CIT (TDS) CHANDIGARH vs. GENERAL MANAGER, HRY. ROADWAYS HISAR

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ITA/21/2010HC Punjab & HaryanaPHHC01093120201029 April 2010Author: MR. JUSTICE M.M. KUMAR,MR. JUSTICE JITENDRA CHAUHAN6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that there was no merit in the revenue's appeals and they were liable to be dismissed. The Court agreed with the categorical findings of the ITAT that Haryana Roadways did not purchase any bus chassis, and therefore, there was no contract between Haryana Roadways (through its Transport Commissioner) and Haryana Roadways Engineering Corporation Limited for carrying out any work. The transaction was characterized as a simple case of supply of buses by HRECL to Haryana Roadways. The Court noted that the supply of buses was subject to Sales Tax and VAT. Examining Section 194C(1) of the Act, the Court found that it envisages payment to a resident for carrying out any work in pursuance of a contract. In this case, there was no such contract for carrying out any work, nor could the expression 'Contractor' be imputed to any of the parties. Consequently, no substantive question of law arose for determination. The appeals were dismissed as wholly without merit.

What were the facts?

The revenue, Commissioner of Income Tax (TDS), Chandigarh, filed 12 appeals against orders of the Income Tax Appellate Tribunal (ITAT) concerning various assessment years (2003-04 to 2007-08). The core issue involved the General Manager, Haryana Roadways, Hissar (and other branches), who entered into contracts for the fabrication of bus bodies with Haryana Roadways Engineering Corporation Limited (HRECL). The revenue alleged that the assessee failed to deduct tax at source under Section 194C of the Income Tax Act, 1961, on payments made for these fabrications. For instance, in one case, a payment of Rs. 28,99,252/- was made for fabrication charges in FY 2006-07 (AY 2007-08) without TDS. The Assessing Officer treated the assessee in default and raised demands under Sections 201(1) and 201(1A). The CIT(A) and subsequently the ITAT deleted these demands, holding that the transactions were for the supply of goods, not works contracts.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the ITAT was right in law in upholding the order of the CIT(A), deleting the demand created by the Assessing Officer under Section 201(1) and 201(1A) of the Income Tax Act, 1961, as the assessee failed to deduct tax at source as per the provisions of Section 194C of the Act? 2. Whether on the facts and in the circumstances of the case, the ITAT is right in law in holding that the contract was for the supply of goods and not a case of executing a works contract, ignoring the provisions of Section 194C of the Income Tax Act, 1961? Assessee's Contentions: The assessee argued that the transactions were for the supply of goods (bus bodies) and not for executing a works contract. They relied on the findings of the CIT(A) and the ITAT, which held that the contract was for the supply of goods manufactured and fabricated as per specifications, and ownership passed upon full payment. The ITAT's finding that it was a case of supply of goods as per specifications given by the buyer, not a works contract contemplated under Section 194C, was central to their argument. Revenue's Contentions: The revenue contended that the assessee failed to deduct tax at source under Section 194C of the Act on payments made for the fabrication of bus bodies, treating these as works contracts. They argued that the ITAT was wrong in upholding the deletion of demands raised under Sections 201(1) and 201(1A) by the Assessing Officer.

Which sections of the Income-tax Act were involved?

Section 194C,Section 201(1),Section 201(1A),Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No. 21 of 2010 (O&M) Date of Decision: April 29, 2010 Commissioner of Income Tax (TDS), Chandigarh ..Appellant Versus General Manager, Haryana Roadways, Hissar ...Respondent CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE JITENDRA CHAUHAN Present: Mr. Yogesh Putney, Advocate, for the revenue-appellant. Mr. B.M. Monga, Advocate, for the assessee-respondent.

1.

To be referred to the Reporters or not?

2.

Whether the judgment should be reported in the Digest? M.M. KUMAR, J. This order shall dispose of a bunch of 12 appeals2 filed by the revenue under Section 260A of the Income Tax Act, 1961 (for brevity, ‘the Act’). Since common questions of law and facts are involved, these appeals have been clubbed together. In ITA Nos. 131 and 132 of 2009, common order dated 22.7.2008 passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘B’, Chandigarh, passed in ITA Nos. 1001 & 1002/Chd/2007 in respect of assessment years 2003-04 & 2004-05, has been challenged. Similarly, in ITA Nos. 21 to 30 common order dated 27.5.2009, passed by the Income Tax Appellate Tribunal, Delhi Bench ‘A’, Delhi, in ITA Nos. 870, 872, 868, 874, 873, 875, 879, 877, 876 and 871/Del/2009, in respect of assessment years 2004-05, 2005-06, 2006-07 and 2007-08, is the subject matter of challenge.

The following substantial questions of law have been raised by the revenue in ITA No. 21 of 2010:- “(1) Whether on the facts and in the circumstances of the case, the ITAT was right in law in upholding the order of the CIT(A), deleting the demand created by the Assessing Officer under Section 201(1) and 201(1A) of the Income Tax Act, 1961, as the assessee failed to deduct tax at source as per the provisions of Section 194C of the Act? (2) Whether on the facts and in the circumstances of the case the ITAT is right in law in holding that contract was for supply of goods and not a case of executing works contract ignoring the provisions of Section 194C of the Income Tax Act, 1961?” . It is pertinent to notice that in the other appeals similar questions of law have been raised by the revenue.

Brief facts of the case as culled out from ITA No. 21 of 2010 are that the Income Tax Officer (TDS), Hisar, noticed that the assessee-General Manager, Haryana Roadways, Hisar, entered into a contract with the Haryana Roadways Engineering Corporation Limited, Gurgaon (HRECL), for fabrication of bodies of buses but failed to deduct tax at source under Section 194C of the Act. During the Financial Year 2006-07 (Assessment Year 2007- 08) the assessee paid a sum of Rs. 28,99,252/- as fabrication charges. However, no tax at source at the rate of 2% plus cess was deducted out of the aforesaid payment in terms of Section 194C of the Act. The Income Tax Officer (TDS), Hisar, treated the assessee in default and raised a demand of Rs. 76,120/- in respect of the Financial Year 2006-07, vide order dated 29.8.2008, passed under Section 201(1) & 201(1A) of the Act (A-1). The assessee filed an appeal before the Commissioner of Income Tax (Appeals), Rohtak, against the orders passed by the Income Tax Officer (TDS), Hisar. The CIT (Appeals) followed the decision of the Income Tax Appellate Tribunal, Chandigarh Bench ‘B’, dated 22.7.2008, passed in ITA Nos. 1001 and 1002/CHD/2007, in respect of the Assessment Years 2004-05 and 2005-06 (General Manager, Haryana Roadways, Kurukshetra v. ITO Ward- I/TDS, Kurukshetra) and also relied upon his own order dated 21.10.2008 in the case of General Manager, Haryana Roadways, Jhajjar, in ITA Nos. 79 and 80/RTK/2008-09, while allowing the appeal in favour of the assessee vide order dated 11.12.2008 (A-2). Thereafter the revenue preferred further appeal before the Income Tax Appellate Tribunal, Delhi Bench ‘A’, Delhi, against the order of the CIT (A), Rohtak. The Tribunal dismissed the appeal of the revenue on the ground that the contract was for supply and was not a works contract. The Tribunal followed the order passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘B’, Chandigarh, in the case of General Manager, Haryana Roadways, Kurukshetra, in ITA No. 1001 and 1002/Chd/2007, dated 22.7.2008, against which ITA Nos. 131 and 132 of 2009 have been filed. The finding recorded in para 11 of the order by the Tribunal reads thus:- “11. From the facts narrated by the department itself, it is clear that Haryana Roadways Engineering Corporation Ltd., Gurgaon manufactured and fabricated the bus bodies as per specification given by the Transport Commissioner and Secretary (Transport) to Govt. of Haryana and the ownership of the vehicle passed on to the Govt. of Haryana through Transport Commissioner and Secretary (Transport) after full payment is made by Transport Commissioner, Haryana Roadways. The manufacturer and fabricator of the bus bodies also charged sales tax and VAT as applicable. From this fact, it is clear that it is a case of supply of bus bodies manufactured and fabricated as per specification given by the buyer. Thus, it is not a case of executing works contract as it contemplated u/s 194C of the Act. It is a case of supply of goods as per specification given by the buyer.” Having heard learned counsel for the parties and perusing the paper books with their able assistance we are of the considered view that there is no merit in these appeals warranting their admission and the same are liable to be dismissed. From the categorical findings it is evident that Haryana Roadways did not purchase any bus chasis and, therefore, there was no question of any contract between Haryana Roadways through its Transport Commissioner and Haryana Roadways Engineering Corporation Limited. It is a simple case of supply of buses by the Haryana Roadways Engineering Corporation Limited to the Haryana Roadways. The supply of buses as such has been subjected to charge of Sales Tax and VAT. We may examine Section 194C(1) of the Act, which envisages payment of any sum to any resident for carrying out any work in pursuance of a contract between the contractor and Central or State Government etc. In the present case there is no such contract for carrying out any contract nor the expression ‘Contractor’ could be imputed to any one of the parties. Therefore, no question of law much less a substantive question of law would arise for determination of this Court. These appeals are wholly without merit and the same are dismissed. A photocopy of this order be placed on the files of connected appeals. (M.M. KUMAR) JUDGE (JITENDRA CHAUHAN) April 29, 2010 JUDGE Pkapoor 5

2 Sr. No.ITA No.Parties Name131 of 2009The Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Kurukshetra132 of 2009The Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Kurukshetra.21 of 2010The Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Hissar.22 of 2010The Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Bhiwani.23 of 2010The Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Hissar.24 of 2010The Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Bhiwani.25 of 2010The Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Bhiwani.26 of 2010The Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Bhiwani.27 of 2010The Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Fatehabad.28 of 2010The Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Fatehabad.29 of 2010The Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Fatehabad.30 of 2010The Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Hissar. (M.M. KUMAR) JUDGE (JITENDRA CHAUHAN) April 29, 2010 JUDGE Pkapoor

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