M/s. Gujarat State Petroleum Corpn. Ltd., Ahmedabad V. The Income tax Officer,TDS, Gandhinagar

CO 322/AHD/2010

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 9017 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-10-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 22-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income
• Section: 133A; 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTAN T MEMBER INCOME TAX OFFICER(TDS), GANDHINAGAR (APPELLANT) VS GUJARAT STATE PETROLEUM CORPORATION LTD, GSPC BHAVAN, SECTOR NO. 11, GANDHINAGAR PAN: AHMG00887G (RESPONDENT) GUJARAT STATE PETROLEUM CORPORATION LTD, GSPC BHAVAN, SECTOR NO. 11, GANDHINAGAR PAN: AHMGOO887G (CROSS OBJECTOR) VS INCOME TAX OFFICER(TDS), GANDHINAGAR (RESPONDENT) REVENUE BY: SRI P.L. KUREEL, SR.D.R. ASSESSEE BY: SRI S.N. SOPARKAR, A.R. DATE OF HEARING : 23-10-2013 DATE OF PRONOUNCEMENT : 29-11-20 13 ITA NO. 2884/AHD/2010 ASSESSMENT YEAR 2009-10 C.O. NO. 322/AHD/2010 ASSESSMENT YEAR 2009-10 I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 2 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- REVENUES APPEAL AND CO BY ASSESSEE ARE AGAINST TH E ORDER OF LD. CIT(A)-VI AHMEDABAD DATED 09-08-2010. 2. IN REVENUES APPEAL THERE ARE TWO FOLLOWING EFFE CTIVE GROUNDS: 1. THE LD. CIT(A) ERRED IN LAW AS WELL AS FACTS OF THE CASE IN DELETING THE ORDER PASSED U/S. 201(1) & INTEREST CH ARGED U/S. 201(1A) OF THE I T ACT OF RS. 60,57,478/- FOR ASST. YEAR 20 09-10 BY THE AO BY TREADING THE HIRING OF HOARDING U/S. 194C OF THE AC T AGAINST 194I OF THE ACT BY THE AO. 2. THE LD. CIT(A) ERRED IN LAW AS WELL AS FACTS OF THE CASE IN DELETING THE ORDER PASSED U/S. 201(1) & INTEREST CH ARGED U/S. 201(1A) OF THE I T ACT OF RS. 77,28,335/- FOR A.Y. 2009-10 BY THE AO BY TREATING THE HIRING OF PIPELINES CONNECTION U/S. 19 4C OF THE ACT AS AGAINST 1941 OF THE ACT BY THE AO. 3. GROUND NO. 1 RELATES TO RAISING OF DEMAND U/S. 201(1) AND 201(1A) R.W.S. 194-1 ON PAYMENT MADE TO PROVEG COMMUNICATIO N PVT LTD. AO HAS DEALT WITH THE ISSUE INVOLVED IN THIS GROUND AS UND ER:- 'THE ASSESSEE COMPANY MADE PAYMENT OF M/S PROVEG CO MMUNICATION PVT. LTD. THE A.O. HAD STATED THAT THE ASSESSEE CO. HAD SUBMITTED A LETTER DTD. 1/5/2008 REGARDING HIRING THE HOARDINGS AT 17 MAJOR LOCATIONS IN GUJARAT AND FIXED THE MONTHLY RATE OF RS. 34,24,2607/-. THE A.O. OBSERVED THAT THE ASSESSEE CO. HAD MADE PA YMENT OF RS. 6,85,43,740/- TO THE AFORESAID CONTRACTOR DURING TH E YEAR UNDER CONSIDERATION. HOWEVER, THE ASSESSEE HAD DEDUCTED T AX @ 2% U/S 194C AS AGAINST 10% U/S 1941 OF THE ACT. AS THE TAX WAS DEDUCTED @ 2% ONLY ON THE ABOVE PAYMENT, THERE WAS A SHORT DED UCTION OF TAX BY 8% + SC+EC. THE ASSESSEE WAS SHOW-CAUSED AND REPLIE D AS UNDER... I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 3 AFTER CONSIDERING ASSESSEE'S REPLY AO HELD THAT ASS ESSEE WAS LIABLE FOR 10% TDS AS AGAINST 2% DEDUCTED . . 4. ASSESSEES SUBMISSION BEFORE LD. CIT(A) WAS AS U NDER:- 'THE APPELLANT HAS PLACED AN ORDER VIDE A LETTER NO . GSPC / CC / 2008 DATED 01-05-2008 WITH M/S. PRAVEG COMMUNICATIO N PVT. LTD., 102 SHANTI ARCADE, 132 RING ROAD, NARANPURA, AHMEDA BAD FOR 'DISPLAY OF HOARDING ADVERTISEMENT AT 17 MAJOR LOC ATIONS IN GUJARAT. 2.2 THE LEARNED A.O. HAS FOUND THE FOLLOWING IN HI S SHOW CAUSE NOTICE DATED 27-03-2009 WHICH IS REPRODUCED AS UNDE R FOR YOUR REFERENCE. YOU HAVE MADE MONTHLY PAYMENTS OF RS. 34.24 LACS T O PROVE COMMUNICATION PVT. LTD. FOR HIRING OF HOARDINGS AN D DEDUCTED TDS @ 2% ONLY U/S. 194C OF THE I T ACT WHEREAS YOU WERE REQUIRED TO DEDUCT TAX U/S 194 1 OF THE ACT. AS PER OFFICE NOTE IN YOUR FILE, IT HAS SPECIFICALLY BEEN MENTIONED THAT THIS IS PURELY A H IRING CHARGES OF HOARDINGS AND ALL OTHER CHARGES OF FLEX PROVIDING E TC. ARE EXTRA. THIS PROVES THAT CHARGES PAID ON MONTHLY BASIS FROM MAY, 2008 LO FEBRUARY 2009 ARE OF NATURE OF RENT AND AS SUCH YOU ARE REQUIRED LO DEDUCT TAX @ 2 % . PLEASE SHOW CAUSE WHY TAX WAS NO T DEDUCTED @ 10% U/S 194 I OF THE ACT. 2.3 THE APPELLANT HAS SUBMITTED REPLY ON 04-05-2 009 WHICH IS REPRODUCED UNDER FOR YOUR REFERENCE. WITH REFERENCE TO THE ABOVE, WE HAVE TO STATE THAT GSPC HAS, ISSUE AN ORDER DATED MAY 2008 TO PRAVEG COMMUNICATION PVT L IMITED- PCPL FOR 'DISPLAY OF HOARDING OF ADVERTISEMENT WHICH INC LUDES THE FOLLOWING. 1) IDENTIFICATION OF HOARDING LOCATION ON HIRE BASI S AT 110 DIFFERENT SITES IN 17 DIFFERENT TOWNS / CITIES IN GUJARAT. 2) FLEX PRINTING 3) FLEX INSTALLATION 4) COORDINATION WITH OTHER AGENCIES I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 4 5) DESIGN 6) PLANNING 7) QUALITY CONTROL 8) SUPERVISION FROM ABOVE, YOU WILL APPRECIATE THAT GSPC HAS TAKEN THE SERVICES OF PCPL WITH THE ONLY PURPOSE OF 'BRAND BUILDING'. YO U WILL FURTHER APPRECIATE THAT GSPC IS NOT IN THE BUSINESS OF TAKI NG 'HOARDINGS ON RENTAL BASIS'. GSPC HAS SOLE PURPOSE OF ADVERTISEME NT AND BUILDING ITS IMAGE IN THE STATE OF GUJARAT. FOR THE VERY SAM E REASON PCPL HAS BEEN APPOINTED AS AN AGENCY TO RENDER SPECIALIZED S ERVICES FOR DISPLAY OF HOARDING OF ADVERTISEMENT. PCFL ITSELF DOES NOT OWN THE 'HOARDINGS' AND IT IS NATURAL FOR THEM TO OBTAIN TH E SAME FROM 'HOARDING OWNERS' ON RENTAL BASIS. IT IS OBVIOUS T HAT GSPC HAS TO PAY PCPL FOR THE CHARGES OF THE HOARDINGS AS A PART OF THE ADVERTISEMENT CONTRACT. HOWEVER THIS ENTIRE PROCEDURE IS A PART OF THE WIDE UNDERSTANDING OF RENDERING ADVERTISEMENT RELATED SERVICES. WE DRAW YOUR KIND ATTENTION TO THE CIRCULAR NO. 715 DATED 8 TH AUGUST 1995 OF CBDT, WHEREIN IT HAS BEEN CATEGORICALLY MEN TIONED THAT WHEN CONTRACT FOR PUTTING UP A HOARDING IS IN THE NATURE OF ADVERTISING CONTRACT, THE PROVISIONS OF THE SECTION 194C OF THE ACT WILL GOVERN THE TAX DEDUCTION ISSUE. YOU ARE AWARE THAT CBDT CIRC ULARS ARE BINDING TO THE TAX AUTHORITIES AND HENCE THE RATIO PRONOUNC ED BY THE CBDT CIRCULAR HAS TO BE FOLLOWED BY YOU. HENCE, GSPC HAS RIGHTFUL DEDUCTED TAX U/S 194C OF THE ACT. IN FACT THE ROTE OF TAX FOR 'ADVERTISERS' IS 1% PLUS APPLICABLE SURCHARGE AND C ESS HOWEVER GSPC HAS DEDUCTED TAX AT 2% PLUS APPLICABLE SURCHAR GE AND CESS. UNDER THE CIRCUMSTANCES, GSPC IS NOT LIABLE TO DEDU CT TAX AT THE RATE OF 10% PLUS APPLICABLE SURCHARGE AND CESS AS PER TH E PROVISIONS OF SECTION 194-I OF THE ACT. WITHOUT PREJUDICE TO WHAT IS STATED ABOVE, EVEN IF IT IS PRESUMED THAT GSPC HAS PAID RENTAL CHARGES FOR HIRING OF HOARDING S TO PCPL, GSPC IS LIABLE ONLY TO DEDUCT TAX AT THE RATE OF 2% PLUS APPLICABLE SURCHARGE AND CESS AS PER THE PROVISIONS OF SECTION 194C OF THE ACT. THE PROVISIONS OF SECTION 194-1 OF THE ACT ARE NOT APPLICABLE TO THE I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 5 AFORESAID TRANSACTION. THIS RATIO IS INLINE WITH TH E JUDGMENT OF HON'BLE MUMBAI ITAT IN THE CASE OF ITO VS. ROSHAN P UBLICITY PRIVATE LIMITED (2005) 4 SOT 105 WHERE THE TRIBUNAL HAS HEL D THAT THE AMOUNT PAID FOR ADVERTISEMENT PURPOSE WOULD ATTRACT THE PROVISIONS OF 'SECTION. 194C AND HENCE TDS @ 2%. IT IS THEREFORE, CLEAR BEYOND DOUBT THAT WHAT IS CO NTEMPLATED IS BRAND BUILDING AND THERE IS NO QUESTION OF HOARDINGS OR R ENTAL GIVEN, BUT THE IDEA IS TO BUILD UP THE CORPORATE IMAGE, HENCE, GSP C IS LIABLE TO DEDUCT TAX AT THE RATE OF 2% PLUS APPLICABLE SURCHA RGE AND CESS. 2.4 THE LEARNED A . O. HAS GROSSLY ERRED IN IGNORING THE JUDGMENT OF THE HON'BLE MUMBAI ITAT IN THE CASE OF ITO VS. ROSH AN PUBLICITY PRIVATE LIMITED [2005] 4 SOT 105 WHERE THE TRIBUN AL HAS HELD THAT THE AMOUNT PAID FOR ADVERTISEMENT PURPOSE WOULD ATT RACT THE PROVISIONS OF SECTION 194C. 2.5 THE LEARNED A O. HAS GROSSLY ERRED IN LAW AND O N FACTS IN LEVYING INTEREST UNDER SECTION 201(IA) OF THE ACT. WITHOUT PREJUDICE TO WHAT 15 STALED ABOVE, THE APPE LLANT HUMBLY PLEADS THAT AS PER THE BINDING JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE CIT VS. RISHIKESH APARTMENTS CO-O P. HOUSING SOCIETY LIMITED (2002) 253 ITR 310, IF THE PAYEE HA S PAID THE ADVANCE TAX IF PAYABLE THEN THERE IS NO REVENUE LOSS TO THE EXC HEQUER AND IN THAT EVENT NO INTEREST CAN BE LEVIED U/S 201(1A) OF THE ACT. 2.6 THE LEARNED A.O. HAS GROSSLY ERRED IN NOT C ONSIDERING THE FOLLOWING TWO JUDGMENT QUOTED BY THE APPELLANT THR OUGH LETTER DATED 04-01-2010. 1. CHILDREN'S EDUCATION SOCIETY VS. DCIT (TDS ) (2009) 319 ITR 409, KARNATAKA HIGH COURT 2. HINDUSTAN COCACOLA BEVERAGES PVT. LTD VS. CIT (2 007) 293 ITR 226 (SC) IT HAS BEEN HELD IN THE AFORESAID TWO JUDGMENTS THA T ONCE TAX HAS BEEN ALREADY PAID BY FILE DEDUCTEE THE SAME TOGETHER WIT H INTEREST AND I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 6 PENALTY CANNOT BE RECOVERED FROM THE DEDUCTOR EVEN THOUGH DEDUCTOR HAD FAILED TO DEDUCT TAX AT SOURCE. THE APPELLANT HAS ALSO SUBMITTED THAT TAX PAID BY P CPL AMOUNTS TO RS. 30, 91,403/- AGAINST TAX PAYABLE OF RS. 10,07,4 30/-. THE APPELLANT HAS ALSO SUBMITTED DOCUMENTARY EVIDENCING THROUGH T HE LETTER DATED 21-01-2010 FOR THE ABOVE REFUND OF RS 20,63, 973/- FOR THE A.Y. 2009- 10. YOU WILL APPRECIATE THAT THE DETAILS SUBMITTED ARE IN LINE WITH THE ABOVE REFERRED TWO JUDGMENTS. HENCE THERE IS NO LIA BILITY FOR TDS IN VIEW OF THE SAME. 2.7 IN VIEW OF THE ABOVE, THE APPELLANT HUMBLY SUBM ITS THAT THE CONTENTIONS OF THE LEARNED AO IS BAD IN LAW AND HEN CE THE SAME SHOULD BE DELETED. 5. AFTER TAKING INTO CONSIDERATION THESE SUBMISSION S OF THE ASSESSEE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERV ING AS UNDER: 3.3 I HAVE CONSIDERED THE ORDER OF THE AO, FCTS OF THE CASE AND APPELLANT'S SUBMISSION. APPELLANT PAID TO M/S PROVE G COMMUNICATION LTD FOR THE PURPOSE OF BRAND BUILDING AND TAKING HO ARDINGS FOR ADVERTISEMENT INCLUDED SEVER OTHER SERVICES APART F ORM HIRING HOARDINGS. APPELLANT RELINED UPON ITAT, MUMBAI DECI SION IN THE CASE OF ITO. VS. ROSHAN PUBLICITY PVT. LTD. REPORTED IN 4 SOT 105. IN THE SAID DECISION IT WAS HELD THAT IN ACQUIRING THE RIG HT OF DISPLAYING ADVERTISEMENT AT HOARDING SITE AND MAKING PAYMENT T O HOARDING SITE OWNERS DOES NOT INVOLVE LEASE, SUB-LEASE OR TENANCY AND THEREFORE, SEC. 194-I IS NOT APPLICABLE AS THE PAYMENT CANNOT BE TERMED AS RENT. APPLICANTS CASE IS ALSO IDENTICAL SINCE IT HAD AD VERTISEMENT CONTRACT WITH PCPL THE ADVERTISING COMPANY WHO HIRES T HE HOARDINGS WILL FALL WITHIN THE PURVIEW OF 194-1 AND NOT THE PERSON WHO PAYS ADVERTISEMENTS CHARGES. FROM THE DETAILS OF ADVE RTISEMENT CHARGES SUBMITTED IT IS CLEAR THAT ONLY THE PART OF THE AM OUNT RELATES TO HOARDINGS, THE REMAINING PART IS FOR OTHER SERVICES REFERRED IN APPELLANT'S REPLY SUCH AS BUSINESS PROMOTION, PRINT ING AND STATIONARY BRAND BUILDING ETC. CONSIDERING THIS AND RESPECTFU LLY FOLLOWING THE I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 7 DECISION OF MUMBAI ITAT REFERRED ABOVE, THE ITO. TD SS ACTION IS NOT UPHELD AND THIS GROUND IS ALLOWED. 6. SINCE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSE E BY FOLLOWING THE DECISION OF MUMBAI ITAT IN THE CASE OF ITO VS. ROS HAN PUBLICITY PVT LTD REPORTED IN 4 SOT 105 AND NO CONTRARY DECISION WAS CITED BY THE REVENUE AT THE TIME OF HEARING BEFORE US WE FEEL NO NEED TO IN TERFERE WITH THE ORDER PASSED BY LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 7. SECOND GROUND RELATES TO RAISING OF DEMAND U/S. 201(1) AND 201(1A) R.W.S. 194J ON PAYMENT TO GSPL FOR GAS TRANSMISSION . 8. AO HAS DEALT THE ISSUE AS UNDER:- THE ASSESSEE COMPANY MADE PAYMENT TO GUJARAT STATE PETRONET LTD. IT IS OBSERVED BY THE AO THAT THE ASSESSEE CO. HAD MADE PAYMENT OF RS. 8,90,69,820/- TO GUJARAT STATE PETRONET LTD. TO WARDS GAS TRANSPORTATION CHARGES BY HIRING PIPELINE CONNECTIO N. HOWEVER, THE ASSESSEE HAD DEDUCTED TAX @ 2% U/S 194C AS AGAINST 10% U/S. 1941 OF THE ACT. AS THE TAX WAS DEDUCTED @ 2% ONLY ON T HE ABOVE PAYMENT, THERE WAS SHORT DEDUCTION OF TAX BY 8% +SC+EC. THE ASSESSEE WAS SHOW-CAUSED AND REPLIED AS UNDER.. THE ASSESSEES CONTENTION WAS NOT ACCEPTED BY THE A O AND RAISED DEMAND OF RS. 77,28,335/-. 9. ASSESSEES SUBMISSION BEFORE LD. CIT(A) WAS AS U NDER: - 4.1 WITHOUT PREJUDICE TO WHAT IS STATED BELOW, THE APPELLANT SUBMITS THAT THE LEARNED A.O. HAS NOT ASKED ANY DETAILS REG ARDING PAYMENT MADE TO GSPL DURING THE COURSE AT SURVEY. THE STATE MENT ON OATH DATED 18-03-09 OF MR. RAJESH SIVADASON EVIDENCE OF THE SAME. I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 8 4.2 THE LEARNED A.O. HAS FOUND FOLLOWING IN HIS SHO W CAUSE NOTICE DATED 27-03-09 WHICH IS REPRODUCED AS UNDER FOR YOU R REFERENCE. 'IT IS ALSO OBSERVED THAT YOU HAVE DEDUCTED TDS @ 2 % ONLY I.E. U/S 194C ON GAS TRANSPORTATION CHARGES PAID TO GUJARAT STATE PETRONET LTD. WHEREAS THIS PAYMENT IS OF RENTAL NATURE AND A S SUCH YOU WERE REQUIRED TO DEDUCT TAX @ 10%. THE TOTAL AMOUNT PAID FOR TRANSPORTATION OF GAS CHARGES IS APPROXIMATELY RS. 12 CRORES. SHORT DEDUCTION @ 8% COMES TO RS. 96 LACS + SC + EC AS AP PLICABLE. 4.3 THE APPELLANT HAS SUBMITTED REPLY ON 04-03-2009 WHICH IS REPRODUCED AS UNDER FOR YOUR REFERENCE. YOU HOVE OBSERVED THAT GSPC HAS DEDUCTED TAX AT THE RATE OF 2% U/S 194C FOR THE PAYMENT MODE FOR 'GAS TRANSPORTATION C HARGES' OF RS. 12 CRORES TO GUJARAT STATE PETRONET LIMITED (GSPL) INSTEAD OF TDS @ 10% U/S. 194-I AS THE SAME IS OF RENTAL NATURE. Y OU HAVE FURTHER OBSERVED THAT PAYMENT IS ALSO MADE TO GSPL BY GSPC TOWARDS 'PIPELINE PAYMENT CHARGES / CONNECTIVITY CHARGES' A FTER DEDUCING TAX AT THE RATE 2% U/S 194C INSTEAD OF DEDUCING TAX AT THE RATE OF 10% U/S 194-I. WE DRAW OUR KIND ATTENTION TO STARTING PARAGRAPH OF YOUR SHOW CAUSE NOTICE WHICH IS REPRODUCED BELOW. 'A SURVEY U/S. 133A (1) OF THE IT ACT WAS CARRIED O UT AT YOUR OFFICE PREMISES AT THE ADDRESS CAPTIONED ABOVE ON 17 TH AND 18 TH MARCH 2009. DURING THE COURSE OF SURVEY ACTIONS, FOLLOWIN G DISCREPANCIES WERE NOTICED. (I) (II).. (III). (IV). (V) (VI) WITH SHOCK AND SURPRISE, WE DRAW YOUR ATTENTION TO THE FACT THAT NO SUCH SO-CALLED DISCREPANCIES WERE FOUND BY SURVEY T EAM AS MENTIONED BY YOU AT POINT NO. (V) AND (VI) WHICH CAN BE VERIF IED FROM THE I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 9 STATEMENT OF MR. RAJESH SIVADASAN, SR. MANAGER (FIN ANCE) WHICH WAS RECORDED ON OATH ON 18 TH MARCH 2009 AT 7 PM, AND THE SAME OATH WAS ADMINISTERED BY MR. NARPAT SINGH, ITO, TDS -J, AHME DABAD, FROM THE STATEMENT YOU WILL OBSERVE THAT NO QUESTION REG ARDING PAYMENT MADE TO GSPL HAS BEEN ASKED BY THE SURVEY TEAM OF T AX DEPARTMENT. THIS POINT IS NOT A PART OF SURVEY. WITH THIS BACKG ROUND, AND WITHOUT PREJUDICE TO OUR CONTENTIONS, YOU WILL APPRECIATE T HAT YOUR CONTENTION THAT DURING THE COURSE OF THE SURVEY THE AFORESAID DISCREPANCIES WERE FOUND IN PAYMENT TO GSPL IS TOTALLY BASELESS AND FA R FROM THE TRUTH. WITHOUT PREJUDICE TO OUR RIGHTS AND CONTENTIONS, WE HAVE TO STATE AS UNDER. YOU HAVE CORRECTLY OBSERVED THAT GSPC HAS PAID RS. 12 CRORES TO GSPL FOR 'GAS TRANSPORTATION CHARGES'. GSPC HAS PAI D 'GAS TRANSPORTATION CHARGES TO ENSURE THAT GAS REACHES TO CONSUMERS AND HAS NOT PAID FOR 'HIRING OF PIPELINES'. IT MAY KINDLY BE NOTED THAT GSPC IS NOT IN THE BUSINESS OF 'HIRING OF PIPELINES '. WE DRAW YOUR KIND ATTENTION TO THE CBDT CIRCULAR NO . 715 DATED 8 TH AUGUST 1995, WHEREIN IT HAS BEEN CLEARLY STATED THA T ANY PAYMENT MODE FOR TRANSPORTATION / CARRIAGE OF GOODS OTHER T HAN BY RAIL IS LIABLE TO TAX U/S 194C OF THE ACT. THE SAME IS ALSO CONFIR MED BY CBDT CIRCULAR NO. 723 DATED 19 TH SEPTEMBER 1995. YOU ARE AWARE THAT CBDT CIRCULARS ARE BINDING TO THE TAX AUTHORITIES A ND HENCE THE RATIO PRONOUNCED BY THE CBDT CIRCULAR HAS TO BE FOLLOWED BY YOU. YOU WILL APPRECIATE THAT GSPC HAS DEDUCTED TAX FROM THE PAYMENT MADE TO GSPL AT THE APPROPRIATE RATE I.E. @ 2% PLUS APPLICABLE SURCHARGE AND CESS U/S 194C OF THE ACT AS THE PAYME NT IS FOR THE PURPOSE OF 'TRANSPORTATION OF GOODS'. PAYMENTS ARE MADE TO GSFL FOR TRANSPORTATION OF GAS . THE PAYMENT IS FOR GAS TRANSPORTATION CHARGES. YOU HAVE WRONGLY CLASSIFIED IT AS 'PIPELINE PAYMENT CHARGES / CONNECTIVITY CHARGES'. GAS TRANSPORTATION CHARGES ARE PAID ONLY AND ONLY TO EN SURE THAT THE GAS REACHES TO THE CONSUMER AND IT IS NOT FOR HIRING OF PIPELINES. HENCE, VIEWED FROM ANY ANGLE THERE IS NO QUESTION OF HIRE AND THEREFORE THE PROVISIONS OF SECTION 194J ARE NOT APPLICABLE. I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 10 GSPC IS NOT IN THE BUSINESS OF HIRING OF PIPELINES. WHAT IS CONTEMPLATED IS 'GAS TRANSPORTATION CHARGES WHICH IS ALSO THE HEADING CORRECTED REFLECTED IN ITS ACCOUNTS AND THI NG BEING IN THE NATURE OF WORKS CONTRACT, THE PROVISIONS OF SECTION 194C ARE ATTRACTED. YOU WILL THEREFORE APPRECIATE THAT QUESTION OF PAYM ENT OF TAX FOR SHORTFALL OF PS. 96 LACS PLUS SURCHARGE AND CESS AS MENTIONED BY YOU DOES NOT ARISE. 4.4 THE LEARNED A.O. HAS GROSSLY ERRED IN IGNORING THE 'RULING OF BOMBAY HIGH COURT IN THE CASE OF INDIAN NATIONAL SH IP OWNERS ASSOCIATION (LNSA) STATING AS UNDER. 'THE HIGH COURT ALSO OPINED THAT THE SCOPE OF SECTI ON 194C COVERS CARRIAGE OF GOODS AND PASSENGERS, AND FREIGHT PAYME NTS ARE TO BE DEALT WITH UNDER SECTION 194C AND NOT SECTION 194-I . IN OTHER WORDS, ONE CAN SAY THAT THE COURT HAS IMPL IEDLY RESTARTED THE PRINCIPLE OF 'SPECIFIC OVERRIDES GENERAL', THAT IS. WHERE SECTION 194C SPECIFICALLY COVERS CASES OF CARRIAGE OF GOODS AND PASSENGERS, THEN SECTION 194-1, WHICH IS MORE GENERAL IN NATURE, CAN NOT OVERRIDE THE FORMER.' 4.5 THE LEARNED A.O. HAS GROSSLY ERRED IN IGNORING THE RULING OF ASSOCIATED CEMENT COMPANY LTD VS. CIT (201 1TR 435) WHEREIN THE SUPREME COURT HELD THAT 'ANY WORK' MEANS ANY WORK A ND NOT O ''WORK CONTRACT'. 'WORK;' ENVISAGED IN THE SUB-SECT ION, HAS A WIDE IMPORT AND COVERS ''ANY WORK' WHICH THE ORGANIZATIO NS SPECIFIED IN THE SUB SECTION CAN GET CARRIED OUT THROUGH A CONTR ACTOR UNDER A CONTRACT. IT INCLUDES OBTAINING BY THE SPECIFIED OR GANIZATIONS SUPPLY OF LABOUR UNDER A CONTACT WITH A CONTRACTOR FOR CARRYI NG OUT ITS WORK. 4.6 THE LEARNED A.O. HAS GROSSLY ERRED IN NOT CONSI DERING THE APPELLANT'S CONTENTION THAT AS PER CBDT CIRCULAR NO . 681 DATED 8 TH MARCH 1994, CLARIFYING THAT THE SCOPE OF ACTIVITIES COVERED UNDER PROVISION OF SECTION 194 C OF THE ACT AS FOLLOWS: I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 11 'THE PROVISIONS OF SECTION 194C SHALL APPLY TO ALL TYPES OF CONTRACTS FOR CARRYING OUT ANY WORK INCLUDING TRANSPORT CONTR ACTS, SERVICE CONTRACTS, ADVERTISEMENT CONTRACTS, BROADCASTING CO NTRACTS, TELECASTING CONTRACTS, LABOUR CONTRACTS, MATERIAL C ONTRACTS AND WORK CONTRACTS. 4.7 LEARNED A.O. HAS GROSSLY ERRED IN IGNORING THE JUDGMENT OF HON'BLE KERALA HIGH COURT IN THE MATTER OF CBDT V. COCHIN GOODS TRANSPORT ASSOCIATION WHEREIN THE HONBLE HIGH COUR T HELD AS UNDER. 'FOLLOWING THE ASSOCIATED CEMENT CO. LTD.'S CASE (S C), WE HOLD THAT A TRANSPORT CONTRACT SIMPLICITER FALLS WITHIN THE AMBIT OF SUBSECTION (1) OF SECTION 194C AND, THEREFORE DEDUCTION AT SOU RCE AT THE RATE OF TWO PER CENT FROM THE AMOUNTS CREDITED TO THE ACCOU NT OF THE CONTRACTOR CAN BE MADE BY A PERSON RESPONSIBLE FOR PAYING ANY SUM FOR THE TRANSPORT CONTRACT. 4.8 THE LEARNED AO. HAS GROSSLY ERRED IN LAW AND ON FACTS IN LEVYING INTEREST UNDER SECTION 201(IA) OF THE ACT. WITHOUT PREJUDICE TO WHAT IS STATED ABOVE, THE APPE LLANT HUMBLY PLEADS THAT AS PER THE BINDING JUDGEMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE CIT VS. RISHIKESH APARTMENTS CO - OP. HOUSING SOCIETY LIMITED (2002) 253 1TR 310. IF THE PAYEE HA S PAID THE ADVANCE TAX, IF PAYABLE THEN THERE IS NO REVENUE LO SS TO THE EXCHEQUER AND IN THAT EVENT NO INTEREST CAN BE LEVIED U/S 201 [IA] OF THE ACT. 4.9 THE LEARNED A.O. HAS GROSSLY ERRED IN NOT C ONSIDERING THE FOLLOWING TWO JUDGMENT QUOTED BY THE APPELLANT THRO UGH LETTER DATED 04-01-2010. 1. CHILDREN'S EDUCATION SOCIETY VS. DCIT (TDS) (2 009) 319 ITR 409, KARNATAKA HIGH COURT 2. HINDUSTAN COCACOLA BEVERAGES PVT LTD. VS. CIT (2 007) 293 ITR 226 IT HAS BEEN HELD IN THE AFORESAID TWO JUDGMENTS THA T ONCE TAX HAS BEEN ALREADY PAID BY THE DEDUCTEE THE SAME TOGETHER WITH INTEREST AND PENALTY CANNOT BE RECOVERED FROM THE DEDUCTOR EVEN THOUGH DEDUCTOR HAD FAILED TO DEDUCT TAX AT SOURCE. I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 12 THE APPELLANT HAS ALSO SUBMITTED THAT TAX PAID BY G SPL AMOUNTS TO RS. 54,65,16,254/- AGAINST TAX PAYABLE OF RS. 54,65 ,16,254/-. THE APPELLANT HAS ALSO SUBMITTED DOCUMENTARY EVIDENCING THROUGH THE LETTER DATED 21-01-2010. THE DETAILS SUBMITTED ARE IN LINE WITH THE ABOVE RE FERRED TWO JUDGMENTS. HENCE THERE IS NO LIABILITY FOR TDS IN VIEW OF THE SAME. 10. LD. CIT(A) AFTER TAKING INTO CONSIDERATION THE ABOVE SUBMISSION OF THE ASSESSEE HAS GIVEN RELIEF TO THE ASSESSEE BY OB SERVING AS UNDER:- 5.3. I HAVE CONSIDERED THE FACTS OF THE CASE, THE ASSESSING OFFICER'S ORDER AND APPELLANT'S SUBMISSION. APPELLANT MADE PA YMENTS OF TRANSMISSION OF GAS FOR WHICH IT DEDUCTED TAX U/S 1 94C. HOWEVER, THE A.O. CONSIDERED THE PAYMENT AS RENT IN VIEW OF AMEN DED DEFINITION OF SEC. 194I FOR USE OF EQUIPMENT SUCH AS GAS PIPELINE S. IN THE ORDER, A.O. DID NOT DISCUSS OR EVEN MENTION AS TO HOW TRAN SMISSION OF GAS BY GSPL WILL BE EQUIVALENT TO USE OF EQUIPMENT BY THE APPELLANT. FOR CARRYING OUT ANY WORK OR TRANSPORTING OR TRANSMITTI NG GOODS, MACHINES AND EQUIPMENTS ARE USED BUT QUESTION IS WH O USED THESE EQUIPMENTS. IF THE EQUIPMENTS HAVE BEEN GIVEN ON LE ASE, SUBLEASE, TENANCY OR UNDER ANY OTHER ARRANGEMENT, THEN PROVIS IONS OF SEC . 1941 IS ATTRACTED. IN THE ABSENCE OF ANY OF THESE, USE O F EQUIPMENT FOR ANY WORK, TRANSMISSION ETC BY THE OWNER OF THESE EQUIPM ENTS WILL NOT ATTRACT THE PROVISION OF SEC. 194-I. IN THE CASE OF APPELLANT, THE GAS PIPELINE IS OWNED OPERATED AND MAINTAINED BY GSPL W HO USED THE PIPELINE FOR TRANSPORTING THE GAS. A CERTIFICATE FR OM GSPL WAS SUBMITTED BY THE APPELLANT IN WHICH GSPL CONFIRMED THAT GSPL PROVIDED SERVICES OF TRANSPORT OF GAS THROUGH THE P IPELINE OWNED, MAINTAINED AND OPERATED BY GSPL AND APPELLANT DOES NOT HAVE ANY RIGHT, EXCLUSIVE OR OTHERWISE ON THE PIPELINES. IT WAS ALSO CONFIRMED THAT SAME PIPELINE IS USED OR TRANSPORT OF GAS FOR MANY OTHER CUSTOMERS. ON PERUSAL OF CONTRACT WITH GSPL, IT IS CLEAR THAT TRANSMISSION CHARGES ARE BASED ON GAS QUANTITY TRANSMITTED. THE CHARGES ARE NOT BASED ON TIME OR LENGTH OF THE PIPELINE. THIS ALSO INDICATES THAT APPELLANT DID NOT USE ANY EQUIPMENT BUT THE SAME WE RE USED BY GSPL I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 13 TRANSMITTED GAS THROUGH ITS PIPELINE. FOR BRINGING ANY PAYMENT IN THE NATURE OF RENT WITHIN THE PURVIEW OF SECTION 194-1, THERE HAS TO BE USE OF ASSET OR EQUIPMENT BY THE PAYER. IF THE SOME IS USED BY THE RECEIVER FOR THE WORK OF THE PAYER, IT WILL FALL WITHIN THE PROVISIONS OF SEE. 194C. SINCE SEC. 194C CLEARLY INCLUDES CARRIAGE OF GOODS AND PASSENGER BY ANY MODE OF TRANSPORT OTHER THAN RAILW AYS, THE TRANSPORTATION OF GAS THROUGH PIPELINE IS COVERED B Y THIS. HAVING CONSIDERED THE FACTS OF THE CASE, THE GAS TR ANSMISSION AGREEMENT, MODE AND BASIS FOR PAYMENT USE OF PIPELI NE FOR TRANSMITTING GAS FOR MANY CONSUMERS, OPERATION AND MAINTENANCE OF PIPELINE BY GSPL AND NO POSSESSION OR EXCLUSIVE RIG HT TO USE THE PIPELINE AT ANY GIVEN POINT OF TIME, I AM OF THE CL EAR VIEW THAT THE PAYMENT FOR GAS TRANSMISSION BY THE APPELLANT WILL NOT ATTRACT THE PROVISIONS OF SEC. 1941. IN VIEW OF THIS, THE APPEL LANT HAS NOT COMMITTED DEFAULT U/S 201(1) AND ACCORDINGLY TAX U/ S 201(1] AND INTEREST U/S 201(1A) IS NOT PAYABLE BY THE APPELLAN T. 11. SINCE LD. CIT(A)S ABOVE FINDING IS IN CONFORMI TY WITH THE FINDING OF THE TRIBUNAL IN THE CASE OF ACIT VS. GUJARAT STATE PETRONET LTD IN ITA NO. 3317/AHD/2010 & CO NO. 17/AHD/2011 A.Y. 2009-10 DA TED 08-03-2013 ON IDENTICAL ISSUE WHEREIN FOLLOWING WAS HELD. 5 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERU SED THE MATERIAL ON RECORD. THE FIRST PAYMENT NAMELY VEHICLE HIRING CHARGES HAS NOT BEEN PRESCRIBED U/S. 1941 VEHICLES AND CHAUFFERS SU PPLIED BY THE CONTRACTOR AND WAS UNDER THE COMPLETE CONTROL OF TH E CONTRACTOR. THUS, WE CONFIRM THE ORDER OF THE CIT(A) ON THIS IS SUE. SIMILARLY, THE SECOND PAYMENT FOR CONNECTIVITY CHARGES WERE PAID T O GPSC AGAINST THE AGREEMENT FOR USING OF PIPELINE CONNECTION OF G AIL FOR GAS TRANSPORTATION. THIS PIPELINE WAS OWNED BY THE GAIL AND WAS OPENED TO SERVICE TO ITS OTHER CLIENTS ALSO, WHICH WAS IN NATURE OF CARRIAGE OF GOODS AND COVERED U/S.194C OF THE IT ACT. THUS, ON SECOND ISSUE ALSO, THE LD. CIT(A) FOUND JUSTIFIED AND WE DO NOT FIND THE REASON OF ANY INTERVENTION IN THE ORDER OF THE CIT(A) ON THIS ISSUE. THE THIRD AND LAST PAYMENT WAS GAS TRANSPORTATION CHARGES. TH E APPELLANT PAID THESE PAYMENTS FOR GAS TRANSPORTATION PURPOSES TO G UJARAT GAS COMPANY LTD. AND AVAIL THEM FACILITY OF PIPELINE O F IT. THE OWNERSHIP I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 14 AND COMPLETE CONTROL OF THIS PIPELINE IS OF GUJARAT GAS COMPANY LTD. THIS PIPELINE OWNED BY THE CONTRACTOR IS OPEN FOR U SE FOR OTHER CLIENTS ALSO AND IT WAS A WORK PERFORMED CARRIAGE OF GOODS AS PRESCRIBED U/S.194C OF THE IT ACT. THUS, IT IS COVERED U/S. 19 4C AND LD, CIT(A) WAS RIGHT TO DECIDE THIS ISSUE IS AS A CONTRACT FOR THE TRANSPORTATION OF GAS. THE APPELLANT HAS ALSO SUBMITTED THE CONFIRMA TION FROM THE DEDUCTEE THAT THESE RECEIPTS HAVE BEEN DISCLOSED IN THEIR RESPECTIVE INCOME AND ALL THE DEDUCTEES ARE LIMITED COMPANY. T HUS, IN VIEW OF THE HON'BLE SUPREME COURT DECISION IN CASE OF HINDU STAN COCA COLA BEVERAGES PVT. LTD (SUPRA) AND THE ASSESSEE CANNOT BE TREAT AS DEEMED DEFAULTER WITHIN U/S. 201(1) OF THE IT ACT. ACCORDINGLY, WE DISMISS THE APPEAL OF THE REVENUE AND ALLOW THE CO OF THE APPELLANT. WE FEEL NO NEED TO INTERFERE WITH THE ORDER PASSED BY LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 12. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 13. IN THE CO FILED BY ASSESSEE LD. CIT(A)S ORDER HAS BEEN CHALLENGED ON FOLLOWING TWO GROUNDS:- ITEM NO. I: PAYMENT TO GLOBAL VECTRA HILICORP LTD. (GVHL)- RS. 3,67,93,523/- 1.1 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE BY HOLDING THAT APPELLANT'S CONTRACT IS NOT FOR TRANSP ORTATION BUT FOR HIRING OF HELICOPTER SERVICES AND THEREFORE, IT FAL LS IN THE CATEGORY OF EQUIPMENT RENT. THE LEARNED CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE LEARNED ASSES SING OFFICER TO LEVY INTEREST OF RA. 5,02.500/-U/S. 201(1A) ON SHORTFALL OF TDS U/S 201(1). HE OUGHT TO HAVE APPRECIATED THAT ONCE THE TAX HAS ALREADY BEEN PAID BY THE DEDUCTEE THE SAME TOGETHER WITH INTEREST AND PENALTY CANNOT BE RECOVERED FROM THE DEDUCTOR EVEN THOUGH DEDUCTOR HA D FAILED TO DEDUCT TAX AT SOURCE IN VIEW OF DECISION OF CHILDRE N'S EDUCATION SOCIETY VS. DCIT (TDS) (2009) 319 ITR 409 KARNATAKA HIGH COURT AND DECISION OF HINDUSTAN COCACOLA BEVERAGES PVL LT D. VS CIT (2007) 293 ITR 226 (SC). IN VIEW OF THE ABOVE, THE APPELLANT HUMBLY I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 15 SUBMITS THAT THE CONTENTION OF THE LEARNED CIT(A) I S BAD IN LAW AND HENCE THE SAME SHOULD BE DELETED ITEM NO. LL: PAYMENT TO 3 RD I EVENT MANAGEMENT RS. 28,16 , 500/- 1.2 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE BY HOLDING THAT APPELLANT HAS MADE PAYMENT OF RS 28,16 .500/- FOR ARRANGEMENT OF CORPORATE CRICKET TOURNAMENT WHICH A RE SQUARELY COVERED U/S. 194J AND ACCORDINGLY APPELLANT IS REQU IRED TO DEDUCT TAX AT SOURCE. HE HAS FAILED TO APPRECIATE THAT APPELLA NT HAS MADE PAYMENT TO 3 RD I EVENT MANAGEMENT FOR MANAGING AND ORGANIZING TH E 'GSPC INVITATION 20-20 CORPORATE CRICKET TOURNAMENT 2008' AND THEREFORE APPELLANT IS REQUIRED TO DEDUCT TAX AS PE R PROVISIONS OF SECTION 194C. THE LEARNED CIT(A) HAS ALSO ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING O FFICER TO RECOVER SHORT DEDUCTION OF TAX OF RS 2,26,278/- AND INTERES T OF RS 18,102/- U/S. 201(1A) ON SHORT FALL OF TDS U/S. 201(1). IN VIEW OF THE ABOVE THE APPELLANT HUMBLY SUBMITS THAT THE CONTENTION OF THE LEARNED CIT(A) IS BAD IN LAW AND HENCE THE SAME SHOULD BE DELETED. 14. THE AO HAS DEALT THE ISSUE IN RESPECT OF PAYMEN T TO GLOBAL VECTRA HELICOPTER LTD AS UNDER: ' THE ASSESSEE COMPANY HAS EXECUTED A SERVICE CONTR ACT WITH M/S GLOBAL VECTRA HELICROP LTD. LTS OFFICE IS SITUA TED AT MUMBAI. AS PER THE LOI, THE ASSESSEE COMPANY DESIRES FOR HIRIN G OF HELICOPTER SERVICE FOR ITS OFFSHORE DRILLING SITES AND FIXED T HE MONTHLY RENT FOR OPERATING THE HELICOPTER. ON VERIFICATION OF THE DE TAILS SUBMITTED BY THE ASSESSEE, IT WAS NOTICED THAT ASSESSEE HAD MADE PAYMENT OF RS. 3,67,93,523/- FROM 1/4/2008 TO 16/06/2008 TO M/S GL OBAL VECTRA HELICROP. LTD. AND DEDUCTED TDS @ 2% U/S 194C AS AG AINST 10% U/S 194I OF THE ACT. ASSESSEE SUBMITTED ITS REPLY AS UN DER THE A.O. HAD STATED THAT ASSESSEE'S CONTENTION IS N OT ACCEPTABLE IN VIEW OF TAXATION LAWS AMENDMENT ACT 2006 EXTENDE D THE DEFINITION OF RENT TO INCLUDE PAYMENT FOR THE USE OF MACHINERY , PLANT EQUIPMENT, FURNITURE, FITTINGS ETC. HIRING OF VEHICLE TO ATTRA CT TDS U/S 1941 OF THE ACT. FURTHER, IT IS TO BE REITERATED THAT THE CONTR ACTOR CO. (GVHL) HAS I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 16 APPLIED FOR CERTIFICATE U/S 197 R.W.S. 1 94-1 OF TH E ACT FOR LOWER DEDUCTION OF FAX AND OBTAINED THE SAME. CONSIDERING THE ABOVE, PAYMENT MADE TO GVHL ARE IN NATURE OF RENT EQUIPMENT' AS DEFINED IN SECTION 194-I OF T HE IT. ACT AND TAX WAS REQUIRED TO BE DEDUCTED @ 10 % UPTO THE PERIOD OF OBTAINING THE CERTIFICATE U/S 197 OF THE ACT, I.E. UPTO 9/7/2006. HENCE, THERE WAS A SHORT DEDUCTION OF TAX BY 8% + EX. THEREFORE, INTE REST U/S 20L(IA) IS MANDATORY AND CONTINUED UNTIL TAX IS PAID. THUS THE A.O. RAISED DEMAND OF RS. 34,58,490/- U/S 201(1) & 201 (1A) R.W .S. 194-I. 15. ASSESSEES SUBMISSION BEFORE LD. CIT(A) WAS AS UNDER: 1.1 THE APPELLANT HAS EXECUTED A SERVICE CON TRACT WITH M/S. GLOBAL VECTRA HELICORP LTD. HAVING ITS CORPORATE OF FICE AT SUNDERVILLA, B-314, 3' D FLOOR, 19 SV ROAD. SANTACRUZ (W), MUMBAI ON 23-11-2007 AVAILING HELICOPTER SERVICES IN RELATION TO AIR LOGISTIC SUPPORT FOR CREW AND PERSONNEL OF THE APPELLANT AND /OR ANY OF ITS CONSULTANTS AND/OR SUPPLIERS ETC. AS WELL AS SUPPLY OF ESSENTIAL CARGO TO AND FROM OFFSHORE. 1.2 THE LEARNED A.O. HAS FOUND THE FOLLOWING; IN HIS SHOW CAUSE NOTICE DATED 27-03-2009 WHICH IS REPRODUCED AS UNDE R FOR YOUR REFERENCE. 'IT IS ALSO OBSERVED THAT TAX @ 2% HAS BEEN DEDUCTE D WHILE MAKING PAYMENT TO GLOBAL HELICOPS LTD. AS THE GLOBAL HELIC ORP CO. HAS PROVIDED YOU A CERTIFICATE DATED 9 TH JULY, 2008 U/S 197 READ WITH 194 - 1 AUTHORIZING THE PAYER TO DEDUCT TAX @ 2% ONLY , HOWEVER AS THE CERTIFICATE WAS ISSUED ON 09/07/2008, GSPC WAS REQU IRED TO DEDUCT TAX @ 10% PLUS SC + EC ON PAYMENT OF RS. 4.5 CRORES MADE BEFORE ISSUE OF CERTIFICATE. AS TAX WAS DEDUCTED @ 2% ONLY ON THE ABOVE PAYMENT, THERE IS SHORT DEDUCTION OF TAX BY 8% + SC + EC. YOU ORE THEREFORE ASKED TO SHOW CAUSE WHY TAX WAS NOT DEDUC TED@ 10 % ON PAYMENTS TO GLOBAL HELICORP COM MADE BEFORE 09/07 2 008.' 1.3 THE APPELLANT HAS SUBMITTED REPLY ON 04-05-2009 WHICH IS REPRODUCED AS UNDER FOR YOUR REFERENCE. 'WITH REFERENCE TO THE ABOVE WE HAVE TO STATE THAT GSPC HAS ENTERED INTO CONTRACT WITH GLOBAL VECTRA HELICORP LIMITED - GVHL PREVIOUSLY KNOWN AS GLOBAL HELICORP PRIVATE LIMITED (GHPL) FRO M 25 TH MAY 2004 FOR 'HELICOPTER SERVICES' AND SINCE THEN IT HA S BEEN MAKING THE PAYMENT TO GVHL AFTER DEDUCTION OF TAX U/S 194C OF THE ACT. YOU I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 17 WILL APPRECIATE THAT PAYMENT FOR 'HELICOPTER SERVIC ES' ARE MAINLY FOR THE AIR LOGISTIC SUPPORT FOR CREW AND PERSONNEL OF GSPC AND/OR ANY OF ITS CONSULTANTS AND/OR SUPPLIERS ETC AND SUPPLY OF ESSENTIAL CARGO TO AND FROM OFFSHORE. THUS IN NUT SHELL THE 'HELICOPTE R SERVICES' IS FOR TRANSPORTATION PURPOSE ONLY I.E. TRANSPORTATION OF PERSONNEL AND CARGO. THE SAME IS EVIDENT FROM THE DETAILS MENTION ED IN THE CONTRACT BETWEEN GSPC AND GVHL AS WELL AS PROSPECTUS FT/ED B V GVHL WITH SEBI. YOU WILL FURTHER APPRECIATE THAT THE CONTRACT IS NO T MERELY FOR HIRING A HELICOPTER ON RENTAL BASIS BUT IF ALSO INCLUDES ALL THE ASSOCIATED SERVICES SUCH AS COMPLIANCE WITH DGCA RULES, SETTLE MENT OF DISPUTES WITH DGCA, ARRANGEMENT FOR SPECIAL SORTIES, RADIO S ERVICES, SAFETY SERVICES, SPECIALIZED CREW AND PILOTS, HANGER AND B ASE FACILITIES ALONG WITH THE HELICOPTER. IT IS TO BE NOTED THAT 'HELICO PTER SERVICES' ARE TO BE PROVIDED AS PER THE REQUIREMENTS OF GSPC. SECTION 194-1 OF THE ACT WAS AMENDED TO INCLUDE DED UCTION OF TAX AT THE RATE OF 10% IN RELATION TO PAYMENT TOWARDS RENT OF PLANT AND/OR EQUIPMENT FROM 1 ST JUNE 2007. THUS WITHOUT PREJUDICE TO OUR CLAIM AND CONTENTION EVEN IF THE PAYMENT IN RELATION TO ' HELICOPTER SERVICES' IS TREATED AS 'RENT' THEN IT HAS TO BE TR EATED AS 'RENT OF EQUIPMENT'. YOU WILL AGREE THAT IT CANNOT BE CONSID ERED AS 'RENT OF BUILDING, LAND, PLANT FURNITURE OR FIXTURE''. THE Q UESTION OF DEDUCTION OF TAX OF THE RATE OF 10% U/S 194-1 OF THE ACT PRIO R TO 1 ST JUNE 2007 FROM THE PAYMENT TO GVHL TOWARDS 'HELICOPTER SERVIC ES'' DOES NOT ARISE AS THE SAID PROVISION CAME INTO OPERATION ONL Y FROM 1 ST JUNE 2007 ONLY. THE ONLY SECTION FOR DEDUCTION OF TAX FO R THE AFORESAID PAYMENT PRIOR TO T*' JUNE 2007 WAS SECTION 194C OF THE ACT AND TAX RATE IS 2% PLUS SURCHARGE AND CESS AS APPLICABLE. T HUS, GSPC HAS RIGHTLY DEDUCTED AND DEPOSITED TAX ACCORDINGLY FROM THE PAYMENT MADE TO GVHL PRIOR TO 1 ST JUNE 2007. SO FAR AS THE PAYMENTS MADE BY GSPC TO GVHL AFTER 1 ST JUNE 2007 AND BEFORE THE DATE OF ISSUE OF CERTIFICATE U/S 197 READ WITH SECTION 194-1 OF THE ACT BY INCOME TAX DEPARTMENT TO GSPC I .E. 9' H JULY 2008 ARE CONCERNED, WE HAVE TO STATE AS UNDER. WE DRAW YOUR KIND ATTENTION TO CBDT CIRCULAR NO. 7 15 DATED 8 TH AUGUST 1995, WHEREIN IT HAS BEEN CLEARLY STATED THA T PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT 1961 WILL BE APP LICABLE WHEN A PLANE OR BUS OR OTHER MODE OF TRANSPORT IS CHARTERE D. UNDER THE CIRCUMSTANCES, YOU WILL APPRECIATE THAT THE TERM 'O THER MODE OF I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 18 TRANSPORT' INCLUDES 'HELICOPTER'. UNDER THE CIRCUMS TANCES, GSPC HAD CORRECTLY DEDUCTED TAX FOR THE PERIOD BEGINNING FROM 1 ST JUNE 2007 TILL THE DATE OF ISSUE OF CERTIFICATE/S 197 RE AD WITH SECTION 194-1 OF INCOME TAX ACT, 1961 BY INCOME TAX DEPARTMENT. T HIS RATIO WILL ALSO APPLY TO PAYMENTS MADE TO GVHL PRIOR TO 1 ST JUNE 2007. YOU ARE AWARE THAT CBDT CIRCULARS ARE BINDING TO THE TAX AU THORITIES AND HENCE THE RATIO PRONOUNCED BY THE CBDT CIRCULAR HAS TO BE FOLLOWED BY YOU. HENCE, GSPC WAS NOT LIABLE TO DEDUCT TAX AT THE RATE OF 10% UNDER THE PROVISIONS OF SECTIONS 194-1 OF THE INCOM E TAX ACT 1961 FOR THE PERIOD BEGINNING FROM 1 ST JUNE 2007 TILL 9 LH JULY 2008. YOU WILL APPRECIATE THAT WHAT IS CONTEMPLATED IS HE LICOPTER SERVICES AND THE MAIN OBJECT IS 'AIR LOGISTIC SUPPORT' FOR C REW AND PERSONNEL OF GSPC. THAT AS PER CBDT CIRCULAR NO. 715 DOTED 8 TH AUGUST 1995, IT AMOUNTS TO TRANSPORT WHICH IS CHARTERED AND THE CORRECT RATE OF TAX WOULD BE 2% AND THE PROVISIONS OF SECTION 1941 ARE NOT APPLICABLE. TO SUMMARIZE THE SAME, WE FURTHER STATE THAT 1 THE CERTIFICATE ISSUED THOUGH IS UNDER SEC. 194 -1 THE RATE OF TAX IN THE COMPUTATION IS MUCH LESS AND GSPC HAS CORRECTLY PAID FOX OF THE RATE OF 2%. THOUGH THE TDS AUTHORITY HAS INVOKED SE C. 194-1 VIDE CERTIFICATE DATED 9TH JULY, 2008, CBDT CIRCULAR NO. 715 DATED 8TH AUGUST, 1995 STATES THAT WHERE PLANE OR OTHER MODE OF TRANSPORT IS CHARTERED, THE RATE OF TAX WOULD BE 2% AS THIS WOUL D BE FALLING WITHIN SEC. 194-C. 2. PLANE INCLUDES HELICOPTER, EVEN 'OTHER MODE OF TRANSPORT' WOULD INCLUDE HELICOPTERS. 3. CIRCULAR OF CBDT IS BINDING AND, THEREFORE, VI EWED FROM ANY ANGLE THE RATE OF TAX APPLICABLE FOR TDS PURPOSE WO ULD BE 2 %. 4. IN CONNECTION WITH THE TREATMENT GIVEN BY GLOB AL VECTRA HELICORP LTD, IT IS CLEARLY SPECIFIED UNDER 'EXISTING CLIENT ELE' THAT THE SERVICES THEY ARE RENDERING ARE 'AIR LOGISTICS SUPPORT FOR C REW/PERSONNEL AND ESSENTIAL CARGO TO AND FROM OFFSHORE'. 5. TAKING INFO VIEW THE OVERALL PICTURE IT IS CLE AR THAT GVHL IS RENDERING HELICOPTER SERVICES AS PER THE REQUIREMEN T OF GSPC AND HENCE FOR THE SERVICES THE CORRECT RATE OF TAX APPL ICABLE WOULD BE 2%. I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 19 1.4 THE LEARNED A.O. HAS GROSSLY ERRED IN IGNORING THE RULING OF BOMBAY HIGH COURT IN THE CASE OF INDIAN NATIONAL SH IP OWNERS ASSOCIATION (INSA) STATING AS UNDER: 'THE HIGH COURT ALSO OPINED THAT THE SCOPE OF SECTI ON 194C COVERS CARRIAGE OF GOODS AND PASSENGERS, AND FREIGHT PAYME NTS ARE TO BE DEALT WITH UNDER SECTION 194C AND NOT SECTION 1941. IN OTHER WORDS, ONE CAN SAY THAT THE COURT HAS IMPL IEDLY RESTATED THE PRINCIPLE OF SPECIFIC OVERRIDES GENERAL'. THAT IS, WHERE SECTION 194C SPECIFICALLY COVERS CASES OF CARRIAGE OF GOODS AND PASSENGERS, THEN SEC 194L, WHICH IS MORE GENERAL IN NATURE, CANNOT O VERRIDE THE FORMER.' 1.5 THE LEARNED A O. HAS GROSSLY ERRED IN IGNORI NG THE RULING OF ASSOCIATED CEMENT COMPANY LTD VS. CIT (201 ITR 435) WHEREIN THE SUPREME COURT HELD THAT 'ANY WORK' MEANS ANY WORK A ND NOT A ''WORK CONTACT'. 'WORK' ENVISAGED IN THE SUB-SECTIO N, HAS A WIDE IMPORT AND COVERS ''ANY WORK' WHICH THE ORGANIZATIO NS SPECIFIED IN THE SUB SECTION CAN GET CARRIED OUT THROUGH A CONTR ACTOR UNDER A CONTRACT. IT INCLUDES OBTAINING BY THE SPECIFIED OR GANIZATIONS SUPPLY OF LABOUR UNDER A CONTRACT WITH A CONTRACTOR FOR CARRY ING OUT ITS WORK. 1.6 THE LEARNED AQ. HAS GROSSLY ERRED IN NOT CONSIDERING THE APPELLANT'S CONTENTION THAT AS PER CBDT CIRCULAR NO . 681 DATED 8 TH MARCH 1994, CLARIFYING THAT THE SCOPE OF ACTIVITIES COVERED UNDER PROVISIONS OF SECTION 194 C OF THE ACT AS FOLLOWS; 'THE PROVISIONS OF SECTION 194C SHALL APPLY TO ALL TYPES OF CONTRACTS FOR CARRYING OUT ANY WORK INCLUDING TRANSPORT CONTR ACTS, SERVICE CONTRACTS ADVERTISEMENT CONTRACTS, BROADCASTING CO NTRACTS, TELECASTING CONTRACTS LABOUR CONTRACTS, MATERIAL CO NTRACTS AND WORK CONTRACTS. 1.7 THE LEARNED A.O. HAS GROSSLY ERRED IN IGNO RING THE JUDGMENT OF HON'BLE KERALA HIGH COURT IN THE MATTER OF CBDT V. COCHIN GOODS TRANSPORT ASSOCIATION WHEREIN THE HON'BLE KERALA HI GH COURT HELD AS UNDER. 'FOLLOWING THE ASSOCIATED CEMENT CO. LTDS CASE (SC ), WE HOLD THAT, A TRANSPORT CONTRACT SIMPLICITER FALLS WITHIN THE A MBIT OF SUBSECTION AND,(1) OF SECTION 194C AND THEREFORE, DEDUCTION AT SOURCE AT THE RATE OF TWO PER CENT FROM THE AMOUNTS CREDITED TO THE AC COUNT OF THE CONTRACTOR CAN BE MADE BY A PERSON RESPONSIBLE FOR PAYING ANY SUM FOR THE TRANSPORT CONTRACT.' I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 20 THUS YOU WILL APPRECIATE THAT WHAT GSPC HAS DONE IS CORRECT AND IS CONSIDERATE STEP CONSIDERING THE VARIOUS INTERPRETATIONAL ISSUES INVOLVED IN MAKING THE DECISION.' 1.8 THE LEARNED A.O. HAS GROSSLY ERRED IN LA W AND ON FACTS IN LEVYING INTEREST UNDER SECTION 20L (LA) OF THE ACT. WITHOUT PREJUDICE TO WHAT IS STATED ABOVE, THE APPE LLANT HUMBLY PLEADS THAT AS PER THE BINDING JUDGMENT OT HAN'BLE GUJARAT HIGHCOURT IN THE CASE CIT VS. RISHIKESH APARTMENTS CO-OP. HOU SING SOCIETY LIMITED (2002) 253 RR 310, IF THE PAYEE HAS PAID TH E ADVANCE TAX, IF PAYABLE THEN THERE IS NO REVENUE LOSS TO THE EXCHEQ UER AND IN THAT EVENT NO INTEREST CAN BE LEVIED U/S 201 (1A) OF THE ACT. 1.9 THE LEARNED AO HAS GROSSLY ERRED IN NO T CONSIDERING THE FOLLOWING JUDGMENT QUOTED BY THE APPELLANT THROUGH LETTER DATED 04- 01-2010. 1. CHILDREN'S EDUCATION SOCIETY VS. DCIT (TDS ) (2009) 3T9 ITR 409, KARNATAKA HIGH COURT 2. HINDUSTAN COCACOLA BEVERAGES PVT LTD. VS. CIT (2 007) 293 ITR 226 (SC) IT HAS BEEN HELD IN THE AFORESAID TWO JUDGMENTS THA T ONCE TAX HAS BEEN ALREADY PAID BY THE DEDUCTEE THE SAME TOGETHER WITH INTEREST AND PENALTY CANNOT BE RECOVERED FROM THE DEDUCTOR EVEN THOUGH DEDUCTOR HAD FAILED TO DEDUCT TAX AT SOURCE. THE APPELLANT HAS ALSO SUBMITTED THAT TAX PAID BY G VHL AMOUNTS TO RS. 4,07,53,082/- AGAINST TAX PAYABLE OF RS. NIL. T HE APPELLANT HAS ALSO SUBMITTED DOCUMENTARY EVIDENCING THROUGH THE L ETTER DATED 15- 02-2010 FOR THE ABOVE REFUND OF RS. 4,07,53,082/- F OR THE A Y. 2009- 10. THE DETAILS SUBMITTED ARE IN LINE WITH THE ABOVE RE FERRED TWO JUDGMENTS. HENCE THERE IS NO LIABILITY FOR TDS IN VIEW OF THE SAME. 1.10 IN VIEW OF THE ABOVE, THE APPELLANT HUMBLY SUBMITS THAT THE CONTENTION OF THE LEARNED A.O. IS BAD IN LAW AND HE NCE THE SAME SHOULD BE DELETED. 16. HOWEVER, LD. CIT(A) CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER: I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 21 2.3 I HAVE CONSIDERED THE ORDER OF THE AO, FACTS O F THE CASE AND APPELLANT'S SUBMISSION. APPELLANT HAS DEDUCTED 2% T AX ON HIRING OF HELICOPTER SERVICE U/S 194C WHEREAS AO CONSIDERED T HE SAME AS COVERED BY SEC. 1941 CONSIDERING THE SAME AS RENT O F EQUIPMENT AND THE DIFFERENTIAL TAX DEDUCTED AND INTEREST THEREON WAS RAISED AS LIABILITY. APPELLANT HIRED THE HELICOPTER SERVICE F OR LOGISTIC SUPPORT FOR ITS EMPLOYEES AND CONSULTANTS. AS PER DETAILS SUBMI TTED BY THE APPELLANT, THE CONTRACT WITH GVHL IS FOR HIRING HEL ICOPTER ON RENTAL BASIS WHICH IS ALSO FOR ASSOCIATED SERVICES. THE FA CTS REMAINS THAT APPELLANT'S CONTRACT IS NOT FOR TRANSPORTATION BUT FOR HIRING OF HELICOPTER SERVICES THEREFORE, IT FALLS IN THE CATE GORY OF EQUIPMENT RENT. EVEN GVHL HAS APPLIED FOR LOWER DEDUCTION U/S 197 R.W.S. 194-1 WITH REGARD TO THE PAYMENT RECEIVED FROM APPELLANT. IN VIEW OF THESE CLEAR FACTS, THE TRANSACTION IS FOR HIRING OF HELIC OPTER AND NOT FOR TRANSPORTATION. THE DECISIONS RELIED UPON BY THE AP PELLANT ARE THEREFORE, NOT RELEVANT. IN VIEW OF THIS I CONFIR M THE ACTIN OF THE ITO. ITS IN LEVYING TAX AND INTEREST U/S 201(1) & 201(1A ) ON PAYMENT TO GVHL. 2.3.1 APPELLANT'S RELATED GROUND IN VIEW OF APEX CO URT'S DECISION IN THE CASE OF HINDUSTAN COCA-COLA LTD. IS THAT THE RECIPI ENT GVHL HAD PAID TAXES ON RECEIPT AND FILED THE RETURN OF INCOM E, THEREFORE, THE TAX DEMAND IS NOT RECOVERABLE FROM THE APPELLANT. I AGR EE WITH THE APPELLANT THAT WHEREVER THE INCOME SUBJECT TO TDS H AS BEEN OFFERED FOR TAX AND TAXES HAVE BEEN PAID ON THE SAME, THE D EMAND U/S 201(1) CANNOT BE ENFORCED. ITO.TDS. IS THEREFORE, DIRECTE D TO VERIFY THE APPELLANT'S CLAIM AND IF THE TAXES HAVE BEEN PAID O N THE INCOME RECEIVED BY THE DEDUCTEE; DEMAND U/S 201(1) WILL BE REDUCED. INTEREST U/S 201(1A) WILL HOWEVER, BE LEVIABLE IN VIEW OF TH E SAME DECISION OF APEX COURT. 17. BEFORE US LEARNED COUNSEL OF THE ASSESSEE REITE RATED THE SUBMISSION MADE BEFORE LD. CIT(A) AND PLACED RELIANCE ON THE D ECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. RELIANCE ENGINEERING ASSOCIATED PVT. LTD WHEREIN ON SIMILAR FACTS IT WAS HELD THAT AGREEMENT FOR HIRING SERVICES OF CONTRACTORS FOR RENDERING TRANSPORTATIO N SERVICES FOR GOODS AND I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 22 PASSENGERS BY BUSES CARS SUMOS UTILITY VANS ETC WOU LD BE COVERED U/S. 194C AND NOT U/S. 194I. RELIANCE WAS ALSO PLACED ON THE DECISION OF BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF SKILL INFRASTR UCTURE LTD. LD. DR HOWEVER RELIED ON THE ORDER OF LOWER AUTHORITIES. 18. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT ASSESSEE HAD EXECUTED A SERVICE CONTRACT WITH M/S G LOBAL VECTRA HELICORP LTD ON 23-11-2007 FOR AVAILING HELICOPTER SERVICES IN RELATION TO AIR LOGISTIC SUPPORT FOR CREW AND PERSONNEL OF THE ASSESSEE AND ANY OF ITS CONSULTANTS OR SUPPLIERS AS WELL AS SUPPLY OF ESSENTIAL CARGO TO A ND FROM OFFSHORE RIG. ASSESSEE WHILE MAKING PAYMENT TO GLOBAL VECTRA HELI CORP LTD HAS DEDUCTED TAX @ 2 % AS PER PROVISIONS OF SECTION 194C. AO HO WEVER WAS OF THE VIEW THAT THE PAYMENT MADE TO M/S GVHL IS COVERED BY SEC TION 194I, CONSIDERING THE SAME AS RENT OF EQUIPMENT AND THERE FORE ASSESSEE WAS TO DEDUCT TAX @ 10 %. AS PER CONTRACT BETWEEN ASSESSE E AND M/S GVHL, THE HELICOPTER SERVICES WERE HIRED BY THE ASSESSEE FOR AIR LIFT OF CREW INCLUDING COMPANYS AND COMPANYS THIRD PARTY PERSONNEL AND E SSENTIAL CARGO REQUIRED AT THE RIG. ASSESSEE HAD NOT TAKEN POSSESSION OF T HOSE HELICOPTERS FROM M/S. GVHL AND RESPONSIBILITY OF OPERATING AND MAINTAININ G OF THE HELICOPTERS WAS OF M/S GVHL ONLY. WE FURTHER FIND THAT UNDER CL AUSE (IV) OF EXPLANATION ADDED TO SECTION 194C OF THE ACT, THE W ORK SHALL INCLUDE: CLAUSE (C): CARRIAGE OF GOODS AND PASSENGERS BY AN Y MODE OF TRANSPORT OTHER THAN BY RAILWAYS. I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 23 THEREFORE THIS CONTRACT BETWEEN ASSESSEE AND GVHL F ALLS UNDER SECTION 194C OF THE ACT. THIS VIEW OF OURS GETS SUPPORT FR OM THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. RELIANCE ENGINEERING ASSOCIATES P. LTD [2012] 209 TAXMAN 351 . IN THAT CASE, THE ASSESSEE HAD ENGAGED THE SERVICES OF CONTRACTORS FO R RENDERING TRANSPORTATION SERVICES FOR GOODS AND PASSENGERS BY BUSES, CARS, S UMOS UTILITY VANS ETC. IT HAD NOT TAKEN POSSESSION OF THOSE VEHICLES FROM THE CONTRACTORS AND THE RESPONSIBILITY OF OPERATING AND MAINTAINING OF THE VEHICLES WAS OF THE CONTRACTOR. THE ASSESSEE MADE DEDUCTION OF TAX IN ACCORDANCE WITH PROVISION U/S. 194C. THE REVENUE AUTHORITIES HOWEV ER HELD THAT CARRIAGES FOR THE PURPOSE OF CARRYING GOODS AND PASSENGERS WOULD BE TREATED TO BE MACHINERIES WITHIN THE MEANING OF EXPLANATION TO SE CTION 194I AND THEREFORE THE ASSESSEE WAS LIABLE TO DEDUCT HIGHER AMOUNT OF TAX AS PER SECTION 194I. ON APPEAL THE TRIBUNAL DECIDED IN ASSESSEES FAVOUR . ON REVENUES APPEAL HONBLE JURISDICTIONAL HIGH COURT CONFIRMED THE ORD ER OF ITAT BY HOLDING AS UNDER: - THERE WAS NO DISPUTE THAT A CONTRACT WAS ENTERED I NTO UNDER CLAUSE (IV) OF EXPLANATION TO SECTION 194C FOR CARRYING VA RIOUS GOODS AND PASSENGERS BY TRAILER, UTILITY VANS, WATER TANKERS, SUMOS, ETC, AND THUS, IT CLEARLY COMES WITHIN THE MEANING OF WORK. [PAR A 6] SO FAR THE DEFINITION OF RENT AS PROVIDED IN SECT ION 194-I IS CONCERNED, ACCORDINGLY TO THE SAME, RENT MEANS AN Y PAYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB-LEASE, T ENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF (EITH ER SEPARATELY OR TOGETHER) ANY: (A) LAND; OR (B) BUILDING (INCLUDE FACTORY BUILDING); OR (C) LAND APPURTENANT TO A BUILDING (INCLUDE FACTORY BUI LDING); OR (D) MACHINERY; OR (E) PLANT ; OR (F) EQUIPMENT; OR I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 24 (G) FURNITURE; OR (H) FITTINGS, WHETHER OR NOR ANY OR ALL OF THE ABOVE ARE OWNED BY THE PAYEE. ON COMPARISON OF THE TWO EXPLANATIONS ADDED TO SECT IONS 194-I AND 194C, IT APPEARS THAT IT WAS NEVER THE INTENTION OF THE LEGISLATURE TO OVERLAP ANY OF THE ITEMS MENTIONED WITHIN THE MEANI NG OF RENT BY INCLUDING THE SAME WITHIN THE MEANING OF WORK UND ER SECTION 194C. SINCE THE AGREEMENT FOR CARRIAGE OF GOODS BY VEHICL ES OTHER THAN RAILWAYS COMES WITHIN THE PURVIEW OF EXPLANATION OF WORK WITHIN THE MEANING OF SECTION 194C, IT NECESSARILY FOLLOWS TH AT IT WAS NEVER THE INTENTION OF THE LEGISLATURE TO INCLUDE THE AMOUNT TAKEN FOR HIRING OF SUCH VEHICLES WITHIN THE MEANING OF WORD RENT. [P ARA 6.1] MOREOVER, NOW IT IS SETTLED LAW THAT WHERE TWO INTE RPRETATIONS ARE POSSIBLE, THE ONE WHICH IS FAVOURABLE TO THE ASSESS EE SHOULD BE ADOPTED. EVEN IF THE AFORESAID PRINCIPLE IS APPLIE D, THE TRIBUNAL BELOW WAS QUITE JUSTIFIED IN ADOPTING THE CASE OF T HE ASSESSEE IN THE FACTS OF THE INSTANT CASE. [PARA 8] IN VIEW OF THE ABOVE THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN HOLDING THAT PAYMENT MADE BY THE ASSESSEE TO M/S GVHL FOR HIRING OF HELICOPTERS FOR TRANSPORTATION OF HIS EMPLOYEES FALLS UNDER THE CAT EGORY OF EQUIPMENT HIRING AND TDS @ 10% WAS DEDUCTABLE ON THIS PAYMENT U/S 19 4I OF THE ACT. THEREFORE THEIR ORDERS ARE HEREBY SET ASIDE AND THI S GROUND OF ASSESSEES CO IS ALLOWED. 19. SECOND GROUND OF CO HAS BEEN DEALT BY AO AS UND ER: - 4.1 THE ASSESSEE COMPANY MADE PAYMENT TO 3 RD I EVENT MANAGEMENT. THE ASSESSEE COMPANY ISSUED A WORK ORD ER DTD. 23/05/2008 TO 3 RD I EVENT MANAGEMENT GROUP FOR MANAGING AND ORGANIZING THE GSPC INVITATION 20-20 CORPORATE CRI CKET TOURNAMENT 2008 FOR AN AMOUNT OF RS. 28, 16,500/- . THE WORK ORDER WAS PLACED OFFER INVITING QUOTATIONS FROM THE INTER ESTED PARTIES. FURTHER, 3 RD I EVENT MANAGEMENT HAVE ALSO CHARGED SERVICE CHAR GES @ 12% FOR THE SERVICES PROVIDED TO GSPC. ACCORDINGL Y, THE ASSESSEE CO. HAS MADE PAYMENT TO THE CONTRACTOR AND DEDUCTED THE TAX AT SOURCE @ 2% ONLY AS AGAINST 10 % U/S 194-J OF THE A CT. SINCE THE I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 25 PAYMENT WAS MADE TO THE PERSON WHO MANAGED THE EVEN T (I.E. EVEN MANAGEMENT), THE ASSESSEE WAS REQUIRED TO DEDUCT TH E TAX AS PER THE PROVISIONS OF SECTION 194J OF THE ACT. AS THE TAX WAS DEDUCTED @ 2% ONLY ON THE ABOVE PAYMENT, THERE WAS SHORT DEDUCTIO N OF TAX BY 8% +5C+EC. THE ASSESSEE WAS SHOW-CAUSED ... AFTER CONSIDERING ASSESSEES REPLY AO RAISED DEMAND U/S 201(1) AND 201(1A). 20. ASSESSEES SUBMISSION WAS AS UNDER:- 3.1 THE APPELLANT HAS ISSUED A WORK ORDER VID E LETTER DATED 23- 05-2008 TO 3 RD I EVENT MANAGEMENT GROUP FOR ORGANIZING THE 'GSPC INVITATION 20-20 CORPORATE CRICKET TOURNAMENT 2008' FOR AN AMOUNT OF RS. 28,16,500/-. 3.2 THE LEARNED A O. HAS FOUND FOLLOWING IN HIS SHOW CAUSE NOTICE DATED 27-03-2009 WHICH IS REPRODUCED AS UNDER FOR Y OUR REFERENCE. 'IT IS ALSO OBSERVED THAT YOU HAVE MADE PAYMENT TO 3 M I EVENT MANAGER OF RS. 13,32,140/- AFTER DEDUCING TDS @ 2% U/S 194C, WHEREAS THIS SERVICES RENDERED BY 3 RD I EVENT MANAGER IS OF PROFESSIONAL SKILLS AND THEREFORE ATTRACTS TDS PROV ISION U/S 194 1 OF THE I T ACT. YOU ARE HEREBY ASKED TO SHOW CAUSE W HY TAX WAS NOT DEDUCTED U/S 194 1 OF THE IT ACT.' 3.3 THE APPELLANT HAS SUBMITTED REPLY ON 04-05-20 09 WHICH AS REPRODUCED AS UNDER FOR YOUR REFERENCE. 'WITH REFERENCE TO THE ABOVE, WE HAVE TO STATE THAT GSPC HAS ISSUED AN ORDER TO 3 RD I EVENT MANAGER - 3 RD I PRIMARILY TO ORGANIZE A 'CORPORATE CRICKET TOURNAMENT INVOLVING GSPC, ONGC RELIANCE, TATA, INDIAN RAILWAYS AND INCOME TAX. THE ENTIRE RE SPONSIBLY OF THE MANAGEMENT OF THE CRICKET TOURNAMENT FOR A PERIOD O F 12 DAYS WAS ON THE SHOULDERS OF 3 RD I. THE RESPONSIBILITY OF 3 RD I AMONG OTHER THINGS INCLUDE THE FOLLOWING. 1) ARRANGEMENT FOR CRICKET BALLS/STUMPS 2) LIGHTING 3) GENERATOR AND FUEL 4) DECORATION 5) SOUND 6) MEDICAL KITS 7) MANPOWER 8) GROUND EXPENSES 9) PHOTOGRAPHS 10) REFRESHMENT I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 26 11) DINNER 12) ROOM BOOKING 13) FIRE CRACKERS 3 RD I WAS TO BE PAID MANAGEMENT FEES AT THE RATE OF 1 5% OF THE TOTAL VALUE OF BILLING. SPC HAS TAKEN THE SERVICES OF 3 RD I FOR HOLDING THE 'CRICKET TOURNAMENT'. THE ORDER IS FOR THE ARRANGEM ENT OF 'ENTIRE TOURNAMENT' IN AN EFFICIENT MANNER. IN SHORT, 3 RD I IS REQUIRED TO CONDUCT THE 'ENTIRE TOURNAMENT' AS PER THE LIKING, STANDARD AND DESIRE OF GSFC. IT IS THEREFORE OBVIOUS FOR GSPC TO DEDUCT TAX AS PER THE PROVISIONS OF SECTION 194C OF THE ACT. YOU WILL APPRECIATE THAT PROVISIONS OF SECTION 194J O F THE ACT, IS APPLICABLE ONLY TO 1) ANY PAYMENT BY WAY OF FEES FOR PROFESSIONAL SERV ICES 2) ANY PAYMENT BY WAY OF FEES FOR TECHNICAL SERVICE S 3) ANY PAYMENT BY WAY OF ROYALTY WE WILL ANALYZE THE AFORESAID POINTS ONE BY ONE WIT H REFERENCE TO THE PAYMENT MADE TO 3 RD I 1 ) PAYMENT BY WAY OF FEES FOR PROFESSIONAL SERVICE S : PROFESSIONAL SERVICES MEAN THE SERVICES RENDERED BY PERSON CARRYING ON THE FOLLOWING PROFESSIONS (A) LEGAL PROFESSION; (B) MEDICAL PROFESSION; (C) ARCHITECTURAL PROFESSION; (D) PROFESSION OF ACCOUNTANCY; (E) PROFESSION OF TECHNICAL CONSULTANCY; (F) PROFESSION OF INFERIOR DECORATION; (G) PROFESSION OF ADVERTISING (I.E. ACTOR, DIRE CTOR AND CAMERAMAN PROVIDING PROFESSIONAL SERVICES TO AN ADVERTISING A GENCY) (H) ANY OTHER PROFESSION NOTIFIED FOR THE PURPOSE O F SECTION 44AA; (IT INCLUDES AUTHORIZED REPRESENTATIVE, FILM ARTIST, CO MPANY SECRETARY AND INFORMATION TECHNOLOGY (I) ANY OTHER PROFESSION NOTIFIED FOR THE PURPOSE OF SECTION 194J (NO SUCH NOTIFICATION IS ISSUED SO FAR ) FROM THE ABOVE, YOU WILL BE ABLE TO CONCLUDE THAT S ERVICES RENDERED BY 3 RD I TO GSPC ARE NOT COVERED BY ANY OF THE ABOVE PROF ESSIONS MENTIONED HEREIN ABOVE AND HENCE PAYMENTS MADE BY G SPC TO 3 RD I ARE CERTAINLY NOT COVERED BY THE FIRST CATEGORY. 2) PAYMENT BY WAY OF FEES FOR TECHNICAL SERVICES : I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 27 THE EXPRESSION FEES FOR TECHNICAL SERVICES HAS BEEN DEFINED U/S 9(1)(VII) OF INCOME TAX ACT, 1961 TO MEAN ANY CONSI DERATION (INCLUDING LUMP SUM CONSIDERATION) FOR THE RENDERIN G OF ANY MANAGERIAL, TECHNICAL IF CONSULTANCY SERVICES INCLU DING PROVISION OF SERVICES OF TECHNICAL OR CONSULTANCY SERVICES (INCL UDING PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MININ G OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT IS CHARGEABLE UNDER THE HEAD 'SALA RIES' FROM THE ABOVE, YOU WILL BE ABLE TO ASCERTAIN THAT SERVICES RENDERED BY 3RD I TO GSPC ARE NOT COVERED BY TECHNICAL SERV ICES MENTIONED HEREIN ABOVE AND HENCE PAYMENTS MADE BY GSPC TO 3 RD I ARE CERTAINLY NOT COVERED BY THE SECOND CATEGORY. 3.4 THE LEARNED AO, HAS GROSSLY ERRED IN IGNORIN G THE DECISION OF ITAT AHMEDABAD 'C BENCH IN THE CASE OF GUJARAT STATE ELECTRICITY CORPORATION LIMITED VS. INCOME TAX OFFICER WHEREIN IT WAS HELD THAT IN THE CASE OF AGREEMENT FOR OPERATION AND MAINTENA NCE OF POWER PROJECT, PAYMENT MADE BY THE APPELLANT COMPANY TO G UJARAT STATE ELECTRICITY BOARD FOR ENTIRE OPERATION AND MAINTENA NCE OF POWER PLANT UNDER A COMPREHENSIVE CONTRACT COULD NOT BE TREATED AS PAYMENT OF FEES FOR PROFESSIONAL SERVICES AS CONTEMPLATED IN S EC, 194J. SUCH PAYMENT WOULD COME WITHIN THE LIMB OF EXCLUSIVE PAR T, VIZ 'CONSIDERATION FOR LIKE PROJECT' EXCLUDED FN THE DE FINITION OF 'FEES FOR TECHNICAL SERVICES' GIVEN IN EXPLN. TO SEC 9 (1A) (VII). DEDUCTION OF TAX AT SOURCE AT 2% AS PER SECTION 194C WAS JUSTIFI ED. 3.5 THE LEARNED A.O. HAS GROSSLY ERRED IN LAW AND O N FACTS IN LEVYING INTEREST UNDER -SECTION 201 (IA) OF THE ACT . WITHOUT PREJUDICE TO WHAT IS STATED ABOVE, THE APPE LLANT HUMBLY PLEADS THE AS PER THE BINDING JUDGMENT OF HON'BLE G UJARAT HIGHCOURT IN THE CASE CIT VS RISHIKESH APARTMENTS CO -OP- HOU SING SOCIETY LIMITED (2002) 253 ITR 31O, IF THE PAYEE HAS PAID T HE ADVANCE TAX, IF PAYABLE THEN THERE IS NO REVENUE LOSS TO THE EXCHEQ UER AND IN THAT EVENT NO INTEREST CAN BE LEVIED U/S 201(IA) OF THE ACT. THE LEARNED A.O. HAS GROSSLY ERRED IN NOT CONSIDERI NG THE FOLLOWING THE TWO JUDGMENT QUOTED BY THE APPELLANT THROUGH LE TTER DATED 04-01- 2010. 1. CHILDREN'S EDUCATION SOCIETY VS. DCIT (TDS) ( 2009) 319 ITP 409 KARNATAKA HIGH COURT I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 28 2. HINDUSTAN COCACOLA BEVERAGES PVT. LTD. VS. CI T (2007) 293 ITR 226 (SC) IT HAS BEEN HELD IN THE AFORESAID TWO JUDGMENTS THA T ONCE TAX HAS BEEN ALREADY PAID BY THE DEDUCTEE THE SAME TOGETHER WITH INTEREST AND PENALTY CANNOT BE RECOVERED FROM THE DEDUCTOR EVEN THOUGH DEDUCTOR HAD FAILED TO DEDUCT TAX AT SOURCE. 3.7 IN VIEW OF THE ABOVE, THE APPELLANT HUMBLY SUBM ITS THAT THE CONTENTION OF THE LEARNED. A.O. IS BAD IN LAW AND H ENCE THE SAME SHOULD BE DELETED. 21. LD. CIT(A) CONFIRMED THE ACTION OF AO BY OBSERV ING AS UNDER:- 4.3 I HAVE CONSIDERED THE ORDER OF THE AO, FACT S OF THE CASE AND APPELLANT'S SUBMISSION. APPELLANT MADE PAYMENT FOR MANAGEMENT SERVICES HOWEVER, DEDUCTED TAX U/S 194C ONLY. A . O. CONSIDERED THE SAME IN THE CATEGORY OF MANAGERIAL CONSULTING SERVI CES. THE KINDS OF SERVICES RECEIVED BY THE APPELLANT DEFINITELY FALL IN THIS CATEGORY. THE DECISION RELIED UPON BY THE APPELLANT IN THE CASE O F GUJ. ELECTRICITY LTD, IS NOT RELEVANT SINCE THAT CONTRACT WAS FOR CO MPREHENSIVE SERVICES. HOWEVER IN THE CASE OF APPELLANT IT WAS ONLY MANAGEMENT FEES WHICH ARE SQUARELY COVERED U/S. 194-J. ACCORD INGLY, A.O. S ACTION IS CONFIRMED. 4.3.1 APPELLANT'S RELATED GROUND IN VIEW OF APEX CO URT'S DECISION IN THE CASE OF HINDUSTAN COCA-COLA LTD. IS THAT THE RE CIPIENT 3 I EVENT MANAGEMENT HAD PAID TAXES ON RECEIPT AND FILED THE RETURN OF INCOME, THEREFORE, THE TAX DEMAND IS NOT RECOVERABLE FROM T HE APPELLANT. I AGREE WITH THE APPELLANT THAT WHEREVER THE INCOME S UBJECT TO TDS HAS BEEN OFFERED FOR TAX AND TAXES HAVE BEEN PAID ON TH E SAME, THE DEMAND U/S 201(1) CANNOT BE ENFORCED. ITO. TDS IS T HEREFORE, DIRECTED TO VERIFY THE APPELLANTS CLAIM AND IF THE TAXES HAVE BEEN PAID ON THE INCOME RECEIVED BY THE DEDCUTEE, DEMAND U/S 201(1) WILL BE REDUCED. INTEREST U/S 201 (1A) WILL HOWEVER, BE LE VIABLE IN VIEW OF THE SAME DECISION OF APEX COURT. 22. BEFORE US LEARNED COUNSEL OF THE ASSESSEE REITE RATED THE SUBMISSION MADE BEFORE LD. CIT(A) AND SUBMITTED THAT THOUGH SE RVICES PROVIDED BY M/S 3 RD EYE EVENT MANAGEMENT ARE MANAGERIAL IN NATURE BUT THE SAME SERVICES WERE NOT TAKEN BY THE ASSESSEE FOR MANAGING ITS BUS INESS BUT THESE SERVICES I.T.A NO.2884/AHD/2010 & CO NO. 322/AHD/2010 A.Y . 2009-10 PAGE NO ITO VS. GUJARAT STATE PETROLEUM CORPORATION LTD 29 WERE TAKEN FOR MANAGING A 20-20 CRICKET TOURNAMENT ONLY. THEREFORE PAYMENT MADE TO M/S 3 RD EYE EVENT MANAGEMENT IS NOT COVERED BY THE PROVISIONS OF SECTION 194 J. THIS ARGUMENT ADVANCE D BY THE ASSESSEE IS DEVOID OF ANY MERIT AS THE EXPENSES INCURRED BY THE ASSESSEE ON ORGANIZING OF CRICKET TOURNAMENT HAVE BEEN CLAIMED BY THE ASSE SSEE AGAINST ITS BUSINESS INCOME AS IF THE SAME WERE INCURRED FOR BUSINESS PU RPOSES. THEREFORE IT CANNOT BE SAID THAT MANAGERIAL CONSULTATION SERVICE S OF THIRD EYE EVENT WERE NOT FOR ITS BUSINESS. THE ASSESSEE CANNOT TAK E CONTRARY STAND TO AVOID ITS TDS LIABILITY. THEREFORE WE HAVE NO HESITATION IN UPHOLDING THE ORDER OF LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GRO UND OF CO IS DISMISSED 23. IN THE COMBINED RESULT REVENUES APPEAL IS DISM ISSED AND ASSESSEES CO IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 29/11/2013 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,