2016 (4) TMI 1274 - AT - Income Tax

TDS u/s 194C - whether there was an obligation on the part of respondent society to deduct tax at source in respect of amount paid by the respondent society to the developer viz. Lakshman? - Held that - On perusal of the said agreement, it is clear that the payment were made as per the stage of completion of work contract but the contract is only for purchase of developed sites as evidenced by sale deeds. We find that identical clauses are found in the sale deeds executed by the developer in favour of members of society in this case also. The fact that the payments are made as per stage of completion of work, doesn t have impact on the true nature of contract entered into. Respectfully following the decision of the Coordinate Bench in the case of Kautilya House Bldg 2016 (4) TMI 1269 - ITAT BANGALORE . Co-operative Society Ltd., to which one of us i.e Hon ble Accountant Member is author of the order, we hold that the respondent society is not under obligation to deduct tax at source on the payment made to the developer. Accordingly, we do not find any reason to interfere with the orders of the CIT(A), hence the appeal filed by the Revenue is dismissed.

Summary

Issues involved:
Appeals filed by Revenue against CIT(A) order for assessment years 2008-09, 2009-10, 2012-13, and 2013-14 - Whether TDS under sec. 194C required on payments to developer - Whether contract for purchase of developed sites or works contract - Applicability of sec. 194C - Interpretation of agreement terms - Role of respondent society - CIT(A) decision upheld.

Analysis:

Issue 1: Appeals against CIT(A) order
The Revenue filed appeals challenging the CIT(A) order for various assessment years. The common issues in all appeals were addressed collectively in a consolidated order for convenience and clarity.

Issue 2: Requirement of TDS under sec. 194C
The Revenue contended that the respondent society failed to deduct tax at source under sec. 194C on payments made to the developer. The TDS Officer treated the society as 'assessee in default' for non-deduction and demanded tax under sec. 201(1) along with interest.

Issue 3: Nature of Contract - Purchase or Works Contract
The CIT(A) held that the respondent society's role was that of a facilitator in procuring developed sites, making it a case of purchasing sites rather than a works contract. This interpretation was based on the agreement terms and the decision of the Jurisdictional High Court.

Issue 4: Applicability of sec. 194C
The Revenue argued that the agreement with the developer constituted a works contract, pointing to specific clauses indicating payment stages based on project progress. However, the respondent society contended that the agreement was for the purchase of developed sites, emphasizing the overall contract terms.

Issue 5: Interpretation of Agreement Terms
The Tribunal analyzed the agreement clauses and sale deeds to determine the true nature of the contract. Emphasis was placed on the sale of developed sites to individual members of the society, with the society acting as a facilitator rather than engaging in a works contract.

Issue 6: CIT(A) Decision Upheld
Relying on precedent and the decision in a similar case, the Tribunal upheld the CIT(A) decision, concluding that the respondent society was not obligated to deduct TDS under sec. 194C on payments to the developer. The appeals filed by the Revenue were dismissed based on this analysis.

This detailed analysis of the issues involved in the judgment highlights the interpretation of agreement terms, the distinction between a purchase contract and a works contract, and the application of sec. 194C in the context of the respondent society's transactions with the developer.