Ita/535/2016 Of The Commissioner Of Income-Tax v. The Director Of Technical Education

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 10 DAY OF FEBRUARY 2071.PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’‘’BLE MR. JUSTICE NATARAJ RANGASW A BETWEEN: ILT.A. NO.535 OF 2016 1.|THE COMMISSIONER OF INCOME-TA® TDS, NO.59, HMT BHAVAN| 4TH FLOOR, BALLARI ROAD GANGANAGAR, BENGALURU-5600532. 2 |THE ASST. COMMISSIONER OF INCOME-TAX TDS, CIRCLE-1(1), NO.59_ HMT BHAVAN, 4TH FLOOR BALLARI ROAD, GANGANAGAR BENGALURU-560032. .., APPELLANTS~ (BY SRI. K.V. ARAVIND, ADV.,) AND* THE DIRECTOR OF TECHNICAL EDUCATION.TECHNICAL EDUCATION BUILDINGOPP, MAHARANI COLLEGEPALACE ROAD, BENGALURU-560001|PAN: BLRDO 2314E. ~. RESPONDENT (BY SRI. VIKRAM HUILGOL, ADV.)| THIS I.T.A. IS FILED UNDER SEC. J6O0-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 20.05.2016 PASSEDIN ITA NO.1124/BANG/2015 FOR THE ASSESSMENT YEAR 2011-12, PRAYING TO: (1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW,STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDERS.PASSED BY THE ITAT, BENGALURU IN ITA NO.1124/BANG/2015_DATED 20.05.2016 CONFIRMING THE ORDER OF THE APPELLATE.COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASST..COMMISSIONER OF INCOME TAX, TDS, CIRCLE-1(1), BENGALURU.(iii) PASS SUCH OTHER SUITABLE ORDERS AS THIS)HON BLE COURT DEEMS FIT TO GRANT IN THE FACTS AND.CIRCUMSTANCES OF THE CASE IN THE INTERES! OF JUSTICE.AND EQUIYT. THIS ILT.A. COMING ON FOR’ HEARING, THIS DAY, |ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short)has been preferred by the revenue. The subject matter|of the appeal pertains to the Assessment year 2011-12.The appeal was admitted by a Bench of this Court videorder dated 31.10.2017 on the following substantialquestion of law: "WhetherOf)thefactsandcircumstances of the case, the Tribunal isright in law in holding that the assessee isnot liable to deduct tax on payments madeto M/s. Karnataka Board and M/s. RitesLtd for rendering of services in connection with.constructionOf|Engineering|and|Polytechnic college Buildings in the Stateof Karnataka even when the nature of therelationship between assessee and saidpartiesareIn|nature OF|contractor/contractee as per agreement ofDTE with KHB & Rites, the work entrustedby them is not merely consultancy butoverall responsibility of construction of thebuilding right from design to completion ofwork which attracted provision 194c and194] of the Act and as such the assesseewas liable to deduct tax on payment madeto said parties?”. 2. Facts leading to filing of this appeal brieflystated are that the assessee is Technical Education|Department of Government of Karnataka which is.incharge of academic and administrative functions of controlling technical education in the State of Karnataka.As part of its activities, the construction of engineering|and polytechnic college buildings was required. TheASSESSEE,|therefore,|entered|Intoconstruction| agreements with Karnataka Housing Board and with|M/s. RITES Ltd. for construction of engineering andpolytechnic college building construction work which was|entrusted to them. There was an information to the!effect that the assessee has not deducted tax asrequired under Section 194C of the Act in respect of thepayments made under the contracts with KarnatakaHousing Board and RITES Ltd. Therefore, an enquiry.Was conducted on 13.08.2013 and tne assesseefurnished the details. As per the details furnished by theassessee, tax was not deducted in respect of thepayments made under the agreement. Since the.assessee had failed to deduct the tax as required underSection 194C of the Act, the provisions of Section201(1) of the Act were attracted and a snow cause.notice dated 16.08.7013 was served on the assessee.The assessee filed a response to the same. The DeputyCommissioner of Income-tax passed an order underSection 201(1) of tne Act and held that since the assessee had failed to deduct the tax as required underSection 194C of the Act, the assessee was treated as an.assessee in default and it was held that the assessee jsliable to pay Rs.1,/79,/6,000/-. The demand notice wasissued accordingly. 3. The assessee thereupon filed an appeal beforethe Commissioner of Income Tax (Appeals), who by an.order dated 28.10.2014, allowed the appeal preferred by|the assessee. The aforesaid order was challenged by the|revenue before the Tribunal. The Tribunal, by an order.dated 20.05.2016, dismissed the appeal preferred by.the revenue. In the aforesaid factual Dackground, therevenue Nas filed this appeal. 4 Learned counsel for the revenue submitted that.the Commissioner of Income Tax (Appeals) as well as.the Tribunal ought to have appreciated that the|relationsnip between the assessee and RITES andKarnataka Housing Board was principal and agent and therefore, the provisions of Section 194C of the Act were.attracted to the fact situation of the case and the'assessee was therefore an assessee in default and§accordingly, the Assessing Officer has rightly raised the|demand. However, the aforesaid aspect of the matterhas neither been appreciated by the Commissioner ofIncome Tax (Appeals) nor by the Tribunal. 5. On the otner hand, learned counsel for the|assessee submitted that whether the provisions of.Section 194C of the Act would apply to the fact situationof the case, is a finding of fact. It is further submitted|tnat the concurrent finding of fact nas been recorded in.favour of the assessee by the Commissioner of IncomeTax (Appeals) as well as the Tribunal and both tneauthorities under the Act have correctly held that theprovisions of 194) of the Act are applicable to the factsituation of the case. The aforesaid finding of fact, inany stretch of imagination, cannot be said to be perverse warranting interference under Section 260A of the Act. 6. We have considered the submissions made onboth|sidesand|have|perused|therecord. TheCommissioner of Income Tax (Appeals) in its orderdated 28.10.7014 inter alia held that the assessee is aswing of Government of Karnataka carrying out the|constitutionally mandate function of imparting education|to the students int eh state of Karnataka. It was further|held that appellant controls the technical educationbeing provided in around 195 Engineering Colleges, 291|Polytecnnic Colleges, 12 Junior Technical Scnools and /6.fine Arts College. It nas further been held tnat thegovernment of Karnataka directed the assessee toappoint a particular agency like M/s Rites Ltd. Or M/s|Karnataka Housing Board for every new building. The|agencyIS.remuneratedDy providingaspecificpercentage usually around 7% to 10% of the projectcost for each building in the form of service charges. It hasfurtherbeenheld In|paragraph8.10,theCommissioner of Income Tax (Appeals) has gone into.details of memorandum of understanding entered into|with M/s Rites Ltd. or M/s Karnataka Housing Board and.has held that the provisions of Section 194C are notapplicable to the facts of the case. The aforesaid findingof fact has been affirmed by the tribunal. In the peculiarfacts of this case, we are not inclined to interfere with.the concurrent findings of fact, in the absence of anyperversity being demonstrated before us. Therefore, the|substantial question of law is answered against the|revenue and in favour of the assessee. | In the result, we do not find any merit in this|appeal, the same fails and is hereby dismissed. Sd/-—JUDGE. RV/SS Sd/-JUDGE.