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2017 (10) TMI 227 - AT - Income TaxLiability to deduct Tax at source u/s. 194C/194J - work contract - Held that - In respect of agreement for the supply of equipments, no TDS is deductible u/s 194C of the Income Tax Act 1961 as it is amounts to a contract of sale. We note that M/ s. HCL Infosystems Ltd. supplied equipments as per the specifications of the assessee but the same have not been purchased from MTNL. M/s. HCL Infosystems Ltd. has purchased the said equipments from person other than such customer i.e. not from MTNL. Hence, TDS provisions would not fall applicable on the supply of equipments. Further since billing for the supply of equipments is separate from that of the services, TDS would not be deducted on the supply of equipments. TDS would not liable to be deducted on the supply of equipments as the same is not being covered under the purview of Section 194C of the Act. In the view of the above all it is clear that in respect of agreement for the supply of equipments, no TDS is deductible u/s 194C of the Income Tax Act 1961. We further find that, TDS would only be liable to be deducted on the value of professional services of installation, deployment and redeployment availed by the appellant company u/s 194J of Income Tax Act 1961 which the Assessee has already deducted and deposited. It is also clear that assessee is not liable to deduct TDS on the said transaction of supplying of equipments as per the provisions of Section 194C of the Act. In the view of the clear provisions of Section 194C of the Act, we are of the view that the assessee is not liable to deduct TDS amounting to ₹ 6,64,00,359/- on the supply of equipments by M/ s HCL Infosystems Ltd., therefore, the Ld. CIT(A) under the circumstances has rightly held that the action of Assessing Officer of holding assessee company as in default for amount of ₹ 6,64,00,359/- was without any cogent basis. Accordingly, Ld. CIT(A) has rightly gave the relief to the assessee in respect of the total amount, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute and reject the grounds raised by the Revenue.
Issues Involved:
1. Deletion of addition of ?6,64,00,359/- made under section 201(1)/201(1A) of the Income Tax Act, 1961. 2. Non-recording of reasons for admitting additional evidence under Rule 46A(2) of the I.T. Rules, 1962. 3. Applicability of section 194C(3)(i) vs. section 194C(3)(ii) of the IT Act. 4. Production of all invoices regarding the purchase of equipment. 5. Evidence of equipment purchase from third parties. 6. Evidence of separate invoices for supply of equipment and services. Detailed Analysis: 1. Deletion of Addition of ?6,64,00,359/-: The Assessing Officer (AO) had issued a notice to the assessee to furnish details of TDS deducted on payments made to M/s HCL Infosystems Ltd. The notice was received by the assessee on 28/03/2013, but due to subsequent holidays, the AO passed the order on 30/03/2013 without waiting for the response. The AO assumed the assessee failed to deduct TDS amounting to ?6,64,00,359/- and raised a total demand of ?8,63,20,466/- including interest. The CIT(A) allowed the appeal of the assessee, stating that the contract involved both supply of equipment and services, and TDS was only applicable to the services part. The Tribunal upheld the CIT(A)'s decision, noting that the supply of equipment was a contract of sale and not liable for TDS under section 194C. 2. Non-recording of Reasons for Admitting Additional Evidence: The Revenue contended that the CIT(A) erred in not recording reasons for admitting additional evidence as required under Rule 46A(2). The Tribunal noted that the additional evidence, including copies of purchase orders and separate invoices for equipment and services, was crucial for determining the nature of the contract. The Tribunal found that the CIT(A) had rightly considered the additional evidence to arrive at a just decision. 3. Applicability of Section 194C(3)(i) vs. Section 194C(3)(ii): The AO argued that section 194C(3)(ii) was applicable as the value of materials supplied was not separately mentioned in the invoices. However, the Tribunal observed that the assessee had provided separate invoices for equipment and services, and thus, section 194C(3)(i) was applicable. The Tribunal concluded that TDS was not required on the supply of equipment as it was a contract of sale. 4. Production of All Invoices Regarding the Purchase of Equipment: The Revenue claimed that the assessee did not produce all invoices for the purchase of equipment. The Tribunal noted that the assessee had submitted relevant invoices during the appellate proceedings, and the AO's assumption of non-compliance was incorrect. The Tribunal upheld the CIT(A)'s finding that the assessee had produced necessary invoices. 5. Evidence of Equipment Purchase from Third Parties: The AO contended that there was no evidence that M/s HCL Infosystems Ltd. purchased equipment from third parties. The Tribunal found that the assessee had provided sufficient evidence showing that the equipment was purchased from third parties and not from the assessee. The Tribunal upheld the CIT(A)'s decision that the equipment supply was a contract of sale. 6. Evidence of Separate Invoices for Supply of Equipment and Services: The Revenue argued that there was no evidence of separate invoices for equipment and services. The Tribunal noted that the assessee had submitted separate invoices for both components during the appellate proceedings. The Tribunal concluded that the CIT(A) rightly held that TDS was only applicable to the services part of the contract. Conclusion: The Tribunal upheld the CIT(A)'s decision, confirming that the assessee was not liable to deduct TDS on the supply of equipment as it was a contract of sale. The appeal filed by the Revenue was dismissed.
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