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2015 (8) TMI 1352 - HC - Income TaxTDS u/s 194C - payment made against the supply of materials included in composite contracts for executing Turn Key Projects - Held that - 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 suffered an amendment also with effect from October 1, 2009 and the provision has been made very clear without any ambiguity. Thus, we can conclude safely that if a person executing 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. See Commissioner of Income-tax Versus Karnataka Power Transmission Corporation Ltd. (KTPCL) 2012 (6) TMI 204 - Karnataka High Court TDS u/s 194J or 194C - payments made by an assessee towards Bill Management Services - Held that - The services rendered by the agencies engaged by the assessees at Hospet, Bellary and Raichur are not professional services, and, therefore, Section 194J is not attracted. The demand towards the alleged short deduction of tax deducted at source and interest, therefore, was improper. The contract was rightly held to be a service contract by the Tribunal and we, also, feel that it was a contract, which should be covered under Section 194C of the Act.
Issues:
1. Application of Section 194C of the Income-Tax Act on payments made for supply of materials in composite contracts for Turn Key Projects. 2. Classification of payments made for Bill Management Services under Section 194J or Section 194C of the Income-Tax Act. Analysis: Issue 1: The first issue in the appeals revolved around whether payments made for the supply of materials in composite contracts for Turn Key Projects would attract the provisions under Section 194C of the Income-Tax Act. The High Court referred to a previous judgment and held that the separate contracts for supply of materials in composite contracts did not allow for the deduction of tax at source under Section 194C. The court emphasized that the contract for supply of material was distinct and separate, and therefore, not subject to division for tax deduction purposes under Section 194C. The court concluded that purchasing materials from a third party did not fall under the definition of 'work' as per Section 194C. Issue 2: The second issue addressed in the appeals was the classification of payments made for Bill Management Services under either Section 194J or Section 194C of the Income-Tax Act. The court determined that the services provided by the agencies were not professional services, thus Section 194J was not applicable. The Tribunal's decision to categorize the contract as a service contract under Section 194C was upheld by the High Court. Consequently, the demand for alleged short deduction of tax and interest was deemed improper. The court dismissed the appeals, stating that they did not involve any substantial question of law warranting consideration by the court and directed each party to bear their respective costs. In conclusion, the High Court clarified the application of Sections 194C and 194J of the Income-Tax Act in the context of payments for supply of materials in composite contracts and Bill Management Services. The judgment provided detailed reasoning for each issue, relying on legal precedents and contract interpretations to arrive at a comprehensive decision.
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