ASSESSEES PLEA THAT ON THE CONTRACT FOR SUPPLY EQUIPMENT NO TAX IS TO BE DEDUCTED. THE 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 CONTRACT AS THE BID 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 WERE 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 C ONTRACT THE RESPONSIBILITY OF THE CONTRACTOR FOR SUCCESSFUL COMPLETION OF PLANT/EQUIPMENT AS PER SPECIFICATION AND A BREACH IN ONE CONTRACT SHALL AUTOMATICALLY BE 4 ITA NOS. 380 & 381/NAG/2016 CONSTRUED AS BREACH OF OTHER CONTRACT WHICH WILL CONFER A RIGHT OF A OWNER TO TERMINATE THE O THER CONTRACT ALSO AT A RISK AND COST OF THE OTHER CONTRACTOR. THESE FACTORS HAVE BEEN TAKEN INTO ACCOUNT BY THE AUTHORITIES BELOW IN HOLDING THAT THE ENTIRE SPECTRUM OF ACTIVITIES HAVE THE ELEMENTS OF THE COMPOSITE CONTRACTS. 19. WE FIND THAT IDENTICAL I SSUE WAS CONSIDERED BY HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. KARNATAKA POWER TRANSMISSION 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 TRANSMISSION LINES AND SUB - STATIONS. IT H AD 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 LINES 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 CONTRAC TOR 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 TOWARDS 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 ERECTION 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 COMPOSIT E 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 / 5 ITA NOS. 380 & 381/NAG/2016 ASSESSED TAX PAYAB LE 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 CONTRACT ORS 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 AS SESSEE 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 THREE SEPARATE CONTRACTS, ONE FOR S UPPLY 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 R ESPECT 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 ON SINGLE SOLE RESPONSIBLE BASIS. THE CONTRACTOR IS BOUND TO PERF ORM 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 OT HER 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 CONTRACT IS TO BE CONSTRUED. CLAUSE 7 . 1 EXPRESSLY STATE THAT NOTWITHS TANDING 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 GOODS, THE SECOND FOR ERECTION AND THE THIRD FOR THE CIVIL ENGINEERING W ORKS 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 ENTERE D 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 DIVISIBLE CONTRACT. 6 ITA NOS. 380 & 381/NAG/2016 THEREFORE, THE PARTIES HAVE ENTERED INTO THREE SEPARAT E 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 T ITLE 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 FOR SUPPLY, THAT THE OBLIGATION UNDER THE CONTRACT WOULD NOT COME TO A N 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 CLEARLY EXPRE SSED 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 CONTRACT AND THE ASSESSING AUTHORITY AS WELL AS THE APPELLATE COMMISSIO NER 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 CONTRACTOR AGREES TO SUPPLY MATERIAL WHICH MAY BE USED BY HIM LATER IN CARR YING 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 1 3] 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 DID NOT INTEND TO CHANG E 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 7 ITA NOS. 380 & 381/NAG/2016 PURCHASED FROM A PERSON OT HER THAN SUCH CUSTOMER , 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 INVO ICE. 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 CONTR ACT, 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 ENTERED INTO AND ON E SUCH AGRE E MENT IS AGREEMENT FOR SUPPLY OF MATERIAL , MER ELY 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 CONTR ACT. NO DEDUCTION IS PERMISSIBLE IN RESPECT OF CONTRACT FOR SUPPLY OF MATERIAL FOR CARRYING OUT WORK . IN FACT , THE TRIBUNAL, BY A DETAILED 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 COMPOSITE 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 DEDUCTION 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 I S WITH RESPECT TO THE DEDUCTION OF TAX WITH RESPECT TO THE CONTRACT PERTAINING TO SUPPLY 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 ASSESS EE DECIDES TO AWARD THE CONTRACT TO THE SUCCESSFUL BIDDER, A DIVISIBLE CONTRACT COVERING 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 TH E HONBLE HIGH COURT IS ALSO SIMILAR HERE. THE HONBLE HIGH COURT IN THE ABOVE CASE LAW HAS DEALT UPON THE OBJECTIONS OF THE REVENUE THAT BREACH OF ONE CONTRACT SHALL AUTOMATICALLY BE CONSTRUED AS BREACH OF OTHER CONTRACT. THE HONBLE 8 ITA NOS. 380 & 381/NAG/2016 HIGH COURT EXPOUNDED THAT THIS WAS DONE IN ORDER TO SEE THAT THE OBJECT OF ENTERING INTO CONTRACT IS ACHIEVED, 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 EXTENDED 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 T HE CONTRACTS HAVE TO BE CONSTRUED. 21. 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 DISTINGUISH 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 SEPA RATE DISTINCT CONTRACT AND ON WHICH NO DEDUCTION IS PERMISSIBLE U/S 194C. 22. SIMILAR 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 HO NBLE 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 PER MISSIBLE 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, THERE FORE, 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 O F THE ACT . SECTION 194C HAS SUFFEREDAN AMENDMENT ALSO WITH EFFECT FROM OCTOBER 1, 2009 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 PER SON OTHER THAN THE CUSTOMER , THE SAME WOULD NOT FALL WITHIN THE DEFINITION OF 'WORK' UNDER SECTION 194C 9 ITA NOS. 380 & 381/NAG/2016 OF THE ACT . 23. 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 PAYING 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 INCOME - 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 INCL UDING PRODUCTION OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; (C) CARRIAGE OF GOODS 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 PRESENT 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 CLAUSE 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 MANUFACTUR ING 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 POWER PLANT CAN BE REASONABLY HELD TO BE AN ACTIVITY OF CONSTRUCTION. SHE HELD THAT THE TER M CONSTRUCTION IS MORE SUITABLE TO THE ACT OF PUTTING UP A POWER PLANT THAN THE TERM MANUFACTURING. 10 ITA NOS. 380 & 381/NAG/2016 24. 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 E NTITLED 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. GLENMARK 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 SOURCED FROM THE CUSTOMER/PURCHASER BUT WAS INDEPENDENTLY OBTAINED BY THE MANUFACTURER FROM A PERSON OTHER THAN CUSTOMER, THE CONTRACT ENTERED INTO BY THE ASSESSEE WAS NOT A CONTRACT FOR CARRYING ON WORK WITHIN THE MEANING 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 CONTRACT. 25. AS REGA RDS RELIANCE OF THE REVENUE ON THE DECISION OF HONBLE GUJRAT HIGH COURT IN THE CASE OF ESSAR OIL LTD VS. ITO INCOME TAX APPEAL NO. 33 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 PRODU CTS (1973) 88 ITR 192. 26. IN THE LIGHT OF ABOVE DISCUSSION AND PRECEDENTS, RESPECTFULLY 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. 11 ITA NOS. 380 & 381/NAG/2016 27. IN THE RESULT THE APPEALS BY THE ASSESSEE STAND ALLOWED. 8. ADHERING TO THE DOCTRINE OF STARE DECISIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). ACCORDINGLY WE UPHOLD THE SAME. 9. IN THE RESULT, THESE APPEALS FILED BY THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF DEC., 2016. SD/ - SD/ - (RAM LAL NEGI) ( SHAMIM YAHYA) JUDICIAL MEMBER. ACOUNTANT MEMBER. NAGPUR, DATED: 28 TH DEC. , 2016. COPY FORWARDED TO : 1. MAHARASHTRA STATE POWER GENERATION COMPANY LTD., NIRMAN BHAVAN, URJANAGAR, CHANDRAPUR - 442404. 2. I.T.O. (TDS), WARD - 2(3), CHANDRAPUR. 3. C.I.T. - ( TDS ), NAGPUR. 4. CIT(APPEALS) - II , NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.