ITAT : Sec. 194C TDS applicable on ‘advances’ made for carrying works, rejects ‘pass-through’ entity plea

Delhi ITAT holds assessee-society (formed for organizing South Asian Federation Winter Games, 2009) liable to deduct TDS u/s. 194C on amount tendered as ‘advance’ to various PSUs (Public Sector Undertakings) w.r.t. various works relating to construction of the infrastructure for winter games for AYs 2009-10 & 2010-11; Rejects assessee’s stand that it was merely a pass through entity that has been granted sum for organizing the winter games and it did not enter into any contract with the parties to whom payments were made; ITAT acknowledges that grants / sponsorship received by the assessee, are in turn, disbursed to various recipients (i.e. PSUs) who got the work done through contractors and deducted TDS on payments made to such contractors; However, ITAT remarks that “Though the contractor may be identified and engaged by the other organization, however, the implementation and utilization is the sole responsibility of the assessee. Otherwise, there is no other reason for the formation of the assessee society”; Observes that as required u/s. 194C, assessee is the person responsible for payments of sums to the PSUs, which infact was paid by the assessee; Clarifies that “Merely because the assessee is provided grant for onward distribution to these parties does not exclude the assessee from the liability for deduction of tax at source u/s 194C”; W.r.t. assessee’s alternative argument that all the recipients have already received the grant and if tax is recovered from the assessee it ought to be refundable in the hands of the recipients, ITAT directs the AO to verify as to whether due taxes have been paid by the recipients in terms of the proviso to Sec. 201(1); Lastly, ITAT deletes penalty levied u/s. 271C absent contemptuous conduct on assessee’s part for non-deduction of TDS; Separately in context of payments made to non-resident parties for equipment supply, ITAT rules that Sec. 195 TDS shall not apply as no income has accrued to those parties in India, in terms of Sections 5 & 9 of the Act and title of the goods has passed outside India.:ITAT