The ITO,TDS Ward-1, Baroda V. GAIL (India) Ltd., Baroda

ITA 1722/AHD/2010

• Counselvise Citation: 172220514 RSA 2010
• Duration Of Justice: 3 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 06-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 21-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: MILAN MEHTA
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.1722/AHD/2010 A.Y. 2009-10 ITO, TDS, WARD-1, BARODA. VS M/S. GAIL (INDIA) LIMITED, MANISHA CIRCLE, OLD PADRA ROAD, BARODA PAN: AAACG 1209J (APPELLANT) (RESPONDENT) CO NO.225/AHD/2010 A.Y. 2009-10 M/S. GAIL (INDIA) LIMITED, MANISHA CIRCLE, OLD PADRA ROAD, BARODA PAN: AAACG 1209J VS ITO, TDS, WARD-1, BARODA. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.C. MATHEWS, SR.D.R., ASSESSEE(S) BY : SHRI MILAN MEHTA / DATE OF HEARING : 06/03/2014 / DATE OF PRONOUNCEMENT: 14/03/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THE APPELLANT-REVENUE HAS FILED THIS APPEAL AND THE RESPONDENT ASSESSEE IS A CROSS OBJECTOR. BOTH ARE EMANATING FR OM THE ORDER OF LEARNED CIT(A)-VII, BARODA DATED 11.02.2010. WE SHA LL FIRST TAKE UP THE APPEAL OF THE REVENUE AND THE GROUNDS RAISED ARE RE PRODUCED BELOW: THE LD. CIT(A) ERRED IN LAW AS WELL AS FACTS OF TH E CASE IN CANCELING THE ORDER PASSED U/S.201(1) & DELETING THE INTEREST CHA RGED U/S.201(1A) OF THE IT ACT OF RS.4,36,395/- & RS.29,414/- RESPECTIVELY FOR A.Y. 2009-10 BY THE AO ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 2 - TREATING THE ASSESSEE IN RESPECT OF PAYMENT OF VEHI CLES HIRING, THE TAX DEDUCTED U/S.1941 OF THE ACT. 2. THE LD. CIT(A) ALSO ERRED IN LAW AS WELL AS FACT S OF THE CASE IN CANCELING THE ORDER PASSED U/S.201(1) & DELETING THE INTEREST CHARGED U/S.201(1A) OF THE IT ACT OF RS.4,36,695/- & RS.29,414/- RESPECTIVELY FOR A.Y. 2009-10 BY THE AO TREATING THE ASSESSEE IN RESPECT OF MAINTENANCE OF TERMINAL AND PIPE LINE U/S. 194 J OF THE ACT. 2. A PROPOS TO GROUND NO.1. FACTS IN BRIEF AS EMERG ED FROM THE CORRESPONDING ORDER PASSED U/S.201(1)/201(1A) OF IT ACT, DATED 20 TH OF MARCH, 2009 WERE THAT; IT WAS NOTED THAT, DURING TH E COURSE OF SPOT VERIFICATION IT WAS FOUND THAT THE ASSESSEE HAD DED UCTED TDS U/S. 194C FOR PAYMENT OF VEHICLE HIRING, INSTEAD OF DEDUCTING THE TAX U/S.194 I OF IT ACT. IN COMPLIANCE TO A SHOW CAUSE NOTICE, IT WAS E XPLAINED BY THE ASSESSEE THAT THE PROVISIONS OF SECTION 194I WERE N OT APPLICABLE IN RESPECT OF HIRING OF THE CARS / TAXIES. ACCORDING T O THE ASSESSEE, THE SAID SERVICES WERE NOT WITHIN THE DEFINITION OF RENT. HOWEVER, IT WAS EXPLAINED THAT IN THE LIGHT OF THE PROVISIONS OF SE CTION 194C EXPLANATION (IV)(C), THE CARRIAGE OF GOODS AND PASSENGER BY ANY MODE OF TRANSPORT OTHER THAN RAILWAYS FALLS UNDER THE EXPRESSION WOR K. THE ASSESSEE HAS ALSO EXPLAINED THE CONDITIONS ON WHICH THE VEHICLES WERE TAKEN ON HIRE AS UNDER: YOUR OFFICE MAY KINDLY NOTE THAT WE HAVE ONLY OBTA INED THE SERVICES OF TRANSPORTATION FROM THE VEHICLE OWNER. THE DRIVER O F THE CAR, PARKING OF THE CAR, THE RISK AND THREAT ATTACHED TO THE USAGES OF CAR DURING THE COURSE OF HIRING LIES WITH THE PERSON WHO HAS GIVEN SUCH SERV ICE. THE COMPANY IS NOT RESPONSIBLE FOR ANY DAMAGES CAUSED TO THE CAR ON AC COUNT OF ANY MISTAKE OF THE CAR DRIVER. THE CAR IS ALSO NOT FIXED, SERVICE OF PARTICULAR MAKE MODEL CAR IS REQUIRED AS PER THE TERMS OF CONTRACT. THE VARIO US LIABILITY OF PAYMENT OF ROAD TAXES, REPAIR AND MAINTENANCE, R.T.O TAXES, IN SURANCE ETC. ARE NOT OF THE COMPANY. THE DRIVERS ARE NOT OF THE ASSESSEE COMPAN Y THEREFORE POSSESSION OF THE CAR LIES WITH THE PROVIDER OF THE CAR. FOR YOUR KIND REFERENCE WE ARE SUBMITTING THE COPY OF AGREEMENT WITH MAJOR PARTIES MARKED AS ANNEXURE-1. 3. THE AO WAS NOT CONVINCED AND HELD THAT THE VEHIC LE REMAINED IN THE POSSESSION OF THE ASSESSEE AS A HIRER AND A CON SOLIDATED PAYMENT WAS ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 3 - MADE, THEREFORE, THE VEHICLES WERE TAKEN ON RENT; H ENCE, AS PER THE HIRING CONTRACT; PROVISIONS OF SECTION 194I WOULD APPLY. T HE AO HAS THEREAFTER COMPUTED THE SHORT DEDUCTION OF TDS BECAUSE AS PER THE PROVISIONS OF SECTION 194C ONLY 2% TDS WAS REQUIRED TO BE DEDUCTE D, WHERE AS UNDER SECTION 194I AS PER AO 10% TAX WAS REQUIRED TO BE D EDUCTED BY THE ASSESSEE. RESULTANTLY, A DEMAND U/S.194I FOR SHORT DEDUCTION OF RS.4,36,695/- WAS RAISED AGAINST THE ASSESSEE. BEIN G AGGRIEVED THE MATTER WAS CARRIED BEFORE LEARNED CIT(A). 4. AFTER CONSIDERING THE FACTS OF THE CASE, LEARNED CIT(A) HAS HELD AS UNDER: I HAVE CONSIDERED THE SUBMISSION OF LEARNED AR AND FACTS OF THE CASE. THE VEHICLES WERE HIRED BY THE APPELLANT AS PER THE SER VICE CONTRACT. THE CONTRACTOR PROVIDES VEHICLES WITH DRIVER. THE VEHIC LES WERE PUT AT THE DISPOSAL OF THE APPELLANT AND CHARGES WERE COLLECTED AS PER THE USAGE OF THE VEHICLES. THE VEHICLES WERE NEVER PUT AT THE DISPOSAL OF THE APPELLANT, BUT ONLY SERVICES, DRIVEN BY THE DRIVERS PROVIDED BY THE CONTRACTOR. T HE MAINTENANCE, FUEL EXPENSES, KEEPING THE VEHICLES IN PERFECT RUNNING C ONDITIONS ETC WERE THE LOOK OUT OF THE CONTRACTOR, BUT NOT THAT OF THE APPELLAN T. IN THE ACT, CARS OR VEHICLES WERE INCLUDED UNDER THE HEAD PLANT AND MACHINERY AN D AS SUCH THE AO MUST HAVE BEEN UNDER THE IMPRESSION THAT CARS OR VEHICLE S ARE PLANT AND MACHINERY FOR THE PURPOSE OF DEDUCTING THE TAX AT SOURCE. AS COMMONLY UNDERSTOOD, PLANT OR MACHINERY HAS TO PRODUCE THINGS OR ARTICLES AS O UTPUTS FROM INPUTS OF RAW MATERIALS, WHERE AS SUCH A THING IS NOT FOUND IN HI RING OF CARS OR VEHICLES IN THE CASE OF THE APPELLANT. THE CARS OR VEHICLES TRA NSPORT EMPLOYEES OF THE APPELLANT FROM PLACE TO PLACE, SAY, FROM RESIDENCE TO WORKPLACE AND BACK AS PER THE TIME SCHEDULE OF THE CONTRACTEE. SINCE, THE CARS OR VEHICLES ARE PLACED AT THE DISPOSAL OF THE APPELLANT, IN ADDITION TO TH E TRANSPORT OF EMPLOYEES FROM RESIDENCE TO WORKPLACE; IT MAY BE USED FOR ANY OTHE R BUSINESS PURPOSE AS DEEMED NECESSARY BY THE APPELLANT. THERE IS ALSO NO STIPULATION IN AGREEMENT THAT THE SAME CAR OR VEHICLE HAS TO BE PROVIDED, BU T IT IS ENOUGH IF THE SAME TYPE OR MODEL OF VEHICLE IS PLACED AT THE DISPOSAL OF THE APPELLANT, FOR THE PURPOSE FOR WHICH, THE CAR OR VEHICLE HAS BEEN HIRE D. IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CASE, THERE IS NO HESITATI ON IN TREATING THE ABOVE CONTRACT AS ONE FOR RENDERING SERVICES, RATHER THAN HIRE FOR VEHICLES. AS ALREADY POINTED OUT, CAR OR VEHICLE COULD BY NO STR ETCH OF IMAGINATION BE CONSIDERED AS A PLANT OR MACHINERY AS THE FACTS INV OLVED IN THIS CASE SUGGEST. THUS, I AM OF THE OPINION THAT THE AO WAS NOT JUSTI FIED IN APPLYING THE PROVISIONS OF SECTION 1941, INSTEAD OF THE PROVISIO NS OF SECTION 194C, AS APPLIED BY THE APPELLANT. HENCE, THE AO IS DIRECTED TO DEDUCT TAX AT SOURCE AT ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 4 - 2%, INSTEAD OF 10% IN THIS REGARD AND THUS THIS GRO UND OF APPEAL IS PARTLY ALLOWED. 5. FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., M R. K.C. MATHEWS HAS RAISED HIS OBJECTION THAT LEARNED CIT(A) HAS RE CORDED WRONGLY THAT THE VEHICLES WERE NOT PUT AT THE DISPOSAL OF THE AS SESSEE BUT ONLY SERVICES OF THE VEHICLE WERE PROVIDED BECAUSE THOSE VEHICLES WERE DRIVEN BY THE DRIVERS PROVIDED BY THE CONTRACTOR. HIS SECOND ARGU MENT WAS THAT THIS ISSUE IS COVERED BY A DECISION OF HONBLE GUJARAT H IGH COURT PRONOUNCED IN THE CASE OF THREE STAR GRANITE (P) LTD., (2014) 41 TAXMANN.COM 91 (KERALA). 6. FROM THE SIDE OF THE RESPONDENT-ASSESSEE, LEARNE D AR, MR. MILAN MEHTA APPEARED AND EMPHASIZED THAT AS PER THE TERMS AND CONDITIONS OF THE AGREEMENT THE VEHICLES WERE HIRED WHICH WERE TH E RESPONSIBILITY OF THE SAID AGENCY WHO HAS PROVIDED THE VEHICLES AND T HAT AGENCY WAS TO INCUR THE RUNNING EXPENSES; HENCE, THE ASSESSEE WAS NOT HAVING THE CONTROL OR POSSESSION OVER THE PROPERTY, I.E., VEHI CLES. EVEN, THE ASSESSEE HAD NO CLAIM OVER ANY COMPENSATION OR LOSS CONNECTE D WITH THE VEHICLES. HE HAS PLACED RELIANCE ON A CBDT CIRCULAR NO.558 DA TED 28.09.1990 WHEREIN IT WAS ADVISED AS UNDER: ON THE BASIS OF THESE TERMS AND CONDITIONS, THE BO ARD HAVE BEEN ADVISED THAT ALTHOUGH THE CONTRACT MAY APPEAR TO BE A SINGLE HIR E CONTRACT. IT IS ACTUALLY A SERVICE CONTRACT (FOR CARRYING OUT ANY WORK) ENTERE D INTO BETWEEN THE STATE ROAD TRANSPORT CORPORATION AND THE OWNER OF THE BUS FOR PLYING CERTAIN BUSES ON CERTAIN ROUTES AND SUBJECT TO CERTAIN CONDITIONS . IN SUCH CASES, THE PROVISIONS OF SECTION 194C ARE APPLICABLE AND TAX W ILL HAVE TO BE DEDUCTED AT SOURCE FROM THE PAYMENTS MADE TO THE PRIVATE BUS OW NERS. IT MAY, THEREFORE, BE KEPT IN MIND THAT THE APPLICABILITY OF PROVISION S OF SECTIONS 194C IN SUCH CASES MAY BE CONSIDERED ON MERITS IN THE LIGHT OF T HE AFORESAID OBSERVATIONS, AND TO THIS EXTENT THE CLARIFICATION GIVEN IN QUEST ION NO.5 IN BOARDS CIRCULAR NO.98, DATED 26.09.1972 STAND MODIFIED. ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 5 - 6.1 LEARNED AR HAS PLACED RELIANCE ON EXPLANATION ( IV) CLAUSE (C) OF SECTION 194C(7). LEARNED AR HAS ALSO PLACED RELIANC E ON AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ACIT, IN ITA NO.163 7/AHD/10, ORDER DATED 10.03.2011. 7. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE TO SEEK A LEGAL ANSWER TO THIS PROBLEM. IN TERMS OF SECTION 1 94C(1) ANY PERSON RESPONSIBLE FOR PAYING ANY SOME TO ANY RESIDENT FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT SHALL AT THE TIME OF CR EDIT DEDUCT AN AMOUNT EQUAL TO 2%. AN EXPLANATION IS ANNEXED TO TH IS SECTION ACCORDING TO WHICH AS PER CLAUSE (IV) AND SUB CLAUSE (C) THE TERM WORK SHALL INCLUDE CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS. ONCE, THE STATUTE ITSELF HAS PRES CRIBED THE DEFINITION OF WORK WHICH HAS INCLUDED THE CARRIAGE OF PASSENGER BY AN Y MODE OF TRANSPORT, I.E., VEHICLES; THEN THE CONDITIONS AS P RESCRIBED UNDER THIS SECTION, I.E., SECTION 194C SHALL BE APPLIED. ON TH E CONTRARY, IN SECTION 194I THE RESPONSIBILITY OF DEDUCTION OF TAX ON ANY PERSON IS IN RESPECT OF PAYMENT TO A RESIDENT ANY INCOME BY WAY OF RENT. AN EXPLANATION IS ALSO ANNEXED BELOW SECTION 194I BUT ACCORDING TO WHICH T HERE IS NO MENTION OF USE OF VEHICLES BUT PERTAINS TO EQUIPMENT. UND ER THE TERM RENT THE EXPLANATION PRESCRIBES ANY PAYMENT FOR THE USE OF L AND, BUILDING, PLANT, MACHINERY, EQUIPMENT, FURNITURE, FITTINGS, ETC. ACC ORDING TO US, THE VEHICLES DO NOT FALL UNDER ANY OF SUCH CATEGORIES; HENCE, ON THIS BASIC DIFFERENCE BETWEEN THE PROVISIONS OF SECTION 194I A ND THE PROVISIONS OF SECTION 194C WE CAN HEREBY SAFELY HOLD THAT KEEPING IN MIND THE LANGUAGE OF THE STATUTE THE HIRING OF VEHICLES BY A N AGENCY MERELY FOR TRANSPORTATION OF THE EMPLOYEES OF THE COMPANY DO N OT FALL UNDER THE ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 6 - PROVISIONS OF SECTION 194I BUT COVERED UNDER THE PR OVISIONS OF SECTION 194C OF IT ACT. IN THIS REGARD, WE MAY LIKE TO PLAC E RELIANCE ON THE ORDER OF RESPECTED CO-ORDINATE A BENCH ITAT AHMEDABAD I N THE CASE OF AHMEDABAD URBAN DEVELOPMENT AUTHORITY (SUPRA) WHERE IN VIDE PARAGRAPH 5 IT WAS HELD AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE M ATERIAL AVAILABLE ON RECORD. THE FACTS NOTED BY THE AO ARE NOT IN DISPUT E THAT THE ASSESSEE HAD HIRED CARS ON FIXED RENT PAYMENT AND TDS WAS DEDUCT ED @ 2% TREATING THE SAME AS CONTRACT AS PER SECTION 194C OF THE IT ACT. THE AO ALSO NOTED THAT THE ASSESSEE HAD MADE VEHICLE HIRE CHARGES PAYMENT IN CONNECTED WITH PLYING OF EMPLOYEES FROM ONE PLACE TO ANOTHER. IT WAS ALSO NOTED BY THE AO THAT VEHICLES ARE OWNED AND MAINTAINED BY CONTRACTORS. T HE ASSESSEE PAID FIXED PAYMENT FOR USE OF THE HIRED CARS AND ALL THE EXPEN SES ARE BORNE BY THE CONTRACTORS. IT IS ALSO ADMITTED FACT THAT THE ASSE SSEE IS A LOCAL AUTHORITY. THE PROVISIONS OF SECTION 194C OF THE IT ACT IS APPLICA BLE TO THE ASSESSMENT YEAR UNDER APPEAL PROVIDED (A) ANY PERSON RESPONSIBLE FO R PAYING ANY SUM TO ANY RESIDENT (B) ANY LOCAL AUTHORITY (AS THE ASSESSEE I S) REFERRED TO AS CONTRACTOR FOR CARRYING OUT ANY WORK IN PURSUANCE OF THE CONTR ACT BETWEEN THE CONTRACTOR AND THE LOCAL AUTHORITIES ETC., SHALL AT THE TIME O F CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT ANY TIME OF PAYMENT THEREOF IN CASH OR ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO, (I) 1% IN CASE OF ADVERTISING, ( II) OR IN ANY OTHER CASE 2%, OF SUCH SUM AS INCOME TAX OR INCOME COMPRISED THERE IN. THE DEFINITION OF WORK HAS BEEN PROVIDED IN EXPLANATION (III) TO SE CTION 194C OF THE IT ACT WHICH PROVIDES FOR THE PURPOSE OF THIS SECTION, EXP RESSION WORK SHALL ALSO INCLUDE. . THE ABOVE DEFINITION OF RENT DOES NOT PROVIDE ANY I TEM FOR VEHICLE HIRE CHARGES. THEREFORE, PROVISIONS OF SECTION 194-I HAS BEEN WRONGLY APPLIED IN THE MATTER BY THE AO. CONSIDERING THE ABOVE DISCUSS IONS WE ARE OF THE VIEW THAT THE AUTHORITIES BELOW HAVE WRONGLY APPLIED THE PROVISIONS OF SECTION 194I OF THE IT ACT IN THE MATTER. WE ACCORDINGLY, SET AS IDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE DEMAND AND THE INT EREST THEREON FOR SHORTFALL AS NOTED BY THE AO ON THIS ISSUE. IN VIEW OF THE ABOVE FINDING, THERE IS NO NEED TO A DMIT THE ADDITIONAL GROUND OF APPEAL OF THE ASSESSEE. 7.1 WE MAY ALSO LIKE TO PLACE RELIANCE ON ANOTHER D ECISION OF RESPECTED CO-ORDINATE D BENCH ITAT MUMBAI IN THE CASE OF ACIT VS. ACCENTURE SERVICES PVT. LTD., BEARING ITA NO.59 20, 5921 AND 5922/MUM/2009, FOR A.YS.2007-08, 2008-09 AND 2009-1 0, ORDER DATED ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 7 - 20 TH OF OCTOBER, 2010, WHEREIN THE ISSUE WAS THAT WHETH ER THE TDS ON PAYMENT FOR HIRING OF VEHICLE FOR TRANSPORTATION OF THE EMPLOYEES WAS CORRECTLY MADE U/S.194C OF IT ACT BY THE ASSESSEE. AS PER AO, IN THAT APPEAL AS WELL, THE ALLEGATION OF THE REVENUE DEPAR TMENT WAS THAT THE MOTOR VEHICLES WERE ON RENTAL BASIS PROVIDED TO THE ASSESSEE, THEREFORE, THE SAID ARRANGEMENT WAS WITHIN THE PROVISIONS OF S ECTION 149I OF IT ACT. AFTER DETAILED DISCUSSION OF FEW CASE LAWS AND CBDT CIRCULARS, IT WAS HELD THAT IN SECTION 194I THE EXPRESSION PLANT AND MACHINERY DO NOT INCLUDE THE HIRING OF VEHICLES; HENCE, THAT APPEAL OF THE REVENUE WAS DISMISSED. AS FAR AS THE DECISION OF THREE STAR GRA NITE (SUPRA) AS CITED BY LEARNED DR IS CONCERNED WE HAVE NOTED THAT THE HIRI NG OF VEHICLE WAS NOT FOR CARRYING THE EMPLOYEES FOR LOADING AND UNLOADIN G THAT TOO FOR FIXED PERIOD ON PAYMENT BASIS. THE ASSESSEE HAS ALSO USED THE VEHICLES AND PAID THE CHARGES. IT IS WORTH TO MENTION THAT LEARN ED DR HAS ALSO FILED BEFORE US THE ITAT COCHIN BENCH DECISION OF THREE S TAR GRANITE PVT. LTD., (2012) 20 TAXMANN.COM 76 (COCHIN) AND WE HAVE APPRECIATED THAT THE FACTS WERE NOT AKIN TO THE FACTS OF THE APPEAL IN HAND. IN THAT CASE, THE AGREEMENT WAS FOR HIRING OF VEHICLE TO BE USED FOR LOADING AND UNLOADING. THE TRIBUNAL HAD EXAMINED THE CLAUSES OF THE AGREEM ENT AND THEN CAME OUT WITH A FACT THAT THE CONTRACT WAS MADE FOR THE FIXED HOURS. THE ASSESSEE IN THAT CASE HAD ACCEPTED TO MAKE THE PAYM ENT AFTER USE OF VEHICLE AS PER THE AGREEMENT. IN VIEW OF THE ABOVE DISCUSSION AND FOLLOWING THE CASE LAW CITED SUPRA, WE HEREBY AFFIR M THE FACTUAL AS WELL AS LEGAL FINDING OF LEARNED CIT(A) AND HOLD THAT TH E REVENUE WAS WRONG IN COMPLYING THE PROVISIONS OF SECTION 194I ON THE SPECIFIC FACTS OF THE CASE. GROUND NO.1 IS THEREFORE DISMISSED. ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 8 - 8. APROPOS TO GROUND NO.2, IT WAS OBSERVED BY THE A O THAT THE ASSESSEE HAD ASSIGNED THE WORK OF ANNUAL MAINTENANC E OF TERMINAL AND PIPELINES AND ON PAYMENT DEDUCTED THE TAX @ 2% U/S. 194C OF IT ACT. AS AGAINST THAT THE AOS ALLEGATION WAS THAT THE ASSES SEE WAS REQUIRED TO DEDUCT THE TAX U/S.194J OF IT ACT. AS PER SECTION 1 94C, THE ASSESSEE WAS REQUIRED TO DEDUCT THE TAX @ 2%, WHEREAS U/S.194J, THE ASSESSEE WAS REQUIRED TO DEDUCT THE TAX EQUAL TO 10% OF SUCH PAY MENT. ASSESSEES EXPLANATION WAS THAT THE SAID PAYMENT WAS MADE IN R ESPECT OF DAY TO DAY MAINTENANCE OF TERMINAL AND PIPE LINES. THE AOS AL LEGATION WAS THAT THE MAINTENANCE OF EQUIPMENT AND MACHINERY WAS A TECHNI CAL WORK; HENCE, THE TECHNICAL WORK COULD NOT BE CARRIED OUT BY A CO MMON PERSON. THE AO HAS COMPUTED THE SHORT DEDUCTION BY APPLYING THE PR OVISIONS OF SECTION 194J OF IT ACT. BEING AGGRIEVED THE MATTER WAS CARR IED BEFORE THE FIRST APPELLATE AUTHORITY. 9. IT IS WORTH TO MENTION THAT LEARNED CIT(A) HAS V ISITED THE WORK PLACE AND THEREUPON GIVEN A FINDING ON FACTS. THERE AFTER, HE HAS ASSIGNED FOLLOWING REASONS AND HELD THAT THE AO WAS NOT JUST IFIED IN APPLYING THE PROVISIONS OF SECTION 194J OF IT ACT, RELEVANT FIND ING IS AS UNDER: I HAVE CONSIDERED THE SUBMISSION OF THE LD. AR AND FACTS OF THE CASE. I AM NOT ABLE TO AGREE WITH THE FINDINGS OF THE AO. ANNUAL M AINTENANCE CONTACTS ARE GENERALLY WORK CONTRACTS, COVERED UNDER THE PROVISI ONS OF SECTION 194C, BUT NOT UNDER THE PROVISIONS OF SECTION 194J. THE SCOPE OF WORK IS MAINLY SERVICING AND MAINTENANCE OF TERMINAL AND PIPELINE. THIS IS TRUE IN ALL OTHER CONTRACTS, WHICH ARE COMPOSITE CONTRACT. I DO NOT F IND ANYTHING WRONG IN THE ACTION OF THE ASSESSEE FOR DEDUCTING THE TDS U/S. 1 94C OF THE ACT FOR THE CONTRACTS UNDER CONSIDERATION, INSTEAD OF APPLYING SECTION 194J AS OPINED BY THE AO. IN THE CIRCUMSTANCES, I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED BY TREATING THE ASSESSEE IN DEFAULT U /S.201(1) AND 201(1A) OF THE ACT IN TERMS OF SECTION 194J, AND ACCORDINGLY, HE I S DIRECTED NOT TO LEVY THE TDS U/S 194J OF THE IT ACT, 1961, BUT ONLY U/S.194C OF THE ACT. HENCE, THE ORDER OF ASSESSING OFFICER IN THIS REGARD IS NOT SU STAINED, AND THE RATE OF TDS IS REDUCED ACCORDINGLY. ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 9 - 10. FROM THE SIDE OF THE REVENUE, LEARNED DR. MR. K .C. MATHEWS APPEARED AND VEHEMENTLY ARGUED THAT THE MAINTENANCE WORK WAS NOT A WORK TO BE CARRIED OUT BY TOM, DICK AND HARRY BUT I T WAS A TECHNICAL WORK; HENCE, THE PAYMENT WAS NOTHING BUT FOR TECHNI CAL SERVICES; HENCE, AN AMOUNT EQUAL TO 10% WAS REQUIRED TO BE DEDUCTED AS TDS. HE HAS PLACED RELIANCE UPON THE DECISION OF CIT VS. KOTAK SECURITIES, 20 TAXMANN.COM 846 (BOM). LEARNED DR HAS ALSO CITED LU FDHANSA CARGO INDIA PVT. LTD., 91 ITD 133 (DELHI). HOWEVER, AT TH IS JUNCTURE, ITSELF IT IS WORTH TO MENTION THAT IN THE SAID CASE THE PAYMENT WAS MADE TO A NON RESIDENT AND IT WAS HELD THAT BY VIRTUE OF EXCLUSIO NARY CLAUSE OF SECTION 9(1)(VII)(B) THE ASSESSEE WAS NOT OBLIGED TO DEDUCT TAX AT SOURCE. THIS CITATION WAS THEREFORE UNWARRANTED. 11. FROM THE SIDE OF RESPONDENT-ASSESSEE, LEARNED A R HAS INFORMED THAT IT WAS A CONTRACT MERELY FOR THE MAINTENANCE O F PIPELINE, ETC. IT WAS NOT TO CARRY OUT ANY TECHNICAL SERVICE. HE HAS REFE RRED THE ANNUAL MAINTENANCE CONTRACT TO ASCERTAIN THE NATURE OF THE CONTRACT. SINCE IT WAS A NORMAL MAINTENANCE CONTRACT; THEREFORE, THE VIEW EXPRESSED IN CBDT CIRCULAR NO.715, DATED 08.08.1995 IS APPLICABLE ON THE ASSESSEE. HE HAS PLACED RELIANCE ON GUJARAT STATE ELECTRICITY CORPOR ATION, 82 TTJ 456 AHMEDABAD. 12. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE HAVE NOTED THAT THE CONTRACT WAS SIMPLY IN THE NATURE OF ANNUAL MAI NTENANCE CONTRACT. IN THE CASE OF GUJARAT STATE ELECTRICITY CORPORATION L TD. VS. ITO, 82 TTJ 456 (AHD) HAS HELD THAT THE AGREEMENT WAS IN RESPEC T OF OPERATION AND ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 10 - MAINTENANCE OF POWER PROJECT AND THE PAYMENT WAS MA DE UNDER A COMPREHENSIVE CONTRACT WHICH COULD NOT BE TREATED A S A PAYMENT OF FEES FOR PROFESSIONAL SERVICES AS CONTEMPLATED IN SECTIO N 194J OF IT ACT OTHERWISE ALSO U/S. 194J, EXPLANATION, THE PHRASE PROFESSIONAL SERVICES IS DEFINED AS SERVICES RENDERED BY PERSON IN THE CO URSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFES SION, TECHNICAL CONSULTANCY AND SUCH OTHER PROFESSIONS AS NOTIFIED. THIS IS NOT THE CASE WHERE FEES FOR SUCH PROFESSIONAL SERVICES OR FEES F OR TECHNICAL SERVICES HAS BEEN PAID BY THE ASSESSEE. IT IS WORTH TO NOTE THAT ON PAGE 11 OF THE ORDER OF LEARNED CIT(A) HAS NOTED THAT HE HAD VISIT ED ONE OF THE GAS FILING STATION OF THE ASSESSEE AND THEREUPON GIVEN HIS FIN DINGS ON FACTS. SINCE, THE LEARNED CIT(A) HAS TAKEN THAT MUCH OF TROUBLE O F PERSONALLY VISITING THE SITE, THEREFORE, WE ARE NOT INCLINED TO DISTURB THOSE FINDINGS. RESULTANTLY, THIS GROUND OF THE REVENUE IS HEREBY D ISMISSED. 13. THE ASSESSEE HAS RAISED THE FOLLOWING CROSS OBJ ECTION. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFIC ER IN TREATING THE APPELLANT AS AN ASSESSEE DEFAULT U/S. 201(1) OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFIC ER IN CONCLUDING THAT THE PAYMENTS MADE FOR SALE OF CNG IS COVERED BY THE PRO VISIONS OF SECTION 194J OF THE ACT INSTEAD OF SECTION 194C OF THE ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFIC ER IN HOLDING THAT THE APPELLANT HAS WRONGLY DEDUCTED TDS U/S. 194C INSTEA D OF SECTION 194J OF THE ACT AND THEREBY RAISING A DEMAND OF RS.8,55,912/- U /S. 201(1) AND RS.72,474/- U/S. 201(1A) OF THE ACT ON THIS COUNT. 13.1 IT WAS NOTED BY THE AO THAT THE WORK OF CONVER SION OF NATURAL GAS INTO CNG WAS ASSIGNED TO M/S. INDIA COMPRESSOR LTD. IT WAS NOTED THAT THE TAX WAS DEDUCTED U/S.194 C OF IT ACT. HOWEVER, AS PER AO, THE WORK ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 11 - PROVIDED BY M/S. INDIA COMPRESSOR LTD. WAS IN THE N ATURE OF PROVIDING TECHNICAL SERVICES, THEREFORE, THE ASSESSEE WAS REQ UIRED TO DEDUCT THE TAX U/S.194J OF IT ACT. IT WAS NOTED THAT THE NATURAL G AS WAS CONVERTED INTO CNG AND SUCH CONVERSION WAS DONE THROUGH COMPRESSOR MACHINE AND OTHER RESOURCES. THE OPERATOR WAS REQUIRED TO KNOW THE TECHNICAL ASPECT; HENCE, THE CONVERSION WAS THE INVOLVEMENT OF TECHNI CALITY. ACCORDING TO AO, IT WAS NOTHING BUT RENDERING OF TECHNICAL SERVI CES; HENCE, THE ASSESSEE WAS REQUIRED TO DEDUCT THE TAX U/S. 194J O F IT ACT. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE THE FIRST A PPELLATE AUTHORITY. AS NOTED ABOVE, LEARNED CIT(A) HAS VISITED THE WORK PL ACE OF THE ASSESSEE AND THEREUPON HE HAS HELD THAT THE CONVERSION OF NG TO CNG WAS A TECHNICAL SERVICE OBTAINED BY THE ASSESSEE FROM ICL . THE LEARNED CIT(A) HAS GIVEN FOLLOWING REASONS. (I) THE PROCESS INVOLVED IN TRANSMISSION OF ELECTR ICITY AND VOICE SIGNALS IN THE CASES CITED BY THE APPELLANT HAVE NOT GOT ANY C HANGE, SIGNAL INPUT AND OUTPUT WERE SAME, WHEREAS IN THIS CASE THERE WAS CO NVERSION OF NG TO CNG WHERE TEMPERATURE, DENSITY, PRESSURE ETC. HAVE GOT TO BE MANIPULATED THROUGH COMPRESSION AND AS SUCH THE INPUT AND OUTPUT IS NOT THE SAME AS IT WAS IN THE CASES CITED BY THE APPELLANT. (II) IN THE CASES CITED BY THE APPELLANT SOPHISTICA TED TECHNOLOGIES WERE USED, REMOTELY AT THE EXCHANGE FOR TRANSMITTING SIGNALS F ROM ONE DOMAIN TO OTHER DOMAIN, WHEREAS IN THE PRESENT CASE THE TECHNOLOGY OF THE COMPRESSION IS PART AND PARCEL OF THE APPELLANT'S NET WORK FOR WHICH CO NVERSION CHARGES HAVE BEEN PAID. (III) IN THE CASES CITED BY THE APPELLANT NO HUMAN ELEMENT WAS USED AS INTERCONNECTION POINTS OR PORTS WERE FUNCTIONING AU TOMATICALLY, WHEREAS IN THE COMPRESSION PROCESS TECHNICAL PERSONNEL OF THE VENDOR ARE INVOLVED. (IV) IN THE CASES CITED BY THE APPELLANT THERE IS N O DANGER OF LOSS OF MEN AND MATERIAL IN CASE OF FAILURE OF SYSTEM OR BREAKDOWN OF NETWORK ETC, WHEREAS IN THIS ACTIVITY ANY VARIATION IN ANY OF THE PARAMETER S LIKE PRESSURE, TEMPERATURE, ETC. WOULD RESULT IN EXPLOSION AND THERE BY CAUSING IMMENSE LOSS, FOR WHICH TRAINED PERSONNEL REGULATE OPERATIONS ROUND THE CLO CK, WHICH WAS WITNESSED BY THE UNDERSIGNED WHILE INTERACTING WITH THE TECHN ICAL STAFF. ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 12 - (V) IN THE CASES CITED BY THE APPELLANT, REFERENCE WAS MADE TO AN ORDER MADE BY THE UNDERSIGNED IN THE CASE OF ONGC, WHICH WAS R ENDERED WITH REFERENCE TO EXCLUSION OF MINING IN THE PROVISIONS OF EXPLANA TION-2 TO SECTION 9(1)(VII), WHEREAS THE ACTIVITIES OF THE APPELLANT VIS-A-VIS S ERVICES OF M/S. ICL FOR CONVERSION OF NG TO CNG ARE NOT COVERED BY ANY EXCL USION CLAUSE. (VI) IN THE CASES CITED BY THE APPELLANT SERVICES B Y ICL WERE MISCONSTRUED BY THE APPELLANT IN THE SENSE, TO CITE A SIMPLE EXAMPL E, SERVICES OF A VACUUM CLEANER, SAY TO KEEP THE SERVICE STATION VISITED BY UNDERSIGNED NEAT AND CLEAN, IT COMES UNDER SECTION 194C WHEN VACUUM CLEANER IS USED TO KEEP THE AREA NEAT AND CLEAN. BUT HERE THE VACUUM CLEANER TECHNOL OGY WAS USED, THAT TOO AIDED AND ASSISTED BY TECHNICAL PERSONNEL ROUND THE CLOCK. (VII) IN THE CASES CITED BY THE APPELLANT TRANSMISS ION OF THE SIGNALS WAS A CONTINUOUS PROCESS WITHOUT ANY INTERRUPTION, WHEREA S IN THE PRESENT CONTEXT, IT IS MADE USE OF WHEREVER NEED ARISES, NO DOUBT BY TH E HUMAN ELEMENT. (VIII) IN THE CASES CITED BY THE APPELLANT, THE FUN CTIONING IS PERPETUAL, WHEREAS IN THE CONTEXT OF THE APPELLANT IT IS OPERATED, WHE REVER IT IS NEEDED BY TECHNICAL PERSONNEL. 14. WE HAVE HEARD BOTH THE SIDES. FROM THE SIDE OF THE CROSS OBJECTOR, LEARNED AR HAS ARGUED THAT THE ENTIRE ACTIVITY OF C ONVERTING THE NG TO CNG WAS DONE BY THE MACHINES AND THEREFORE SOME BAS IC KNOWLEDGE TO OPERATE THOSE MACHINES WAS REQUIRED. THERE WAS HARD LY ANY INTERVENTION OF HUMAN SKILL WAS NEEDED, THEREFORE, NO TECHNICAL SERVICES WERE PROVIDED BY THE MACHINE OPERATORS. THE OPERATORS WE RE NEEDED ONLY TO FILL THE MOTOR VEHICLES AND NOT REQUIRED IN THE CON VERSION PROCESS BEING DONE BY THE MACHINES. THE ACTIVITY OF CONVERSION IS AUTOMATICALLY HANDLED BY THE SOPHISTICATED MACHINES. HE HAS PLACE D RELIANCE ON JAIPUR VIDYUT VITRAN NIGAM LTD., 123 TTJ 888 AND PARAS RAM PURIA SYNTHETICS, 20 SOT 248 (DELHI). LEARNED AR HAS ALSO ARGUED THAT IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HI NDUSTAN COCA COLA BEVERAGES, 293 ITR 226, NO ADDITIONAL TAX IS REQUIR ED TO BE DEMANDED FROM THE COMPANY DEDUCTING THE TAX AFTER THE TAX HA S BEEN PAID BY THE DEDUCTEE COMPANY. ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 13 - 14.1 FROM THE SIDE OF THE REVENUE, LEARNED DR HAS S TRONGLY SUPPORTED THE FINDINGS OF LEARNED CIT(A). THE REASONS GIVEN B Y LEARNED CIT(A) ARE VERY SPECIFIC AFTER DUE APPRECIATION OF FACTS, HENC E, NEED NOT TO BE DISTURBED. AS FAR AS THE DECISION OF JAIPUR VIDYUT VITRAN NIGAM, 123 TTJ 888 IS CONCERN THE PROVISIONS WHICH WERE DEALT WITH IN THE CITED CASE WERE DIFFERENT AND THE SAID DECISION WAS IN THE CON TEXT OF THOSE SECTIONS; HENCE, NEED NOT TO BE APPLIED IN THE PRESENT SET OF FACTS. AS FAR AS AN OBSERVATION IN THE SAID CASE THAT THE PROVISIONS OF SECTION 194J WOULD BE APPLICABLE WHEN THE TECHNOLOGY OR TECHNICAL KNOWLED GE OF A PERSON IS MADE AVAILABLE TO OTHERS AND NOT WHERE BY USING TEC HNICAL SYSTEMS OR SERVICES ARE RENDERED TO OTHERS. RENDERING ALL SERV ICES BY ALLOWING USE OF TECHNICAL SYSTEM WAS HELD AS DIFFERENT THEN CHARGIN G FEES FOR RENDERING TECHNICAL SERVICES. IT WAS HELD THAT THE APPLICABIL ITY OF SECTION 194J WOULD COME INTO EFFECT ONLY WHEN BY MAKING PAYMENT OF FEES FOR TECHNICAL SERVICES, ASSESSEE ACQUIRED SERVICE SKILL OR KNOWLEDGE OR INTELLECT WHICH CAN BE FURTHER USED FOR ITS OWN PUR POSE OR RESEARCH. OUR FOREMOST OBSERVATION IS THAT CERTAIN CLAUSES OF THE AGREEMENT WERE CONSIDERED BY THE ITAT JAIPUR BENCH AND THEREUPON T HE CONTROVERSY WAS ADDRESSED IN THE LIGHT OF THE PROVISIONS OF SECTION 40(A)(IA) OF IT ACT. AS PER THE FINDINGS OF LEARNED CIT(A) THE SERVICES PRO VIDED BY M/S. INDIA COMPRESSOR LTD. WAS NOTHING BUT IN THE NATURE OF FE ES FOR ENGINEERING SERVICES USED FOR CONVERSION OF NATURAL GAS TO CNG. LIKEWISE, THE DECISION OF PARAS RAMPURIA SYNTHETICS, 20 SOT 248 A S CITED BY LEARNED CIT(A) IS THE APPLICABILITY OF PROVISIONS OF SECTIO N 194 J, VIS--VIS SECTION 9(1) OF IT ACT; HENCE, NOT DIRECTLY CONNECT ED WITH THE PRESENT SET OF CONTROVERSY AS SETTLED BY LEARNED CIT(A). CONSID ERING THE EFFORTS ITA NO.1722/AHD/2010 & CO NO.225/AHD/2010 ITO, TDS-WARD-1, BARODA V/S. M/S. GAIL (INDIA) LTD . A.Y.2009-10 - 14 - MADE BY LEARNED CIT(A), WE ARE NOT INCLINED TO DIST URB THOSE FINDINGS ON FACTS; HENCE, THE GROUNDS OF THE CROSS OBJECTION IS HEREBY DISMISSED. 15. IN THE RESULT, APPEAL OF THE REVENUE AND THE CR OSS OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED. SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 14/03/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD