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2012 (8) TMI 231 - AT - Income TaxNon applicability of TDS provisions u/s 194C & consequently the charging of interest u/s 201 & 201(1A) - the assessee is a CONSORTIUM - Held that - Considering facts of the present cases where the contract amounts are received by the assessee-JVs, which were transferred to one of the respective constituents, who actually executed the contract and the income of the JV was treated as NIL - CIT(A) opined the assessee as the one regularly making TDS on the said contract amount and in fact, fact of the matter in these cases is that the assessees made TDS under protest subsequent to survey, which is completely ignored - CIT(A) merely dismissed the assessee s grounds relying on the assessee s compliance in effecting TDS but did not discuss the fact that made assessee to effect TDS, i.e. events that occurred during the survey operations. CIT(A) should have given attention to the grounds raised before him and gone to the root of the matter as to why the assessee is aggrieved on the issue of the requirement to deduct TDS and the liability on the assessee etc. The contract sums were taxed subsequently in the hands of one of the constituents of the assessee-Consortiums and to avoid double tax, the said amounts were never taxed in the hands of the assessee - consortium. This is a relevant fact that the CIT(A) should have considered, while deciding as to why one must make TDS, when the JV - assessee are created to procure a contract and never to execute the same by themselves with the intention to earn income - the objection raised by the Learned Departmental Representative about the requirement of fresh adjudication on the said issue relating to liability to make TDS under S.201(1) is required to be approved - matter is restored to the file of the first appellate authority for fresh adjudication - in favour of assessee for statistical purposes.
Issues Involved:
1. Non-compliance with Section 194C of the Income-tax Act. 2. Liability to deduct tax at source (TDS) under Section 201(1) and Section 201(1A) of the Act. 3. Levy of interest under Section 201(1A). 4. Adjudication of the basic liability under Section 201. 5. The role of Joint Venture (JV) agreements and the transfer of contracts to constituents. Detailed Analysis: 1. Non-compliance with Section 194C of the Income-tax Act: The primary issue revolves around the failure of the assessees (various consortiums) to comply with the provisions of Section 194C, which mandates the deduction of tax at source for payments made under a contract. The assessees received substantial amounts from the Government of Andhra Pradesh but did not deduct TDS when remitting these amounts to their respective partners. 2. Liability to Deduct Tax at Source (TDS) under Section 201(1) and Section 201(1A) of the Act: The assessing officer treated the assessees as defaulters for not deducting TDS and levied tax and interest under Sections 201(1) and 201(1A). The assessees argued that they were not liable to deduct TDS as the amounts received were transferred to their constituents who executed the contract work and paid taxes on the income earned. 3. Levy of Interest under Section 201(1A): The CIT(A) confirmed the interest charged by the assessing officer under Section 201(1A), stating that the assessees had admitted their liability to deduct tax by subsequently complying with TDS provisions. The CIT(A) relied on CBDT Circular No. 8 of 2009 and the Supreme Court decision in Hindustan Coca Cola Beverages P. Ltd. V/s. CIT to support the mandatory nature of interest under Section 201(1A). 4. Adjudication of the Basic Liability under Section 201: The assessees contended that the CIT(A) failed to adjudicate the basic issue of liability under Section 201, which should precede the levy of interest under Section 201(1A). The CIT(A) was criticized for not addressing the grounds raised by the assessees, particularly regarding the non-applicability of TDS provisions. 5. The Role of Joint Venture (JV) Agreements and the Transfer of Contracts to Constituents: The assessees argued that the JV consortiums were formed solely to procure contracts, which were then transferred to one of the constituents for execution. They claimed that the amounts received were not income to the consortiums, and hence, there was no liability to deduct TDS. The absence of written agreements was not deemed a decisive factor. The CIT(A) and the assessing officer were criticized for not considering the factual circumstances under which the assessees made TDS under protest following a survey. Conclusion and Remand: The Tribunal found that the CIT(A) did not properly adjudicate the issues raised by the assessees, particularly the liability to deduct TDS and the circumstances under which TDS was made under protest. The Tribunal remanded the cases back to the CIT(A) for fresh adjudication, emphasizing the need to consider the relevant facts, the JV agreements, and the legal precedents cited by the assessees. The CIT(A) was directed to provide a detailed and reasoned order in accordance with Section 250(6) of the Act. Result: All 14 appeals were allowed for statistical purposes, and the matters were remanded back to the CIT(A) for fresh adjudication.
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