ITO, Bangalore V. M/s Karnataka Powre Transmission Corporation Ltd., Davangere

ITA 226/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5648 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-01-2011
• Assessment Year: 2009-2010
• Appeal Filed On: 26-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CHYTHANYA K K SHRI G V G
• Keywords: Recovery proceedings
• Section: 133A; 194C; 201(1)

Judgement Text

PAGE 1 OF 16 ITA NOS.259 TO 262 & 226/BANG/20 10 1 THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI A MOHAN ALANKAMONY, A.M. ITA NOS.259 TO 262/BANG/2010 (ASST. YEARS 2008-09 & 2009-2010) M/S KARNATAKA POWER TRANSMISSION CORPORATION LTD., MAJOR WORKS (S) DIVISION, DAVANGERE. - AP PELLANT VS THE INCOME-TAX OFFICER, TDS WARD, AAYAKAR BHAVAN, STAFF ROAD, FORT, BELLARY. - RESPONDENT ITA NO.226/BANG/2010 (ASST. YEAR 2009-10) (BY REVENUE) APPELLANT BY : SHRI CHYTHANYA, K. K, ADVOCATE RESPONDENT BY : SHRI G V GOPALA RAO, CIT-I O R D E R PER BENCH : THESE FIVE APPEALS (I) FOUR APPEALS INSTITUTED BY KPTCL, DAVANAGERE DIVISION AND (II) THE LONE APPEAL OF THE REVENUE - ARE DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE LD. CIT (A)-L TU, BANGALORE IN ITA NOS: 38 & 39/CIT(A)-LTU/09-10 DATED: 30.11.2009 FOR THE ASSESSMENT YEARS 2008-09 & 2009-10. PAGE 2 OF 16 ITA NOS.259 TO 262 & 226/BANG/20 10 2 I. ITA NOS: 259 & 261 /10 AYS. 2008-09 & 09-10 - U/S 201(1) OF THE ACT BY THE ASSESSEE : 2. THE ASSESSEE HAD RAISED AS MANY AS NINETEEN IDENTICAL GROUNDS FOR BOTH THE AYS IN AN ILLUSTRATIVE AND NARRATIVE MANNER. O N A CLOSE SCRUTINY OF THE SAME, THE CRUXES OF THE ISSUES EMERGED ARE THAT 1. THE CIT (A) WAS NOT JUSTIFIED IN SUSTAINING THE ACTION OF THE AO (TDS) IN TREATING THE ASSESSEE AS ASSESS EE IN DEFAULT AND DEMANDING THE TAX ON THE BASIS THAT T HE ASSESSEE OUGHT TO HAVE DEDUCTED THE TDS IN RESPECT OF PAYMENTS MADE TO THE CONTRACTORS TOWARDS SUPPLY OF MATERIALS 2. THAT THE CIT(A0 HAD FAILED TO APPRECIATE THAT T HE ASSESSEE CANNOT BE REGARDED AS AN ASSESSEE IN DEFA ULT U/S 201(1) AS THERE WAS NO OBLIGATION ON THE ASSESS EE TO DEDUCT TDS UNDER ANY OF THE PROVISIONS OF THE ACT; & 3. WITHOUT PREJUDICE, THE CIT(A)-LTU OUGHT TO HAVE APPRECIATED THAT THE RECIPIENTS HAVING PAID THE TAX ES ON THE AMOUNTS RECEIVED FROM THE ASSESSEE, THE ASSESSE E WAS UNDER NO OBLIGATION TO PAY THE TAX UNDER SECTIO N 201(1) OF THE ACT. IN ITA NO.261/10 FOR AY 2009-10, APART FROM THE ABO VE ISSUES, THERE IS YET ANOTHER ISSUE NAMELY, WHETHER THE CIT(A) IS JUSTIFIED IN TREATING THE TESTING CHARGES AS SUMS PAID TOWARDS CARRYING OUT FOR WORK AND HOLDING THAT THE SAME FALL WITHIN THE PRO VISIONS OF SECTION 194C OF THE ACT . SINCE THIS ISSUE IS ANOTHER FACET OF THE ISSUE TH AT IS RAISED IN REVENUES APPEAL (ITA NO.226/10), WE S HALL CONSIDER THE SAME ALONG WITH THE REVENUES APPEAL. PAGE 3 OF 16 ITA NOS.259 TO 262 & 226/BANG/20 10 3 II. ITA NOS:260 & 262/10 AYS: 2008-09 & 2009-10 U/S. 201(1A) OF THE ACT - BY THE ASSESS EE: 3. THE ASSESSEE HAD RAISED THREE IDENT ICAL GROUNDS FOR THE AYS UNDER DISPUTE [U/S 201(1A) OF THE ACT]. SINCE GROUND NO.1 BEING GENERAL IN NATURE, IT DOESNT SURVIVE FOR ADJUDICATION. IN TH E REMAINING GROUNDS, THE SUBSTANCES OF THE ISSUES ARE REFORMULATED AS UNDER: 1. THE CIT (A) WAS NOT JUSTIFIED IN SUSTAINING THE ACT ION OF THE AO (TDS) IN TREATING THE ASSESSEE AS ASSESSEE IN DEFAULT AND DEMANDING THE INTEREST ON TAX; & - THAT HE WAS NOT JUSTIFIED IN UPHOLDING THE STAND OF THE AO IN LEVYING INTEREST U/S 201 (1A) OF THE ACT WHE N THE ASSESSEES CASE DOESNT FALL WITHIN THE SPHERE OF S .201(1) OF THE ACT. III. ITA NO: 226/10 AY 2009-10 [BY REVENUE] 4. THE REVENUE HAD RAISED SIX GROUNDS OF APPEAL, O UT OF WHICH, GROUND NO.1 BEING GENERAL IN NATURE, IT HAS BECOME NON-CONSEQUENTIAL. IN THE REMAINING GROUNDS, THE ESSENCES OF THE ISSUES A RE LISTED OUT, IN A CONCISE MANNER, AS UNDER: (I) THE CIT (A) FAILED TO APPRECIATE THAT THE PAYMENT O F RS.74.72 LAKHS WERE TOWARDS TESTING CHARGES AS ADMITTED BY THE ASSESSEE ITSELF AND, HENCE, CLEARLY COVERS U/S 194J OF THE ACT AND NOT U/S 194C OF THE ACT; & (II) THAT NO SUFFICIENT TIME AND OPPORTUNITY WAS GIVEN T O FURNISH THE REMAND REPORT AND, THUS, THE IMPUGNED ORDER WAS PASSED WITHOUT CONSIDERING THE REMAND REPORT. PAGE 4 OF 16 ITA NOS.259 TO 262 & 226/BANG/20 10 4 5. AS THE ISSUES RAISED BY THE RIVAL P ARTIES WERE IDENTICAL PERTAINING TO THE SAME ASSESSEE, THEY WERE HEARD, CONSIDERED T OGETHER AND DISPOSED OFF IN THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E AND CLARITY. ASSESSEES APPEALS AYS 2008-09 & 2009-10 : 6. BRIEFLY STATED, THE ASSESSEE WAS - A STA TE GOVERNMENT PUBLIC SECTOR COMPANY - CARRYING ON THE BUSINESS OF TRANSMISSION OF ELECTRICITY FROM ELECTRICITY GENERATING POINTS TO VARIOUS ELECTRICAL SUB-STATIONS IN THE STATE THROUGH THE NETWORK OF TRANSMISSION LINES AND SUB-S TATIONS. THE ASSESSEES PREMISES WERE SUBJECTED TO AN OPERATION U/S 133A OF THE ACT ON 30.1.2009 TO VERIFY THE COMPLIANCE WITH TDS PROVISIONS. DURIN G THE COURSE OF SURVEY, IT WAS NOTICED THAT THE ASSESSEE HAD ENTERED INTO A GREEMENTS WITH VARIOUS CONTRACTORS FOR SETTING UP OF ELECTRICAL SUB-STATIO NS. THE SUB-STATIONS WERE ESTABLISHED IN ORDER TO SEGREGATE THE LOAD OF ONE S TATION OR TO IMPROVE THE RELIABILITY OF POWER SUPPLY AND TO MEET THE INCREASIN G DEMAND FOR POWER SUPPLY. IT WAS NOTICED BY THE REVENUE DURING THE VER IFICATION OF THE AGREEMENTS THAT THE ASSESSEE HAD ENTERED INTO SEPAR ATE AGREEMENTS FOR SUPPLY OF MATERIALS, ERECTION AND FOR CIVIL WORK POR TION ETC., IT WAS, FURTHER, NOTICED THAT WHEN THE ASSESSEE WAS DEDUCTING TAX AT SOURCE WHILE MAKING PAYMENTS ON CIVIL WORK AND ERECTION PORTION, HOWEVER , NO TDS WAS EFFECTED ON PAYMENTS TOWARDS SUPPLY OF MATERIAL PORTION. DURI NG THE COURSE OF PROCEEDINGS U/S 201(1) AND 201(1A) OF THE ACT, THE AO WAS OF THE VIEW THAT AS THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURC E ON THE SUPPLY OF MATERIAL PORTION ALSO, IT WAS REQUIRED TO EXPLAIN S UCH INACTION ON THE PART OF THE ASSESSEE. PAGE 5 OF 16 ITA NOS.259 TO 262 & 226/BANG/20 10 5 6.1. TURNING DOWN THE ASSESSEES DETAILED CONT ENTIONS, THE AO WENT AHEAD IN CONCLUDING, AFTER DETAILED REASONS RECORDED IN T HE IMPUGNED ORDER UNDER CHALLENGE, THAT THE ASSESSEE SHOULD HAVE DEDUCTED T AX AT SOURCE ON THE SUPPLY PORTION ALSO WHICH IT HAD FAILED TO DO SO, T HE ASSESSEE WAS TREATED AS ASSESSEE IN DEFAULT AND, ACCORDINGLY COMPUTED THE TAXES AS WELL AS INTEREST THEREON U/S 201(1) AND U/S 201(1A) OF THE ACT FOR T HE ASSESSMENT YEARS UNDER DISPUTE. 7. AGGRIEVED, THE ASSESSEE HAD APPROACHED THE LD. CIT (A)-LTU FOR SOLACE. AFTER DUE CONSIDERATION OF THE CONTENTIONS PUT-FORTH BY THE ASSESSEES A.R., PERUSING THE OBSERVATIONS MADE BY T HE AO IN HIS IMPUGNED ORDERS UNDER CHALLENGE, ANALYZING THE PROVISIONS OF S.194C OF THE ACT, EXTENSIVELY QUOTING THE RULINGS IN THE CASES OF (I) ASSOCIATED CEMENT CO. LTD. V. CIT (1993) 201 ITR 435 (SC), (II) BRIJ BHUSHAN LALS CASE (1976) 115 ITR 524 (SC), (III) STATE OF HIMALCHAL PRADESH V. ASSOCIATED HOTELS OF INDIA LTD. (1972) 29 STC 474 (SC), (IV) STATE OF GUJARAT (COMMISSIONER OF SALES- TAX, AHMEDABAD) V. VARIETY BODY BUILDERS 38 STC 176 ( SC) AND DUE PERUSAL OF TENDER NOTIFICATION FLOATED BY THE ASSESSEE AND ALSO CONSIDERING THE CASE LAWS ON WHICH THE ASSESSEE HAD PLACED STRONG R ELIANCE, THE LD. CIT (A) HAD OBSERVED THUS: 4.12. (C) (ON PAGE 30) FROM THE FACTS STATED ABOVE , IT CAN BE SEEN THAT THE CONTRACT ITSELF SPECIFIED T HE MATERIAL AND WORK WITH ESTIMATED COST OF SUPPLY AS WELL AS WORK AND LABOUR. THUS, SUPPLY AND WORK ARE DISTINCT AND IDENTIFIABLE. IN THE INSTANT CASE, TH E APPELLANT FLOATED A TENDER AND THERE IS NO SEPARATI ON OF SUPPLY, ERECTION AND INSTALLATION AS WELL AS CIV IL PAGE 6 OF 16 ITA NOS.259 TO 262 & 226/BANG/20 10 6 WORKS. ONLY AFTER AWARDING THE TENDER, THE APPELLA NT ENTERED INTO AGREEMENT WITH THE CONTRACTOR FOR SUPPLY, CIVIL WORKS AND ERECTION. THUS, THE FACTS OF THE CASE LAW CITED ARE DISTINGUISHABLE AND IS OF NO ASSISTANCE TO THE APPELLANTS CASE. 4.13. IN THE WRITTEN SUBMISSIONS, THE APPELLANT FURTHER STATED THAT IT IS NOT THE CASE OF THE AO TH AT THE CONTRACTOR HAS FAILED TO FULFILL THE TAX OBLIGA TION AND THAT THE GOVERNMENT WAS DEPRIVED OF TAX DUE, RELYING ON THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE PVT. LTD. V. CIT (2007) 293 ITR 226 (SC) WHERE THE PAYEE HAD ALREADY PAID THE TAX ON THE INCOME WHICH WAS THE SUBJECT MATTER OF SHORT DEDUCTION OF TAX AT SOURCE, RECOVERY OF TAX CANNOT BE MADE ONCE AGAIN FROM THE TAX DEDUCTOR. THIS ISSUE HAS ALREADY BEEN DISCUSSED IN PARAS 4.4.1 AND 4.2 SUPRA AND AS THERE IS NO MERIT IN THE APPELLANTS SUBMISSION IN VIEW OF T HE PROVISIONS OF SECTION 194C OF THE ACT. HENCE, THE OBJECTIONS IN THIS REGARD ARE REJECTED. 4.14. HERE, THE LAST POSITION OF THE SPECIAL TERM IN REGARD TO THE PAYMENT OF THE AMOUNT DUE UNDER THE CONTRACT ALSO MAKES CLEAR THAT IT IS ONLY WHEN THE COMPONENT PARTS ARE FITTED INTO POSITION AT THE SUB - STATION THAT AN EQUIPMENT WOULD BE TREATED AS COMPLETE AND THIS EQUIPMENT HAS TO BE TO THE SATISFACTION OF THE APPELLANT AND IT IS THEN TO BE HANDED OVER BY THE CONTRACTOR TO THE APPELLANT AND THEN ALONE WOULD BE REMAINING 10 PER CENT WOULD BE PAYABLE BY THE APPELLANT TO THE CONTRACTOR. IT IS, THEREFORE, CLEAR THAT THE CONTRACT IS ONE SINGLE AN D INDIVISIBLE CONTRACT AND THE ERECTION AND INSTALLAT ION OF THE EQUIPMENT IS AS MUCH FUNDAMENTAL PART OF THE CONTRACT AS THE FABRICATION AND SUPPLY. IN THE CIRCUMSTANCES AND IN VIEW OF THE DISCUSSION MADE ABOVE, MY CONSIDERED OPINION IS THAT THE CONTRACT W AS PAGE 7 OF 16 ITA NOS.259 TO 262 & 226/BANG/20 10 7 A CONTRACT FOR WORK AND LABOUR AND NOT A CONTRACT F OR SUPPLY. I, THEREFORE, DO NOT FIND INFIRMITIES IN T HE AOS FINDINGS AND, THEREFORE, THE SAME IS CONFIRMED . 7.1. DURING THE COURSE OF APPELLATE PROCEED INGS BEFORE THE LD. CIT (A), THE ASSESSEE HAD RAISED ADDITIONAL GROUNDS FOR THE AY 2009.10, THE SUBSTANCES OF WHICH, IN BRIEF, ARE AS UNDER: - THAT THE AO ERRED IN LEVYING PENALTY U/S 201(1) AN D INTEREST U/S 201(1A) OF THE ACT IN RESPECT OF LIABI LITY U/S 194J WITHOUT GIVING ANY OBSERVATION/FINDING AGAINST THE ASSESSEES REBUTTAL; & - THE AO OUGHT TO HAVE REFRAINED FROM LEVYING SUCH PE NALTY AND INTEREST U/S 201(1) AND 201(1A) OF THE ACT. 7.1.1. AFTER HEARING THE ASSESSEES AUTH ORIZED REPRESENTATIVE AND ALSO ON PERUSAL OF RECORDS, THE LD. CIT (A) HAD OBSERVED THUS - 5.6.. IT IS OBSERVED THAT AN AMOUNT OF RS.8,54,313/- HAS BEEN LEVIED BY THE AO ON PAYMENT OF RS.74,72,250/- WITHOUT GIVING HIS FINDINGS IN TH E ORDER. AT THE HEARING OF THE APPEAL, THE APPELLANT RAISED ADDITIONAL GROUND ON THIS ISSUE AND A COPY O F THE SAME WAS MADE AVAILABLE TO THE AO VIDE LETTER DATED 6.11.2009 FORWARDED BY THE CIT (A), HUBLI FOR HIS COMMENTS AND THE AOS REPLY IS NOT RECEIVED TIL L DATE. IN THE ABSENCE OF THE AOS FINDINGS, I AGREE WITH THE APPELLANTS SUBMISSIONS THAT PAYMENT WAS MADE TO THE CONTRACTOR TOWARDS DESIGN, FABRICATION, SUPPLY, ERECTION AND COMMISSIONING OF 400 KV DC LIN E FOR WHICH CONTRACTOR (M/S. KEC INTERNATIONAL) SUPPL IED TOWERS. HENCE, AS SUCH THE PAYMENT WAS FOR WORK CONTRACT AND NOT FOR TESTING CHARGES AND IS COVERED BY SECTION 194C OF THE ACT. PAGE 8 OF 16 ITA NOS.259 TO 262 & 226/BANG/20 10 8 5.7. THE AO IS, THEREFORE, DIRECTED TO CALCULATE T HE TAX AT THE RATE AS APPLICABLE ON PAYMENT U/S 194C AND ACCORDINGLY RECALCULATE THE INTEREST THEREIN .. 8. AGGRIEVED WITH THE FINDING OF THE LD . CIT (A)-LTU ON MAJOR ISSUES FOR THE AYS UNDER CHALLENGE, THE ASSESSEE HAS COME UP WITH THE PRESENT APPEALS. 9. BEFORE ADDRESSING TO THE ISSUES RAISED BY THE A SSESSEE AS WELL AS THE ARGUMENTS PUT FORTH BY THE LD. A R REFERRED SUPRA, W E WOULD LIKE TO POINT OUT THAT ALMOST IDENTICAL ISSUES WERE RAISED BEFO RE THIS BENCH BY THE ASSESSEES COUNTER-PART KPTCL BANGALORE DIVISION IN ITS APPEALS IN ITA NOS. 112 TO 115 & 162 TO 165/BANG/2010 DATED 10 TH MARCH, 2011. 9.1. THE SAID FACTS WERE ELABORATELY DISCUSSED AND SUBMISSIONS OF BOTH THE LD. A.R AS WELL AS THE LD. D.R. WERE CONSI DERED AT LENGTH IN THOSE APPEALS. AFTER CONSIDERING THE DETAILED RIVAL SUBM ISSIONS AND ON A PERUSAL OF MATERIALS ON RECORD, THIS BENCH HAD DECIDED THE ISS UE IN THE FOLLOWING MANNER (QUOTE ) 11.6. IN TAKING INTO ACCOUNT THE FACTS AND CIRCUMSTANCES OF THE ISSUES WHICH HAVE BEEN METICULOUSLY ANALYZED AND ALSO EXTENSIVELY QUOTING THE VARIOUS JUDICIAL PRONOUNCEMENTS ON THE ISSUES IN TH E FORE-GOING PARAGRAPHS, WE ARE OF THE CONSIDERED VIE W THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATING THE ASSESSEE KPTCL AS AN ASSESSEE IN DEFAULT U/S 201(1) AND ALSO CHARGING INTEREST U/S 201(1A) OF THE ACT FOR THE FOLLOWING REASONS: - THE ASSESSEE CANNOT BE CATEGORIZED AS AN ASSESSEE IN DEFAULT WHEN THERE WAS NO OBLIGATION ON THE PAR T PAGE 9 OF 16 ITA NOS.259 TO 262 & 226/BANG/20 10 9 OF THE ASSESSEE TO DEDUCT TAX U/S 194C OF THE ACT FOR SUPPLY PORTION; - AMENDMENT OF S. 194C THROUGH FINANCE ACT(NO.2) OF 2009, CLARIFY DEDUCTION DOESNT EXTEND TO SUPPLY OF MATERIALS (PORTION); - THE MATERIALS IN QUESTION WERE PURCHASED FROM THE SUPPLIERS BY THE ASSESSEE AND GIVEN TO THE CONTRACTOR(S) FOR CARRYING OUT THE WORK OF CIVIL, ERECTION, ETC., - THE CONTRACT BETWEEN THE ASSESSEE AND THE CONTRACTOR WAS A CONTRACT FOR SUPPLY AND NOT FOR CONTRACT OF WORK AND THE REVENUE HAD CONSISTENTLY REFUSED TO SEE THE REASON AND TO RECOGNIZE THE DISTINCT MEANING - SUPPLY AND WORK; - IT WAS WRONGLY VISUALIZED THAT THE EQUIPMENTS, MATERIALS COMPONENT PARTS WERE FABRICATED AND INSTALLED AT WORK SITE PREMISES; - IT WAS WRONGLY PRESUMED THAT THE CONTRACTS ENTERED INTO BETWEEN THE ASSESSEE AND THE CONTRACTOR WERE COMPOSITE CONTRACT AND AN INDIVISIBLE CONTRACT WHEREAS THERE WERE THREE SEPARATE CONTRACTS, VIZ., (I) SUPPLY OF MATERIALS; (II) FOR ERECTION & (III) FOR CIVIL WORK PORTION; - INSTRUCTION TO BIDDERS (SECTION II ITB) UNDER CLAUSE 14. TAXES AND DUTIES [SOURCE P 123 OF PB AR] IT HAS BEEN MADE IMPLICITLY CLEAR THAT 14.1. AS INDICATED IN CLAUSE 35.2 OF SECTION ITB OF THE BID DOCUMENT, IN CASE OF AWARD OF CONTRACT, A DIVISIBLE CONTRACT COVERING THE ENTIRE SCOPE OF THE PARTIAL/TOTAL TURNKEY PACKAGE WILL BE ENTERED INTO WITH THE SUCCESSFUL BIDDER, THERE SHAL L BE THREE SEPARATE CONTRACTS AS UNDER: (I) FOR SUPPLY OF GOODS (II) FOR ERECTION WORKS (III) FOR CIVIL ENGINEERING WORKS PAGE 10 OF 16 ITA NOS.259 TO 262 & 226/BANG/2 010 10 THUS, TENDER CLEARLY GIVES BREAKS-UP OF SEPARATE AGREEMENTS REFLECTING SEPARATE CONSIDERATION; - THROUGH A SINGLE BIDDING PROCESS, ALL THE CONTRACTS WERE AWARDED DISTINCTLY WHICH DO NOT MEAN THAT THEY WERE COMPOSITE CONTRACT; - THE HONBLE APEX COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES P. LTD. V. CIT REPORTED IN 293 ITR 226(SC) HAD RULED THAT IT IS NOT DISPUTED THAT THE CIRCULAR NO. 275/201/95-IT(B) DATED JANUARY 29, 1997 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES DECLARING THAT 'NO DEMAND VISUALIZED UNDER SECTION 201(1) OF THE INCOME- TAX ACT SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER-IN-CHARGE OF TDS, THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE-ASSESSEE; - WHEN THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TAX ON SUPPLY PORTION, THERE WAS NO QUESTION OF CHARGING INTEREST U/S 201(1A) OF THE ACT; - WE HAVE ALSO DULY PERUSED THE CASE LAWS ON WHICH THE LD. CIT (A) HAD PLACED STRONG RELIANCE. HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT THOSE DECISIONS WERE CLEARLY DISTINGUISHABLE TO THE FACTS AND CIRCUMSTANCES OF THE ISSUES UNDER CONSIDERATION. 11.7. IN A NUT-SHELL (I) WHEN THE ASSESSEE WAS UNDER NO OBLIGATION TO DEDUCT TAX U/S 194C OF THE ACT TOWARDS THE PAYMENTS MADE ON SUPPLY PORTION, THE ASSESSEES CASE DOESNT FALL WITHIN THE AMBIT OF THE PROVISIONS OF S.201(1) OF THE ACT AND, THUS, THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT; AND (II) THAT WHEN THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX TOWARDS THE PAYMENT ON SUPPLY PAGE 11 OF 16 ITA NOS.259 TO 262 & 226/BANG/2 010 11 PORTION, THERE WAS NO QUESTION WHATSOEVER IN CHARGING INTEREST U/S 201(1A) OF THE ACT. IT IS ORDERED ACCORDINGLY.(UN-QUOTE). 9.2. AS THE ISSUES BEFORE US IN THESE APPEALS ARE SIMILAR TO THAT OF THE ISSUES AND ALSO IN CONFORMITY WITH THE SAID FIND INGS IN THE CASE OF KPTCL, BANGALORE DIVISION REFERRED SUPRA, WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS RECORDED THERETO HOLD GOOD FOR THE PRESENT APPEALS TOO. IT IS ORDERED ACCORDINGLY. 9.3. FOR THE SAKE OF REFERENCE, A COPY OF THE ORDER IN THE CASE OF KPTCL, BANGALORE DIVISION IN ITA NOS. 112 TO 115 AN D 162 TO 165/BANG/2010 DT: 10.3.2011 IS ANNEXED HERETO. 10. LET US NOW TAKE UP THE REVENUES APPEAL FOR THE AY 2009-10 AND ALSO GROUND NOS.20 AND 21 IN ASSESSEES APPEAL FOR AY 2009-10 (ITA NO.261/10) FOR CONSIDERATION. 10.1 GROUND NOS.20 & 21 IN ASSESSEES APPEAL READS AS FOLLOWS:- 20. THE LEARNED COMMISSIONER (APPEALS) IS NOT JUSTI FIED IN TREATING THE TESTING CHARGES AS SUMS PAID TOWARDS CARRYING OUT FOR WORK AND HOLDING THAT THE SAME FA LL WITHIN THE PROVISIONS OF SECTION 194C. 21. THE LEARNED COMMISSIONER (APPEALS) HAS FAILED T O APPRECIATE THAT THE TESTING CHARGES WERE PAID FOR R EPORT ON THE WITHSTANDING/SUSTAINING ABILITY OF THE TOWER AND THE SAID REPORT WAS GENERATED BY THE VENDOR BY TEMPORARILY FIXING A TESTING MACHINE IN THE TOWER. HE HAS FAILED TO APPRECIATE THAT THE TEST REPORT WAS GENER ATED IN AN AUTOMATED PROCESS AND THERE IS NO LABOUR EXPE NDED SO AS TO ATTRACT SECTION 194C. THERE IS NO HUMAN PAGE 12 OF 16 ITA NOS.259 TO 262 & 226/BANG/2 010 12 INTERFACE/ELEMENT INVOLVED IN TESTING SO AS TO ATTR ACT EITHER SECTION 194C OR SECTION 194J. THERE IS NO TRANSFER OF POSSESSION AND CONTROL OF THE TESTING EQUIPMENT BY THE VENDOR IN FAVOUR OF THE APPELLANT S O AS TO ATTRACT SECTION 194I OR SECTION 194J. 11. THE CASE OF THE REVENUE WAS THAT - THE CIT (A) FAILED TO APPRECIATE THAT THE PAYMENT O F RS.74.72 LAKHS WERE TOWARDS TESTING CHARGES AS ADMI TTED BY THE ASSESSEE ITSELF AND, HENCE, CLEARLY COVERED U/S 194J AND NOT U/S 194C OF THE ACT; - THAT NO SUFFICIENT TIME AND OPPORTUNITY WAS GIVEN T O FURNISH THE REMAND REPORT AND, THUS, THE IMPUGNED O RDER WAS PASSED WITHOUT CONSIDERING THE REMAND REPORT. 11.1. THE BRIEF SUBMISSION OF THE R EVENUE WAS THAT THE FINDING OF THE CIT (A) WAS UNILATERAL IN AS MUCH AS WITHOUT HE ARING THE REVENUE SIDE OF THE STAND AND, THEREFORE, PLEADED THAT THE ACTION O F THE AO REQUIRES TO BE SUSTAINED. 11.1.1. ON THE OTHER HAND, THE LD. A R CAME UP WITH THE FOLLOWING SUBMISSIONS:- - THAT THE TESTING CHARGES WERE PAID BY THE APPELLAN T FOR REPORT ON THE WITHSTANDING/SUSTAINING ABILITY OF THE TOWER AND THE SAID REPORT WAS GENERATED BY THE VENDOR BY TEMPOR ARILY FIXING A TESTING MACHINE IN THE TOWER. - THAT THE CIT (A) WAS NOT JUSTIFIED IN TREATING THE TESTING CHARGES AS SUMS PAID TOWARDS CARRYING OUT FOR WORK AND HOLDING THAT THE SAME FALL WITHIN THE PROVISIONS OF SECTION 194C. - THAT THE TEST REPORT WAS GENERATED IN AN AUTOMATE D PROCESS AND FOR CARRYING OUT ANY WORK, MANPOWER IS SINE QUO NON AND PAGE 13 OF 16 ITA NOS.259 TO 262 & 226/BANG/2 010 13 WITHOUT MAN POWER IT CANNOT BE SAID THAT WORK HAS B EEN CARRIED OUT. IN THE INSTANT CASE AS THERE WAS NO LABOUR EXPENDED OR LABOUR BESTOWED TO GENERATE THE TEST RE PORT THE CHARGES PAID BY THE APPELLANT DO NOT QUALIFY TO BE RE GARDED AS WORK AND HENCE, THE PROVISIONS OF SECTION 194C DO NOT APPLY. IT IS ALSO SUBMITTED THAT, AS THERE IS NO HUMAN INTERF ACE/ELEMENT INVOLVED IN TESTING THE PROVISIONS OF SECTION 194J DO NOT GET ATTRACTED AS HELD IN THE CASE OF CIT V. BHARTI CELLULAR LTD. [2008] 175 TAXMAN 573 (DELHI) . - WITHOUT PREJUDICE TO THE ABOVE, IT IS ALSO SUBMIT TED THAT AS THERE IS NO TRANSFER OF POSSESSION AND CONTROL OF T HE TESTING EQUIPMENT BY THE VENDOR IN FAVOUR OF THE APPELLANT T HE PROVISIONS OF SECTION 194-I OR SECTION 194J DO NOT GET ATTRACTED. - IN THE CASE OF DELL INTERNATIONAL SERVICES (INDIA ) P. LTD., IN RE [2008] 305 ITR 37 (AAR), THE HONBLE AUTHORITY FOR A DVANCE RULING RULED THAT, LEGALLY AND IN THE ORDINARY SENSE, THE EXPRESSION RENTAL DENOTES THE CONSIDERATION PAID IN A TRANSACTION OF LEASE OR HIRE. SUCH TRANSACTION PRES UPPOSES THE TRANSFER OF INTEREST IN THE PROPERTY OR GOODS. RIGHT TO EXCLUSIVE POSSESSION/CUSTODY AND ENJOYMENT THEREOF OVER A STIPU LATED PERIOD OF TIME ARE ITS NECESSARY ATTRIBUTES. 11.2. WE HAVE DULY CONSIDERED THE SUBMISSION OF THE ASSESSEE COUPLED WITH VARIOUS CASE LAWS AND ALSO PERUSED THE RELEVAN T RECORDS. THE REVENUE IN ITS GROUNDS OF APPEAL GRIEVED THAT THE LD. CIT ( A) HAD NOT GIVEN SUFFICIENT TIME AND OPPORTUNITY TO THE AO CONCERNED TO SUBMIT H ER REMAND REPORT ETC., HOWEVER, IT HAD FAILED TO AVAIL THE OPPORTUNITY T O PUT FORTH ITS SIDE OF STORY EVEN BEFORE THIS BENCH DURING THE COURSE OF HE ARING. 11.2.1. REVERTING BACK TO THE ISSUE ON HAND, WE RECALL THE RULING OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. PO OMPUHAR SHIPPING CORPN. LTD., REPORTED IN (2006) 153 TAXMAN 486 (MAD.). A LMOST AN IDENTICAL ISSUE PAGE 14 OF 16 ITA NOS.259 TO 262 & 226/BANG/2 010 14 TO THAT OF THE ISSUE ON HAND WAS BEFORE THE HONBLE COURT FOR ITS CONSIDERATION. AFTER DELIBERATING THE ISSUE AT LEN GTH, THE HONBLE COURT WAS PLEASED TO OBSERVE THAT - UNDER SECTION 194C, THE TAX IS TO BE DEDUCTED WHEN A CONTRACT WAS ENTERED INTO FOR CARRYING OUT ANY WORK I N PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND THE ENTITIES MENTIONED IN SUB-SECTION(1) OF SECTION194C . IN THE PRESENT CASE, THERE WAS NO CONTRACT BETWEEN THE ASSESSEE, AND THE SHIPPING COMPANIES TO CARRY OUT AN Y WORK. ON THE OTHER HAND, THE ASSESSEE-COMPANY HIRED THE SHIPS BELONGING TO OTHER SHIPPING TO OTHER SHIPPING COMPANIES FOR A FIXED PERIOD ON PAYMENT OF HIRE CHAR GES. THE HIRED SHIPS WERE UTILIZED BY THE ASSESSEE IN THE BUSINESS OF CARRYING THE GOODS FROM ONE PLACE TO ANO THER IN PURSUANCE OF AN AGREEMENT ENTERED INTO BETWEEN T HE ASSESSEE AND THE TAMIL NADU ELECTRICITY BOARD. THERE WAS NO AGREEMENT FOR CARRYING OUT ANY WORK OR TRANSPO RT ANY GOODS FROM ONE PLACE TO ANOTHER BETWEEN THE ASSESSEE AND THE OTHER SHIPPING COMPANIES. THE ASSESSEE-COMPANY SIMPLY HIRED THE SHIPS ON PAYMENT OF HIRE CHARGES AND IT WAS UTILIZED IN THE BUSINESS OF THE ASSESSEE AT THEIR OWN DISCRETION. IT IS NOT THE CAS E OF THE REVENUE THAT THE ASSESSEE ENTERED INTO THE SAID CONTRACT WITH THE SHIPPING COMPANY FOR TRANSPORT OF COAL FROM ONE PLACE TO ANOTHER. THE HIRING OF SHIPS FOR THE PURPOSE OF USING THE SAME IN THE ASSESSEES BUSINES S WOULD NOT AMOUNT TO A CONTRACT FOR CARRYING OUT ANY W ORK AS CONTEMPLATED IN SECTION 194C. .. THEREFORE, IN OUR VIEW, WHEN THE ASSESSEE ENTERED INTO A CONTRACT FOR THE PURPOSE OF TAKING TEMPORARY POSSESSION OF SHIPS IN T HE SHIPPING COMPANY IT COULD NOT BE CONSTRUED AS IF THE ASSESSEE ENTERED INTO ANY CONTRACT FOR CARRYING OUT A NY WORK, AND WHEN THE CONTRACT IS NOT FOR CARRYING OUT ANY WORK, THE REVENUE CANNOT INSIST THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE UNDER SECTION 194C OF T HE ACT. PAGE 15 OF 16 ITA NOS.259 TO 262 & 226/BANG/2 010 15 11.2.2. IT HAS BEEN AVERRED BY THE ASSES SEE THAT THE ASSESSEE HAD AWARDED CONTRACT FOR ERECTION OF LINES ON THE CONTR ACTOR UNDER NOMENCLATURE OF DESIGN, FABRICATION, TESTING , SUPPLY ERECTION AND COMMISSIONING OF 400 KV DC LINE FROM PROPOSED 400/2 20 KF BTPS AND ACCORDINGLY THE CONTRACTOR HAD SUPPLIED TOWERS AS PE R DESIGNS SPECIFIED BY THE ASSESSEE DULY TESTED BY THE TESTING AUTHORITIES F OR WHICH KEC INTERNATIONAL GOT TESTED THE TOWERS FROM THE AUTHOR IZED TESTING AGENCIES. IT WAS FURTHER SUBMITTED THAT IN ACCORDANCE WITH TH E REQUIREMENT, THE TOWERS MATERIALS HAVE BEEN SUPPLIED BY KEC INTERNATI ONAL TO THE ASSESSEE AND NOWHERE TESTING CHARGES WERE IDENTIFIABLE OR QU ANTIFIED IN THE AWARD OR TEST CHARGES SPECIFICALLY PAID BY THE ASSESSEE TO KE C AND, THUS, THE ASSESSEE WAS NOT LIABLE TO EFFECT TDS ON TESTING CHARGES. 11.2.3. WE HAVE DULY CONSIDERED THE SUBMI SSION OF THE ASSESSEE AND FIND THAT THERE IS FORCE IN THE CONTENTION OF THE A SSESSEE. MOREOVER, THE REVENUE HAS NOT COME UP WITH ANY DISCREET DOCUMENTAR Y EVIDENCE TO REBUT THE ASSESSEES CONTENTION. 11.2.4. AS THE RULING OF THE HONBLE COUR T REFERRED ABOVE IS DIRECTLY ON THE POINT, WE ARE OF THE CONSIDERED VIEW THAT NEITH ER THE PROVISIONS OF S.194C NOR S. 194J OF THE ACT ARE APPLICABLE TO THE FACTS OF THE ISSUE ON HAND. THEREFORE, GROUND NOS.20 AND 21 IN ASSESSEE S APPEAL (ITA NO.261/10) IS ALLOWED AND REVENUES APPEAL (ITA NO.226/10) STA NDS DISMISSED. IT IS ORDERED ACCORDINGLY. PAGE 16 OF 16 ITA NOS.259 TO 262 & 226/BANG/2 010 16 12. IN THE RESULT (I) THE ASSESSEES APPEALS FOR THE ASSESSMENT YEARS 20 08-09 AND 2009-2010 [U/S 201(1) AND U/S 201(1A) OF THE ACT] A RE ALLOWED; & (II) THE REVENUES APPEAL FOR THE AY 2009-10 IS DISMISSE D. THE ORDER PRONOUNCED ON 8 TH DAY OF APRIL, 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMB ER COPY TO :- 1.THE ASSESSEE 2. THE REVENUE 3. THE CIT (A) CONCERNED. 4. THE CIT CONCERNED. 5. THE DR 6. GF BY ORDER MSP/23.3. ASSISTANT REGISTRAR, ITAT, BANGALORE.