Case Law Details

Case Name : Jalandhar Improvement Trust Vs ITO TDS, Jalandhar (ITAT Amritsar)
Appeal Number : ITAT No.40 to 43/Asr/2015
Date of Judgement/Order : 10/06/2015
Related Assessment Year :
Courts : All ITAT (7336) ITAT Amritsar (62)

Brief Facts of the Case- Assessee made payment to Punjab Water Supply & Sewerage Board (‘Board’)for laying of sewerage pipe lines & water supply lines on account of legal obligation under section 24(1) of the Punjab Water Supply and Sewerage Board Act, 1976 in each of F.Y. 2006-07, 2007-08, 2008-09 and 2009-10.

Contention of Revenue– Payment on account of financial transactions bounded by statute for laying of sewerage pipe lines, water supply lines made to Board, for work undertaken as entrusted by statutory law, was in pursuance of a contract and therefore, liable to deduction of tax u/s 194C.

Contention of Assessee- Such payments are out of legal obligations rather than contractual arrangements and hence not liable for TDS.

Held-It is only when payments are made ‘in pursuance of a contract’ that the provisions of section 194C come to into play. The contract may be oral or written, express or implied but there must be a contract nevertheless. In the present case, however, the payment is on account of legal obligation under section 24(1) of the Punjab water Supply & Sewerage Board Act 1976 which provides that “The cost of Investigation, preparation and execution of any scheme undertaken by the Board shall be initially incurred by the Boards out of its funds but it shall be recoverable from the concerned local authority or local authorities in such manner and in such installments as may be prescribed”.

Held in favour of the Assessee. Appeals are allowed.

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