M/s Oil & Natural Gas Corporation Ltd., Rajahmundry V. THE ITO(TDS), Rajahmundry

ITA 157/VIZ/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6556 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 19-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M BHUPAL REDDY
• Assessee Lawyers: E S H MOHAN
• Section: 194C; 201(1)

Judgement Text

1 ITA NOS. 156 & 157/VIZ/2013 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI G. MANJUNATHA, HONBLE ACCOUNTANT MEMBER ITA NO. 156 & 157 / VIZ /201 3 (ASST. YEAR : 20 08 - 09 & 2009 - 10 ) OIL AND NATURAL GAS CORPORATION LTD., (ONGC) , RAJAHMUNDRY ASSET, GODAVARI BHAVAN, RAJAHMUNDRY. V . ITO (TDS), RAJAHMUNDRY. PAN NO. AAACO 1598 A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADVOCATE & SHRI E.S.H. MOHAN - CA . DEPARTMENT BY : SHRI M. BHUPAL REDDY - DR DATE OF HEARING : 09 / 01 /201 7 . DATE OF PRONOUNCEMENT : 2 0 / 01 /201 7 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER TH E S E ARE THE APPEAL S FILED BY THE ASSESSEE AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 11 , MUMBAI CAMP AT VISAKHAPATNAM , DATED 0 9 /0 1 /201 3 FOR THE ASSESSMENT YEAR S 200 8 - 0 9 & 200 9 - 1 0 . ITA NO. 156/VIZ/2013 2. FACTS OF THE CASE, IN BRIEF, ARE THAT ASSESSEE - OIL AND NATURAL GAS CORPORATION LTD. IS A COMPANY ENGAGED IN EXPLORATION AND PRODUCTION OF OIL AND NATURAL GAS IN K.G. BASIN . THE ASSESSEE FILED ITS TDS RETURNS 2 ITA NOS. 156 & 157/VIZ/2013 WITH ITO (TDS), RAJAHMUNDRY . A TDS SURVEY WAS CONDUCTED ON 30/01/2009 IN THE PREMI SES OF THE ASSESSEE - COMPANY AT RAJAHMUNDRY TO VERIFY WHETHER ASSESSEE IS COMPLYING WITH THE TDS PROVISIONS OR NOT. DURING THE COURSE OF SURVEY, IT WAS NOTICED THAT THE ASSESSEE HAD MADE THE FOLLOWING PAYMENTS, ON WHICH TDS ATTRACTS : - A) ROYALTY B) WORK OVER OPERATIONS C) TRANSPORT EXPENSES D) REPAIR AND MAINTENANCE E) OTHER CONTRACTUAL PAYMENTS THE ASSESSING OFFICER HAS NOTED FROM THE INFORMATION FURNISHED BY THE ASSESSEE THAT THE ASSESSEE DID NOT MAKE TDS AT APPROPRIATE RATES APPLICABLE ON THE PAYMENTS MADE TOWARDS WORK OVER OPERATIONS AND TRANSPORT EXPENSES. FURTHER , THE ASSESSING OFFICER HAS NOTED THAT ON VERIFICATION, IT IS FOUND THAT THE ASSESSEE HAS MADE TDS UNDER SECTION 194C AT 2.266% ON THE ABOVE TWO PAYMENTS , TAKING INTO ACCOUNT TH AT THE PAYMENTS WERE MADE TO CONTRACTORS. DURING THE COURSE OF FINANCIAL YEAR 2007 - 08, THE ASSESSEE HAS MADE PAYMENTS TO THE TUNE OF 176,66,48,423/ - TOWARDS WORK OVER OPERATION AND TRANSPORT EXPENSES . THE ASSESSEE - COMPANY HAS BEEN ASKED TO PRODUCE ALL THE AGREEMENT COPIES ENTERED INTO WITH THEIR PAYEES/CONTRACTORS . THE ASSESSEE - COMPANY HAS SUBMITTED A SAMPLE COPY OF AGREEMENT OF EACH WORK, THE DETAILS ARE AS UNDER: - A) WORK OVER OPERATION : M/S.DEEP INDUSTRIES LTD. , GANDHI NAGAR , GUJARAT B) REPAIR & MAINTENANCE : MITHRA AGENCIES, RJY AND CUMMINS ENGINEERS C) HIRING OF DUAL CABS : PRASAD ASSOCIATES, RAJAHMUNDRY D) TRANSPORTATION OF CRUDE OIL : GRADUATES TRANSPORT SERVICES, VISAKHAPATNAM. 3 ITA NOS. 156 & 157/VIZ/2013 THE ASSESSING OFFICER FURTHER NOTED THAT THE WORK OVER OPERATIONS COMPRISES OF ON - SITE WORK , SUCH AS DIGGING OF WELLS, BORES BY USING RIGS , COMPRESSION OF NATURAL GAS TO ACHIEVE ZERO - FLARING , DEVELOPMENT / EXPL O RATOR Y WELLS BY DEPLOYING ITS MOBILE WORK - OVER UNIT AT SUCH LOCATIONS WITHIN THE OPERATING AREA AS MAY BE IDENTIFIED BY ONGC , AND TO SUCH DEPARTMENT S A S ARE DESIGNATED BY ONGC TO EXPLOIT NATURAL HYDROCARBON IN THE FORM OF OIL AND GAS. ALL THESE OPERATIONS ARE DONE BY THE ONGC BY HIRING SERVICES OF VARIOUS CONCERNS BY ENTERING INTO AGREEMENTS F OR A SPECIFIC PERIOD. 3 . THE ASSESSING OFFICER , BY CONSIDERING THE AGREEMENT, OBSERVED THAT WORK OVER OPERATIONS CARRIED ON BY THE ASSESSEE, IT CAN BE SAID THAT THE PAYMENTS MADE ARE ONLY TOWARDS HIRING OF SERVICES, MACHINERY, PLANT, EQUIPMENT, FURNITURE, FITTINGS ETC. AND THE ASSESSEE IS LIABLE TO MAKE TDS UNDER THE PROVISIONS OF SECTION 194 - I AND NOT UNDER THE PROVISIONS OF SECTION 194C . 4 . SO FAR AS TRANSPORT EXPENSES ARE CONCERNED, THE ASSESSING OFFICER OBSERVED THAT THE PAYMENTS ARE IN THE NATURE OF HIR E PAYMENTS . T HIS S COPE OF WORK IS LI FT ING AND TRANSPORTATION OF CRUDE OIL , WHICH WAS CONDENSED FROM WELL SITES/PRODUCTION INSTALLATIONS OF ONGC IN RAJAHMUNDRY ASSET TO S. YANAM OIL UNLOADING TERMINAL/TATIPAKA MINI REFINERY OR FROM ONE ONGC PRODUCTION INSTALLATION OR WELL SITE TO OTHER PR ODUCTION INSTALLATION OR WELL SITE OF RAJAHMUNDRY ON - SHORE AREA BY USING 20KL OR HIGHER CAPACITY OIL TANKER S. HE FURTHER NOTI C ED THAT THE ASSESSEE MADE A TDS UNDER SECTION 194C, ACTUALLY HE HAS TO MAKE TDS 4 ITA NOS. 156 & 157/VIZ/2013 UNDER SECTION 194 - I . THEREFORE, HE COMPLETED THE ASSESSMENT BY OBSERVING THAT THE ASSESSEE MADE SHORT DEDUCTIONS UNDER SECTION 194C AND FAILED TO DEDUCT TAX AT SOURCE UNDER SECTION 194 - I AT 11.33%. THE ASSESSEE IS DEEMED TO BE ASSESSEE IS IN DEFAULT IN RESPECT OF SUCH TAX , HENCE, DIRECTED TO PAY TAX AND INTEREST UNDER SECTION 201(1) AS WELL AS 201(1A) OF THE ACT . 5. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED THAT ASSESSEE HAS DEDUCTED TDS CORRECTLY UNDER SECTION 194C OF THE ACT AND THE ASSESSING OFFICER WRONGLY HELD THAT ONGC I.E. ASSESSEE I S IN DEFAULT FOR SHORT DEDUCTION OF TAX AT SOURCES AND SUBMITTED THAT THE ORDER PASSED BY THE ASSESSING OFFICER MAY BE REVERSED. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE CALLED REMAND REPORT FROM THE ASSESSING OFFICER AND OBSERVED TH A T CONSIDERING THE FACTS OF THE CASE, THE REPORT OF THE ASSESSING OFFICER, SUBMISSIONS OF THE LD. AR AND THE JUDGMENT OF THE HON'BLE APEX COU R T IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD. V. CIT [293 ITR 226 (SC)] , IT IS HEREBY HELD THAT THE APPELLANT IS NOT LI A BLE FOR ANY DEMAND UNDER SECTION 201(1) IN T H OSE CASES OF NON - DEDUCTION AND SORT DEDUCTION OF TAX AT SOURCE WHEREVER HE HAS SHOWN THAT THE PAYEE HAS FILED THE INCOME TAX RETURN DECLARING THE RECEIPTS FROM TH E APPELLANT AS ITS INCOME AND PAID TAXES THEREON APPROPRIATELY. ACCORDINGLY , HE DIRECTED THE ASSESSING OFFICER TO EXAMINE THE RECORDS OF THE PAYEES WITH RESPECT TO FILING OF INCOME TAX RETURNS SHOWING THE RECEIPT OF INCOME FROM THE ASSESSEE AND ALLOW RELIE F IN ALL THOSE CASES 5 ITA NOS. 156 & 157/VIZ/2013 WH E RE THE RETURN OF THE PAYEES SHOWING THE INCOME FROM THE ASSESSEE IS FILED AND TAXES ARE PAID. 6 . ON BEING AGGRIEVED , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUN AL. 7 . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS RAISED A SPECIFIC GROUND BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) I.E. GROUND NO.2 BY ALLEGING THAT SECTION 194 - I HAS NO APPLICATION TO THE ASSESSEE AND THE ASSESSING OFFICER IS NOT CORRECT IN ALLEGING THAT THE ASSESSEE HAS MADE SHORT DEDUCTION AND THE COMMISSIONER OF INCOME TAX (APPEALS) WITHOUT ADJUDICATING THE GROUND RAISED BY THE ASSESSEE, BY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD. (SUPRA) , DIRECTED THE ASSESSING OFFICER TO EXAMINE THE RETURNS FILED BY THE PAYEES AND GRANTED RELIEF TO THE ASSESSEE. HE FURTHER SUBMITTED TH A T THE ISSUE INVOLVED IN THIS APPEAL IS WHETHER TDS HAS TO BE DEDUCT ED UNDER SECTION 194 - I OR 194C , SHOULD BE ADJUDICATED FIRST AND THEREAFTER ALTERNATIVE PLEA HAS TO BE CONSIDERED. HE FURTHER SUBMITTED THAT THE ISSUE MAY BE REMITTED BACK TO THE COMMISSIONER OF INCOME TAX (APPEALS) FOR RE - ADJUD I CATION ON MERITS OF THE CASE. 8 . ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ISSUE MAY BE SENT BACK TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW . THE ISSUE 6 ITA NOS. 156 & 157/VIZ/2013 INVOLVED IN THIS APPEAL IS AS TO WHETHER ASSESSEE HAS TO DEDUCT TDS UNDER SECTION 194C OR 194 - I IN RESPECT OF WORK OVER OPERATIONS, TRANSPORT EXPENSES. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS TO BE DEDUCTED TDS UNDER THE PROVISION S OF SECTION 194 - I , BUT THE ASSESSEE S CONTENTION IS TO DEDUCT TDS BY 194C AND NOT UNDER SECTION 194 - I. WHEN TH IS APPEAL CAME UP FOR HEARING BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), THE COMMISSIONER OF INCOME TAX (APPEALS) WITHOUT ADJUDICATING MERITS OF THE CASE , DIRECTED THE ASSESSING OFFICER TO FOLLOW THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE (P) LTD. (SUPRA) . WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT CONSIDERED THE GROUND NO.2 RAISED BY THE ASSESSEE, HE ONLY CONSIDERED THE ALTERNATIVE PLEA AND REMANDED THE MATTER BACK TO THE FI LE OF THE ASSESSING OFFICER. WE, T HEREFORE, BY CONSIDERING THE ARGUMENTS OF BOTH THE SIDES AND ALSO REQUEST MADE BY BOTH THE COUNSEL , SET ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND REMAND THE MATTER BACK TO THE FILE OF THE ASSE SSING OFFICER TO EXAMINE ALL THE DETAILS OF THE CASE AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. ITA NO. 157/VIZ/2013 10 . SO FAR AS ITA NO. 157/VIZ/2013 FOR THE ASSESSMENT YEAR 2009 - 10 IS CONCERNED, THE FACTS AND CIRCUMSTANCES OF THE CASE ARE SIMILAR , THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO FOLLOW THE ORDER PASSED IN ASSESSMENT YEAR 2008 - 0 9. ORDERED ACCORDINGLY. 7 ITA NOS. 156 & 157/VIZ/2013 11 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON TH I S 2 0 T H DAY OF JANUARY , 201 7 . S D / - S D / - ( G. MANJUNATHA ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 0 T H JANUARY , 201 7 . VR/ - COPY TO: 1 . THE ASSESSEE. OIL AND NATURAL GAS CORPORATION LTD., (ONGC), RAJAHMUNDRY ASSET, GODAVARI BHAVAN, RAJAHMUNDRY. 2 . THE REVENUE. ITO (TDS), RAJAHMUNDRY. 3 . THE CIT(TDS), HYDERABAD. 4 . THE CIT(A) , VISAKHAPATNAM. 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., VISAKHAPATNAM