2018 (6) TMI 1309 - AT - Income Tax

TDS u/s 194C - liability to deduct tax at source on the payments made to developers/contractors - Held that - CIT(A) on perusal of the clauses of the agreement has arrived at the conclusion that the payments for the purchase of the sites was calculated on sq. ft. area of the property and the amount was paid for the purchases of completed property and not for development work carried out. CIT(A) found that the agreements were only for purchase of sites and does not involve any works contract . The aforesaid conclusion/finding of the CIT(A) cannot be faulted and the same is a correct reading of the scope of the agreements; which has to be treated as a whole and not in piece meal manner. The mere fact that the contractor/developer were required to layout roads and undertake other activities before the delivery of the completed sites cannot be either determinative of the facts or need to mean that the agreements entered into by the assessee society is a composite contract and amounts to a works contract. The case of the assessee is squarely covered by the decisions in the case of Karnataka State Judicial Department Employees House Building Cooperative Society Ltd. 2010 (3) TMI 1211 - KARNATAKA HIGH COURT - Decided against revenue

Summary

Issues:
Deletion of demands raised under sections 201(1) and 201(1A) of the Income Tax Act by the Commissioner of Income Tax (Appeals) for the assessment years 2008-09 to 2014-15.

Analysis:

1. The appeals by the Revenue were directed against the order of the Commissioner of Income-tax (Appeals) regarding demands raised under sections 201(1) and 201(1A) of the Income Tax Act for the assessment years 2008-09 to 2014-15. The common issues were heard together due to commonality and disposed of in a single order for convenience.

2. The case involved a cooperative society engaged in identifying lands for residential layouts. The Assessing Officer held the society to be in default for not deducting tax at source on payments to developers/contractors, treating the activities as works contracts under section 194C of the Act. The Commissioner of Income Tax (Appeals) later allowed the society's appeals, ruling that tax deduction was not required under section 194C.

3. The Revenue's grounds for appeal included contentions that the agreements with developers/contractors constituted composite works contracts falling under section 194C. The Revenue argued that the decisions relied upon by the Commissioner of Income Tax (Appeals) were not binding as they were contested by the Department.

4. The society contended that the agreements were solely for the purchase of land and residential sites, not works contracts. The Tribunal analyzed the agreements and found that the payments were for completed properties, not development works. The Tribunal upheld the Commissioner's decision based on judicial precedents and concluded that tax deduction was not required under section 194C.

5. The Tribunal referenced the judgment of the Hon'ble Karnataka High Court in a similar case, emphasizing that the nature of the agreements did not constitute works contracts. The Tribunal also cited decisions of other co-ordinate benches supporting the view that tax deduction was not warranted under section 194C. Consequently, the Tribunal dismissed the Revenue's appeals for the assessment years 2008-09 to 2014-15.

In conclusion, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to delete the demands raised under sections 201(1) and 201(1A) of the Income Tax Act for the specified assessment years, based on the nature of the agreements and the absence of works contracts requiring tax deduction at source.