INDIAN OIL CORORATION V. COMMISSIONER OF INCOME TAX TD

CWJC/10633/2011

AI Insights

The case involves Indian Oil Corporation (the petitioner) contesting the rate of tax deducted at source from payments made to transporters under various agreements for transportation of products. The dispute arose when the tax authorities contended that the agreements were lease agreements, thus subjecting the payments to a higher tax deduction rate of 10% under Section 194I of the Income Tax Act, instead of 2% under Section 194C, which the Corporation had applied. The Corporation argued that the agreements were not leases but contracts for service, which should attract the lower rate. The High Court's decision to stay the recovery proceedings was influenced by the pending appeals and the public sector status of the Corporation.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 760401 (HC-PATNA)
• Appeal Type: Others
• Pronouncement Date: 11-07-2011
• Assessment Year: misc
• Laws Referred To: Article 226 of the Constitution, Section 194C of the Income Tax Act, Section 194I of the Income Tax Act, Section 43(3) of the Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: HARSHWARDHAN PRASAD
• Assessee Lawyers: D V PATHY; ABHI SARKAR
• Keywords: Coercive Recovery; Lease agreement; Public sector undertaking; Tax deduction at source; Transportation contracts
• Section: 194C; 194I; 43(3)

Judgement Text

"IN THE HIGH COURT OF JUDICATURE AT PATNA CIVIL WRIT JURISDICTION CASE No.10633 of 2011 ====================================================== Indian Oil Corporation, a company incorporated under the Companies Act, having its office at Lok Nayak Jai Prakash Bhawan, P.O. GPO, P.S. Kotwali, Patna through its Chief Finance Manager Shri Bimalendu Biswas son of Late Kani Lal Biswas, resident of P.O. GPO P.S. Kotwali, Patna, District-Patna. .... .... Petitioner Versus 1. Commissioner of Income Tax (TDS), Patna having its office at 5th Floor, Central Revenue Building (Annexe), Beerchand Patel Marg, Patna. 2. Assistant Commissioner of Income Tax (TDS), Patna having its office at 6th Floor, Central Revenue Building (Annexee), Beerchand Patel Marg, Patna. .... .... Respondents ====================================================== Appearance : For the Petitioner : Mr. D.V.Pathy, Advocate with Mr. Abhi Sarkar, Advocate For the Respondents : Mr. Harshwardhan Prasad, Advocate ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE BIRENDRA PRASAD VERMA ORAL ORDER (Per: HONOURABLE THE CHIEF JUSTICE) 2 11-07-2011 With the consent of the learned advocates, the petition is decided today. This petition under Article 226 of the Constitution is filed by the Indian Oil Corporation for stay of the recovery proceedings pursuant to the impugned notice of demand, pending Patna High Court CWJC No.10633 of 2011 (3) dt.11-07-2011 2 / 3 2 the appeals against the notice of demand. The dispute relates to the rate of tax deducted at source by the petitioner Indian Oil Corporation (hereinafter referred to as „the Corporation‟) from the contractual amount paid to the transporters. Learned advocate Mr. D.V. Pathy has appeared for the Corporation. He has submitted that the Corporation has entered into various agreements for transportation of its products such as L.P.G. and other petroleum products with various transporters. From the amount paid to the transporters the Corporation has deducted tax at source @ 2% as envisaged by Section 194C of the Income tax Act. The demand is that the transport contracts entered into by the Corporation with the transporters are the lease agreement. Under the said agreements the vehicles are leased to the Corporation and the amount paid by the Corporation is that of rent. The Corporation, therefore, is liable to deduct tax at source @ 10% of the amount paid as envisaged by Section 194I of the Income tax Act. The matter involves manifold questions of fact and law. Whether the agreements for transport entered into by the Corporation is a lease agreement; whether for the purpose of deduction of tax at source the transport vehicles can be termed as “Plant” within the meaning of Section 43(3) of the Act; whether in spite of payment of tax by the transporters, the Corporation can be compelled to make good the alleged short fall in the amount of tax deducted at source. In view of the aforesaid questions that arise in the appeals pending before the appellate authority and that the petitioner is a public sector undertaking of the Government of Patna High Court CWJC No.10633 of 2011 (3) dt.11-07-2011 3 / 3 3 India, we consider it expedient that pending the appeals and subject to the decision in the appeals, no coercive recovery should be made from the petitioner Corporation For the aforesaid reasons, the petition is allowed. Pending the appeals before the appellate authority there shall be no coercive recovery pursuant to notices of demand dated 19th January 2011 for the financial years 2007-08, 2008-09 and 2009-10 (Annexure-3 series to the petition). The parties will bear their own cost. Pawan Kumar/- (R.M. Doshit, CJ) (Birendra Prasad Verma, J) "