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2017 (1) TMI 312 - AT - Income TaxTDS u/s 194C - nature of composite contract - supply contract or works contract - supply of main plant at Chandrapur TPS extension project - Held that - The Hon ble jurisdictional High Court in the case of CIT vs. Glenmark Pharmaceutical Ltd. 2010 (3) TMI 289 - BOMBAY HIGH COURT has clearly expounded that if the property in the product manufactured passes to the customer upon delivery and the material that was required was not sourced from the customer/purchaser but was independently obtained by the manufacturer from a person other than customer, the contract entered into by the assessee was not a contract for carrying on work within the meaning of section 194C.Considered from this point of view also the assessee is not liable for deduction of tax at source on the equipment good supply contract. Contract of supply of material is a separate distinct contract and on which no deduction is permissible u/s 194C. - Decided in favour of assessee
Issues Involved:
1. Whether TDS needs to be deducted on payments made for supply contracts. 2. Whether the contracts in question are composite contracts or divisible contracts. 3. Applicability of CBDT Circular No. 13 of 2006 regarding TDS on works contracts. 4. Relevance of previous ITAT Nagpur decisions in similar cases. Detailed Analysis: 1. TDS Deduction on Supply Contracts: The primary issue was whether TDS should be deducted on payments of ?198,38,20,000 for AY 2009-10 and ?315,43,91,259 for AY 2010-11. The CIT(A) ruled that TDS was not required on these amounts, which the Revenue contested. The ITAT upheld the CIT(A)’s decision, referencing a previous ITAT decision in the same assessee’s case, where it was held that the appellant was not liable to deduct TDS on the supply contract. The ITAT noted that the facts of the current case were identical to those in the previous decision. 2. Nature of Contracts - Composite vs. Divisible: The Revenue argued that the contracts were composite, thus requiring TDS on the entire amount. However, the CIT(A) and ITAT found that the contracts were divisible into supply, erection, and civil works contracts. The ITAT referred to the Karnataka High Court’s decision in CIT vs. Karnataka Power Transmission Corporation Ltd., which clarified that separate contracts for supply, erection, and civil works do not constitute a composite contract. The ITAT concluded that the supply contract was distinct and did not require TDS under Section 194C. 3. Applicability of CBDT Circular No. 13 of 2006: The Revenue’s reliance on CBDT Circular No. 13 of 2006 was dismissed by the ITAT. The tribunal found that the circular did not apply as the supply contract was a separate and distinct contract, not a composite one. The ITAT emphasized that TDS under Section 194C is not applicable to contracts solely for the supply of goods. 4. Relevance of Previous ITAT Decisions: The CIT(A) followed the ITAT’s prior decision in the assessee’s case for AY 2008-09 to 2010-11, which was upheld by the ITAT in the current appeal. The tribunal reiterated that the facts of the present case were identical to those previously adjudicated, and thus, the doctrine of stare decisis (to stand by things decided) was applied. The ITAT found no distinguishing features that would alter the previous decision. Conclusion: The ITAT upheld the CIT(A)’s decision that the assessee was not required to deduct TDS on the supply contracts, as these were distinct and not part of a composite contract. The appeals by the Revenue were dismissed, reaffirming the principle that separate contracts for supply do not attract TDS under Section 194C. The order was pronounced in the Open Court on December 28, 2016.
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