Saamya Biotech (India) Limited, Hyderabad V. Income Tax Officer, Ward-15(2), Hyderabad

ITA 1211/HYD/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6385 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 16-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 08-08-2012
• Court: TRIBUNAL
• Department Lawyers: A SEETHARAMA RAO
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Opportunity of being heard; Tax effect
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 1211/HYD/12 2009 - 10 M/S. SAAMYA BIOTECH (INDIA) LTD., HYDERABAD [TAN: HYDS17129A] INCOME T AX OFFICER, WARD-15(2), HYDERABAD 1563/HYD/12 2009 - 10 INCOME TAX OFFICER, WARD-15(2), HYDERABAD M/S. SAAMYA BIOTECH (INDIA) LTD., HYDERABAD [TAN: HYDS17129A] FOR ASSESSEE : SHRI P. MURALI MOHAN RAO, AR FOR REVENUE : SHRI A. SEETHARAMA RAO, DR DATE OF HEARING : 13-07-2016 DATE OF PRONOUNCEMENT : 19-08-2016 O R D E R THESE ARE APPEALS AGAINST THE ORDER OF THE COMMISSION ER OF INCOME TAX (APPEALS)-II, HYDERABAD, DATED 12-07-201 2 ON THE ISSUE OF LEVY OF DEMAND U/S. 201(1) AND INTEREST U/S. 201(1A) OF THE INCOME TAX ACT [ACT] ON THE AMOUNT OF RS. 1.5 CRORES PAID TO M/S. SHAPOORJI PALLONJI & CO. 2. BRIEFLY STATED, THERE WAS A SURVEY OPERATION U/S. 1 33A ON 18-03-2009 TO VERIFY ASSESSEES COMPLIANCE TO VA RIOUS TDS PROVISIONS. DURING THE PROCEEDINGS, IT WAS NOTED THAT ASSESSEE HAD ENTERED INTO A TURNKEY AGREEMENT WITH M/S. SHAPOORJI PA LLONJI & CO., LIMITED, MUMBAI ON 10-03-2008 AND AS PER THAT AGR EEMENT, ASSESSEE-COMPANY MADE AN ADVANCE OF RS. 1.5 CRORES ON 15-03- 2008. WHEN QUESTIONED WHETHER TDS WAS MADE, ASSESSEE SUBMITTED THAT THEY HAD ENTERED INTO AN AGREEMENT WITH I.T.A. NOS. 1211 & 1563/HYD/12 M/S. SAAMYA BIOTECH (INDIA) LTD., :- 2 -: M/S. SHAPOORJI PALLONJI & CO., LIMITED, MUMBAI, FOR THE CONSTRUCTION OF THE PLANT AND ASSOCIATED BUILDINGS, FOR THEIR COMPANY AT S.P. BIOTECHNOLOGY PARK AT TURKAPALLY, SHAM EERPET MANDAL, HYDERABAD ON THE TURNKEY CONTRACT BASIS AND THE SAID PAYMENT OF RS. 1.5 CRORES WAS ONLY A SECURITY DEPOSI T AGAINST THE BANK GUARANTEE FOR FULFILLING THE CONTRACT AND IT WAS O NLY REFUNDABLE DEPOSIT, SO NO TDS WAS MADE. IT WAS FURTHE R SUBMITTED THAT THEY WOULD DEDUCT THE TDS AS AND WHEN THE BILLS RELA TING TO CONSTRUCTION ACTIVITIES WERE SUBMITTED BY THE PARTY AND TH E CONSTRUCTION WORK WAS IN PROGRESS AND THE CONTRACTOR DI D NOT SUBMIT ANY BILLS TILL THEN. 2.1. THE AO NOTICED FROM THE TRIAL BALANCE FOR THE PER IOD FROM 01-04-2008 TO 18-03-2009 THAT THE DEPOSITS (ASSE TS) STOOD AT RS. 16,01,840/- ONLY WHICH IMPLIED THAT THE PAYMENT MAD E TO M/S. SHAPOORJI PALLONJI & CO. LIMITED, MUMBAI IS NO T INCLUDED UNDER THE HEAD DEPOSITS. HE ALSO NOTED THAT FROM THE COPY OF THE TURNKEY AGREEMENT ENTERED INTO ON 10-03-2008 BY ASSESS EE WITH M/S. SHAPOORJI PALLONJI & CO. LIMITED, AND FROM THE C OPY OF THE BANK GUARANTEE GIVEN BY STANDARD CHARTERED BANK THAT TH E SUM OF RS. 1.5 CRORES GIVEN BY ASSESSEE REPRESENT MOBILIZAT ION ADVANCE. AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO ASSESSEE , THE AO TREATED THE SAID PAYMENT OF RS. 1.5 CRORES TO M/S. SHAP OORJI PALLONJI & CO. LIMITED, MUMBAI, AS NOTHING BUT MOBILIS ATION CHARGES PAID IN ADVANCE OUT OF WHICH ASSESSEE OUGHT T O HAVE MADE TDS AS PER THE PROVISIONS OF SECTION 194J. HE HELD TH AT THE PAYMENT WAS COMMITMENT-CUM-MOBILISATION ADVANCE FOR PR OVIDING PROFESSIONAL, TECHNICAL AND MANAGERIAL SERVICES AND ACCORDINGLY TREATED ASSESSEE AS ASSESSEE IN DEFAULT UNDER THE PR OVISIONS OF I.T.A. NOS. 1211 & 1563/HYD/12 M/S. SAAMYA BIOTECH (INDIA) LTD., :- 3 -: SECTION 194J AND LEVIED TAX AND INTEREST U/S. 201(1) AN D 201(1A) OF RS. 60,99,500/- AND RS. 3,22,905/- RESPECTIVELY. 3. BEFORE THE LD. CIT(A) IT WAS CONTENDED THAT THE AMOUN T WAS ONLY A REFUNDABLE DEPOSIT AND IN THE ALTERNATE, C ONTENDED THAT THE CORRECT SECTION TO BE INVOKED WAS 194C, AS CONTRACTUA L PAYMENT AT 2% AND NOT 11.33% U/S. 194J. 4. RELYING ON THE BANK GUARANTEE PROVIDED BY STANDARD CHARTERED BANK, LD. CIT(A) HELD THAT THE AMOUNT PAID WAS NOTHING BUT A CONTRACT PAYMENT WHICH WAS COVERED U/S. 194C AND DIRECTED THE AO TO APPLY THE TAX RATE APPLICABLE U/S. 194C AND R ECALCULATE THE TAX AND INTEREST ACCORDINGLY. 5. REVENUE IS AGGRIEVED ON THE DIRECTIONS OF LD. CIT (A) THAT PROVISIONS OF SECTION 194C ARE APPLICABLE WHEREAS A SSESSEE IS CONTENDING THAT THE TDS PROVISIONS ARE NOT APPLICABLE A S THE AMOUNT WAS ONLY A DEPOSIT WHICH WAS REFUNDED. 6. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSIN G THE PAPER BOOK PLACED ON RECORD, I AM OF THE OPINION THAT THERE IS NO MERIT IN THE CONTENTIONS OF THE REVENUE. AS RIGHTLY HEL D BY THE LD. CIT(A), THE AMOUNT WAS PAID AS PART OF CONTRACTUAL PAY MENT, SO THE APPLICABLE PROVISIONS ARE 194C ONLY. TO THAT EXTENT, THE ORDER OF LD. CIT(A) IS UPHELD AND REVENUES APPEAL IS DISMIS SED. 6.1. COMING TO ASSESSEES APPEAL, THE FACTS DO INDIC ATE THAT ASSESSEE PAID THE AMOUNT AS PART OF CONTRACTUAL AMOUNT B UT WAS TREATED AS REFUNDABLE DEPOSIT BY BOTH THE PARTIES. E VEN IN THE ARBITRATION PROCEEDINGS PLACED ON RECORD, THE SAID AMO UNT WAS NOT I.T.A. NOS. 1211 & 1563/HYD/12 M/S. SAAMYA BIOTECH (INDIA) LTD., :- 4 -: ADJUSTED BY M/S. SHAPOORJI PALLONJI & CO., AS A RECE IPT AND ULTIMATELY REFUNDED TO ASSESSEE. SINCE THE AMOUNT STAND REFUNDED AS OF NOW, WHETHER THE AMOUNT IS COVERED U/S. 194C BEC OMES ACADEMIC AS THERE IS NO TAX EFFECT OR TAX LIABILITY O N THE SAID AMOUNT. ON THE FACT THAT THE AMOUNT STAND REFUNDED TO ASSE SSEE, I AM OF THE OPINION THAT THE PROVISIONS OF TDS ARE NOT A PPLICABLE ON THE FACTS AS OF NOW AND SO THE DIRECTION OF CIT(A) TO L EVY INTEREST U/S. 201(1) AND 201(1A) IS NOT CORRECT. TO THAT EXTEN T, THE ORDER OF CIT(A) IS MODIFIED AND ASSESSEES CONTENTIONS ARE ACC EPTED. GROUNDS OF ASSESSEE ARE ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED AND RE VENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST, 2016 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 19 TH AUGUST, 2016 TNMM I.T.A. NOS. 1211 & 1563/HYD/12 M/S. SAAMYA BIOTECH (INDIA) LTD., :- 5 -: COPY TO : 1. M/S. SAAMYA BIOTECH (INDIA) LTD., HYDERABAD. C/ O. P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3 , 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2. INCOME TAX OFFICER, WARD-15(2), HYDERABAD. 3. COMMISSIONER OF INCOME TAX(APPEALS)-II, HYDERABA D 4. COMMISSIONER OF INCOME TAX-TDS, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.