Appeal details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 4489 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 year(s) 10 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-07-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Next Hearing Date
18-05-2016
Assessment Year
2002-2003
Appeal Filed On
28-08-2009
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.1517-1519/KOL/2009 ASSESSMENT YEARS:2002-03 TO 2004-05 INDIAN OIL CORPORATION LTD. MARKETING DIVISION, (EASTERN REGION), INDIAN OIL BHAVAN, 2, GARIAHAT ROAD (SOUTH), KOLKATA-700 068 [ PAN NO.AAACI 1681 G ] / V/S . DCIT, CIRCLE-58 (TDS), KOLKATA, 10B, MIDDLETON ROW, KOLKATA-700 071 /APPELLANT .. /RESPONDENT /BY ASSESSEE SHRI SOUMITRA CHOWDHURY, ADVOCATE /BY REVENUE SHRI NILOY BORAN SOM, JCIT-DR /DATE OF HEARING 18-05-2016 /DATE OF PRONOUNCEMENT 20-07-2016 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THREE APPEALS BY THE SAME ASSESSEE ARE DIRECTED AG AINST THE DIFFERENT ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-XVI, KOLKATA VIDE EVEN DATE I.E. ON 02.07.2009. ASSESSMENTS WERE FRAMED BY DCIT , CIRCLE-58, KOLKATA U/S 201(1)/201(1A) OF THE INCOME TAX ACT, 1961 (HEREINA FTER REFERRED TO AS THE ACT) VIDE HIS ORDERS DATED 31.03.2008 FOR ASSESSME NT YEARS 2002-03 TO 2004- 05 RESPECTIVELY. ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 2 SHRI SOUMITRA CHOUDHURY, LD AUTHORIZED REPRESENTAT IVE APPEARED ON BEHALF OF ASSESSEE AND SHRI NILOY BARAN SOM, LD DEPARTMEN TAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. SINCE COMMON GROUNDS ARE INVOLVED IN ALL THE APP EALS RAISED BY THE ASSESSEE EXCEPT FIGURE, THEREFORE WE HEARD THEM TOG ETHER AND DEEM IT APPROPRIATE TO DISPOSE THEM BY WAY OF THIS COMMON O RDER. ACCORDINGLY WE ARE TAKING THE FACTS OF THE CASE FOR AY 2004-05 AS A LEAD CASE FOR THE SAKE OF CONVENIENCE, WE PASS A CONSOLIDATED ORDER FOR ALL T HE APPEALS. EFFECTIVE GROUNDS HAVE BEEN RAISED OUT OF WHICH GROUND NO.1 I S OF GENERAL NATURE AND DOES NOT REQUIRE SEPARATE ADJUDICATION. THE GROUNDS RAISED ARE AS UNDER:- 1. FOR THAT ON THE FACTS OF THE CASE, THE ORDER PA SSED BY THE LD. C.I.T.(A)-XVI, KOLKATA IS COMPLETELY ARBITRARY, UNJ USTIFIED AND ILLEGAL. 2. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN HOLDING THAT RS.10,51,87,592/- PAID TO BRP LTD WAS TERMINAL ING CHARGES AND LIABLE TO DEDUCTION U/S. 194C OF THE IT ACT, WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 3. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN NOT CONSIDERING THE AGREEMENT BETWEEN BRP LTD AND THE A SSESSEE COMPANY WHEREIN AS PER CLAUSE 8.4, THE SAID AMOUNT OF RS.10,51,87,592/- CRORES WAS AID TO BRP LTD AGAINST MARKETING RIGHTS VESTED WITH IOC AND FOR ALSO USING THE LOADING OF P RODUCTS THROUGH LOADING INFRASTRUCTURE OPERATED BY BRP LTD, THEREFO RE, THE SAID AMOUNT WAS NOT LIABLE FOR DEDUCTION OF TDS U/S. 194C OF TH E IT AC, THEREFORE THE FINDING OF THE LD. CIT(A) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 4. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN NOT ACCEPTING THE FACT THAT THE RENT PAID TO IBP LTD FO R USING INFRASTRUCTURE FOR LOADING AND UNLOADING FACILITY AMOUNTING TO RS. 1,79,847/- WAS NOT TERMINALING CHARGES AND THEREFORE SHALL NOT BE LIAB LE TO DEDUCTION OF TDS U/S. 194C OF THE IT ACT AMOUNTING TO RS.3,686/- WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 5. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN NOT ACCEPTING THE FACT THAT IBP LTD HAS PAID INCOME TA X ON THE SAID INCOME FROM THE ASSESSEE COMPANY, THEREFORE, DEMAND RAISED U/S. 201(1) AMOUNTING TO RS.3,686/- IS COMPLETELY ARBITRARY, UN JUSTIFIED AND ILLEGAL. ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 3 6. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG IN CONFIRMING LEVY OF INTEREST U/S. 201(1A) OF THE IT ACT AMOUNTING TO RS.10,36,752/- WHICH IS COMPLETELY ARBITRARY, UNJUS TIFIED AND ILLEGAL. 7. FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT(A ) WAS WRONG BY DITTOING THE ORDER OF THE AO THEREBY CONFIRMING THE CHARGING OF INTEREST U/S. 201(1A) AMOUNTING TO RS.10,36,752/- WITHOUT CONSIDE RING THE BOARDS CIRCULAR DATED 29.1.1997 WHICH IS COMPLETELY ARBITR ARY UNJUSTIFIED AND ILLEGAL. 3. THE INTER-CONNECTED ISSUES RAISED IN GROUNDS NO. 2 AND 3 BY ASSESSEE ARE THAT LD CIT(A) ERRED IN CONFIRMING THE ORDER O F ASSESSING OFFICER BY HOLDING THE TERMINAL CHARGES PAID TO BONGIGON REFIN ERY & PETROCOM CHEMICALS LTD. (BRPL FOR SHORT) FOR AN AMOUNT OF 10,51,87,592/- IS LIABLE TO DEDUCTION U/S. 194C OF THE ACT. 3.1 FACTS IN BRIEF ARE THAT IN THE PRESENT CASE, AS SESSEE IS A COMPANY OWNED BY CENTRAL GOVERNMENT AND ENGAGED IN OIL BUSI NESS. THERE WAS A SURVEY ON THE PREMISES OF ASSESSEE ON 04.11-2004 UN DER SECTION 133A OF THE ACT. DURING THE SURVEY IT WAS OBSERVED BY AO THAT A SSESSEE HAS PAID TERMINALLING CHARGES TO BRPL WITHOUT DEDUCTING TAX AT SOURCE (TDS FOR SHORT) U/S 194C OF THE ACT. ACCORDINGLY, AO ISSUED SHOW CA USE NOTICE UPON THE ASSESSEE FOR NON-DEDUCTION OF TDS ON THE PAYMENT OF TERMINALLING CHARGES AS MANDATED U/S. 194C OF THE ACT. IN RESPONSE TO THE N OTICE, THE ASSESSEE SUBMITTED THAT PAYMENT OF TERMINALLING CHARGES WAS IN THE NATURE OF AN ELEMENT OF PURCHASE PRICE OF THE PRODUCT I.E. PETRO LEUM PRODUCTS. THE ASSESSEE FURTHER SUBMITTED THAT THE PAYMENT WAS MAD E TO BRPL FOR THE UTILIZATION OF LOADING INFRASTRUCTURE OWNED BY BRPL AND ASSESSEE IN SUPPORT OF ITS CLAIM PRODUCED THE AGREEMENT WITH BRPL. THE TER MINALLING CHARGES WHICH HAVE BEEN PAID TO BRPL IS FOR EVACUATING THE OIL EX TRACTED AND REFINED BY BRPL WHICH IS PART OF THE PRICE FOR THE PURCHASE OF THE PETROLEUM PRODUCTS. THE ASSESSEE ALSO FURNISHED THE COPY OF THE COMPUT ATION OF TOTAL INCOME AND ASSESSMENT ORDERS OF BRPL TO JUSTIFY THAT THE PAYEE HAS INCLUDED THE TERMINALLING CHARGES IN ITS INCOME. ACCORDINGLY THE ASSESSEE SUBMITTED THAT ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 4 THE TRANSACTIONS FOR THE PAYMENT OF TERMINALLING CH ARGES ARE OUT OF THE PURVIEW OF TDS PROVISION. HOWEVER AO HAS DISREGARDED THE PL EA OF THE ASSESSEE AND WHILE DOING SO THE AO ALSO CONSIDERED CERTAIN CLAU SES OF THE AGREEMENT. THE REASONS FOR THE REJECTIONS ARE ENUMERATED AS UNDER: - I) M/S BRPL WRITTEN A LETTER TO THE ASSESSEE THAT I T HAS NOT OBTAINED ANY CERTIFICATE UNDER SECTION 197/ 197A OF THE ACT BUT HAS INCLUDED THE RECEIPT OF TERMINALLING CHARGES IN ITS BOOKS OF ACCOUNT AS INCOME. II) SAME TERMINALLING CHARGES WERE PAID TO M/S INDI AN OIL PETRONAS PVT. LTD. AFTER THE DEDUCTION OF TDS. III) THE ASSESSEE FAILED TO PRODUCE DOCUMENTS TO DE MONSTRATE THAT THE PAYEE HAS INCLUDED THE TERMINALLING CHARGES IN ITS INCOME AND HAS PAID THE TAX THEREON. THE AO ALSO OBSERVED FROM THE ASSESSMENT ORDER SUBMITTED ALONG WITH COMPUTATION O F INCOME THAT THERE WAS OUTSTANDING DEMAND OF THE TAX ON BRP L FOR THE FINANCIAL YEAR 2002-03 AND 2003-04. IT WAS VERY CLE AR FROM THE AO ORDER FOR THE ASSESSMENT YEAR 2004-05 THAT THERE WA S TAX DEFICIENCY OF RS. 3,82,79,751.00 AND ASSESSEE FAILE D TO FILE ANY EVIDENCE FOR THE PAYMENT OF THE TAX. IV) IT WAS NOTED THAT LOADING INFRASTRUCTURE FACILI TIES WAS 100% OWNED AND OPERATED BY BRPL. THEREFORE IT WAS UNDER THE C ONTROL OF BRPL. WHILE USING THE INFRASTRUCTURE FACILITIES FOR LOADING OF PETROLEUM PRODUCTS FOR THE ASSESSEE, IT WAS OPERATE D BY BRPL. THE PAYMENT WAS MADE AS LUMP SUM CONSIDERATION. THE REFORE, IT CANNOT BE CONCLUDED THAT TERMINAL CHARGES WERE PAID FOR HIRE CHARGES / RENTAL CHARGES FOR THE USE OF AFORESAID I NFRASTRUCTURE FACILITIES. THE CLAIM OF ASSESSEE THAT THE TERMINAL CHARGES WAS PAID FOR STORING PETROLEUM PRODUCTS PURCHASED FROM BRPL IS NOT CORRECT AS PER THE AGREEMENT. THE AGREEMENT EXPLICI TLY PROVIDES FOR THE PAYMENT TOWARDS MARKETING RIGHTS AND FOR TH E USE OF INFRASTRUCTURE FACILITIES. ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 5 V) INFRASTRUCTURE FACILITIES FOR THE LOADING OF THE PRODUCTS IS OWNED AND OPERATED BY BRPL. VI) AS PER AGREEMENT THE INFRASTRUCTURE FACILITIES WAS CONTROLLED AND OPERATED BY BRPL WHILE LOADING PRODUCTS AND THEREFO RE IT IS NOT PROPER TO SAY THAT BRPL ALLOWED THE ASSESSEE TO UTI LIZE INFRASTRUCTURE FACILITIES. VII) THE TERMINALLING CHARGES PAID BY ASSESSEE IS N OT FORMING PART OF PURCHASE PRICE AND ANALOGY CAN BE DRAWN WITH CARRIA GE INWARD AND LOADING AND UNLOADING CHARGES WHICH ARE HAVING CORRECT NEXUS WITH THE PURCHASE, IN FACT, THESE CHARGES REM AINED ALTOGETHER SEPARATE CHARGES FROM THE PURCHASE PRICE . VIII) AS PER THE AGREEMENT, IT APPEARS THAT THERE I S NO CONTEMPLATION OF ANY PAYMENT OF MARKET PRICE BUT THE NATURE OF PAYME NT FOR TERMINAL CHARGES IS ALONE MENTIONED FOR DESPATCHING OF PRODUCTS. THEREFORE, THE DOMINANT CHARACTER AND NATURE OF SUC H PAYMENT AS PER THE AGREEMENT WAS FOR LOADING OF SAID PRODUCTS. IX) AS PER THE AGREEMENT WITH BRPL THE ASSESSEE WAS TO MAKE THE PAYMENT FOR THE MARKETING RIGHTS AND FOR AVAILING T HE INFRASTRUCTURE FACILITY FOR LOADING OF THE PETROLEUM PRODUCTS. BUT THE PAYMENT MADE DURING THE YEAR TO BRBL CANNOT BE BIFURCATED B ETWEEN THE ABOVE TWO SERVICES. HOWEVER IT IS VERY MUCH GLARING THAT THE PAYMENT IS MADE TOWARDS THE USE OF INFRASTRUCTURE F ACILITIES AS THE ASSESSEE HAS DEBITED THE ENTIRE AMOUNT AS TERMINALL ING CHARGES. IN VIEW OF ABOVE, AO INFERRED THAT ASSESSEE HAS FAI LED TO DEDUCT TDS AS REQUIRED U/S. 194C OF THE ACT. THE AO FURTHER OBSER VED THAT SIMILAR PAYMENT WAS MADE TO M/S INDIAN OIL PETRONUS PVT. LTD. (IOPP L FOR SHORT) DURING THE FINANCIAL YEARS 2001-02, 2002-03 & 2003-04 WITHOUT DEDUCTING TDS AS IOPPL SUBMITTED THE CERTIFICATE OF NON-DEDUCTION OF TDS I SSUED BY INCOME TAX DEPARTMENT TO IOPPL UNDER SECTION 197 OF THE ACT. T HEREFORE, ARGUMENT ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 6 RAISED BY ASSESSEE CANNOT BE ACCEPTED THAT PAYMENT IS NOT IN THE NATURE OF WORK CONTRACTS AND THEREFORE NOT ALLOWABLE DUE TO N ON DEDUCTION OF TDS. IN VIEW OF ABOVE, AO HAS HELD THAT ASSESSEE IS IN D EFAULT WITHIN THE MEANING OF SEC. 201(1) OF THE ACT AND ACCORDINGLY CHARGED I NTEREST U/S. 201(1A) OF THE ACT. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D CIT(A) WHERE ASSESSEE SUBMITTED THAT THE PAYMENTS MADE TO BRPL I N THESE THREE YEARS ARE AS FOLLOWS ON WHICH THE AO HAS CALCULATED THE NON-D EDUCTION OF TDS U/S. 201(1) AND INTEREST U/S. 201(1A) WHICH ARE AS FOLLO WS:- FY AMOUNT CREDITED TO BRPL (RS) DEMAND U/S. 201(1) (RS) INTEREST U/S. 201(1A) (RS) 2001-02 14,00,00,000 28,56,000 22,09,140 2002-03 6,20,50,892 13,03,068 9,77,249 2003-04 10,51,87,592 21,56,344 10,35,024 THE ASSESSEE BEFORE THE LD. CIT(A) PLEADED THAT THE RE WAS AN AGREEMENT BETWEEN BRPL AND THE ASSESSEE-COMPANY. AS PER CLAUS E 8.4 OF AGREEMENT, THE PAYMENT WAS TO BE MADE FOR THE MARKETING RIGHTS VESTED WITH IOC AND ALSO LOADING OF PRODUCTS THROUGH LOADING INFRASTRUC TURE WHICH IS OWNED AND OPERATED BY BRPL. THE ASSESSEE-COMPANY AGREED TO CO MPENSATE THE BRPL A LUMP SUM OF 14 CRORES PER ANNUM. THAT IN THE BALA NCE SHEET OF BRPL FOR THE FINANCIAL YEAR 2001-02 AT PAGE 255 IN SCHEDULE N WHICH CAN BE SEEN THAT BRPL HAS TAKEN THE SAID INCOME AS FEES FOR MARKETIN G RIGHTS. THAT THE FINANCIAL YEAR 2002-03 AT PAGE NO. 198 BRPL HAS WRI TTEN OFF THE SAID AMOUNT AS TERMINAL CHARGES / FEES FOR MARKETING RIGHT AMOU NTING TO RS.6.20 CRORES. THAT IN THE FINANCIAL YEAR 2003-04 AT PAGE 127 THE BRPL IN HIS BALANCE SHEET IN SCHEDULE N HAS SHOWN REIMBURSEMENT OF INFRASTR UCTURE COST FROM IOC AT 10.51 CRORES, THEREFORE FROM THE BALANCE SHEET OF B RPL IT CAN ALSO BE VERY WELL SAID THAT THESE AMOUNTS WERE NOT TERMINAL CHAR GES BUT REIMBURSEMENT OF INFRASTRUCTURE COST AS WELL AS FEES FOR MARKETING R IGHTS. THAT THESE PAYMENTS ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 7 MADE TO BRPL WERE IN THE NATURE OF COMPENSATION FOR USING THE LOADING INFRASTRUCTURE AS WELL AS THE FEES FOR MARKETING RI GHT PAID TO BRPL, THEREFORE, THESE MONEYS WERE NOT PAID TO BRPL FOR DOING ANY CO NTRACT JOB, THEREFORE, 194C OF THE ACT IS NOT ATTRACTED AND THE ASSESSEE W AS NOT LIABLE TO DEDUCT TDS. HENCE, NO TDS WAS DEDUCTED BY THE ASSESSEE-COM PANY. THAT IN THE EARLIER YEARS, SIMILAR PAYMENT WAS MADE TO BRPL ON WHICH NO TDS WAS DEDUCTED AND THE DEPARTMENT HAS ACCEPTED THIS AS MA RKETING FEES. THEREFORE AO WAS WRONG IN HOLDING THESE PAYMENTS AS TERMINAL CHARGES AND WAS WRONG IN HOLDING THAT THE ASSESSEE-COMPANY WAS LIABLE TO DEDUCT TDS U/S. 194C OF THE IT ACT AND THEREBY RAISED THE DEMAND U/S. 201(1 ) AND 201(1A) WHICH IS ARBITRARY UNJUSTIFIED AND ILLEGAL. CONSIDERING THE SUBMISSION MADE BY ASSESSEE, LD CIT(A) DISREGARDED THE PLEA TAKEN BY ASSESSEE BY FURTHER OBSERVING AS UNDER:- 7. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT AND PERUSED THE COPY OF THE AGREEMENT AS WELL AS OTHER DOCUMENTS FI LED BY THE APPELLANT. AS FAR AS THE APPELLANTS CONTENTION REG ARDING APPLICABILITY OF PROVISIONS OF SECTION 194C OF THE ACT ON PAYMENT OF TERMINLING CHARGES IS CONCERNED, IT IS SEEN THAT THE AO HAS MADE AN EX HAUSTIVE AND DETAILED ANALYSIS OF THE AGREEMENT BETWEEN M/S BRP LTD AND THE APPELLANT, IN HIS ORDER DATED 31.03.2008. ON PERUSA L OF AGREEMENT AND THE REASONS GIVEN BY THE AO I AGREE WITH THE ASSESS ING OFFICER THAT THE PROVISIONS OF SECTION 194C OF THE ACT WERE APPLICAB LE ON THE PAYMENT OF TERMINALLING CHARGERS TO M/S BRP LTD. AND M/S IBP L TD. AND THE APPELLANT WAS REQUIRED TO DEDUCT THE TAX AT SOURCE ON SUCH PAYMENT. FROM THE SUBMISSION OF THE APPELLANT BEFORE THE AO VIDE LETTER DATED 12.02.2008, IT IS SEEN THAT THE APPELLANT HAS MADE PAYMENT OF SIMILAR NATURE TO M/S INDIAN OIL PETRONUS LTD. ON ACCOUNT O F TERMINALLING CHARGES. FOR FINANCIAL YEARS 2001-02 & 2002-03, THE SAID COMPANY HAS OBTAINED NIL DEDUCTION CERTIFICATE FROM THE CONCERN ED OFFICER AND HENCE NO DEDUCTION WAS MADE BY THE APPELLANT IN THOSE YEA RS. HOWEVER, IN FY 2003-04 THE APPELLANT ITSELF HAS DEDUCTED THE TAX O N THE PAYMENT OF TERMINALLING CHARGES TO M/S INDIAN OIL PETRONUS LTD . IN VIEW OF ABOVE, I UPHOLD THE VIEW OF THE AO THAT THE PROVISIONS OF SE CTION 194C OF THE ACT WERE APPLICABLE ON PAYMENT OF TERMINALLING CHARGES. THE GROUND NOS. 2, 3 & 4 ARE DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 8 5. BEFORE US LD. AR FILED THREE COPIES OF PAPER BOO KS COMPRISING PAGES 1 TO 271 RESPECTIVELY AND LD AR DREW OUT ATTENTION O N PAGE 20 OF THE PB WHERE THE CLAUSE 8.4 OF THE AGREEMENT WITH THE ASSESSEE A ND BRPL IS RECORDED AND RELEVANT EXTRACT IS REPRODUCED BELOW:- 8.4 IN CONSIDERATION OF THE MARKETING RIGHTS VESTE D WITH OOC AND ALSO THE LOADING OF PRODUCTS THROUGH THE LOADING INFRAST RUCTURE OWNED AND OPERATED BY BRPL, IOC HEREBY AGREES TO COMPENSATE B RPL A LUMPSUM AMOUNT OF RS.14 CRORES PER ANNUM. THIS AMOU NT SHALL BE PAYABLE IN FOUR EQUAL QUARTERLY INSTALLMENTS. EACH INSTALLMENT WILL BE PAID ON THE 15 TH OF THE MID MONTH OF EACH QUARTER. 8.4.1 THIS QUANTUM OF LUMP-SUM AMOUNT IS PAYABLE FO R EACH YEAR FOR PERIOD OF 5 YEARS. THEREAFTER THE SAID AMOUNT SHALL BE ESCALATED AT THE RATE OF 55% (COMPOUNDED) PER YEAR FOR THE BALANCE P ERIOD OF THE AGREEMENT. LD AR FURTHER SUBMITTED THAT ONLY A LUMP-SUM CONSI DERATION WAS PAID THROUGH THE LOADING INFRASTRUCTURE FACILITIES OWNED AND OPE RATED BY BRPL, THE PAYMENT OF TERMINAL CHARGES WAS PAID FOR AVAILING INFRASTRU CTURE FACILITIES. THEREFORE, THIS TRANSACTION IS NOT COVERED UNDER THE PROVISION OF SEC. 194C OF THE ACT. HE AGAIN SUBMITTED THAT IN CASE REVENUE WAS TO COVER T HE AFORESAID PAYMENT OF TERMINALLING CHARGES UNDER THE NET OF TDS THEN AT T HE MOST IT CAN BE COVERED U/S 194-I OF THE ACT. HOWEVER, IT IS PERTINENT TO N OTE THAT, THE PROVISION AS STATED IN SECTION 194-I CAME INTO FORCE WITH EFFECT FROM 1-6-2007 AND DISPUTE IN THE PRESENT CASE RELATE TO THE AYS 2002-03, 2003 -04 & 2004-05 RESPECTIVELY. SO THE AMENDMENT U/S 194-I IS NOT APP LICABLE FOR RELATING ASSESSMENT YEARS. ON THE OTHER HAND, LD DR SUBMITTED THAT PROVISION OF SEC. 194C OF THE ACT IS VERY MUCH APPLICABLE IN RELATION TO ASSESSEES APPE ALS AND HE RELIED ON THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT ASSESSEE IN THE INSTANT CASE, HAS MADE THE PAYMENT OF TERMINALLING CHARGES WITHOUT DEDUCTING TDS. ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 9 WE FIND FROM THE ASSESSMENT ORDER, AO THAT ASSESSE ES TRANSACTIONS WERE VERY MUCH ATTRACTED TOWARDS THE PROVISIONS OF SEC. 194C OF THE ACT AND NON- DEDUCTION OF TDS HAS MADE ASSESSEE IN DEFAULT OF SE C. 201(1) OF THE ACT AND ACCORDINGLY ASSESSEE IS LIABLE TO PAY INTEREST TO S EC. 201(1A) OF THE ACT. HOWEVER, IN APPELLANT ORDER, LD CIT(A) HAS ALSO CO NFIRMED THE ACTION OF AO. NOW THE ISSUE ARISE BEFORE US IS AS TO WHETHER PAYM ENT MADE BY ASSESSEE FOR AVAILING INFRASTRUCTURE FACILITIES AMOUNTS TO WORK CONTRACT AS MENTIONED UNDER SECTION 194C OF THE ACT. THE FACT REVEALS FROM THE COPY OF AGREEMENT BETWEEN ASSESSEE AND BRPL, THAT PAYMENT WAS MADE FOR AVAILI NG THE INFRASTRUCTURE FACILITIES AND AS SUCH, THERE WAS NO WORK CONTRACT OF THE NATURE AS SPECIFIED U/S. 194C OF THE ACT. IT IS ALSO PERTINENT TO NOTE THAT LEGISLATIVE HAS BROUGHT AMENDMENT TO SEC. 194-I OF THE ACT FOR MAKING SUCH TRANSACTIONS SUBJECT TO TDS BUT WHICH CAME INTO FORCE WITH EFFECT FROM 1-6- 2007 ONLY. THE DISPUTE IN THE INSTANT CASE RELATE TO THE PERIOD PRIOR TO THE AMENDMENT U/S 194-I OF THE ACT. AT THIS JUNCTURE IT IS IMPORTANT TO PRODUCE THE RELEVANT PROVISIONS OF SECTION 194-I OF THE ACT WHICH READS AS UNDER : [ RENT . 194-I . ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UN DIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT] ANY I NCOME BY WAY OF RENT, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE IS SUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER. [ DEDUCT INCOME-TAX THEREON AT THE RATE OF [(A) TWO PER CENT FOR THE USE OF ANY MACHINERY OR P LANT OR EQUIPMENT; AND (B) TEN PER CENT FOR THE USE OF ANY LAND OR BUILDIN G (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING) OR FURNITURE OR FITTINGS;)] PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE A GGREGATE OF THE AMOUNT OF SUCH INCOME CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE AFORESAID PERSON T O THE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT EXCEED [ONE HUNDRED AND EIGHTY THOUSAND RUPEES]: [ PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WH OSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BU SINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIF IED UNDER CLAUSE (A) ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 10 OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH INCOME B Y WAY OF RENT IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME- TAX UNDER THIS SECTION:] [ PROVIDED ALSO THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION WHERE THE INCOME BY WAY OF RENT IS CREDITED OR PAID TO A BUSINESS TRUST, BEING A REAL ESTATE INVESTMENT TRUST, IN RESPECT OF ANY REAL ESTATE ASSET, REFERRED TO IN CLAUSE (23FCA) OF SECTION 10, OWNED DIRECTLY BY SUCH EXPLANATION FOR THE PURPOSES OF THIS SECTION,- BU SINESS TRUST.] [(I) RENT MEANS ANY PAYMENT, BY WHATEVER NAME CA LLED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF (EITHER SEPARATELY OR TOGETHER) ANY,- (A) LAND; OR (B) BUILDING (INCLUDING FACTORY BUILDING): OR (C) LAND APPURTENANT TO A BUILDING (INCLUDING FACTO RY BUILDING): OR (D) MACHINERY; OR (E) PLANT; OR (F) EQUIPMENT; OR (G) FURNITURE; OR (H) FITTINGS, WHETHER OR NOT ANY OR ALL OF THE ABOV E ARE OWNED BY THE PAYEE;] (II) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, W HETHER CALLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BO OKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITIN G SHALL BE DEEMED TO BE CREDITED OF SUCH INCOME TO THE ACCOUNT OF THE PA YEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. ] FROM THE PLAIN READING OF THE SECTION, WE FIND THAT THE RENT PAID FOR AVAILING THE INFRASTRUCTURE FACILITY ARE SUBJECT TO TDS UNDE R SECTION 194-I OF THE ACT WHICH IS EFFECTIVE FROM 1.6.2007. IN THE CASE ON HA ND THE DISPUTES RELATE TO THE YEARS BEFORE THE INSERTION OF THE PROVISIONS OF SEC TION 194-I OF THE ACT. FOR MAKING A TRANSACTION SUBJECT TO TDS UNDER SECTION 1 94-C OF THE ACT THERE HAS TO BE WRITTEN OR UNWRITTEN WORKS CONTRACT. NOW IT I S IMPORTANT TO UNDERSTAND THE MEANING OF WORKS CONTRACT IN THE CONTEXT OF INFRAST RUCTURE FACILITY USED BY THE ASSESSEE. FROM THE FACTS WE FIND THAT IN THE INSTAN T CASE THE ASSESSEE WAS BUYING THE PETROLEUM PRODUCTS FROM BRPL. BESIDES TH E ABOVE THE LOADING SERVICES WERE ALSO PROVIDED BY BRPL IN CONNECTION W ITH THE PURCHASE OF THE PETROLEUM PRODUCT. FOR THE LOADING SERVICES THE ASS ESSEE WAS MAKING THE ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 11 PAYMENT SEPARATELY TO BRPL. THE PETROLEUM PRODUCTS WERE PURCHASED BY THE ASSESSEE IN BULK AND REGULAR BASIS FOR WHICH LOADIN G FACILITY WAS PROVIDED BY BRPL. THE ASSESSEE FOR AVAILING THE LOADING FACILIT Y WAS MAKING THE PAYMENT TO THE SAME PARTY FROM WHICH HE WAS BUYING THE PROD UCTS I.E. BRPL. THUS THE LOADING FACILITY WAS INTRICATELY LINKED WITH THE EV ERY PURCHASE OF THE PRODUCTS. IT WAS NOT POSSIBLE FOR THE ASSESSEE TO PURCHASE THE P RODUCTS WITHOUT AVAILING THE INFRASTRUCTURE FACILITY OF BRPL. THUS IN OUR VI EW IT SHALL NOT BE INAPPROPRIATE TO TREAT THE EXPENSES ON INFRASTRUCTURE FACILITY AT PAR WITH THE PURCHASE. THE METHOD FOR THE PAYMENT OF INFRASTRUCTURE FACILITY A ND ENTERING INTO A SEPARATE AGREEMENT CANNOT BE THE SOLE BASIS TO TREAT THE TRA NSACTION INDEPENDENT OF THE PURCHASE. HOWEVER WE FIND THAT IN MANY CASES HONBL E COURTS HAVE HELD THAT THE LOADING CHARGES ARE VERY MUCH COVERED UNDER SEC TION 194C OF THE ACT INCLUDING THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF ASSOCIATED CEMENT COMPANY LTD. VS. CIT (1993) 61 CCH 0273 ISCC (1993) 111 CTR 0165 : (1993) 201 ITR 0435 : (1993) 67 TAXMAN 0346, THE FACTS OF THE CASE ARE AS UNDER : 2. THE FACTS WHICH HAVE LED TO THE NEED FOR OUR DECIS ION ON THE SAID QUESTION, ARE BRIEFLY THESE : THE ASSOCIATED CEMENT CO. LTD., THE APPELLANT, ISSUED A LETTER DT. 5TH NOV., 1973 TO MR. S.P. NAG, CONTRACT OR, JHUNAKPANI CONTAINING THE TERMS AND CONDITIONS OF A CONTRACT OF LOADING P ACKED CEMENT BAGS FROM ITS PACKING PLANTS NOS. 1 AND 2 INTO WAGONS OR TRUCKS. UNDER CL. 12 OF THOSE TERMS AND CONDITIONS, THERE WAS A STIPULATION THAT THE CONTRACTOR SHALL BE PAID A SUM FOR HIS WORK AT A FLAT RATE OF 41 PAISE FOR E ACH TONNE OF CEMENT HANDLED IN PACKING PLANT NOS. 1 AND 30 PAISE FOR EACH TONNE OF CEMENT HANDLED IN PACKING PLANT NO. 2. CLAUSE 13 THEREOF, WHICH CONTA INED A RECITAL THAT THE RATE OF LOADING IN CL. 12 HAD BEEN WORKED OUT ON THE BAS IS OF DAILY BASIC WAGES OF RS. 2.35 PAISE, D.A. OF RS. 1.21 PAISE AND H.R.A. O F RS. 0.50 PAISE, PER DAY PER WORKER STIPULATED A TERM OF REIMBURSEMENT BY TH E APPELLANT TO THE CONTRACTOR OF THE DIFFERENCE IN D.A. OVER THE AMOUN T OF RS. 1.21 PAISE AND ANNUAL INCREMENT, ETC., PAYABLE FROM MONTH TO MONTH TO EVERY WORKER BY HIM AS PER THE SECOND WAGE BOARD RECOMMENDATION. AS THE CONTRACTOR CARRIED OUT HIS WORK ACCORDING TO THE TERMS AND CONDITIONS IN THE CONTRACT DURING THE YEARS 1973-74 AND 1974-75, THE APPELLANT MADE PAYME NTS OF THE SUMS PAYABLE TO HIM UNDER CL. 12 OF THE CONTRACT AND THE SUMS REIMBURSABLE TO HIM UNDER CL. 13 THEREOF. BUT THE DEDUCTIONS MADE UNDER S. 194C(1) OF THE ACT BY THE APPELLANT OUT OF THE SUMS PAID OR REIMBURSED TO THE CONTRACTOR FELL SHORT OF THE DEDUCTIONS REQUIRED TO BE MADE THEREUNDER. AS T HE APPELLANT TOOK THE STAND THAT IT WAS NOT LIABLE TO DEDUCT ANY AMOUNT U NDER S. 194C(1), OUT OF THE SUMS PAID ON ITS BEHALF TO THE CONTRACTOR AS PER CL S. 12 AND 13 OF THE CONTRACT, ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 12 THE ITO, JAMSHEDPUR, SERVED ON THE PRINCIPAL OFFICE R OF THE APPELLANT A NOTICE DT. 30TH MARCH, 1978 TO SHOW CAUSE AS TO WHY ACTION SHOULD NOT BE TAKEN AGAINST THE APPELLANT UNDER SS. 276B(1), 281 AND 22 1 OF THE ACT IN RESPECT OF ASST. YRS. 1973-74 AND 1974-75 FOR SHORT DEDUCTIONS OUT OF THE SUMS PAID TO CONTRACTOR WITHOUT OBSERVING THE REQUIREMENT OF S. 194C(1) OF THE ACT. ANOTHER NOTICE DT. 8TH MAY, 1978, RELATING TO THE ASST. YRS . 1974-75 TO 1977-78 OF A SIMILAR NATURE, WAS ALSO SERVED ON THE PRINCIPAL OF FICER OF THE APPELLANT. THE APPELLANT, ALTHOUGH IMPUGNED BOTH THE SAID NOTICES IN A WRIT PETITION FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION BEFO RE THE HIGH COURT OF JUDICATURE AT PATNA, THAT WRIT PETITION WAS DISMISS ED BY THE HIGH COURT BY ITS ORDER DT. 8TH MARCH, 1979. THE APPELLANT HAS, THERE FORE, FILED THIS APPEAL BY SPECIAL LEAVE BEFORE THIS COURT SEEKING THE QUASHIN G OF THE NOTICES WHICH IT HAD UNSUCCESSFULLY IMPUGNED BEFORE THE HIGH COURT, IN ITS WRIT PETITION. HOWEVER, WE FIND THAT THE FACTS IN THE ABOVE CASE A RE DIFFERENT FROM THE CASE IN HAND. IN THE FORMER CASE THE LOADING CHARGES WER E PAID BY THE ASSESSEE BY EMPLOYING THE LABOUR AND THEIR RATE WAS FIXED ON TH E BASIS OF QUANTITY. HOWEVER, IN THE CASE ON HAND, THE RATE LUMP SUM CON SIDERATION WAS FIXED FOR THE INFRASTRUCTURE FACILITY. NO DIRECT LABOUR WAS I NVOLVED IN THE CASE ON HAND. 6.1 THE CLAIM OF THE ASSESSEE THAT OTHER COMPANIES TO WHOM IDENTICAL PAYMENTS WERE MADE BY THE ASSESSEE HAVE FURNISHED T HE FORM 197/197A OF THE ACT FOR NON-DEDUCTION OF TAX, IN OUR VIEW THE M ERE FURNISHING OF FORM 197A OF THE ACT CANNOT CHANGE THE CHARACTER OF THE TRANS ACTIONS. THE LD. AR ALSO SUBMITTED THAT IN THE EARLIER YEARS THE IDENTICAL PAYMENTS WERE MADE FOR THE AVAILING OF INFRASTRUCTURE FACILITIES BUT NO DISALLOWANCE WAS WARRANTED. THE LD. DR FAILED TO BRING ANYTHING ON R ECORD CONTRARY TO THE ARGUMENTS ADVANCED BY THE LD. AR. 6.2 THEREFORE, IN OUR CONSIDERED VIEW, THE PROVISIO N OF SEC. 194C, IN THE INSTANT CASE IS NOT APPLICABLE TO THE ASSESSEE. ACC ORDINGLY, WE REVERSE THE ORDERS OF AUTHORITIES BELOW AND GROUNDS RAISE BY AS SESSEE ARE ALLOWED. AO IS DIRECTED ACCORDINGLY. 7. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.4 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO BY HOLDING THAT LOADING AND UNLOADING FACILITY ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 13 AMOUNTING TO RS.1,79,847/- WAS TERMINALLING CHARGES AND ATTRACTING THE PROVISIONS OF SECTION 194C OF THE ACT. 8. WE HAVE DECIDED THE IDENTICAL ISSUE IN FAVOUR OF ASSESSEE RAISED IN THE GROUNDS OF APPEAL NOS. IN 2 & 3. FOLLOWING THE SAME PRECEDENT, WE ALSO DECIDE THIS ISSUE IN FAVOUR OF ASSESSEE ACCORDINGLY . 9. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.5 IS THAT LD CIT(A) IS ERRED IN HOLDING THAT IBPL HAS NOT PAID INCOME TAX ON THE RECEIPT OF 1,79,847/- FOR PROVIDING TERMINAL CHARGES TO ASSESSEE. 10. AS WE HAVE HELD THAT THE PROVISIONS OF SECTION 194C IS NOT APPLICABLE TO THE ASSESSEE FOR THE REASONS DISCUSSED ABOVE. ACCOR DINGLY THE QUESTION OF TREATING THE ASSESSEE IN DEFAULT DOES NOT ARISE UND ER SECTION 201(1) OF THE ACT. HENCE, THIS GROUND OF APPEAL OF THE ASSESSEE BECOME S IN FRUCTUOUS AND DOES NOT REQUIRE ANY ADJUDICATION. 11 NEXT INTER-CONNECTED ISSUE RAISED BY ASSESSEE IN GROUNDS NO.6 & 7 IS THAT LD CIT(A) ERRED IN CONFIRMING THE ACTION OF A O ON ACCOUNT OF LEVY OF INTEREST U/S. 201(1A) OF THE ACT FOR AN AMOUNT OF 10,36,752/- 12. AT THE OUTSET, IT IS PERTINENT TO MENTION THAT WE HAVE ALREADY DECIDED THE INTER-CONNECTED ISSUE IN GROUND NO. 2 AND 3 IN FAVO UR OF ASSESSEE BY HOLDING THAT ASSESSEE IS NOT IN DEFAULT FOR NON-DEDUCTION O F TDS U/S 201(1) OF THE ACT FOR PAYMENT MADE TO BRPL ON ACCOUNT OF TERMINALLIN G CHARGES. SINCE THE ASSESSEE AS PER CONTENTS OF OUR ORDER IN PARAS-4-6 OF THIS ORDER IS NOT IN DEFAULT, THEREFORE, THE QUESTION OF INTEREST U/S. 2 01(1A) OF THE ACT DOES NOT ARISE. HENCE, WE REVERSE THE ORDERS OF AUTHORITIES BELOW REGARDING THIS INTER- CONNECTED ISSUE. AO IS DIRECTED ACCORDINGLY. 13. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ITA NO.1517-1519/KOL/2009 A.YS 02-03 T O 04-05 INDIAN OIL CORPN LTD. MARKETING DIVN. (E) REGION V. DCIT CIR-58 (TDS0 KOL. PAGE 14 COMING TO ASSESSEES APPEALS NO. 1517-1518/KOL/2009 FOR AYS 02-03 & 03-04. 14. AS STATED EARLIER, THE ISSUES IN BOTH THE YEARS ARE SAME AS THAT OF LAST YEAR AY 2004-05, THE ONLY DIFFERENCE IS THE AMOUNTS INVOLVED. SINCE THE FACTS ARE EXACTLY IDENTICAL, BOTH THE PARTIES AGREED WHA TEVER VIEW TAKEN IN THE ABOVE APPEAL (ITA 1519/KOL/2009) OF ASSESSEE MAY BE TAKEN IN BOTH THE APPEALS OF ASSESSEE ALSO, WE HOLD ACCORDINGLY. 15. IN THE RESULT, BOTH APPEALS OF ASSESSEE ARE ALL OWED. 16. IN COMBINED RESULT, ALL THE APPEALS OF ASSESSEE STA ND ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 20/07/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP #$% - 20/07/2016 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-INDIAN OIL CORPORATION LTD. MARKETING DI VISION, (EASTERN REGION) INDIAN OIL BHA VAN, 2, GARIAHAT ROAD (SOUTH), KOLKATA-68 2. /REVENUE-DCIT, CIR-58 (TDS), 10B, MIDDLETON ROW, KO LKATA-71 3. $$&' ( / CONCERNED CIT 4. ( - / CIT (A)-XVI, KOLKATA 5. )*+ ,,&' , &' / DR, ITAT, KOLKATA 6. +-. / GUARD FILE. BY ORD ER/ , /TRUE COPY/ / $ &',
