2013 (9) TMI 1081 - AT - Income Tax

Treatment given at the time the contract was entered into - the project was turnkey project.- Held that - We find that the contract is restricted only for providing the designing and technical specifications of the plant as well as supervising of the erection of the plant. Addendum is a continuation of the original agreement itself and hence, it relate back to the original contract. In our opinion, there is no merit in the argument taken by the assessee that the agreement with M/s. Biopharmax is in the nature of the works contract for setting up the Insulin Manufacturing Unit when in fact as rightly held by the DCIT (TDS) that the agreement is for providing technical services. Interest charged by the DCIT (TDS) u/s. 201(1a) - Held that - Demand u/s. 201(1) cannot be raised in view of the fact that the amount in question has been offered for tax by the payee but in respect of the interest it is held that the assessee will be liable to pay interest up to the completion of the assessment for the A.Y. 2008-09 in the case of deductee. The Ld. CIT(A) directed the Assessing Officer to delete the addition u/s. 201(1) of the Income-tax Act and compute interest u/s. 201(1A) of the Income-tax Act from the date of payment/credit till the date of completion of the assessment in the case of deductee for the A.Y. 2008-09. We find that in the case of Hindustan Coca Cola Beverage (P) Ltd. (2007 (8) TMI 12 - SUPREME COURT OF INDIA ) the Hon ble Supreme Court has held that even if no demand can be raised if the deductee has deposited the tax but at the same time the assessee will be liable for the interest.

Summary

Issues:
1. Correct treatment of contract as a turnkey project.
2. Applicability of TDS provisions under sections 194C and 194J.
3. Interest charged under section 201(1A) of the Income Tax Act.

Issue 1:
The appellant challenged the CIT(A) decision regarding the correct treatment of the contract as a turnkey project. The Assessing Officer noted that the designs and technical documentation were prepared by the contractor for the assessee company, indicating the provision of technical services. The contract price included technical services and the property rights of designs vested with the assessee. The CIT(A) upheld the decision, emphasizing that the agreement was primarily for technical services, not a works contract. The Tribunal agreed, stating that the agreement focused on technical specifications and supervision, confirming the CIT(A)'s order.

Issue 2:
The dispute revolved around the applicability of TDS provisions under sections 194C and 194J. The Assessing Officer found a short deduction of tax and levied interest under section 201(1A). The appellant argued that the agreement was a works contract falling under section 194C, not 194J. However, the CIT(A) and the Tribunal determined that the agreement primarily involved technical services, justifying the application of section 194J for TDS. The Tribunal dismissed the appellant's appeal, upholding the CIT(A)'s decision on this issue.

Issue 3:
Regarding the interest charged under section 201(1A) of the Income Tax Act, the appellant contended that since the deductee had paid tax and declared income, no demand should be raised. Citing the Hindustan Coca Cola Beverage case, the CIT(A) accepted this argument but held the appellant liable for interest until the completion of assessment for the A.Y. 2008-09. The Tribunal upheld the CIT(A)'s decision, emphasizing that while no demand could be raised if the deductee paid tax, the appellant remained liable for interest. Consequently, the Tribunal dismissed the appellant's appeal on this ground.

In conclusion, the Tribunal upheld the decisions of the CIT(A) and the Assessing Officer, dismissing the appellant's appeal on all grounds.