The ACIT,TDS Circle, Ahmedabad V. M/s. Oil & Natural Gas Corpn.Ltd., Ahmedabad

ITA 385/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80239 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 31-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 11-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 380 & 385 /AHD/2011 (ASSESSMENT YEAR: 2008-09) THE ACIT TDS CIRCLE- AHMEDABAD V/S M/S. OIL AND NATURAL GAS CORP. LTD. KDM BHAVAN, PALAVASNA MEHSANA PAN NO. AAACO 1598A (APPELLANT) (RESPONDENT) THE ACIT TDS CIRCLE- AHMEDABAD V/S M/S. OIL & NATURAL GAS CORP. LTD. AVANI BHAVAN, CHANDKHEDA, AHMEDABAD PAN NO. AAACO 1598A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIMALENDU VERMA CIT/D R WITH SMT. SONIA KUMAR, SR. D.R. RESPONDENT BY : SHRI S.N. SOPARKAR, A.R. ( )/ ORDER DATE OF HEARING : 31-07-201 4 DATE OF PRONOUNCEMENT : 07-08-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-XXI, AHMEDABAD DATED 29.11.2010 FOR A.Y. 2008-09. 2. AT THE OUTSET BOTH THE PARTIES SUBMITTED THAT THOUG H THE APPEALS ARE OF ONGC BUT RELATE TO DIFFERENT DIVISIONS BUT THE ISSUE INV OLVED IN BOTH THE APPEALS ARE ITA NOS. 380 & 385/AHD/2011 . A.Y. 2008- 09 2 IDENTICAL EXCEPT FOR THE AMOUNT AND IT WAS THEREFOR E SUBMITTED THAT THE SUBMISSIONS MADE BY THEM IN THE CASE OF ONE APPEAL WOULD BE APPLICABLE TO THE OTHER AND THEREFORE BOTH THE APPEALS CAN BE HEA RD TOGETHER. WE THEREFORE PROCEED TO DISPOSE OF BOTH THE APPEALS BY WAY OF A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND THUS PROCEED WITH THE FACTS IN THE CASE OF ITA NO. 380/A/2011. 3. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. IN THIS CASE A SURVEY WAS CARRIED OUT ON 5.2.2009 F OR VERIFICATION OF PROPER COMPLIANCE OF VARIOUS TDS PROVISIONS. DURING THE CO URSE OF SURVEY IT WAS FOUND THAT ASSESSEE HAD PAID HIRING CHARGES FOR HIR ING OF VARIOUS ASSETS LIKE VEHICLES, TRAILORS, CRANES, EQUIPMENT ETC. IT WAS N OTICED THAT ASSESSEE HAD DEDUCTED TAX UNDER THE PROVISIONS OF 194C OF THE AC T. A.O WAS OF THE VIEW THAT ASSESSEE SHOULD HAVE DEDUCTED TDS UNDER THE PR OVISIONS OF 194I OF THE ACT AS THE PAYMENTS MADE FOR HIRING OF VEHICLES AND OTHER EQUIPMENTS COME UNDER THE DEFINITION OF RENT AS PROVIDED IN SECTI ON 194I OF THE ACT. ACCORDING TO A.O, SINCE ASSESSEE HAD DEDUCTED TDS U /S. 194C AND NOT U/S. 194I, THERE WAS SHORT DEDUCTION OF TAX. HE THEREFOR E WORKED OUT THE SHORT DEDUCTION OF TAX ON THE BASIS OF PAYMENT OF RENT AT RS. 4,52,09,407/- AND ALSO WORKED OUT INTEREST U/S. 201(1A) AMOUNTING TO RS. 9 9,46,069/- AND THUS CONSIDERED THE ASSESSEE TO BE DEEMED DEFAULTER UNDE R SECTION 201(1) OF THE ACT. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIE D THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 29.11.2010 DELETED THE ADDITION BY HOLDING AS UNDER:- 5. I HAVE CONSIDERED THE ORDER OF THE A.O. ON THE I SSUE INVOLVED AND THE SUBMISSIONS MADE BY THE APPELLANT'S A.R. THE CONTROVERSY INVOLVED IS AS TO WHETHER THE VARIOUS PAYMENTS REFERRED TO BY THE A.O . ARE IN THE NATURE OF RENT OR IN THE NATURE OF PAYMENT F OR CONTRACTS. IT IS THE CLAIM OF THE ( ASSESSEE THAT THE ITA NOS. 380 & 385/AHD/2011 . A.Y. 2008- 09 3 PAYMENTS WERE MADE AS PER THE CONTRACT WORK AND ACC ORDINGLY IT HAD DEDUCTED TAX AT SOURCE FROM SUCH PAYMENT U/S.194C OF THE IT. ACT. ON THE OTHER HAND THE DEPARTMENTAL VIEW IS THAT TH E PAYMENTS ARE COVERED BY THE AMENDED DEFINITIONS OF RENT AS PER SECTION 194-1 WHICH IS I NTRODUCED FROM 13-7-2006. THE A.O. IS, THEREFORE, H OLDING THE VIEW THAT SUCH PAYMENT IS LIABLE TO TDS U/S. 19 4-1 AT THE RATE OF 10%. IT IS SEEN THAT THE A.O. HA S REFERRED TO THE CONTRACT WITH JOHN ENERGY LTD. AND CONCLUDED THAT OTHER CONTRACTS ARE SIMILAR AND THAT IN THE SAID CONTRACT JOHN ENERGY LTD. THE WORD USED WA S HIRE OF 3 NUMBERS OF 50 TON CAPACITY WORK OVER RI GS FOR A PERIOD OF 2 YEARS. HOWEVER, THIS TRANSACTION IS NOT FALLING IN THE YEAR UNDER CONSIDERATION. THE APPELLANT HAS, THEREFORE, CLAIMED THAT SUCH OBSERVA TION CANNOT BE APPLIED. APART FROM THIS, IT IS SUBM ITTED THAT THE A.O. HAS NOT REFERRED TO THE ENTIRE CONTRA CT. THE CONTRACT IS THAT OF CARRYING OUT OPERATION AND IT REQUIRES TO COMPRESS NATURAL GAS AND DELIVERY OF SU CH GAS AS PER SATISFIED WAS A COMPOSITE CONTRACT. I N SO FAR AS THE CONTRACTS FOR VEHICLES ARE CONCERNED, IT IS SHOWN BY THE APPELLANT THAT THE SAME WERE ALSO IN THE NATURE OF COMPOSITE CONTRACT AND THE PAYMENT IS AS PER THE PER HOUR /K.M. PAYMENT TERMS. ACCORDINGLY, THE SAME WAS IN THE NATURE OF CONTRACT PAYMENT FALLING U/S.194C. THIS SUBMISSION OF THE ASSESSEE IS SUPPOR TED BY THE DECISION OF DELHI I.T.A.T. IN THE CASE OF BH ASIN MOTORS INDIA PVT. LTD. WHEREIN THE INSTALLATIO N OF MACHINERY AND EQUIPMENTS FOR PROVIDING SERVICES ALO NG WITH STAFF WAS HELD TO BE FALLING U/S194C AND NO T U/S. 194-1. THE CIRCULAR NO.558 DATED 28-3-1990 WIT H REFERENCE TO THE PAYMENT MADE BY STATE ROAD TRANSPORT CORPORATION FOR HIRING OF BUSES IS ALSO R ELEVANT WHEREIN SUCH PAYMENT IS HELD TO BE FALLING U/S. 194C. THUS, CONSIDERING THE FACTS OF THE CASE, THE PAYMENTS ARE NOT PURELY IN THE NATURE OF RENT FOR S PECIFIC PERIOD BUT FOR COMPOSITE SERVICES AND HENCE EVEN IF THE PLANT AND EQUIPMENTS ARE GIVEN AS A CONSEQUENC E OF SUCH CONTRACT IT IS INCIDENTAL TO SUCH CONTRACT AND HENCE THE PAYMENTS ARE REQUIRED TO BE CONSIDERED U/S.194C. THE A.O. IS, THEREFORE, NOT JUSTIFIED IN APPLYING SECTION 194-1 AND THE TDS RATE OF 10% AS P ER SAID SECTION AS AGAINST THE TAX DEDUCTED BY THE APP ELLANT AS PER SECTION 194C. THE ENTIRE DEMAND RAISE D U/S.201(1) AND CONSEQUENTIAL INTEREST U/S.201(1 A) LEVIED BY THE A.O. IS, THEREFORE, UNJUSTIFIED AND I T IS DIRECTED TO BE DELETED. 5. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD.CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN DELETING THE ORDER PASSED U/S.201 (1) OF THE I.T. ACT OF RS. 4,52,09,407/- AND INTERE ST CHARGE UNDER SECTION 201 (1 A) OF THE I.T. ACT O F RS. 99,46,067/- EVEN THOUGH SPECIFIC HIRING & LEASI NG AGREEMENT WERE EXECUTED WITH THE PARTIES WHICH IS SUBJECT TO TDS U/S. 194-1 OF THE I.T. ACT. 2. THE LD.CIT(A) ERRED IN NOT CONSIDERING THE FACT THA T AFTER 13.7.2006 THE PROVISION OF 1941 IS APPLICABLE ON HIRING CHARGES OF VEHICLES FOR WHICH COVER USES OF PLANT AND MACHINERY AND NOT THE PROVISION OF 194C OF I.T. ACT. 6. THOUGH THE REVENUE HAS RAISED TWO DIFFERENT GROUNDS BUT BOTH THE GROUNDS ARE INTERCONNECTED AND THEREFORE CONSIDERED TOGETHE R. 7. BEFORE US, LD. D.R TOOK US THROUGH THE ORDER OF A.O AND SUPPORTED HIS ORDER AND SUBMITTED THAT THE ASSESSEE OUGHT TO HAVE DEDUC TED TAX U/S. 194I OF THE ACT AND SINCE THERE WAS SHORT DEDUCTION OF TDS, THE ORDER OF A.O NEEDS TO BE UPHELD. HE THUS SUPPORTED THE ORDER OF A.O. THE LD. A.R. ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A).HE FURTHER ITA NOS. 380 & 385/AHD/2011 . A.Y. 2008- 09 4 SUBMITTED THAT ISSUE OF DEDUCTION OF TAX ON THE PAY MENT MADE TOWARDS DRILLING SERVICES, CRANE HIRE CHARGES, D.G. HIRE CH ARGES WAS ALSO BEFORE THE HONBLE HYDERABAD TRIBUNAL IN THE CASE OF HERAMAC L TD IN ITA NO. 1342 & 1343/HYD/2013. THE HONBLE TRIBUNAL HAS HELD THAT T AX WAS DEDUCTIBLE U/S. 194C AND NOT 194I. HE ALSO PLACED ON RECORD THE COP Y OF THE AFORESAID DECISION AT PAGE 33 TO 44 OF THE PAPER BOOK AND POI NTED TO THE RELEVANT PARAS AT PAGE 40 TO 42 OF THE PAPER BOOK. HE ALSO PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT VS. SWAYAM SHIPPING SERVICES PVT. L TD. 2011 339 ITR 647 (GUJ.) HE THUS SUPPORTED THE ORDER OF CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABOUT IS WHETHER TDS W AS TO BE DEDUCTED U/S. 194C OR SECTION 194I OF THE ACT BY THE ASSESSEE. IT IS ASSESSEES SUBMISSION THAT ON THE PAYMENTS MADE BY IT ASSESSEE HAS CORREC TLY DEDUCTED TDS U/S.194C OF THE ACT AND PROVISIONS OF SECTION. 194I OF THE ACT ARE NOT APPLICABLE. WE FIND THAT A SIMILAR ISSUE OF DEDUCTI ON OF TAX WAS BEFORE THE CO-ORDINATE BENCH OF HYDERABAD TRIBUNAL IN THE CASE OF HERAMAC LTD (SUPRA). THE CO-ORDINATE BENCH OF TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER:- 12. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E PAID THE FOLLOWING AMOUNTS TOWARDS RIG SERVICES, CRANE HIRE CHARGES AND DG SET HIRE CHARGES (I) RIG SERVICES DRILLING RS,52,20,455 (II) CRANE HIRE CHARGES RS, 6,16,917 ( III ) DG SET HIRE CHARGES RS , 6,71,521 TOTAL RS. 65,08,893 TDS WAS EFFECTED BY THE ASSESSEE IN RESPECT OF THE ABOVE PAYMENTS IN TERMS OF S.194C OF THE ACT, WHERE AS THE ASSESSING OFFICER FOR THE FOLLOWING REASONS HEL D THAT THESE PAYMENTS ARE LIABLE FOR TDS UNDER S. 1 941 OF THE ACT- (A)IN VIEW OF THE AMENDMENT TO S.80I, RENT PAID ON MACHINERY FALLS UNDER S.I94I OF THE ACT, (B) THE BILLS SHOW THAT THE AMOUNTS WERE PAID ON HO URLY BASIS. (C) THE ASSESSEE'S CONTENTION THAT PAYMENTS SHOULD BE TREATED AS CONTRACT PAYMENTS IS NOT ACCEPTABLE. ACCORDINGLY, HOLDING THAT IT IS THE PROVISIONS OF S , 1941 AND NOT S.-194C THAT ARE APPLICABLE TO THE F ACTS OF THE PAYMENTS NOTED ABOVE, THE ASSESSING OFFICER LEV IED TAX TOWARDS SHORT DEDUCTION OF RS.5,89,972 UNDER ITA NOS. 380 & 385/AHD/2011 . A.Y. 2008- 09 5 5.201(1) OF THE ACT, AND INTEREST THEREON OF RS, 2, 83/186 UNDER S,201(1A) OF THE ACT, IN RELATION TO- THE ABOVE PAYMENTS BY THE IMPUGNED ORDER. 13. ON APPEAL, THE C1T(A) NOTED THAT WITH REFERENCE TO RIG CHARGES, THE ASSESSEE PRODUCED COPIES OF TH E INVOICES FOR THE ENTIRE AMOUNT OF RS. 52, 20, 455. THESE AMOUNTS WERE PAID TO M/S. JOHN ENERGY LTD. THOUGH THE ASSESSEE PRODUCED AGREEMENT WITH M/S. JO HN ENERGY LTD,, THE CIT(A) NOTED THAT THE SAID AGREEMENT PERTAINED TO THE YEAR 2005 AND NOT RELEVA NT TO THE ASSESSMENT YEAR UNDER APPEAL. AS FOR CRAN E HIRE CHARGES OF RS, 6, 16,917, ASSESSEE SUBMITTED B ILLS ONLY FOR RS.L 1,000 WHICH INCLUDED AN AMOUNT O F RS.3,500 PAID TO RJ. CRANES & CONSULTANTS AND AN AM OUNT OF RS, 8,000 PAID TO LAXMI CRANE SERVICES/ BUT NOT PRODUCED ANY AGREEMENTS WITH THESE PARTIES, SIM ILARLY, EVEN WITH REGARD TO CIIESEI CHARGES CLAIMED OF RS, 6,71, 521, THE CIT(A) NOTED THAT THOUGH THE ASS ESSEE PRODUCED A COPY OF THE INVOICE FOR THE ENTIRE AMOUNT, COPY OF THE AGREEMENT WAS NOT BROUGHT ON RE CORD, FOR THESE REASONS, AND ALSO OBSERVING THAT IN RESPECT OF AIL THE THREE KINDS OF PAYMENTS UNDER CO NSIDERATION, THE ASSESSEE HAS NOT PRODUCED COPY OF THE INCOME-TAX RETURNS OF THE PAYEES, AND ALSO THAT AS PER PROVISIONS OF S.1941 ANY CHARGES PAID FOR USE O F THE MACHINERY OR PLANT OR EQUIPMENT ARE TO BE TAXED UND ER THIS SECTION AND NOT UNDER S.194C OF THE ACT, TH E CIT(A) CONFIRMED THE TAX AS WELL AS INTEREST IMPOSE D BY THE ASSESSING OFFICER UNDER S.201 AND S.201(LA )OF THE ACT, 14. AGGRIEVED,, ASSESSEE PREFERRED SECOND APPEAL BE FORE US ON THIS ISSUE. 15. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE ORDERS OF THE REVENUE AUTHORITIES. WE FIN D THAT IN RESPECT OF RIG SERVICE DRILLING AT PAGES 58 TO 64 OF THE PAPER-BOOK, COPY OF THE INVOICES HAVE BEEN FURNISHED. AS CAN BE SEEN THEREFROM, THE PAYMENTS A RE MADE FOR ACTUAL USE FOR THE SERVICES AND AND THE ASSESS.EE HAS NO CONTROL OVER THE SAME. IT IS FURTH ER CLEAR THEREFROM THAT THE POSSESSION AND CONTROL OF THE RIG ALWAYS REMAINED WITH THE PROVIDER, IN THE CIRCU MSTANCES, IN OUR VIEW, IT IS ONLY THE PROVISIONS OF S.194C AND NOT PROVISIONS OF S.194I THAT ARE APPLICABLE. I N THIS CONTEXT, WE FIND SUPPORT FROM THE DECISION I N THE CASE OF M/S, MODERN TRANSPORT M/S, ITO(1TA NO, 827/ BANG/2010) WHEREIN IT HAS BEEN HELD THAT WHEN VEHICLE OR EQUIPMENT ARE UNDER THE CONTROL OF THEIR OWNER AND NOT THE ASSESSEE, AND THE SAME ARE DRIVEN/OPERATED BY THE EMPLOYEES OF THE OWNER/CONTR ACTOR, THE TAX IS DEDUCTIBLE UNDER S.194C AND NOT UNDER S,194I, IN THIS VIEW OF THE MATTER, WITH RESP ECT TO RIG SERVICES, THE ASSESSING OFFICER HAS ERRE D IN INVOKING THE PROVISIONS OF S.194I. 16. WITH RESPECT TO CRANE HIRE CHARGES, COPY OF INV OICES OF CRANE HIRE CHARGES ARE ATTACHED AT PAGES 9 3 AND 94 OF THE PAPER-BOOK, WHICH SHOWED THAT THE PAYMENT IS NOT MADE FOR ANY RENT OR ACTUAL MOVEMENT/TRANSPORT OF GOODS-ARID MATERIAL AND HENCE , IT WAS RIGHTLY TREATED AS CONTRACT FOR CARRYING O F WORK AND TAX HAS BEEN DEDUCTED IN TERMS OF S.194C. 17. WITH, RESPECT TO DG SET, THE CHARGES ARE ON HOU RLY BASIS, AS SEEN FROM THE COPIES OF INVOICES AT P AGE 5 OF THE PAPER-BOOK, AND NOT AS RENT FOR EQUIPMENT, T HE DG SET IS UNDER THE CONTROL AND OPERATION OF THE SERVICE-PROVIDER AND THE EXPENSE ON DIESEL AS WELL AS MAINTENANCE ARE BORNE BY THE DG OWNER, IN THIS V IEW OF THE MATTER, IN RESPECT OF THESE PAYMENTS ALSO, T HE PROVISIONS OF S.1941 ARE INAPPLICABLE, AND THE A SSESSEE HAS CORRECTLY DEDUCTED TAX IN TERMS OF S.194C OF TH E ACT. 9. FURTHER BEFORE US, REVENUE COULD NOT CONTROVERT THE FINDINGS OF LD. CIT(A) NOR HAS NOT BROUGHT ANY CONTRARY BINDING DECISION I N ITS SUPPORT. REVENUE COULD NOT DISTINGUISH THE FACTS IN THE CASE OF HERA MAC LTD. (SUPRA) WITH THAT OF ASSESSEE. IN VIEW OF THESE FACTS, WE FIND NO REA SON TO INTERFERE WITH THE ORDER OF CIT(A). THUS THESE GROUNDS OF REVENUE ARE DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ITA NOS. 380 & 385/AHD/2011 . A.Y. 2008- 09 6 ITA NO. 385/AHD/2011 FOR A.Y. 2008-09 11. SINCE THE FACTS OF THE CASE ARE IDENTICAL TO THAT O F ITA 380/A/2010 AS ADMITTED BY BOTH THE PARTIES, WE THEREFORE FOR THE REASONS GIVEN WHILE DISPOSING OF THE APPEAL IN ITA NO. 380/AHD/2011 HER EINABOVE AND FOR SIMILAR REASONS IN THE PRESENT APPEAL ALSO DISMISS THE GROUNDS OF REVENUE AND THEREFORE THIS APPEAL OF REVENUE IS ALSO DISMIS SED. 12. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON 07 - 08 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,A HMEDABAD