Case Law Details
Roy Mitra Enterprise Vs. ACIT (ITAT Kolkata), ITA No. 1703 (Kol) of 2009, Date of Pronouncement- 24.2.2012.
Explore the Roy Mitra vs. ACIT case (ITA No. 1703/2009) involving Sec. 194C, TDS, and contractual disputes. Key rulings and implications revealed.
On perusal of the assessment order we find that the ld. A.O. considered sum of Rs.1,44,91,357/- on the basis of the bill issued by M/s. Bharat Earth Movers as contractual and, accordingly, invoked provisions of Sec.40(a)(ia)/194C of the Act. Section 194C of the Act speaks of payments to contractors and sub-contractors.
According to this section, any person responsible for paying any sum to any resident, e. contractor, for carrying out any work including supply of labour for carrying out any work, in pursuance of a contract between the contractor and any firm etc., shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent in case of advertising and in any other case two per cent, of such sum as income-tax on income comprised therein. Now we have to examine contractor and sub-contractor with reference to the job, nature of job, etc., because before taking a decision on the applicability of TDS u/s. 194C of the Act on a contract, it is required to be examined whether the contract is a ‘contract for work’ or a ‘contract for sale’. TDS shall be applicable only where it is a ‘contract for work’ as per the principles laid down in para 7(vi)(a) of Circular No. 681, dated 8-3-1994 and Circular No. 13/2006, dated 13-12-2006. Clause (a) of para 7(vi) of the above circular is reproduced below :
“(a) Since contracts for the construction, repaid, renovation or alteration of buildings or dams or laying of roads or airfields or railway lines or erection or installation of plant and machinery are in the nature of contracts for work and labor, income-tax will have to be deducted from payments made in respect of such contracts. Similarly, contracts granted for processing of goods supplied by Government or any other specified person, where the ownership of such goods remains at all times with the Government or such person, will also fall within the purview of this section. The same position will obtain in respect of contracts for fabrication of any article or thing where materials are supplied by the Government or any other specified person and the fabrication work is done by a contractor.”
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