2016 (1) TMI 371 - HC - Income Tax

Tds u/s 194C - failure to deduct tds - contract with Haryana Roadways Engineering Corporation Ltd. for fabrication of bodies of buses - demand created by the A.O. u/s 201(1) and 201 (1A) - Held that - As decided in Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Hisar 2010 (4) TMI 295 - PUNJAB & HARYANA HIGH COURT from the categorical findings, it is evident that Haryana Roadways did not purchase any bus chassis and, therefore, there was no question of any contract between Haryana Roadways through its Transport Commissioner and Haryana Roadways Engineering Corporation Limited. It is a simple case of supply of buses by the Haryana Roadways Engineering Corporation Limited to the Haryana Roadways. The supply of buses as such has been subjected to charge of Sales Tax and VAT. We may examine Section 194C(1) of the Act, which envisages payment of any sum to any resident for carrying out any work in pursuance of a contract between the contractor and Central or State Government etc. In the present case there is no such contract for carrying out any contract nor the expression Contractor could be imputed to any one of the parties. These appeals are wholly without merit and the same are dismissed - Decided in favour of assessee

Summary

Issues:
1. Appeal filed by revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal.
2. Questions of law regarding deduction of tax at source under Section 194C of the Act and classification of contract as supply of goods or works contract.
3. Dispute over demand created by the Income Tax Officer for failure to deduct tax at source.

Analysis:
1. The judgment addresses two appeals, ITA Nos. 18 and 20 of 2010, as they involve common questions of law and facts. ITA No. 18 was filed by the revenue under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal for the assessment year 2006-07. The key questions raised were related to the deletion of demand created by the Assessing Officer under Section 201(1) and 201(1A) of the Act due to the failure to deduct tax at source under Section 194C. Additionally, there was a dispute regarding the classification of the contract as either for the supply of goods or executing a works contract, as per the provisions of the Income Tax Act.

2. The facts of the case revolve around the assessee's contract with Haryana Roadways Engineering Corporation Ltd. for the fabrication of bus bodies. The Income Tax Officer noted the failure of the assessee to deduct tax at source under Section 194C of the Act and created a demand for the relevant financial year. The Commissioner of Income Tax (Appeals) allowed the assessee's appeal, which was further upheld by the Tribunal. The Tribunal dismissed the revenue's appeal, leading to the current appeals before the High Court.

3. The High Court referred to a previous judgment related to a similar case involving Haryana Roadways and highlighted that the situation was a simple case of supply of buses, subject to Sales Tax and VAT, rather than a works contract. The Court emphasized that there was no contract for carrying out any work, and the provisions of Section 194C did not apply in this scenario. Consequently, the Court dismissed the appeals, finding no merit in the questions of law raised by the revenue. The judgment provided a detailed analysis of the factual and legal aspects, ultimately upholding the decisions of the lower authorities and dismissing the appeals.