TDS – Payments to contractors – Section 194C – Assessee, Department of State Government – Government directing assessee to appoint agency for construction of college buildings providing percentage of project cost for each building as service charges – Payments to agencies for construction of college buildings – Appellate authorities on facts holding that assessee not liable to deduct tax – Concurrent findings based on facts not shown to be perverse – Order need not be interfered with

TDS – Payments to contractors – Section 194C – Assessee, Department of State Government – Government directing assessee to appoint agency for construction of college buildings providing percentage of project cost for each building as service charges – Payments to agencies for construction of college buildings – Appellate authorities on facts holding that assessee not liable to deduct tax – Concurrent findings based on facts not shown to be perverse – Order need not be interfered with

The assessee was a Department of the Government of Karnataka and was in charge of the academic and administrative functions of controlling technical education in the State of Karnataka. As part of its activities, the assessee entrusted the construction of engineering and polytechnic college buildings under construction agreements to KHB and RITES. The Deputy Commissioner treated the assessee as an assessee-in-default and passed an order u/s 201(1) on the ground that the assessee had failed to deduct the tax as required u/s 194C on the payments made under the contracts with KHB and RITES. Accordingly, a demand notice was also issued.

The Commissioner (Appeals), inter alia, held that the Government of Karnataka directed the assessee to appoint a particular agency like KHB or RITES for every new building on remuneration by providing a specific percentage of the project cost for each building in the form of service charges and that the provisions of section 194C were not applicable. The Tribunal upheld the order of the Commissioner (Appeals).

On appeal by the Revenue, the Karnataka High Court upheld the decision of the Tribunal and held as under:

‘The Tribunal was right in holding that the assessee was not liable to deduct tax u/s 194C on payments made to KHB and RITES for rendering of services in connection with the construction of engineering and polytechnic college buildings in the State of Karnataka. The Commissioner (Appeals) had gone into the details of the memorandum of understanding entered into with KHB and RITES and had held that the provisions of section 194C were not applicable to the assessee. The concurrent findings of fact by the appellate authorities need not be interfered with in the absence of any perversity being shown.’