M/s Karnataka Power Transmission Corporation Ltd., Gulbarga V. ITO, Gulbarga

ITA 258/BANG/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1487 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-01-2011
• Assessment Year: 2009-2010
• Appeal Filed On: 04-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V GOPALA RAO CITI
• Assessee Lawyers: CHYTHANYA K K; S PARTHASARATHY
• Section: 194C; 201(1); 2

Judgement Text

PAGE 1 OF 6 ITA NOS.251 TO 258/BA NG/2010 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.251 TO 258/BANG/2010 (ASST. YEARS 2006-07 TO 2009-2010) M/S KARNATAKA POWER TRANSMISSION CORPORATION LTD., GULBARGA MAJOR WORKS (S) DIVISION, SHARAN NAGAR, GULBARGA. - APPELLANT VS THE INCOME-TAX OFFICER, TDS WARD, AAYAKAR BHAVAN, SEDAM ROAD, GULBARGA. - RESPONDENT APPELLANT BY : SHRI S PARTHASARATHY & SHRI CHYTHANYA, K. K, ADVOCATE RESPONDENT BY : SHRI G V GOPALA RAO, CIT-I O R D E R PER BENCH : THESE EIGHT APPEALS INSTITUTED BY KPTCL, GULBARGA DIVISION A STATE GOVERNMENT PUBLIC SECTOR COMPANY ARE DIRECTE D AGAINST THE CONSOLIDATED ORDER OF THE LD. CIT (A)-LTU, BANGALOR E, IN ITA NOS: 31 TO 34/CIT(A) LTU/09-10 DATED: 30.11.2009 FOR THE ASSESSMENT YEARS 2006- 07 TO 2009-10 . I. ITA NOS: 251, 253, 255 & 257/10 AYS: 2006-07 TO 2 009-10 U/S.201 (1) OF THE ACT : PAGE 2 OF 6 ITA NOS.251 TO 258/BA NG/2010 2 2. THE ASSESSEE HAD RAISED AS MAN Y AS NINETEEN IDENTICAL GROUNDS FOR THE AYS UNDER DISPUTE IN AN ILLUSTRATIVE AND NARRATIVE MANNER. ON A CLOSE SCRUTINY OF THE SAME, THE CRUXES OF THE ISSUES EMERG ED ARE THAT 1. THE CIT (A) WAS NOT JUSTIFIED IN SUSTAINING THE ACTION OF THE AO (TDS) IN TREATING THE ASSESSEE AS ASSESSEE IN D EFAULT AND DEMANDING THE TAX ON THE BASIS THAT THE ASSESSEE O UGHT TO HAVE DEDUCTED THE TDS IN RESPECT OF PAYMENTS MADE TO THE CONTRACTORS TOWARDS SUPPLY OF MATERIALS 2. THAT THE CIT(A) HAD FAILED TO APPRECIATE THAT T HE ASSESSEE CANNOT BE REGARDED AS AN ASSESSEE IN DEFAULT U/S 201(1) AS THERE WAS NO OBLIGATION ON THE ASSESSEE TO DEDUCT T DS 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 TAXES ON THE AM OUNTS RECEIVED FROM THE ASSESSEE, THE ASSESSEE WAS UNDER NO OBLIGATION TO PAY THE TAX UNDER SECTION 201(1) OF THE ACT. II. ITA NOS: 252, 254, 256 & 258/10 AYS: 2007-08 TO 2 009-10 U/S. 201 (1A)OF THE ACT: 3. LIKEWISE, THE ASSESSEE HAD RAISE D THREE IDENTICAL GROUNDS FOR THE AYS UNDER CHALLENGE, OUT OF WHICH, GROUND NO.1 BEING GENERAL AND NO SPECIFIC ISSUE INVOLVED, IT HAS BECOME NON-CONSEQUE NTIAL. IN THE REMAINING GROUNDS, THE ISSUES RAISED ARE REFORMULATED AS UNDE R: 1. THE CIT (A) WAS NOT JUSTIFIED IN SUSTAINING THE ACT ION OF THE AO (TDS) IN TREATING THE ASSESSEE AS AN ASSESSEE IN D EFAULT 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 WHEN THE ASSESSEES CASE DOESNT FALL WITHIN THE SPHERE OF S.201(1) OF THE A CT. PAGE 3 OF 6 ITA NOS.251 TO 258/BA NG/2010 3 4. AS THE ISSUES RAISED WERE I DENTICAL PERTAINING TO THE SAME ASSESSEE, THEY WERE HEARD, CONSIDERED TOGETHER AND D ISPOSED OFF IN THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND CLARIT Y. 5. BEFORE VENTURE TO ADDRESS TO THE ISSUES REFE RRED SUPRA, WE WOULD LIKE TO POINT OUT THAT IDENTICAL ISSUES WER E RAISED BY THE ASSESSEES COUNTER-PART KPTCL BANGALORE DIVISION IN ITS AP PEALS IN ITA NOS. 112 TO 115 AND 162 TO 165/BANG/2010 DATED 10 TH MARCH, 2011. 6. THE FACTS WERE ELABORATELY DISCUSSED AND SUBMISS IONS OF BOTH THE LD. A.R AS WELL AS THE LD. D.R. WERE CONSIDERED AT LENGTH IN THOSE APPEALS. AFTER CONSIDERING THE DETAILED RIVAL SUBMISSIONS AN D 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 PRONOUNCEM ENTS ON THE ISSUES IN THE FORE-GOING PARAGRAPHS, WE ARE OF THE CONSIDERED VIEW THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TR EATING 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 PART OF THE ASS ESSEE TO DEDUCT TAX U/S 194C OF THE ACT FOR SUPPLY PORTION; - AMENDMENT OF S. 194C THROUGH FINANCE ACT(NO.2) OF 2 009, CLARIFY DEDUCTION DOESNT EXTEND TO SUPPLY OF MATERIALS (PO RTION); - THE MATERIALS IN QUESTION WERE PURCHASED FROM THE S UPPLIERS BY THE ASSESSEE AND GIVEN TO THE CONTRACTOR(S) FOR CARRYIN G OUT THE WORK OF CIVIL, ERECTION, ETC., PAGE 4 OF 6 ITA NOS.251 TO 258/BA NG/2010 4 - THE CONTRACT BETWEEN THE ASSESSEE AND THE CONTRACTO R WAS A CONTRACT FOR SUPPLY AND NOT FOR CONTRACT OF WOR K 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, MATE RIALS COMPONENT PARTS WERE FABRICATED AND INSTALLED AT WORK SITE PR EMISES; - IT WAS WRONGLY PRESUMED THAT THE CONTRACTS ENTERED INTO BETWEEN THE ASSESSEE AND THE CONTRACTOR WERE COMPOSITE CONT RACT AND AN INDIVISIBLE CONTRACT WHEREAS THERE WERE THREE SEPAR ATE CONTRACTS, VIZ., (I) SUPPLY OF MATERIALS; (II) FOR ERECTION & (III) FOR CIVIL WORK PORTION; - INSTRUCTION TO BIDDERS (SECTION II ITB) UNDER CLA USE 14. TAXES AND DUTIES [SOURCE P 123 OF PB AR] IT HAS BEEN MA DE IMPLICITLY CLEAR THAT 14.1. AS INDICATED IN CLAUSE 35.2 OF SECTION ITB O F THE BID DOCUMENT, IN CASE OF AWARD OF CONTRACT, A DIVISIBLE CONTRACT COVERING THE ENTIRE SCOPE OF THE PARTIAL/TOTAL TURN KEY PACKAGE WILL BE ENTERED INTO WITH THE SUCCESSFUL BIDDER, THERE S HALL BE THREE SEPARATE CONTRACTS AS UNDER: (I) FOR SUPPLY OF GOODS (II) FOR ERECTION WORKS (III) FOR CIVIL ENGINEERING WORKS THUS, TENDER CLEARLY GIVES BREAKS-UP OF SEPARATE AG REEMENTS REFLECTING SEPARATE CONSIDERATION; - THROUGH A SINGLE BIDDING PROCESS, ALL THE CONTRACTS WERE AWARDED DISTINCTLY WHICH DO NOT MEAN THAT THEY WERE COMPOSI TE CONTRACT; - THE HONBLE APEX COURT IN THE CASE OF HINDUSTAN COC A 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 SE CTION 201(1) OF THE INCOME- TAX ACT SHOULD BE ENFORCED AFTER THE TA X DEDUCTOR HAS SATISFIED THE OFFICER-IN-CHARGE OF TDS, THAT TA XES DUE HAVE BEEN PAID BY THE DEDUCTEE-ASSESSEE; PAGE 5 OF 6 ITA NOS.251 TO 258/BA NG/2010 5 - WHEN THERE WAS NO OBLIGATION ON THE PART OF THE ASS ESSEE 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 TH E LD. CIT (A) HAD PLACED STRONG RELIANCE. HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT THOSE DECISIONS WERE CLEARLY DISTINGUISHA BLE 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 DEDUC T TAX U/S 194C OF THE ACT TOWARDS THE PAYMENTS MADE ON SUPPLY PORTION, THE ASSESSEES CASE DOESNT FALL WITHIN THE AMBIT O F THE PROVISIONS OF S.201(1) OF THE ACT AND, THUS, THE AS SESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT; AND (II) THAT WHEN THE ASSESSEE WAS NOT REQUIRED TO DEDUCT T AX TOWARDS THE PAYMENT ON SUPPLY PORTION, THERE WAS NO QUESTIO N WHATSOEVER IN CHARGING INTEREST U/S 201(1A) OF THE ACT. IT IS ORDERED ACCORDINGLY.(UNQUOTE). 7. AS THE ISSUES BEFORE US IN THESE APPEALS ARE SI MILAR TO THAT OF THE ISSUES REFERRED SUPRA AND IN CONFORMITY WITH THE SAID FINDINGS IN THE CASE OF KPTCL BANGALORE DIVISION, WE ARE OF THE CON SIDERED VIEW THAT THE FINDINGS RECORDED THERETO HOLD GOOD FOR THE PRESENT APPEALS TOO. IT IS ORDERED ACCORDINGLY. FOR THE SAKE OF REFERENCE, A COPY OF THE ORDER IN THE CASE OF KPTCL, BANGALORE DIVISION IN ITA NOS. 1 12 TO 115 AND 162 TO 165/BANG/2010 DT: 10.3.2011 IS ANNEXED H ERETO. 8. IN THE RESULT , THE ASSESSEES APPEALS FOR THE ASSESSMENT YEARS 2006-07, 2007.08, 2008-09 AND 2009-2010 [U/S 201 (1 ) AND U/S 201(1A) OF THE ACT] ARE ALLOWED. PAGE 6 OF 6 ITA NOS.251 TO 258/BA NG/2010 6 ENCLS : APPEAL NOS.112 TO 115 & 162 TO 165/BANG/2010 DT.10/3/2011 THE ORDER PRONOUNCED ON 18 TH DAY OF MARCH, 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/17.3. ASSISTANT REGISTRAR, ITAT, BANGALORE.