The ITO, TDS-2, RAJKOT-GUJARAT V. M/s. Bharat Sanchar Nigam Ltd., The A.O. (Electrical Division), RAJKOT-GUJARAT

ITA 11/RJT/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94032 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DM RINDANI
• Assessee Lawyers: AVINASH KUMAR
• Section: 194C; 201(1); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE SHRI SHAILEND RA K UMAR YADAV, JUDICIAL MEMBER, AND SHRI N. S. SAINI , ACCOUNTANT MEMBER . ITA. NO S . 09 & 11 / RJT /20 1 3 (ASSESSMENT YEAR S : 2008 - 09 & 2009 - 10 ) INCOME TAX OFFICER, T DS - 2, RAJKOT APPELLANT VS. M/S BHARAT SANCHAR NIGAM LTD., THE A.O.(ELECTRICAL DIV), TELECOME ELEC. DIV. BSNL, 2 ND FLOOR, RAJKOT RESPONDENT PAN: AABCB5576G / BY ASSESSEE : SHRI AVINASH KUMAR , D.R . / BY REVENUE : SHRI D. M. RINDANI, C.A. / DATE OF HEARING : 1 8 .0 5 .2015 / DATE OF PRONOUNCEMENT : 20 .0 5 .2015 ORDER PER SHAILENDRA KUMA R YADAV, J.M: THESE TWO APPEALS FILED BY REVENUE PERTAIN TO SAME ASSESSEE ARE ARISING OUT FORM THE CONSOLIDATED ORDER OF CIT(A) - I T A NO S . 9 & 11 /RJT/1 3 [ ITO, TDS - 2 VS. M/S. BHARAT SANCHAR NIGAM LTD. ] PAGE 2 II , RAJKOT , DATED 31 . 1 0 .2012 . SO, THEY ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO. 09 / RJT /20 1 3 , REVENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUND S : 1. THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION MADE U/S . 201 (1) OF THE LT. ACT OF RS . 17,37 , 280/ - AND INTEREST CHARGED UNDER SECTION 201 (1 A) OF THE IT A CT OF RS . 7 , 03 , 598/ - BY HOLDING THAT THE CONTRACT OF COMPREHENSIVE REPAIR AND MAINTENANCE OF EMS WAS A SIMPLE WORKS CO NTRACT COVERED U/S 194C OF THE I. T. ACT . 2. THE LD . CIT (A) HAS ERRED ON FACTS AND IN LAW IN OVERLOOKING THE FACT THAT COMPREHENSIVE REPA IR AND MAINTENANCE OF EMS WAS POSSIBLE ONLY DUE TO THE INVOLVEMENT OF HIGHLY SKILLED TECHNICAL & EXPERTS PERSONS AND THEREFORE ALL THESE ACTIVITIES WERE COVERED BY SECTION 194 - J OF THE I . T. ACT AND NOT BY SEC . 194C OF THE I. T. ACT. 3. THE LD.CIT(A) HAS ERRED ON FACTS AS WELL AS IN LAW IN OVERLOOKING THE FACTS MENTIONED IN ORDER ITSELF THAT IN OTHER BRANCH OF ASSESSEE COMPANY I.E. BSNL(WTR), RAJKOT HAS ALSO PAID TDS U/S. 194J AND NOT U/S. 194C ON ANNUAL MAINTENANCE PAID TO M/S . XL TELECOM & ENERGY LTD . , A ND M/S . MSTC LTD., BY HOLDING AS TECHNICAL NATURE OF CONTRACT U/S . 194J AND NOT AS A WORK CONTRACT U/S. 194C FOR THE SAME YEAR UNDER CONSIDERATION. 4. THE LD. CI T(A) HAS ERRED ON FACTS AS WELL AS IN LAW IN DELETING THE ADDITIONS RELYING ON THE DECISION I N THE CASE OF KANDLA PORT TRUST AND HE HAS OVER LOOKED THE FACT THAT THE DEPARTMENT HAS ALREADY PREFERRED AN APPEAL AGAINST THIS DECISION BEFORE HON'BLE HIGH COURT U/S. 2 60A OF THE IT ACT. I T A NO S . 9 & 11 /RJT/1 3 [ ITO, TDS - 2 VS. M/S. BHARAT SANCHAR NIGAM LTD. ] PAGE 3 SIMILAR GROUND HAS BEEN RAISED BY REVENUE IN A.Y.2009 - 10. 3 . A SSESSEE COMPANY, NAMELY, BSNL WAS FORMED IN YEAR 2000 AS A GOVERNMENT UNDERTAKEN TELECOMMUNICATION COMPANY PROVIDING COMPREHENSIVE RANGE OF TELECOM SERVICES IN INDIA. IN THIS CASE, A SURVEY ACTION TOOK PLACE U/S.133A OF THE ACT AT OFFICE PREMISES OF ASSES SEE COMPANY ON 26.12.2008 AND IT WAS NOTICED THAT ASSESSEE HAD GIVEN OPERATION AND MAINTENANCE CONTRACT OF ALL EMS FOR J.B. EXCHANGE AND C.T.O. BUILDING UNDER ITS TERRITORIAL JURISDICTION. IT WAS ALSO NOTICED THAT ASSESSEE HAD MADE CERTAIN PAYMENTS TO SUC H PARTIES AMOUNTING TO RS.1,42,56,233/ - DURING YEAR UNDER CONSIDERATION FOR AFORESAID OPERATION AND MAINTENANCE CONTRACT ON WHICH TAX WAS DEDUCTED U/S.194C @ 2.226% AMOUNTING TO RS.4,09,002/ - FOR A.Y. 2008 - 09 AND RS.3,23,046/ - FOR A.Y. 2009 - 10. ASSESSING OFFICER OBSERVED THAT SAID CONTRACT WAS IN NATURE OF TECHNICAL SERVICE AND THEREFORE THE SAME WAS COVERED UNDER THE PROVISIONS OF SECTION 1 94J AND TAX WAS REQUIRED TO BE DEDUCTED @ 10.30%. A S PER ASSESSING OFFICER, THERE WAS A SHORT DEDUCTION OF TAX TO TH E TUNE OF RS.17,37,280/ - FOR A.Y. 08 - 09 AND RS.11,45,346/ - FOR A.Y. 09 - 10 IN VIEW OF PROVISIONS OF SECTION 201(1) OF THE ACT. ASSESSING OFFICER FURTHER NOTICED THAT IN OTHER BRANCH OF ASSESSEE COMPANY I.E. BSNL (WTR), RAJKOT, IT HAD PAID TDS U/S.194J ON A NNUAL MAINTENANCE CONTRACT OF TECHNICAL NATURE TO M/S. XL TELECOM & ENERGY LTD. AND M/S. MSTC LTD. FOR THE SAME YEAR UNDER CONSIDERATION. I T A NO S . 9 & 11 /RJT/1 3 [ ITO, TDS - 2 VS. M/S. BHARAT SANCHAR NIGAM LTD. ] PAGE 4 4. ACCORDINGLY, ASSESSING OFFICER WORKED OUT SHORT DEDUCTION OF TAX AS UNDER: CALCULATION OF SHORT DEDUCTION FOR A. Y. 2008 - 09 S.NO. NATURE OF PAYMENT PAYMENT MADE (RS.) TDS MADE U/S.194C @ 2.226% TDS TO BE DEDUCTED U/S. 194J @ 10.30% SHORT DEDUCTION U/S. 201 1 OPERATION & MAINTENANCE OF EMS AT VARIOUS PLACES 2,16,24,098 4,09,002 22,27,282 17,37,280 CALCULATION FOR SHORT DEDUCTION FOR A.Y. 2009 - 10 S.NO. NATURE OF PAYMENT PAYMENT MADE (RS.) TDS MADE U/S.194C @ 2.226% TDS TO BE DEDUCTED U/S. 194J @ 10.30% SHORT DEDUCTION U/S. 201 1 OPERATION & MAINTENANCE OF EMS AT VARIOUS PLACES 1,42,56,233 3,23,046 14,68,392 11,45,3 46 IN VIEW OF ABOVE, INTEREST CHARGEABLE U/S. 201(1A) WAS CALCULATED BY ASSESSING OFFICER AS UNDER: CALCULATION OF INTEREST U/S.201(1A) FOR A.Y. 2008 - 09 S. NO. PAYMENT MADE TDS REQUIRED TO BE DEDUCTED TDS MADE DIFFERENCE DATE OF PAYMENT NO. OF MONTHS I NTEREST RATE INTEREST AMOUNT (RS.) 1 21624098 2227282 409002 1737280 1.4.08 TO 30.6.10 27 1% 469065 2 21624098 2227282 409002 1737280 1.7.10 TO 21.3.11 09 1.5% 234533 TOTAL 703598 I T A NO S . 9 & 11 /RJT/1 3 [ ITO, TDS - 2 VS. M/S. BHARAT SANCHAR NIGAM LTD. ] PAGE 5 CALCULATION OF INTEREST U/S.201(1A) FOR A.Y. 2009 - 10 S. NO. PAY MENT MADE TDS REQUIRED TO BE DEDUCTED TDS MADE DIFFERENCE DATE OF PAYMENT NO. OF MONTHS INTEREST RATE INTEREST AMOUNT (RS.) 1 14256233 1468392 323046 1145346 25.11.08 15 1% 171802 2 14256233 1468392 323046 1145346 25.11.08 09 1.5% 154622 TOTAL 3 26424 5 . MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) HAS GRANTED RELIEF IN BOTH YEARS. SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE INTER ALIA SUBMITTED THAT CIT(A) ERRED ON FACTS AND IN LAW DELETING ADDITION MADE U/S.201(1) OF INCOME TAX ACT OF RS.17,37,280/ - AND INTEREST CHARGED U/S.201(1A) OF THE ACT OF RS.7,03,598/ - BY HOLDING THAT CONTRACT OF COMPREHENSIVE REPAIR AND MAINTENANCE OF EMS WAS A SIMPLE WORKS CONTRACT COVERED U/S.194C OF THE ACT. CIT(A) ERRED ON FACTS AND IN LAW IN OVERLOOKING THE FACT THAT COMPREHENSIVE REPAIR AND MAINTENANCE OF EMS WAS POSSIBLE ONLY DUE TO INVOLVEMENT OF HIGHLY SKILLED TECHNICAL AND EXPERTS PERSONS AND THEREFORE, ALL THESE ACTIVITIES WERE COVERED BY SECTION 194J OF INCOME TAX ACT. HOWEVER, REVENUE RAISED THESE ISSUES AND REQUESTED TO SET ASIDE THE ORDER OF CIT(A) AND THAT OF ASSESSING OFFICER BE RESTORED. ON OTHER HAND, LEARNED AUTHORIZED REPRESENT ATIVE SUPPORTED THE ORDER OF CIT(A) AND SUBMITTED THAT CIT(A) WAS JUSTIFIED IN HOLDING THAT ALL ACTIVITIES ARE COVERED BY PROVISIONS OF SECTION 194C AND DELETING THE ADDITION , SO SAME SHOULD BE UPHELD. I T A NO S . 9 & 11 /RJT/1 3 [ ITO, TDS - 2 VS. M/S. BHARAT SANCHAR NIGAM LTD. ] PAGE 6 6 . AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT ISSUE IN CONTROVERSY BEFORE US THAT ASSESSING OFFICER HAS HELD THAT THE SAID CONTRACT OF REPAIR AND MAINTENANCE OF EMS WAS IN NATURE OF TECHNICAL SERVICE. THEREFORE, SAME WAS COVERED UNDER THE PROVISIONS OF SECTION 194J AND TAX WAS REQUIRED TO BE DEDUCTED @ 10.30%. THERE WAS AN OPERATION AND MAINTENANCE CONTRACT OF ALL EMS FOR J. B. EXCHANGE AND C.T.O. BUILDING UNDER THE TERRITORIAL JURISDICTION OF ASSESSEE COMPANY. 6.1 WE FIND THAT I N CASE OF KANDLA PORT TRUST V. DY. COM. OF IN COME TAX, TDS CIRCLE, RAJKOT (2011) 16 TAXMANN.COM 273 (RAJKOT) WHEREIN IT WAS HELD AS UNDER: SINCE AFORESAID AGREEMENT MERELY RELATED TO ANNUAL MAINTENANCE OF MACHINERY AND NOT IN RESPECT OF MANAGERIAL OR TECHNICAL OR CONSULTANCY SERVICES SECTION 194J WA S NOT APPLICABLE. SINCE ASSESSEE DID NOT TAKE POSSESSION OF VEHICLES, PAYMENT COULD NOT BE SAID TO BE RENT AS PROVIDED IN SECTION 194I. IN VIEW OF ABOVE LEGAL POSITION, CIT(A) HELD THAT PROVISIONS OF SECTION 194C ARE APPLICABLE TO THE FACTS OF ASSESSE E S CASE AND THEREFORE THERE WAS NO DEFAULT IN THIS REGARD ON THE PART OF IT. ACCORDINGLY, CIT(A) GRANTED RELIEF ON BOTH ACCOUNTS I.E. UNDER THE PROVISIONS OF SECTION 201 (1) AND 201(1A). THIS VIEW IS FORTIFIED BY THE ORDER OF ITAT, MUMBAI B BENCH IN CA SE OF INCOME TAX OFFICER (TDS) VS. BHARAT SANCHAR NIGAM LTD. IN ITA NOS. 6952 TO 6954/MUM/2011, WHEREIN CORRECTLY CLASSIFIED SIMILAR SET OF FACTS AND CIRCUMSTANCE, TRIBUNAL HELD THAT PAYMENTS MADE HAVE BEEN CORRECTLY CLASSIFIED FOR THE PURPOSE I T A NO S . 9 & 11 /RJT/1 3 [ ITO, TDS - 2 VS. M/S. BHARAT SANCHAR NIGAM LTD. ] PAGE 7 OF DEDUCTION OF TAX AT SOURCE U/S.194C, AS AGAINST U/S.194J BEING INSISTED UPON BY REVENUE. IN VIEW OF ABOVE, WE HOLD THAT ASSESSEE IS LIABLE TO DEDUCT TDS U/S. 194C FOR PAYMENTS MADE TO CONTRACTORS UNDER MAINTENANCE CONTRACT. ACCORDINGLY, ORDER OF CIT(A) FOR BOTH Y EARS ARE UPHELD. 7 . IN THE RESULT, APPEAL S FILED BY REVENUE FOR BOTH YEARS ARE DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS THE 20 TH DAY OF MA Y , 201 5 . SD/ - SD/ - (N. S. SAINI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT : DATED 20 /0 5 /2015 S K SINHA COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, RAJKOT 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, RAJKOT