2016 (7) TMI 519 - AT - Income Tax

TDS u/s 194C OR 194H - nature of contract - whether the contract between the assessee and the agencies, is one for supply of manpower/labour for execution of works contract attracting TDS provisions of section 194C of the Act, or is the contract for agency attracting provisions of section 194H? - Held that - The instant case consideration is paid in terms of remuneration payable to the personnel deployed in to the work plus service charge of 14% on the total remuneration payable to the personnel employed. Therefore, we are of the view that the contract between the assessee and the agencies is a mere contract for supply of labour for execution of work contract as defined under the provisions of sec. 194C, but not a contract of agency as defined under sec. 194H of the Act. As on perusal of the nature of work and contract between assessee and agencies, there is no element of contract in the nature of principle to agent so as to invoke the provisions of sec. 194H of the Act. It is merely a contract for supply of labour for execution of work contract as defined under sec. 194C, having all the ingredients of a contract of principle to principle basis. The assessee has rightly deducted TDS @ 2.266% under the provisions of sec. 194C of the Act. The CIT(A) has rightly deleted the additions. - Decided in favour of assessee

Issues:
1. Whether the contract between the assessee and the agencies is for supply of manpower/labour for execution of works contract attracting TDS provisions of section 194C of the Act or for agency attracting provisions of section 194H of the Act.

Analysis:
1. The appeal and cross objection were against the order of Commissioner of Income Tax related to the assessment year 2009-10.
2. The assessee, National Highway Authority of India (NHAI), established toll plazas for fee collection and engaged agencies for the same.
3. A survey revealed TDS deduction discrepancies leading to a show cause notice for default under sections 201(1) and 201(1A) of the Income Tax Act, 1961.
4. The Assessing Officer (A.O.) considered the contract as agency, applying section 194H for commission payments, leading to default status.
5. The CIT(A) held the contract as works contract under section 194C, not agency contract under section 194H, overturning the A.O.'s decision.
6. The Tribunal analyzed the contract terms, finding it to be a supply of labor for works contract under section 194C, not agency contract under section 194H.
7. The agreement details supported the conclusion that the contract was for labor supply, not agency, as per the definitions in the Income Tax Act.
8. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal against the order.
9. The Cross Objection filed by the assessee supporting the CIT(A) was also dismissed by the Tribunal.
10. Consequently, the appeal by the Revenue and the Cross Objection by the assessee were both dismissed by the Tribunal.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by the parties, and the ultimate decision reached by the Tribunal based on the interpretation of the relevant sections of the Income Tax Act.

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