Natioan Highways Authority of India, Vijayawada V. THE DCIT, CIRCLE - 3(1),(TDS), Vijayawada

CO 26/VIZ/2014

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4187 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 30-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P BALA SRINIVAS
• Assessee Lawyers: M BHUPAL REDDY
• Keywords: TDS
• Section: 133A; 194C; 201(1)

Judgement Text

ITA NOS.36 & 37/VIZAG/2014 NATIONAL HIGHWAYS AUTHORITY OF INDIA, VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.36&37/VIZAG/2014 ( / ASSESSMENT YEARS: 2010-11 & 2011-12) DCIT, CIRCLE - 3(1)(TDS), VIJAYAWADA VS. NATIONAL HIGHWAYS AUTHORITY OF INDIA VIJAYAWADA [TAN: HYDOO0805A ] ( / APPELLANT) ( / RESPONDENT) C.O. NOS.25&26/VIZAG/2014 (ARISING OUT OF I.T.A.NOS.36&37/VIZAG/2014) ( / ASSESSMENT YEARS: 2010-11 & 2011-12) NATIONAL HIGHWAYS AUTHORIT Y OF INDIA VIJAYAWADA VS. DCIT, CIRCLE - 3(1)(TDS), VIJAYAWADA ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M. BHUPAL REDDY, DR / RESPONDENT BY : SHRI P. BALA SRINIVAS, AR / DATE OF HEARING : 19.07.2016 / DATE OF PRONOUNCEMENT : 22.07.2016 ITA NOS.36 & 37/VIZAG/2014 NATIONAL HIGHWAYS AUTHORITY OF INDIA, VIJAYAWADA 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE APPEALS FILED BY THE REVENUE AND CROSS OBJEC TIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST SEPARATE, BUT IDE NTICAL ORDERS OF CIT(A), VIJAYAWADA DATED 11.11.2013 FOR THE ASSESSM ENT YEAR 2010-11 & 2011-12. SINCE, THE FACTS ARE IDENTICAL AND ISSU ES ARE COMMON, THEY ARE HEARD TOGETHER AND DISPOSED OFF, BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE, NA TIONAL HIGHWAY AUTHORITY OF INDIA (NHAI) IS AN AUTONOMOUS BODY CRE ATED UNDER THE NHAI ACT, 1988 UNDER THE MINISTRY OF SHIPPING, ROAD TRANSPORT AND HIGHWAYS, TO CARRY OUT THE DEVELOPMENT AND MAINTENA NCE OF HIGHWAYS ACROSS THE COUNTRY. THE NHAI, UNDER THE AEGIS OF CE NTRAL GOVERNMENT, DEVELOPS NATIONAL HIGHWAYS ON ITS OWN OR PUBLIC PRI VATE PARTNERSHIP AND COLLECTS USER FEE FROM THE USERS OF NATIONAL HIGHWA YS. AS SUCH, THE ASSESSEE ESTABLISHED THREE TOLL PLAZAS AT SINGARAYA KONDA FOR COLLECTION OF USER FEE AND ENGAGED THE SERVICES OF SIX AGENCIE S FOR COLLECTION OF TOLL FEES. 3. A SURVEY OPERATION UNDER SEC. 133A OF THE INCOME TAX ACT, 1961 WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSES SEE ON 24.03.2011. ITA NOS.36 & 37/VIZAG/2014 NATIONAL HIGHWAYS AUTHORITY OF INDIA, VIJAYAWADA 3 DURING THE COURSE OF SURVEY OPERATION, IT WAS NOTIC ED THAT THE ASSESSEE IS ENGAGED THE SERVICES OF CONTRACTORS FOR COLLECTI ON OF TOLL FEES AND DEDUCTED TDS @ 2.266% UNDER SEC. 194C OF THE INCOME TAX ACT, 1961. THE A.O. WAS OF THE OPINION THAT THE CONTRACT BETWE EN NHAI AND THE AGENCIES IS A CONTRACT OF AGENCY AND THE AGENTS ARE APPOINTED AS AGENTS ON BEHALF OF NHAI TO COLLECT TOLL FEE AND HENCE, AN Y PAYMENT MADE IN PURSUANCE OF THE SAID CONTRACT OF AGENCY PARTAKES T HE NATURE OF COMMISSION WITHIN THE MEANING OF SECTION 194H OF TH E INCOME TAX ACT, 1961. THEREFORE, ISSUED A SHOW CAUSE NOTICE AND ASK ED TO EXPLAIN WHY THE ASSESSEE SHALL NOT BE TREATED AS ASSESSEE IN DE FAULT U/S 201(1) AND 201(1A) OF THE ACT. IN RESPONSE TO SHOW-CAUSE NOTI CE, THE ASSESSEE HAS FILED A WRITTEN SUBMISSION DATED 30-03-2011 AND CON TENDS THAT THE NATURE OF WORK ENTRUSTED TO CONTRACTORS IS A MERE S UPPLY OF LABOUR FOR EXECUTION OF WORK AS DEFINED UNDER SEC. 194C OF THE ACT, ACCORDINGLY THE PAYMENTS ARE COVERED UNDER SEC. 194C AND IT HAS RIG HTLY DEDUCTED TDS U/S 194C OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS FOLLOWED THE GUIDELINES ISSUED BY CENTRAL GOVT. FROM TIME TO TIME INCLUDING THAT OF THE FORM, METHOD AND MANNER OF AGREEMENT AND THE RA TES OF TDS UNDER SUCH AGREEMENTS. IT WAS FURTHER SUBMITTED THAT THE AGENCIES WERE ENTRUSTED THE WORK OF TOLL FEE COLLECTION AND THE C ONSIDERATION IS PAID IN TERMS OF TOTAL SALARY/WAGE PAID TO THE NUMBER OF PE RSONAL DEPLOYED FOR ITA NOS.36 & 37/VIZAG/2014 NATIONAL HIGHWAYS AUTHORITY OF INDIA, VIJAYAWADA 4 THE WORK PLUS 14% SERVICE CHARGE ON TOTAL SALARY PA ID TO PERSONAL. IT WAS FURTHER SUBMITTED THAT COMMISSION IS CARVED OUT FROM THE VALUE OF TRANSACTION, WHEREAS IN ITS CASE THE CONSIDERATION IS PAID IN TERMS OF SALARY/WAGES PLUS SOME PERCENTAGE OF SERVICE CHARGE ON THE TOTAL SALARY PAID TO PERSONNEL, THEREFORE IT CANNOT BE CONSIDERE D AS COMMISSION WITHIN THE MEANING OF SEC. 194H OF THE INCOME TAX A CT, 1961. 4. THE A.O. AFTER CONSIDERING THE EXPLANATION OF TH E ASSESSEE, HELD THAT THE SERVICES PROVIDED BY THE AGENCIES IS IN TH E NATURE OF PRINCIPLE AND AGENT RELATIONSHIP, CONSEQUENTLY, ANY PAYMENTS MADE IN PURSUANCE OF THE SAID CONTRACT IS OF AGENCY, PARTAKES THE NAT URE OF COMMISSION WITHIN THE MEANING OF SECTION 194H OF THE ACT, AND ACCORDINGLY, TAX IS DEDUCTIBLE UNDER THE SAID SECTION AT THE RATE PRESC RIBED. BUT, THE ASSESSEE HAS DEDUCTED TAX AT THE RATE APPLICABLE TO WORK CONTRACT UNDER SEC. 194C. THE A.O. FURTHER HELD THAT THE AGENTS HA VE BEEN ENTRUSTED THE WORK OF TOLL FEES COLLECTION ON BEHALF OF NHAI AND PAID SERVICE CHARGES AS PER THE AGREEMENT. THERE MAY BE INSTANCE OF COMMISSION IS BEING PAID AS A PERCENTAGE OF VALUE OF THE TRANSACT ION, BUT IT IS NOT CORRECT TO SAY THAT COMMISSION SHOULD BE CALCULATED ON THE BASIS OF FIXED PERCENTAGE ON THE VALUE OF CONTRACT AND THERE IS NO THING WRONG IF THE COMMISSION IS PAID ON A DIFFERENT YARDSTICK. THE FA CTS AND CIRCUMSTANCES OF THE INSTANT CASE ARE FOUND TO BE FALLING WITHIN THE DEFINITION OF ITA NOS.36 & 37/VIZAG/2014 NATIONAL HIGHWAYS AUTHORITY OF INDIA, VIJAYAWADA 5 COMMISSION AS MENTIONED IN SECTION 194H. THEREFORE, HELD THAT THE ASSESSEE AS AN ASSESSEE IN DEFAULT UNDER SEC. 201(1 ) AND 201(1A) OF THE INCOME TAX ACT 1961 AND COMPUTED SHORT DEDUCTION OF TAX AND INTEREST. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE AS SESSEE REITERATED THE SUBMISSIONS MADE BEFORE A.O.. THE ASSESSEE FURTHER SUBMITTED THAT THE A.O. RESORTED TO GENERAL PROVISIONS OF LAWS UNDER T HE CONTRACT ACT AND OTHER ENACTMENTS AND HAS SELECTIVELY CHOSEN TO ANAL YSIS ABOUT THE WORKS CONTRACT AND PRINCIPLE TO PRINCIPLE ARGUMENT AND PR INCIPLE TO AGENT ARGUMENT TO SUIT HIS CONVENIENCE AND LEFT OTHER IMP ORTANT ASPECTS OF THE AGREEMENT SO AS TO COME TO THE CONCLUSION THAT IT I S A CONTRACT FOR AGENCY AND THE IMPUGNED PAYMENTS ARE COVERED UNDER THE PROVISIONS OF SEC. 194H OF THE ACT. IT WAS FURTHER SUBMITTED THAT IT HAS ENGAGED THE SERVICES OF AGENCIES TO PROVIDE MANPOWER FOR TOLL F EE COLLECTION IN DESIGNATED TOLL PLAZAS OF NATIONAL HIGHWAYS. AS PER THE TERMS OF AGREEMENT, THE AGENCIES REQUIRED TO PROVIDE AS MANY AS REQUIRED NUMBER OF PERSONS ON THEIR OWN TERMS AND CONDITIONS WITHOUT ANY OBLIGATION TO THE NHAI. IT IS THE RESPONSIBILITY OF THE AGENCIES TO APPOINT THEIR STAFF AND COMPLETE THE WORK. THE AGENCIES HAV E BEEN PAID CONSIDERATION ON THE BASIS OF TOTAL WAGES/SALARY PA YABLE TO THE ITA NOS.36 & 37/VIZAG/2014 NATIONAL HIGHWAYS AUTHORITY OF INDIA, VIJAYAWADA 6 PERSONNEL EMPLOYED PLUS 14% SERVICE CHARGES ON THE TOTAL SALARY PAYABLE TO THE STAFF. THEREFORE, IT IS MERE SUPPLY OF LABOUR FOR EXECUTION OF WORK CONTRACT, BUT NOT A CONTRACT FOR AGENCY SO AS TO APPLY THE PROVISIONS OF SEC. 194H OF THE ACT. THE CIT(A) AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HELD THAT IT IS A SIMP LE CONTRACT HAVING ALL THE INGREDIENTS OF WORKS CONTRACT. THE CONTRACT BET WEEN THE NHAI AND THE AGENCIES IS ON PRINCIPLE TO PRINCIPLE BASIS, BU T NOT ON PRINCIPLE TO AGENT BASIS. WITH THESE OBSERVATION, HELD THAT THE I MPUGNED PAYMENTS ARE COVERED UNDER THE PROVISIONS OF SEC. 194C, BUT NOT UNDER THE PROVISIONS OF SEC. 194H OF THE INCOME TAX ACT, 1961 . AGGRIEVED BY THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING, THE LD. A.R. FOR THE ASS ESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THESE APPEALS IS SQUAREL Y COVERED BY THE DECISION OF ITAT, VISAKHAPATNAM BENCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10. THE A.R. FURTHER SUBMITTE D THAT THE ITAT, HELD THAT THE CONTRACT BETWEEN THE ASSESSEE AND THE CONTRACTORS IS A MERE CONTRACT FOR SUPPLY OF LABOUR FOR EXECUTION OF WORK, HAVING ALL THE INGREDIENTS OF A CONTRACT OF PRINCIPAL TO PRINCIPAL BASIS AND ACCORDINGLY, THE ASSESSEE HAS RIGHTLY DEDUCTED TDS @ 2.266% UNDE R THE PROVISIONS OF SECTION 194C OF THE ACT. ITA NOS.36 & 37/VIZAG/2014 NATIONAL HIGHWAYS AUTHORITY OF INDIA, VIJAYAWADA 7 7. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORT ED THE ASSESSMENT ORDER. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVO LVED IN THESE APPEALS IS SQUARELY COVERED BY THE DECISION OF ITAT, VISAKH APATNAM BENCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 . WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL, IN ITA NO.69/VIZ AG/2013 DATED 10.6.2016 HELD THAT THE CONTRACT BETWEEN THE ASSESS EE AND THE AGENCIES IS A MERE CONTRACT FOR SUPPLY OF LABOUR FOR EXECUTI ON OF WORK CONTRACT AS DEFINED UNDER THE PROVISIONS OF SECTION 194C, BUT N OT A COMMISSION AS DEFINED UNDER THE PROVISIONS OF SEC. 194H OF THE AC T. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 8. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESEE FO R THE REASON THAT IT IS A MERE CONTRACT FOR SUPPLY OF LABOUR FOR EXECUTI ON OF WORK, BUT NOT A CONTRACT OF AGENCY AS DEFIED UNDER THE PROVISIONS O F SEC. 194H OF THE ACT. THE A.R. REFERRED TO THE AGREEMENT BETWEEN THE NHAI AND THE CONTRACTORS. ON PERUSAL OF THE AGREEMENT, WE FIND T HAT THE COLLECTING ENTITY IS HAVING POWER UNDER ITS BUSINESS RULES TO PROVIDE SERVICES ON CONTRACT BASIS THROUGH ITS PERSONNEL. THE COLLECTIN G AGENCY IS LIABLE TO PROVIDE ITS SERVICES OF TOLL FEES COLLECTION WORK U NDER ITS OWN ORGANIZATIONAL STRUCTURE AND ON DEPLOYMENT OF PERSO NNEL AS PER CLAUSE 11 OF THE AGREEMENT WITHOUT BINDING ON THE NHAI FOR THE SAID EMPLOYEES UNDER CLAUSE 12 OF THE AGREEMENT. AS PER CLAUSE 17 OF THE AGREEMENT, A SERVICE CHARGE OF 14% SHALL BE PAID ON TOTAL REMUNE RATION PAYABLE TO THE PERSONNEL DEPLOYED FOR THE WORK. NORMALLY, COMMISSI ON IS PAID IN TERMS OF VALUE OF TRANSACTION, WHEREAS IN THE INSTANT CASE C ONSIDERATION IS PAID IN TERMS OF REMUNERATION PAYABLE TO THE PERSONNEL DEPL OYED IN TO THE WORK PLUS SERVICE CHARGE OF 14% ON THE TOTAL REMUNERATIO N PAYABLE TO THE ITA NOS.36 & 37/VIZAG/2014 NATIONAL HIGHWAYS AUTHORITY OF INDIA, VIJAYAWADA 8 PERSONNEL EMPLOYED. THEREFORE, WE ARE OF THE VIEW T HAT THE CONTRACT BETWEEN THE ASSESSEE AND THE AGENCIES IS A MERE CON TRACT FOR SUPPLY OF LABOUR FOR EXECUTION OF WORK CONTRACT AS DEFINED UN DER THE PROVISIONS OF SEC. 194C, BUT NOT A CONTRACT OF AGENCY AS DEFINED UNDER SEC. 194H OF THE ACT. WE FURTHER OBSERVED THAT ON PERUSAL OF THE NAT URE OF WORK AND CONTRACT BETWEEN ASSESSEE AND AGENCIES, THERE IS NO ELEMENT OF CONTRACT IN THE NATURE OF PRINCIPLE TO AGENT SO AS TO INVOKE THE PROVISIONS OF SEC. 194H OF THE ACT. IT IS MERELY A CONTRACT FOR SUPPLY OF LABOUR FOR EXECUTION OF WORK CONTRACT AS DEFINED UNDER SEC. 194C, HAVING ALL THE INGREDIENTS OF A CONTRACT OF PRINCIPLE TO PRINCIPLE BASIS. THE ASS ESSEE HAS RIGHTLY DEDUCTED TDS @ 2.266% UNDER THE PROVISIONS OF SEC. 194C OF THE ACT. THE A.O. WITHOUT APPRECIATING THE FACTS SIMPLY, HEL D THAT THE PAYMENTS ARE IN THE NATURE OF COMMISSION WHICH ATTRACTS TDS UNDER SEC. 194H. THE CIT(A) HAS RIGHTLY DELETED THE ADDITIONS. WE DO NOT SEE ANY ERROR OR INFIRMITY IN THE ORDER OF CIT(A). HENCE, WE INCLINE D TO UPHELD CIT(A) ORDER AND REJECT THE APPEAL FILED BY THE REVENUE. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE AND ALSO RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE B ENCH OF THIS TRIBUNAL, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10, WE ARE OF THE VIEW THAT THE IMPUGNED PAYMENTS ARE C OVERED UNDER THE PROVISIONS OF SECTION 194C OF THE ACT, BUT NOT UNDER THE PROVISIONS OF SECTION 194H OF THE ACT. THE CIT(A) AFTER CONSIDERING RELEVANT FACTS AND CIRCUMSTANCES, RIGHTLY DELETED T HE ADDITIONS MADE BY THE A.O. WE DO NOT SEE ANY ERROR OR INFIRMITY I N THE ORDER OF THE CIT(A). HENCE, WE INCLINED TO UPHELD THE CIT(A) OR DER AND REJECT THE APPEALS FILED BY THE REVENUE. 10. THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE SUPPORTING THE ORDER OF CIT(A). WE, THEREFORE, FOR THE REASONS REC ORDED IN THE ITA NOS.36 & 37/VIZAG/2014 NATIONAL HIGHWAYS AUTHORITY OF INDIA, VIJAYAWADA 9 PRECEDING PARAGRAPH, DISMISS THE CROSS OBJECTIONS F ILED BY THE ASSESSEE. 11. IN THE RESULT, THE APPEALS FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22 ND JUL16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 22.07.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-3(1)(TDS), VIJA YAWADA 2. / THE RESPONDENT NATIONAL HIGHWAYS AUTHORITY OF INDIA, PLOT NO.21, ABOVE SBH, TEACHERS COLONY, VIJAYAWADA 3. + / THE CIT(TDS), HYDERABAD 4. + / THE CIT(TDS), VIJAYAWADA 5. + ( ) / THE CIT (A), VIJAYAWADA 6. # . , . , # / DR, ITAT, VISAKHAPATNAM 7 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM ITA NOS.36 & 37/VIZAG/2014 NATIONAL HIGHWAYS AUTHORITY OF INDIA, VIJAYAWADA 10