ITO (OSD) TDS, New Delhi V. Mahanagar Telephone Nigam Ltd., New Delhi

ITA 4715/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4915 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 16-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Keywords: Additional evidence; Non-deduction of tax
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO.4715/DEL/2015 A.Y. : 2011-12 INCOME TAX OFFICER (OSD) TDS, LTU, NEW DELHI NBCC PLAZA, PUSHP VIHAR, NEW DELHI 17 VS. MAHANAGAR TELEPHONE NIGAM LIMITED, 5 TH FLOOR, 9, CGO COMPLEX, LODHI ROAD, NEW DELHI 110 003 (PAN/TAN: DELM03913A) (ASSESSEE) (RESPONDENT) REVENUE BY : SH. SHRAVAN GOTRU, SR. DR ASSESSEE BY : SH. VED JAIN, ADV. ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THIS APPEAL AGAINST THE IMP UGNED ORDER DATED 01.11.2012 OF THE LD. CIT(A)-18, NEW DELHI RELE VANT TO ASSESSMENT YEARS 2011-12. 2. THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER :- 1. THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.6,64,00,359/- MADE IN THE ORDER ULS 201(1)/201(1A) OF THE INCOME TAX 2 ACT, 1961 DATED 30/3/2013 MADE BY ITO, WARD 50(4), NEW DELHI. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN NOT RECORDING THE REASONS FOR ADMITTING ADDITIONAL EVIDENCE AS REQUIRED UNDER RULE 46A(2) OF THE I.T. RULES, 1962. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN CONCLUDING THAT SECTION 194C(3)(I) OF THE IT ACT IS APPLICABLE IN THE CASE OF THE ASSESSEE, WHILE IT IS SECTION 194C(3)(II) WHICH IS APPLICABLE IN THE CASE AS THE VALUE OF THE MATERIAL SUPPLIED TO THE MTNL WAS NOT MENTIONED SEPARATELY IN THE INVOICES OF MIS HCL INFOSYSTEMS LTD. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN CONCLUDING THAT THE ASSESSEE HAD PRODUCED ALL INVOICES WITH REGARD TO THE PURCHASE OF EQUIPMENTS FROM MIS HCL INFOSYSTEMS LTD. WHILE THE ANNEXURE- II OF THE ADDITIONAL EVIDENCE 3 SUBMITTED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS HAD ONLY ONE INVOICE - FOR RS.1,03,56,79,324/- WHILE THE ASSESSMENT ORDER OF ITO(TDS) DATED- 30/03/2013 MENTIONS THE TOTAL CONTRACT AMOUNT OF RS.3,32,00,17,942/- AND ASSESSMENT ORDER CLEARLY MENTIONS THAT THE ASSESSEE HAD NOT FURNISHED ANY INFORMATION REGARDING THE ABOVE CONTRACT WORK DURING THE ASSESSMENT PROCEEDINGS. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN CONCLUDING THAT MIS HCL INFOSYSTEMS LTD. HAD PURCHASED THE EQUIPMENTS SUPPLIED TO THE ASSESSEE FROM THIRD PARTIES AS NO SUCH EVIDENCE WAS SUBMITTED AS ADDITIONAL EVIDENCE DURING THE APPELLATE PROCEEDINGS OR DURING THE ORIGINAL ASSESSMENT PROCEEDINGS BEFORE THE ITO(TDS), WARD 50(4), DELHI. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN CONCLUDING 4 THAT SEPARATE INVOICES WERE RECEIVED FROM THE SUPPLIER M/S HCL LNFOSYSTORNS LTD. FOR SUPPLY OF EQUIPMENTS AND SERVICES AS NO SUCH EVIDENCE WAS SUBMITTED DURING THE APPELLATE PROCEEDINGS OR DURING THE ORIGINAL ASSESSMENT PROCEEDINGS BEFORE THE ITO(TDS), WARD 50(4), DELHI. 7. THE APPELLANT CRAVES LEAVE TO, ADD TO, ALTER, AMEND OR VARY FROM THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT IN THIS CASE, INFORMATION WAS RECEIVED THAT THE DEDUCTOR ASSESSEE HAD AWARDED C ONTRACT WORKS TO M/S HCL INFOSYSTEMS LTD. CONNECTED WITH THE P ROJECT OF COMMON WEALTH GAMES, 2010, HELD IN NEW DELHI. IN O RDER TO VERIFY THE COMPLIANCE BY THE DEDUCTOR ASSESSEE WITH REFERENCE TO THE TDS PROVISIONS UNDER CHAPTER XVII-B OF THE INCOM E TAX ACT, 1961, A QUERY LETTER WAS ISSUED TO THE ASSESSEE ON 26. 3.2013 VIDE WHICH SOME INFORMATION WAS CALLED FROM THE ASSESSEE. THE ASSESSEE WAS REQUIRED TO FURNISH THE DETAILS OF TDS DEDUCTED ON THE ABOVE PAYMENTS. THE ASSESSEE WAS ALSO REQUIRED TO S UBMIT THE COPIES OF ACKNOWLEDGEMENTS OF FILING QUARTERLY E-TDS ON THE 5 PAYMENTS MADE. THE ASSESSEE WAS ALSO REQUIRED TO SU BMIT THE COPIES OF ACKNOWLEDGEMENTS OF FILING QUARTERLY E-TDS RETURNS FOR THE CONCERNED FINANCIAL YEARS. AS PER THE AO, THE A SSESSEE HAS NOT FURNISHED ANY INFORMATION / RESPONSE WITH REFERENC E TO THE QUERY LETTER. AS THE MATTER INVOLVED TIME LIMITATION, A O HAS NO ALTERNATIVE EXCEPT TO PASS THE ORDER U/S. 201(1) /201 (1A) FOR THE FY 2010-11. AS PER INFORMATION AVAILABLE, THE DETAILS OF CONTRACT WORK AWARDED BY THE DEDUCTOR ASSESSEE, AND THE CONTRACT AM OUNT INVOLVED ALONGWITH THE AMOUNT OF LIABILITY TO DEDUCT TAX AT SOURCE U/S. 194C/194J OF THE ASSESSEE IS AS UNDER:- S.NO. NAME OF THE PROJECT WORK CODE NO. PAYMENT MODE INCOME TAX 1. SUPPLY OF EQUIPMENT INSTALLATION TESTING COMMISSIONING OF COMMUNICATION WORK INFRASTRUCTURE FOR CWG-2010. SUBSEQUENTLY REDEPLOYMENT OF THE EQUIPMENT IN DELHI AND MUMBAI. MTNL - 00002497 1,212,569,984/ - 24,251,400 645,202,907/ - 12,904,058/ - 62,642,406/ - 1,252,848/ - 1,094,693,562/ - 21,893,871/ - 224,900,000/ - 4,498,000/ - 77,411,895/ - 1,548,238/ - 6 2,597,188/ - 51,944/ - TOTAL 3,320,017,942/ - 6,64,359/ - 3.1 IN THE ABSENCE OF ANY RESPONSE FROM THE ASSESSE E, IT WAS ASSUMED BY THE AO THAT THE ASSESSEE HAS PAID / CREDITED ALL THE ABOVE MENTIONED CONTRACT AMOUNT DURING FY 2010-11 A ND ACCORDINGLY THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE AMOUNTING TO RS. 6,64,00,359/- IN ACCORDANCE WITH TH E PROVISIONS OF SECTION 194C/194J FROM THESE AMOUNTS CREDITED/ PAID. AS THERE IS NO EVIDENCE BROUGHT BEFORE THE AO TO ESTABLISH THAT THI S TAX WAS DEDUCTED AT SOURCE, THE ASSESSEE WAS DEEMED TO BE IN D EFAULT FOR THIS AMOUNT OF RS. 6,64,00,359/-. FURTHER THE ASSESSEE WAS ALSO LIABLE TO PAY INTEREST U/S. 201(1A) ON THIS AMOUNT. AS FULL DETAILS ARE NOT AVAILABLE, THE AMOUNT OF INTEREST CHARGEABLE U/S. 20 1(1A) IS ESTIMATED AT RS. 1,99,20,107/- @1% P.M. FOR A PERIOD OF 30 MONTHS. THUS TOTAL DEMAND OF RS. 8,63,20,466/- WAS R AISED AGAINST THE ASSESSEE. ACCORDINGLY, AN ORDER DATED 30.3.2013 P ASSED U/S. 201(1)/201(1A) OF THE INCOME TAX ACT, 1961 BY THE A SSESSING OFFICER. AGAINST THE ASSESSMENT ORDER, ASSESSEE APPE ALED BEFORE THE LD. CIT(A)-18, NEW DELHI, WHO VIDE HIS IMPUGNED ORDER DATED 23.3.2015 HAS ALLOWED THE APPEAL OF THE ASSESSEE. A GGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 5. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED HE HAS PASSED A WELL REASONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEV ANT RECORDS, ESPECIALLY THE IMPUGNED ORDER. WE FIND THAT IN THIS CASE THE ASSESSING OFFICER HAD SENT NOTICE DATED 26/03/2013 A S PER WHICH DETAILS WITH REGARD TO TDS DEDUCTED ON THE CONTRACT WERE ASKED FOR IMMEDIATELY TO BE FILED I.E. ON 30/03/2013 WHICH (B EING SATURDAY WAS A HOLIDAY FOR THE DEPARTMENT. THE SAID NOTICE WAS RECEIVED BY THE MTNL ON 28/03/2013 A THURSDAY, THE DAYS TO FOLLOW WERE HOLIDAYS AS 29/03/2013 BEING GOOD FRIDAY, 30/03/201 3 WAS A SATURDAY AND 31/03/2013 WAS A SUNDAY, HENCE THE NEX T WORKING DAY WAS MONDAY I.E. 01/04/2013. HOWEVER, THE AO PAS SED ORDER UNDER SECTION 201(1)/ 201(1A) OF THE INCOME TAX ACT 1961 AGAINST THE FAILURE TO DEDUCT TAX AT SOURCE ON 30/03/2013 WHIC H WAS A HOLIDAY WITHOUT WAITING FOR INFORMATION TO COME IN FRO M THE ASSESSEE. BEING AGGRIEVED, MTNL FILED AN APPEAL BEF ORE THE CIT (A) XXX, NEW DELHI ON 11/09/2013. FURTHER, APPLICATION REQUESTING PRODUCTION OF ADDITIONAL EVIDENCES UNDER RULE 46A OF THE INCOME 8 TAX RULES 1962 HAS BEEN FILED BY THE ASSESSEE ON 15 /10/2014 WHEREIN THE RESPECTIVE COPIES OF PO ISSUED, SEPARATE INVOICES ISSUED FOR BOTH SERVICES AND EQUIPMENTS PURCHASED AND DETAIL S OF TDS DEDUCTED ON THE SERVICES AVAILED WERE SUBMITTED BY T HE ASSESSEE. FURTHER, A REMAND REPORT WAS CALLED FOR FROM THE CO NCERNED ASSESSING OFFICER. THE CONCERNED ASSESSING OFFICER IN THE REMAND REPORT DATED 11/02/2015 HAS HELD THAT IT WAS A WORK CO NTRACT U/S 194C AND ASSESSEE COMPANY IS LIABLE TO DEDUCT TDS ON THE SAID CONTRACT OF SERVICES AND EQUIPMENTS PURCHASED AND TH AT THE ADDITIONAL EVIDENCES FURNISHED UNDER RULE 46A MAY N OT BE ADMITTED. IT WAS STATED THAT: 'IF THE CONTRACT WAS ONLY FOR THE SUPPLY OF MATERIAL A S CLAIMED BY THE ASSESSEE, WHY THE CONTRACTORS WAS REQUIRED TO DO PRE-STUDY PLANNING, DESIGN POC FOR PLANNING, NETWORK DESIGN ETC. ALL THIS SHOWS THAT THI S WAS A WORK CONTRACT. HENCE PAYMENT MADE FOR PURCHASING EQUIPMENTS IS CLEARLY COVERED U/S 194C AND THE ASSE SSEE WAS LIABLE TO DEDUCT TAX AS SOURCE ON THE AMOUNT PAID F OR SUPPLY OF EQUIPMENT KEEPING IN VIEW THE OBJECT, NATU RE OF THE INFRASTRUCTURE PROVIDED BY THE CONTRACTOR. HENCE T HE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE BEFORE 9 YOUR GOODSELF ON THIS ACCOUNT MAY NOT BE ADMITTED UND ER RULE 46A OF INCOME TAX RULES, 1962.' 6.1 WE FURTHER NOTE THAT MTNL STRONGLY OBJECTS THE FIND INGS OF THE CONCERNED ASSESSING OFFICER. DURING THE YEAR UNDER C ONSIDERATION, MTNL HAS AWARDED CONTRACT TO M/S. HCL INFOSYSTEMS L TD. CONNECTED WITH THE PROJECT. AS EVIDENT FROM THE CONTRACT, IT WAS A CONTRACT ON TURNKEY BASIS FOR SUPPLY OF EQUIPMENTS AND FOR INSTA LLATION SERVICES, DEPLOYMENT, REDEPLOYMENT ETC., THUS IT INVOLVES TWO A SPECTS WHICH ARE AS FOLLOWS: I) SUPPLY OF EQUIPMENTS II) SERVICES OF INSTALLATION, DEPLOYMENT, REDEPLOYMEN T THE CONTRACT AWARDED TO M/S HCL INFOSYSTEMS LTD. ON T URNKEY BASIS WOULD INCLUDE THE SUPPLY OF EQUIPMENTS LIKE P R OUTER, DISPERSION COMPENSATION UNIT, ETC. AND FOR THE SERVIC ES IN RELATION TO INSTALLATION, DEPLOYMENT, REDEPLOYMENT, ET C. 6.2 IT IS ALSO NOTED THAT MTNL IN THE RELEVANT YEAR HA D ENTERED INTO AGREEMENT WITH M/S. HCL INFOSYSTEMS LTD. TO SUPPLY EQUI PMENTS CONNECTED WITH THE PROJECT OF COMMON WEALTH GAMES 20 10. HOWEVER, THE EQUIPMENTS SUPPLIED WERE AS PER THE SPEC IFICATIONS OF THE ASSESSEE BUT THE SAME HAVE NOT BEEN PURCHASED FR OM MTNL. 10 M/S. HCL INFOSYSTEMS LTD. HAS PURCHASED THE SAID EQU IPMENTS FROM PERSON OTHER THAN SUCH CUSTOMER I.E. NOT FROM MTNL. FU RTHER, THERE WAS SEPARATE BILLING FOR THE PURCHASE OF EQUIPMENTS FROM THAT OF SERVICES PROVIDED BY M/S. HCL INFOSYSTEMS LTD. TO MTN L; INVOICES RAISED IN THAT REGARD HAVE ALSO BEEN SUBMITTED BY TH E ASSESSEE. 6.3 IN THIS REGARD, RELEVANT PROVISIONS OF SECTION 1 94C OF THE INCOME TAX ACT 1961 HAVE BEEN REPRODUCED HEREUNDER- 194C. (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE CONTRACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SU PPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED PERSON SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CAS H OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MOD E, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO- (II) TWO PER CENT WHERE THE PAYMENT IS BEING MADE OR CREDIT IS BEING GIVEN TO A PERSON OTHER THAN AN INDIV IDUAL OR A HINDU UNDIVIDED FAMILY OF SUCH SUM AS INCOME-T AX ON INCOME COMPRISED THEREIN. 11 (3) WHERE ANY SUM IS PAID OR CREDITED FOR CARRYING OUT ANY WORK MENTIONED IN SUB-CLAUSE (E) OF CLAUSE (IV) OF THE EXPLANATION, TAX SHALL BE DEDUCTED AT SOURCE- (I) ON THE INVOICE VALUE EXCLUDING THE VALUE OF MATER IAL, IF SUCH VALUE IS MENTIONED SEPARATELY IN THE INVOICE; O R (II) ON THE WHOLE OF THE INVOICE VALUE, IF THE VALUE OF MATERIAL IS NOT MENTIONED SEPARATELY IN THE INVOICE. EXPLANATION.-FOR THE PURPOSES OF THIS SECTION,- (IV) 'WORK' SHALL INCLUDE- (F) ADVERTISING: (G) BROADCASTING AND TELECASTING INCLUDING PRODUCTION OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING: (H) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS: (I) CATERING; J) 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 12 SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM PERSON, OTHER THAN SUCH CUSTOMER. AS PER SUB-CLAUSE (E) OF CLAUSE (IV) OF THE EXPLANATION TO SECTION 194C OF THE INCOME TAX ACT 1961, WORK DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM PERSON, OTHER THAN SUCH CUSTOMER. 6.4 FURTHER, RELEVANT EXTRACTS OF CIRCULAR ISSUED BY TH E DEPARTMENT WHICH STATES THAT SECTION 194C WOULD NOT COVER A CONTRAC T FOR THE SALE OF GOODS: CIRCULAR: NO. 681, DATED 8-3-1994 SECTION 194C PAYMENTS TO CONTRACTORS AND SUB- CONTRACTORS ' .... 7. (VI)THE PROVISIONS OF THIS SECTION WILL NOT COVER CONTRACTS FOR SALE OF GOODS- (B) WHERE, HOWEVER, THE CONTRACTOR UNDERTAKES TO SUPPLY ANY ARTICLE OR THING FABRICATED ACCORDING TO THE SPECIFICATIONS GIVEN BY GOVERNMENT OR ANY 13 OTHER SPECIFIED PERSON AND THE PROPERTY IN SUCH ARTICLE OR THING PASSES TO THE GOVERNMENT OR SUCH PERSON ONLY AFTER SUCH ARTICLE OR THING IS DELIVERED , THE CONTRACT WILL BE A CONTRACT FOR SALE AND AS SUCH OUTSIDE THE PURVIEW OF THIS SECTION.' 6.5 WE FURTHER NOTE THAT HONBLE ANDHRA HIGH COURT IN THE CASE OF P.S. & COMPANY VS. STATE OF ANDHRA PRADESH ON 13 SEP TEMBER, 1983 HAS HELD AS UNDER:- 'THE FERRY AS A WHOLE NOW HAS INDIVIDUAL EXISTENCE READY TO BE DELIVERED AND THEREFORE ON DELIVERY THE SELLER BECOMES ENTITLED TO THE REMAINING PAYMENT OF 25 PER CENT OF COST PRICE AND ON SUCH PAYMENT, THE TRANSACTION BECOMES COMPLETE. THE AFORESAID PROCESS IS A STRONG POINTER IN FAVOUR OF THE CONTRACT BEING ONE FOR SALE AND NOTHING ELSE. HENCE, IT IS A CONTRACT OF SALE FOR TRANSFER OF THE PROPERTY, AND THE DELIVERY OF POSSESSION WITH TITLE TO THE BUYER, WHICH IS THE ESSENCE OF CONTRACT OF SALE.' 6.5.1 THE HONBLE ANDHRA PRADESH HIGH COURT P.S. & COMPANY V. STATE OF ANDHRA PRADESH 56 STC 283 ISSUED GUIDELI NES ON A 14 CONSPECTUS OF THE DECISIONS OF THE SUPREME COURT TO DE TERMINE WHETHER A CONTRACT IS 'WORKS CONTRACT' OR 'CONTRACT FOR SALE OF GOODS': (E) A CONTRACT WHERE NOT ONLY WORK IS TO BE DONE BUT EXECUTION OF SUCH WORK REQUIRES GOODS TO BE USED MAY TAKE ONE OF THE THREE FORMS AS UNDER: THE CONTRACT MAY BE FOR WORK TO BE DONE FOR REMUNERATION AND FOR THE SUPPLY OF MATERIALS USED IN THE EXECUTION OF THE WORK FOR A PRICE. IT MAY BE A CONTRACT FOR WORK IN WHICH USE OF THE MATERIALS IS ACCESSORY OR INCIDENTAL TO THE EXECUTIO N OF THE WORK. IT MAY BE A CONTRACT FOR SUPPLY OF GOODS WHERE SOME WORK IS REQUIRED TO BE DONE AS INCIDENTAL TO THE SALE. WHERE THE CONTRACT IS OF THE FIRST TYPE IT IS A CONTRACT CONSISTING ESSENTIALLY OF TWO PARTS - ONE FOR THE SALE OF GOODS AND THE OTHER FOR WORK AND LABOUR . THE SECOND TYPE OF WORK IS CLEARLY A CONTRACT FOR WORK AND LABOUR NOT INVOLVING SALE OF GOODS. THE THIRD TYPE IS CONTRACT FOR SALE WHERE THE THINGS ARE 15 SOLD AS CHATTEL AND SOME WORK IS UNDOUBTEDLY DONE BUT IT IS DONE MERELY AS INCIDENTAL TO THE SALE. 6.6 IN THE CASE OF CIT VS. SILVER OAK LABORATORIES PVT. LTD, SUPREME COURT HAS OBSERVED AS UNDER:- 'OUR ATTENTION, IN FACT, IS INVITED TO THE AMENDMENT IN SECTION 194C OF THE ACT VIDE FINANCE (NO.2) ACT, 2009, WITH EFFECT FROM 1ST OCTOBER, 2009, WHICH DEFINES 'WORK' TO INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER. IN FACT, IT IS CLARIFIE D THAT THE DEFINITION OF THE WORD 'WORK' WILL 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.' 6.7 IN THE CASE OF THE STATE OF HIMACHAL PRADESH VS. ASSOCIATED HOTELS OF INDIA LTD. (SC) [1972] 29 STC 474, THE HON BLE SUPREME COURT OF INDIA HAS OBSERVED AS UNDER:- 'IF THE MAIN OBJECT UNDERLYING THE CONTRACT IS TO TRANSFER PROPERTY IN OR DELIVERY OF POSSESSION OF A 16 CHATTEL AS CHATTEL, THEN THE CONTRACT IS ONE FOR SALE. THE TEST, OBSERVED THEIR LORDSHIPS, IS WHETHER OR NOT THE WORK AND LABOUR BESTOWED ENDED IN ANYTHING THAT CAN PROPERLY BECOME THE SUBJECT MATTER OF A SALE. NEITHER THE OWNERSHIP OF THE MATERIALS NOR THE VALUE OF THE SKILL AND LABOUR, AS COMPARED WITH THE VALUE OF THE MATERIALS IS' CONCLUSIVE, ALTHOUGH SUCH MATTERS MAY BE TAKEN INTO CONSIDERATION IN DETERMINING WHETHER THE CONTRACT IS IN SUBSTANCE ONE FOR WORK AND LABOUR OR ONE FOR THE SALE OF CHATTEL.' 6.8 IN THE CASE OF CIT-VS-GLENMARK PHARMACEUTICALS L TD 324 ITR 199(BOM), THE HONBLE BOMBAY HIGH COURT HAS OBSERVED AS UNDER:- IN THIS CASE, ASSESSEE ENTERED IN TO A CONTRACT WITH OTHER PARTY UNDER WHICH THE OTHER WAS REQUIRED TO SUPPLY THE GOODS AS PER ITS REQUIREMENTS AND SPECIFICATION. THE OTHER PARTY PURCHASED THE MATERIAL FROM THE MARKET AND THEN MANUFACTURED THE DESIRED ITEM. 17 NO TDS WAS MADE WHILE MAKING THE PAYMENTS. AO WAS OF THE VIEW THAT ASSESSEE SHOULD HAVE DEDUCTED THE TAX U/S 194C. THE COURT HELD:- THE COURT HELD 'THE EXPRESSION 'CARRYING OUT ANY WORK' IN SECTION 194C WOULD NOT INCLUDE A CASE WHERE (I) WHERE THE PROPERTY IN THE ARTICLE OR THING PASSES TO THE CUSTOMER UPON DELIVERY, AND (II) THE MATERIAL THAT WAS REQUIRED WAS NOT PURCHASED/ SOURCED FROM THE PURCHASER/CUSTOMER, BUT WAS PURCHASED OR INDEPENDENTLY OBTAINED BY THE MANUFACTURER FROM A PERSON OTHER THAN THE CUSTOMER. THE RATIONALE BEHIND THIS WAS THAT WHERE A CUSTOMER PROVIDES THE MATERIAL, WHAT THE MANUFACTURER DOES IS TO CONVERT THE MATERIAL IN TO A PRODUCT DESIRED BY THE CUSTOMER, THE CONTRACT ESSENTIALLY INVOLVES WORK OF LABOUR AND NOT A SALE.' 6.9 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. REEBOK INDIA CO 306 ITR 124 (DEL) HAS HELD AS UNDER:- 'THE TRIBUNAL ALSO CONSIDERED VARIOUS DECISIONS OF HIGH COURTS AS WELL AS THE SUPREME COURTS AND THEN RETURNS A CONCLUSIVE FINDING THAT THE 18 TRANSACTION BETWEEN THE ASSESSEE AND THE MANUFACTURER WAS THAT OF PURCHASE AND SALE OF GOODS AND NOT THE WORKS CONTRACTS UNDER SECTION 194C OF THE SAID ACT.' 6.10 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DABUR INDIA LTD. 283 ITR 197 (DEL) HAS HELD AS UNDER:- 'IN THE INSTANT CASE ALSO THE SUPPLY OF CORRUGATED BOXES WAS TO BE MADE WITH SOME LABELS PRINTED ON THE SAME. THE QUESTION THAT WAS RAISED BEFORE THE TRIBUNAL, THEREFORE, WAS WHETHER THE SUPPLY OF SUCH BOXES WAS A CONTRACT FOR SALE OF CHATTEL AND AS SUCH OUTSIDE THE PURVIEW OF SECTION 194C OF THE IT ACT, 1961. THE TRIBUNAL HAS, RELYING UPON THE DECISION OF THE SUPREME COURT IN ASSOCIATED HOTELS (SUPRA) AND THE ORDER PASSED BY THE PUNE BENCH OF THE TRIBUNAL IN WADILAL REFERRED TO ABOVE, HELD THAT THE DOMINANT OBJECT UNDERLYING THE CONTRACT IN THE INSTANT CASE WAS THE SUPPLY OF GOODS IN THE FORM OF CORRUGATED BOXES.' 19 6.11 WE FURTHER NOTE THAT CLARIFICATION REGARDING TH E WORD 'WORK' IN SECTION 194C IN THE MEMORANDUM EXPLAINING THE. PROVIS IONS OF THE FINANCE BILL 2009 (PAGE 216-17 OF 324 ITR) READ AS UNDER: 'TO BRING CLARITY ON THIS ISSUE, IT IS PROPOSED TO PROVIDE THAT 'WORK' SHALL NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING RAW MATERIAL PURCHASED FROM A PERSON OTHER THAN SUCH CUSTOMER AS SUCH A CONTRACT IS A CONTRACT FOR 'SALE'. THIS WI LL HOWEVER NOT APPLY TO A CONTRACT WHICH DOES NOT ENTAIL MANUFACTURE OR SUPPLY OF AN ARTICLE OR THING (E.G., A CONSTRUCTION CONTRACT). IT IS ALSO PROPOSED TO INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER, WITHIN THE DEFINITION OF 'WORK'. IT IS FURTHER PROPOSED TO PROVIDE THAT IN SUCH A CASE TDS SHALL BE DEDUCTED ON THE INVOICE VALUE EXCLUDING THE VALUE OF MATERIAL PURCHASED FROM SUCH CUSTOMER IF SUCH VALUE IS MENTIONED SEPARATELY IN THE INVOICE. WHERE THE MATERIAL COMPONENT HAS NOT BEEN SEPARATELY MENTIONED IN THE INVOICE, TDS SHALL BE DEDUCTED ON THE WHOLE OF THE INVOICE VALUE.' 7. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON THE BASIS OF ABOVE CASE LAWS, CIRCULATIONS AN D CLARIFICATIONS, IT IS CLEAR THAT IN RESPECT OF AGREEMENT FOR THE SU PPLY OF EQUIPMENTS, 20 NO TDS IS DEDUCTIBLE U/S 194C OF THE INCOME TAX ACT 19 61 AS IT IS AMOUNTS TO A CONTRACT OF SALE. WE NOTE THAT M/ S. HCL I NFOSYSTEMS LTD. SUPPLIED EQUIPMENTS AS PER THE SPECIFICATIONS OF THE ASSESSEE BUT THE SAME HAVE NOT BEEN PURCHASED FROM MTNL. M/S. HCL INFOSYSTEMS LTD. HAS PURCHASED THE SAID EQUIPMENTS FRO M PERSON OTHER THAN SUCH CUSTOMER I.E. NOT FROM MTNL. HENCE, T DS PROVISIONS WOULD NOT FALL APPLICABLE ON THE SUPPLY O F EQUIPMENTS. FURTHER SINCE BILLING FOR THE SUPPLY OF EQUIPMENTS I S SEPARATE FROM THAT OF THE SERVICES, TDS WOULD NOT BE DEDUCTED ON THE SUPPLY OF EQUIPMENTS. THUS, TDS WOULD ONLY BE LIABLE TO BE DED UCTED ON THE VALUE OF PROFESSIONAL SERVICES AVAILED BY THE ASSESS EE U/S 194J OF THE INCOME TAX ACT 1961. THE ASSESSEE HAS DULY COMPL IED WITH THE LAW BY DEDUCTING TDS ON SERVICES PROVIDED BY M/S. HC L INFOSYSTEMS LTD. THUS BASED ON THE ABOVE MENTIONED FACTS, PROVISION S OF LAW, CASE LAWS, CIRCULATIONS AND CLARIFICATIONS IT IS CL EAR THAT MTNL IS NOT LIABLE TO DEDUCT TDS ON THE SAID TRANSACTION OF SUPPLY OF EQUIPMENTS PROVIDED BY M/ S. HCL INFOSYSTEMS LTD. HOWEVER, THE P ROVISIONS OF TDS WOULD FALL APPLICABLE ON THE SERVICES OF INSTALLA TION, DEPLOYMENT AND REDEPLOYMENT WHICH HAS BEEN DULY DEDUCTED AND D EPOSITED BY THE ASSESSEE. WITH REGARDS TO FACTS, WE FURTHER FIND T HAT M/S HCL INFOSYSTEMS LTD. SUPPLIED EQUIPMENTS AS PER THE SPECIF ICATIONS OF THE ASSESSEE COMPANY BUT THE SAME HAVE NOT BEEN PURCHA SED FROM 21 APPELLANT AND ALSO THE BILLING FOR THE SUPPLY OF EQUI PMENTS HAS BEEN SEPARATELY DONE FROM THAT OF THE SERVICES. FURTHERMORE AS PER THE PROVISIONS STATED U/S 194C, TAX SHALL BE DEDUCTED AT SOURCE ON THE INVOICE VALUE EXCLUDING THE VALUE OF MATERIAL, IF SU CH VALUE IS MENTIONED SEPARATELY IN THE INVOICE. THUS, IN VIEW O F THE ABOVE, IT IS CLEAR THAT TDS WOULD NOT LIABLE TO BE DEDUCTED ON THE S UPPLY OF EQUIPMENTS AS THE SAME IS NOT BEING COVERED UNDER TH E PURVIEW OF SECTION 194C OF THE ACT. IN THE VIEW OF THE ABOVEMENTI ONED CASE LAWS, CIRCULATIONS AND CLARIFICATIONS, IT IS CLEAR T HAT IN RESPECT OF AGREEMENT FOR THE SUPPLY OF EQUIPMENTS, NO TDS IS DED UCTIBLE U/S 194C OF THE INCOME TAX ACT 1961. WE FURTHER FIND THA T, TDS WOULD ONLY BE LIABLE TO BE DEDUCTED ON THE VALUE OF PROFES SIONAL SERVICES OF INSTALLATION, DEPLOYMENT AND REDEPLOYMENT AVAILE D BY THE APPELLANT COMPANY U/S 194J OF INCOME TAX ACT 1961 WH ICH THE ASSESSEE HAS ALREADY DEDUCTED AND DEPOSITED. IT IS AL SO CLEAR THAT ASSESSEE IS NOT LIABLE TO DEDUCT TDS ON THE SAID TRA NSACTION OF SUPPLYING OF EQUIPMENTS AS PER THE PROVISIONS OF SECTI ON 194C OF THE ACT. IN THE VIEW OF THE CLEAR PROVISIONS OF SECTI ON 194C OF THE ACT, WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT LIAB LE TO DEDUCT TDS AMOUNTING TO RS.6,64,00,359/- ON THE SUPPLY OF EQU IPMENTS BY M/ S HCL INFOSYSTEMS LTD., THEREFORE, THE LD. CIT(A) UNDER THE CIRCUMSTANCES HAS RIGHTLY HELD THAT THE ACTION OF ASS ESSING OFFICER OF 22 HOLDING ASSESSEE COMPANY AS IN DEFAULT FOR AMOUNT OF RS.6,64,00,359/- WAS WITHOUT ANY COGENT BASIS. ACCORD INGLY, LD. CIT(A) HAS RIGHTLY GAVE THE RELIEF TO THE ASSESSEE IN RESPECT OF THE TOTAL AMOUNT, WHICH DOES NOT NEED ANY INTERFERENCE O N OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND REJECT THE GROUNDS RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T STANDS DISMISSED. ORDER PRO NOUNCED IN THE OPEN COURT ON 01/09/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 01/09/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHE S