Gujarat State Electricity Corporation Ltd., Baroda V. The Income tax Officer,TDS, Petlad

ITA 2558/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9140 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 16-12-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 10-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U B MISHRA
• Assessee Lawyers: J P SHAH WITH SHRI P M SHUKLA
• Keywords: Bonafide belief; TDS; Set aside
• Section: 194C; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH D DD D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI MUKUL SHRAWAT MUKUL SHRAWAT MUKUL SHRAWAT MUKUL SHRAWAT, , , , JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER AND AND AND AND SHRI SHRI SHRI SHRI N.S.SAINI N.S.SAINI N.S.SAINI N.S.SAINI, , , , ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER DATE OF HEARING : 16-12-2010 DRAFTED ON:16- 12-2010 ITA NO. 2558 /AHD/ 2008 ASSESSMENT YEAR : 2005-06 GUJ ARAT STATE ELECTRICITY CORPORATION LIMITED, SARDAR PATEL VIDYUT BHAVAN,RACE COURSE CCIRCLE, BARODA. VS. INCOME TAX OFFICER (TDS), INCOME TAX OFFICE, STATION ROAD, PETLAD. PAN/GIR NO. : AAACG6864 F (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI J.P . SHAH, ADVOCATE WITH SHRI P.M. SHUKLA. RESPONDENT BY: SHRI U. B. MISHRA, D.R. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, BARODA DATED 27-5-2008. 2. THE SOLE GROUND OF APPEAL TAKEN BY THE ASSESSEE IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND FACTS IN CONFIRMING THE INTEREST O F `.2,76,247/- LEVIED UNDER SECTION 201(1A) FOR THE A LLEGED NON- DEDUCTION OF TAX AT SOURCE FROM TRANSPORTATION CHAR GES PAID TO GAIL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER IN HIS ORDER DATED 6-7-2007 OBSERVED THAT THE ASSESSEE ;PA ID `.4,67,48,628/- TO GAIL(INDIA) LTD., VADODARA FOR T RANSPORTATION CHARGES DURING THE YEAR AND FAILED TO DEDUCT TAX AT SOURCE AT THE TIME OF CREDITING THE AMOUNT TO GAIL (INDIA) LTD., VADODARA AND - 2 - FAILED TO DEPOSIT THE SAME INTO THE GOVERNMENT ACCO UNT WITHIN STIPULATED TIME. HOWEVER,. HE FOUND THAT THE ASSESS EE DEPOSITED THE TAX WHICH WAS TO BE DEDUCTED AT SOURCE AMOUNTIN G TO `.10,49,039/- ON14-12-2006. FOR THIS DEFAULT THE LE ARNED ASSESSING OFFICER HELD THE ASSESSEE LIABLE TO PAY SIMPLE INTE REST AT THE RATE APPLICABLE AT THE RELEVANT TIME UNDER SECTION 201(1 A) OF THE INCOME TAX ACT,19061 WHICH WORKED OUT TO `.2,76,247 /-. 4. ON APPEAL, BEFORE THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) THE SUBMISSION OF THE ASSESSEE WAS THAT T AX WAS NOT DEDUCTED AT SOURCE FROM THE PAYMENTS FOR TRANSPORTA TION CHARGES TO GAIL UNDER THE BONAFIDE BELIEF THAT SUCH TYPE OF PAYMENT IS OUTSIDE THE PURVIEW OF TDS PROVISIONS. AS SOON AS T HE ASSESSEE CAME TO KNOW ABOUT THE CORRECT POSITION, IT DEDUCTE D TDS IN SUBSEQUENT YEARS. THE ASSESSEE ALSO SUBMITTED THAT GAIL WAS RAISING ONE COMPOSITE BILL FOR PURCHASE OF GAS AND TRANSPORTATION CHARGES AND THE PROVISIONS OF SECTION194C WERE NOT APPLICABLE ON SUCH CONTRACTS. THE ASSESSEE FURTHER CONTENTED THAT WHERE THE REGULAR ASSESSMENT OF THE PAYEE WAS COMPLETED AND T HE AMOUNT OF TAX WAS FULLY PAID BY HIM, THE LEARNED ASSESSING OF FICER HAD NO JURISDICTION UNDER SECTION 201 TO DEMAND FURTHER TA X FROM THE ASSESSEE PAYER IN RESPECT OF TAX SHORT DEDUCTED FRO M SUCH PAYEE. ACCORDING TO THE ASSESSEE, SINCE GAIL MUST HAVE SHO WN SUCH TRANSPORTATION CHARGES AS INCOME AND MUST HAVE PAID TAXES ON IT, THERE WAS NO QUESTION OF LEVYING INTEREST UNDER SEC TION 201(1A) ON THE ASSESSEE. RELIANCE WAS ALSO PLACED ON GUJARAT H IGH COURT DECISION IN THE CASE OF CIT VS. RISHIKESH APARTMENT S CO-OP. HOUSING SOCIETY LTD., 253 ITR 310 AND M.P. HIGH COURT DECIS ION IN THE CASE OF GWALIOR RAYON SILK CO. LTD., 140 ITR 832. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERV ED AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS. THE APPELLANT HAS STATED IN PARA-1.3 OF THE WRITTEN SUBMISSION DATED 2-5-2008, THAT AS SOON AS THE APPELLANT CAME TO KNOW ABOUT T HE CORRECT POSITION, IT STARTED DEDUCTING TDS IN SUBSE QUENT YEARS. THIS MEANS THAT APPELLANT ACCEPTED ITS LIAB ILITY TO - 3 - DEDUCT TAX IN THE SAID TRANSACTIONS WITH GAIL. BESI DES ADMITTING THE LIABILITY, THE APPELLANT DEPOSITED TH E TAX DEDUCTED AT SOURCE OF `.10,49,039/- ON 14-12-2006. IN VIEW OF THIS, APPELLANTS QUESTIONING OF THE LIABILITY T O DEDUCT TAX ON THE SAID TRANSACTIONS BECOMES INFRUCTUOUS. APPEL LANTS CONTENTION IS ALSO THAT GAIL MUST HAVE SHOWN SUCH TRANSPORTATION CHARGES AS INCOME AND MUST HAVE PAID TAXED ON IT AND THENCE THERE WAS NO QUESTION OF LEVYING I NTEREST UNDER SECTION 201(1A) ON THE APPELLANT. APPELLANT HAS JUST ASSUMED THAT GAIL MUST HAVE PAID TAXES ON THE INCOM E IN FULL WITHOUT ACCOUNTING FOR THE TDS. WITHOUT PROOF, SUCH ASSERTION CANNOT BE ASSIGNED ANY WEIGHTAGE. EVEN OTHERWISE, THE STATUTE ENTAILS LIABILITY TO DEDUCT TAX AT SOURCE BY THE PAYER FROM CERTAIN PAYMENTS, EVEN THOUGH THE RESPONSIBILITY OF THE PAYEE TO PAY TAXES THROUGH AD VANCE TAX OR SELF ASSESSMENT TAX STILL EXISTS. THIS ARGUMENT OF APPELLANT CAN, THEREFORE, BE NOT ASSIGNED ANY WEIGHTAGE. IN REGARD TO INTEREST UNDER SECTION 201(1A), IT H AS BEEN HELD IN MANY COURT DECISIONS LIKE BENNET COLEM AN AND CO. LTD. VS. V.P. DAMLE, THIRD ITO (1986) 157 ITR 8 12 (BOM), CIT VS. DHANALAKSHMY WEAVING WORKS (2000) 245 ITR 1 3 (KER.), CIT VS. K. K. ENGG. CO. (2001) 116 TAXMAN 3 90 (KER.), CIT VS. ASSAM SMALL INDUSTRIES DEVELOPMENT CORPORAT ION (1996) 219 ITR 324, CIT VS. PREM NATH MOTORS (P) LT D. (2002), 120 TAXMAN 584 (DELHI) THAT THE INTEREST UNDER SECT ION 201(1A) IS COMPENSATORY AND MANDATORY IN NATURE. IN THE CASE OF ACIT VS. ADANI EXPORTS LTD. (2007) 109 ITD 101 (AHD)(TM), THE AHMEDABAD BENCH OF THE ITAT HAS HELD THAT THE BONAFIDE BELIEF OF THE ASSESSEE, EVEN IF IT WAS THERE, WOULD NOT BE OF ANY HELP AND ON COMPENSATORY GROUND , THE ASSESSEE HAD TO PAY INTEREST AS THE MONEY DUE TO TH E GOVERNMENT WAS UTILIZED BY THE ASSESSEE UNTIL IT WA S PAID. THE TRIBUNAL ALSO HELD IN THIS CASE THAT THE LIABIL ITY TO INTEREST IS NOT A PENAL ONE BUT COMPENSATORY. IN VIEW OF ABO VE, THE CHARGING OF INTEREST UNDER SECTION 201(1A) OF `.2,7 6,247/- IS UPHELD. 6. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO A COMP OSITE CONTRACT WITH AIL (INDIA) LTD., FOR PURCHASE OF GAS AND TRAN SPORTATION CHARGES AND THE SAID GAIL (INDIA) LTD., WAS RAISING A COMPO SITE BILL FOR PURCHASE OF GAS AND TRANSPORTATION CHARGES AND THER EFORE, PROVISIONS OF SECTION 194C WERE NOT APPLICABLE ON S UCH CONTRACTS AND ACCORDINGLY ASSESSEE WAS NOT LIABLE TO DEDUCT T DS FROM THE TRANSPORTATION CHARGES PAID TO GAIL (INDIA) LTD., C HARGED IN THE COMPOSITE BILL RAISED ON THE ASSESSEE. HENCE THE AS SESSEE WAS NOT - 4 - LIABLE FOR PAYMENT OF INTEREST UNDER SECTION 201(1A ) OF THE ACT. HE RELIED ON THE DECISION OF HON'BLE PUNJAB AND HARYAN A HIGH COURT IN THE CASE OF CIT(TDS) VS. ASSISTANT MANAGER (ACCOUNT S) FOOD CORPORATION OF INDIA (2010) 326 ITR 106 (P& H) WHER E IT WAS HELD THAT IF EXPENSES INCURRED BY A PERSON ON ACCOUNT OF TRANSPORTATION, INTEREST, STORAGE ETC., WERE ADDED TO THE COST OF T HE GOODS, IT COULD NOT BE INFERRED THAT THE PERSON WHO WAS BILLED HAD PAID A CERTAIN AMOUNT ON ACCOUNT OF THOSE SERVICES SEPARATELY AS I T BECOMES PART OF THE COMMODITY SO SOLD. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, AS PER THE REVENUE THE ASSESSEE MADE PAYMENT OF `.4,67,48,628/ - TO GAIL (INDIA) LTD. FOR TRANSPORTATION CHARGES WITHOUT DED UCTING TDS. HOWEVER, THE ASSESSEE DEPOSITED `.10,49,039/- ON14- 12-2006 TOWARDS THE TDS AMOUNT. THE LEARNED ASSESSING OFFIC ER PASSED ORDER UNDER SECTION 201(1A) OF THE ACT HOLDING THE ASSESSEE LIABLE FOR INTEREST OF `.2,76,247/- FOR DELAY IN DEPOSITIN G THE TDS TO THE CREDIT OF THE CENTRAL GOVERNMENT WHICH WAS CONFIRME D IN APPEAL BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). THE ASSESSEE CONTENDED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT SINCE THE ASSESSEE WAS MAKING PAYMEN T OF COMPOSITE BILL RAISED BY GAIL (INDIA) LTD., FOR PUR CHASE OF GAS AND TRANSPORTATION CHARGES THE PROVISIONS OF SECTION 19 4C WERE NOT APPLICABLE TO THE ASSESSEE. 9. WE FIND THAT IN THE CASE OF CIT (TDS) VS. ASSIST ANT MANAGER (ACCOUNTS) FOOD CORPORATION OF INDIA (2010) 326 ITR 106 (P& H) IT WAS FOUND THAT INVOICES RAISED BY VARIOUS STATE ORG ANIZATIONS WHO PROCURED FOOD GRAINS ON BEHALF OF THE ASSESSEE, THE COST OF WHEAT HAS BEEN SHOWN APART FROM THE COST ON ACCOUNT OF OT HER INCIDENTAL EXPENSES INCURRED BY THE PROCUREMENT AGENCIES, VAT HAS ALSO BEEN CHARGED. IT IS FOUND THAT INCIDENTAL EXPENSES WERE PART OF THE COST - 5 - AT WHICH THE FOOD-GRAINS WERE TO BE TRANSFERRED BY THE PROCUREMENT AGENCIES TO THE ASSESSEE. WITH THIS FACT IT WAS HEL D THAT ASSESSEE HAD NOT PAID ANY AMOUNT TO THE PROCUREMENT AGENCIES ON ACCOUNT OF TRANSPORTATION, INTEREST, OR STORAGE CHARGES AS SUCH, ACCORDINGLY, THERE WAS NO LIABILITY FOR DEDUCTION OF TAX. THE LE ARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE ABOVE DECISION TO CONTEND THAT AS THE ASSESSEE WAS NOT LIABLE TO DEDU CT TAX, INTEREST UNDER SECTION 201(1A) OUGHT NOT TO HAVE BEEN CHARGE D IN THE INSTANT CASE. WE FIND THAT COPY OF THE AGREEMENT W ITH GAIL (INDIA) LTD., BILL RAISED BY GAIL (INDIA) LTD. ETC HAVE NOT BEEN PRODUCED BEFORE US. IN ABSENCE OF THE SAME WE ARE UNABLE TO DECIDE WHETHER THE TRANSPORTATION COST SHOWN SEPARATELY IN THE BILL FORMED PART OF THE COST AT WHICH THE GAS WAS TRANSFERRED B Y GAIL (INDIA) LTD., TO THE ASSESSEE. IT IS NOT CLEAR WHETHER ANY VAT WAS CHARGED OR NOT AND IF CHARGED THEN ON WHICH AMOUNT. NEITHE R OF THE LOWER AUTHORITIES HAVE EXAMINED THE ISSUE FROM THIS ANGLE . WE THEREFORE, ARE NOT IN A POSITION TO ADJUDICATE THIS ISSUE COMP LETELY. 10. FURTHER, IT IS OBSERVED THAT HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. TRANS BHARAT AVIATION (P.) LTD. 320 ITR 671 (DEL) HELD THAT THE AIRPORT AUTHOR ITY OF INDIA BEING A GOVERNMENT UNDERTAKING THE TAXES MAY BE PRESUMED TO HAVE BEEN PAID LASTLY BY THE DUE DATE OF THE FILING OF T HE RETURN OF INCOME AND THEREFORE, THE LIABILITY OF THE ASSESSEE TO PAY INTEREST ON THE AMOUNT WHICH WAS TO BE DEDUCTED AT SOURCE EN DED WITH THE DUE DATE OF FILING OF THE RETURN BY THE AIRPORT AUT HORITY OF INDIA. WE THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHOR ITIES AND RESTORE THE ISSUE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER TAKING INTO CONSIDERATION THE AB OVE CITED TWO DECISIONS AND AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, THE GROUND OF APPEAL OF THE ASS ESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. - 6 - ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 23 RD DAY OF DECEMBER, 2010. SD/- SD/- (MUKUL SHRAWAT ) ( N.S.SAINI ) JUDICIAL MEMBER AC COUNTANT MEMBER DATED: AHMEDABAD, 23 RD DAY OF DECEMBER, 2010 COMPILED AND COMPARED BY: PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS)-I, BARODA. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 16-12-2010 -------------- ----- 2. DRAFT PLACED BEFORE AUTHORITY 21-12-2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 21-12-2010 ----------- -------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 22-12-2010 ---------- --------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 23-12-2010 ------- ------------- 6. KEPT FOR PRONOUNCEMENT ON 23-12-2010 -------- ------------ 7. FILE SENT TO THE BENCH CLERK 23-12-2010 ----- --------------- 8. DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR --------------- ------- ------------- 9. DATE OF DISPATCH OF ORDER --------------- --- ------------------