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TMI Blog2006 (4) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... lates to supply of the material, freight insurance and supply of spare parts, is clearly separable from the other part of the contract relating to carrying out civil work, commissioning and erection of the power generators. Thus, we direct the AO to work out the short deduction of tax at source, if any, by excluding the payments towards supply of machinery, spare parts as well as freight and insurance. We are of the view that the documents on record do not establish the case pleaded by the appellant. We, however, deem it fit and proper to direct the AO to verify this aspect and in case it is found that the contractor has offered the sums received from the appellant to tax then in that event the appellant should not be proceeded against as an appellant in default u/s 201 of the Act, as laid down in the case of Rishikesh Apartments Co-operative Housing Society Ltd.[ 2001 (6) TMI 17 - GUJARAT HIGH COURT] . We are of the view that the other grounds of appeal raised by the appellant do not require any consideration in view of our decision on the main contentions of the appellant. In the result, the appeal is allowed for statistical purposes. - HON'BLE N.V. VASUDEVAN, J.M. AND G.S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... civil works including pile foundations 173.00 lakhs (iv) Erection, testing and commissioning of two ESPs for 2 x 110 MW sets at PTPs Panipat including required dismantling at site 280.00 lakhs (v) Cost of spares for three years manual operation 12.1766 lakhs Total 1910.1766 lakhs 2.2 Another important clause is cl. 3 of the terms and conditions of the contract, which reads as follows: Delivery Commissioning of (a) Guaranteed delivery period for site from the date of acceptance of tender Unit-I: 18 months from the date of receipt of PO by BHEL along with advanced. (b) Time required for complete erection, testing and commissioning of the equipment from the date of supply Unit-II: 24 months from the date of receipt of PO by BHEL along with advance. 2.3 Clause 10 of the contract with regard to terms of payment is also very material and it reads as follows: Terms of Payment: The following terms of payment shall be applicable for the retrofit of EPS as observed for Panipat stage. We require payment to be made by HSEB against a confirmed and irrevocable letter of credit. Supply of Equipment: (i) 10 per cent of supply price as interest-free advance shall be paid at the time of placement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5553900 127742 7000000 Nil 1997-98 45622971 727827 1901299 43,730 392856 Nil 12719996 292561 Nil Nil 1998-99 1832196 (PVC) 42140 705163 16219 1858720 Nil 12713267 291803 Nil Nil 1999-2000 648878 Nil 1029627 72652 613154 Nil 8355045 183810 Nil Nil 2000-01 528483 Nil Nil Nil 397845 Nil 3628202 83,447 Nil Nil 2001-02 1161265 Nil 1453543 30994 233098 Nil 1443000 33,189 Nil Nil G. Total 176944338 769967 15614495 155665 8914945 Nil 49434293 1668149 7000000 Nil 2.5 Under the provisions of s. 194C of the IT Act, any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract, shall at the time of credit of such sum or at the time of payment deduct tax at source at such percentage as is mentioned in s. 194C. The chart of payment of TDS by the appellant has already been set out above. The AO was of the view that the contract between the appellant and M/s BHEL was a composite contract and therefore the appellant ought to have deducted tax at source in respect of payments for supply of materials as well as the payments for execution of civil work, erection, designing and commissioning and also the freight and insurance. According to the appellant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for such commissioning of the plant. As held by the Hon'ble Supreme Court in the case of State of Himachal Pradesh Ors. vs. Associated Hotels of India Ltd. 29 STC 474 (SC), in the case of a composite contract, one has to find out the primary object of the transactions and the intention of the parties while entering into it. On the facts of this case, we find that the primary object of the appellant was to purchase the plant in question and the civil work, erection and commissioning was only incidental to purchase the material by the appellant. In other words, the contract for supply of the equipments and the contract for erection and commissioning of the plant are two separable contracts, though there is only one common purchase order. We are, therefore, of the view that the Revenue authorities were not justified in considering the gross payments made by the appellant to BHEL for the purpose of determining the TDS by the appellant. We have also perused the decision of the Rajkot Bench of the Tribunal in the case of Essar Oil Ltd. We are of the view that the facts of the aforesaid case are clearly distinguishable from the facts of the present case. It was a case where the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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