THE DCIT, CIRCLE - 3(1) (TDS), Vijayawada V. M/s Dalmia Cement(Bharat) Ltds.,

ITA 455/VIZ/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1179 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 14-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M NARAYANA RAO
• Assessee Lawyers: R M MEHTA
• Section: 133A; 194C; 201(1)

Judgement Text

ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.454&455/VIZAG/2013 ( / ASSESSMENT YEARS: 2009-10 & 2010-11) DCIT , CIRCLE - 3(1)(TDS), VIJAYAWADA VS. M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TALUK [PAN: HYDDO3417B ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M. NARAYANA RAO, DR / RESPONDENT BY : SHRI R.M. MEHTA, AR / DATE OF HEARING : 13.04.2016 / DATE OF PRONOUNCEMENT : 29.04.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AG AINST THE COMMON ORDER PASSED BY THE CIT(A), VIJAYAWADA DATED 26.3.2013 FOR THE ASSESSMENT YEARS 2009-10 & 2010-11. SINCE, THE FACTS ARE IDENTICAL ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 2 AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGE THER AND DISPOSED OFF, BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF CEMENT. A SURVEY OPERATION U/S 133A OF THE INCOME TAX ACT, 1961 (HER EINAFTER CALLED AS THE ACT) WAS CONDUCTED IN THE BUSINESS PREMISES O F THE ASSESSEE ON 15.2.2010. DURING THE COURSE OF SURVEY, IT WAS NOTI CED THAT THE ASSESSEE HAD ENGAGED THE SERVICES OF M/S. DIVINE ESTABLISHME NT, CHENNAI FOR THE PURPOSE OF MINING OF LIME STONE TO BE USED FOR MANU FACTURE OF CEMENT FROM THE MINES OWNED BY THE ASSESSEE. IT WAS FURTH ER OBSERVED THAT AS PER THE INVOICES RAISED BY THE CONTRACTOR M/S. DIVI NE ESTABLISHMENT, CHENNAI, THE CONTRACTOR HAS ISSUED INVOICE WITH A D ESCRIPTION THAT THE CONTRACT FOR PROVIDING TECHNICAL SERVICES AND MAINT ENANCE AND OPERATION OF HEMM AT YOUR KADAPA SITE FOR THE MONTH OF AUGUST , 2009. IT WAS FURTHER OBSERVED THAT THE CONTRACTOR HAS ISSUED ONE MORE BILL TOWARDS HIRE CHARGES OF MACHINERY. THEREFORE, THE A.O. WAS OF THE OPINION THAT THE SERVICES PROVIDED BY THE CONTRACTOR IS NOT A ME RE SUPPLY OF LABOUR FOR EXECUTION OF WORKS CONTRACT AS CLAIMED BY THE A SSESSEE, BUT IT IS FOR PROVIDING TECHNICAL SERVICES, THEREFORE, TDS NEEDS TO BE DEDUCTED U/S 194J OF THE ACT. HENCE, ISSUED A SHOW CAUSE NOTICE AND ASKED TO EXPLAIN ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 3 WHY THE ASSESSEE SHALL NOT BE TREATED AS ASSESSEE I N DEFAULT U/S 201(1) OF THE ACT. IN RESPONSE TO SHOW-CAUSE NOTICE, THE ASSESSEE HAS FILED A WRITTEN SUBMISSION DATED 14.7.2010 AND CONTENDED TH AT THE SERVICES PROVIDED BY THE CONTRACTOR M/S. DIVINE ESTABLISHMEN T, CHENNAI IS A MERE CONTRACT FOR EXTRACTION OF LIME STONE FROM THE MINE S OWNED BY THE COMPANY. THE COMPANY HAD ENTERED INTO AN AGREEMENT WITH THE CONTRACTOR AND ALSO ISSUED A SERVICE ORDER, AS PER THE TERMS AND CONDITIONS OF THE SERVICE ORDER, IT IS CLEARLY SPEC IFIED THAT IT IS A CONTRACT FOR MINING AND THERE IS NO TECHNICAL SERVICES IS IN VOLVED. THE ASSESSEE FURTHER SUBMITTED THAT THE COMPANY OWNED THE MINES AND PROVIDES REQUIRED MACHINERY FOR THE PURPOSE OF EXTRACTION OF LIME STONE. THE CONTRACTOR NEEDS TO DEPLOY EXPERIENCED MAN POWER AN D ALSO EXTRACT REQUIRED QUANTITY OF LIME STONE. THEREFORE, THIS I S A CONTRACT FOR EXECUTION OF WORKS CONTRACT AND NOT A CONTRACT FOR PROVISION OF PROVIDING TECHNICAL SERVICES. TO SUPPORT ITS ARGUMENTS, FURNI SHED COPIES OF AGREEMENT ENTERED INTO WITH THE CONTRACTOR ALONG WI TH COPIES OF INVOICES ISSUED BY THE CONTRACTOR. 3. THE A.O. AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE HELD THAT THE SERVICES PROVIDED BY THE CONTRACTOR M/S. D IVINE ESTABLISHMENT, CHENNAI IS NOT A MERE CONTRACT FOR SUPPLY OF LABOUR FOR EXECUTION OF ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 4 WORKS CONTRACT. THE A.O. FURTHER OBSERVED THAT THE CONTRACTOR HIMSELF HAS RAISED INVOICE FOR THE SERVICES PROVIDED IN REL ATION TO PROVISION OF TECHNICAL SERVICES. THEREFORE, THE SERVICE PROVIDE D BY THE CONTRACTOR IS COMING WITHIN THE PROVISIONS OF SECTION 194J OF THE ACT AND NOT WITHIN THE PROVISIONS OF SECTION 194C OF THE ACT. THE A.O . FURTHER OBSERVED THAT ON PERUSAL OF THE SERVICE ORDER ISSUED BY THE COMPANY, IT WAS CLEAR THAT THE ASSESSEE HAS ENGAGED THE SERVICES OF THE C ONTRACTOR FOR ENGAGING EXPERIENCED ENGINEERS FOR THE PURPOSE OF E XTRACTION OF LIME STONE. THOUGH IT IS A MINING ACTIVITY, THE SERVICES PROVIDED BY THE CONTRACTOR CANNOT BE SIMPLY TERMED AS SUPPLY OF MAN POWER FOR THE PURPOSE OF EXECUTION OF WORKS CONTRACT. IT WAS FURT HER HELD THAT EXTRACTION OF LIME STONE REQUIRES TECHNICAL EXPERTI SE AND A NORMAL LABOUR CANNOT OPERATE HEAVY EARTH MOVING EQUIPMENTS AND EX TRACT LIME STONE. THE CONTRACTOR BEING EXPERT IN THE MINING ACTIVITY, THEREFORE, THE COMPANY HAS HIRED THE SERVICES OF A CONTRACTOR. TH EREFORE, THE SERVICE PROVIDED BY THE CONTRACTOR IS COMING UNDER THE DEFI NITION OF TECHNICAL SERVICES AND ACCORDINGLY, THE PAYMENTS ARE COVERED U/S 194J OF THE ACT. WITH THESE OBSERVATIONS, THE A.O. HELD THAT THE ASSE SSEE AS AN ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT AND COMPUTED TDS U /S 194J OF THE ACT @ 11.33% AS AGAINST THE ASSESSEES CLAIM OF 2.26%. ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 5 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER. THE ASSESSEE FURTHER SUBMITTED THAT THE SERVICE PROVIDED BY THE CONTRACTOR IS A MERE CONTRACT FOR SUPPLY OF LABOUR FOR EXECUTION OF WORK S CONTRACT. IT WAS FURTHER ARGUED THAT THE ASSESSEE HAS ENTERED INTO A GREEMENT WITH THE CONTRACTOR AND ISSUED A SERVICE ORDER. THE TERMS A ND CONDITIONS OF SERVICE ORDER SHOWS THAT THE CONTRACTORS NEEDS TO D EPLOY AS MANY AS REQUIRED NUMBER OF LABOURERS TO EXTRACT THE LIME ST ONE FROM THE MINES OWNED BY THE COMPANY. THE COMPANY PROVIDES THE REQ UIRED MACHINERY FOR EXTRACTION OF LIME STONE. THE CONTRACTOR IS NO T DEPLOYING HIS OWN MACHINERY TO EXTRACT THE LIME STONE. IT WAS FURTHE R ARGUED THAT AS PER THE SERVICE ORDER AND SCOPE OF WORK PLACED BY THE C OMPANY, THE CONTRACTOR WAS RESPONSIBLE FOR EXTRACTING SPECIFIED QUANTITY OF LIME STONE WITHIN A SPECIFIED TIME LIMIT BY DEPLOYING HIS MANP OWER AS PER THE REQUIREMENT OF THE COMPANY FROM TIME TO TIME. THE SUPPLY OF MANPOWER INCLUDES SUPPLY OF TRAINED MANPOWER REQUIR ED FOR OPERATING THE HEAVY EARTH MOVING MACHINERIES WHICH WERE OWNED BY THE COMPANY. THE ASSESSEE FURTHER SUBMITTED THAT THE A .O. HIMSELF HAS ADMITTED THAT THE PREDOMINANT OBJECT OF THE CONTRAC T FOR WHICH THE ASSESSEE ENGAGED THE SERVICES OF M/S. DIVINE ESTABL ISHMENT, IS TO CARRY ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 6 OUT MINING AND MAKE THE REQUIRED QUANTITY OF LIME S TONE AVAILABLE TO THE ASSESSEE WITHIN A SPECIFIED TIME. THIS BEING THE P OSITION, THE A.O. OUGHT NOT TO HAVE HELD THAT THIS WAS A CONTRACT FOR TECHN ICAL SERVICES IN AS MUCH AS SECTION 194J OF THE ACT DEFINED THE FEES FO R TECHNICAL SERVICES AS HAVING THE SAME MEANING ASSIGNED TO IT IN EXPLAN ATION 2 TO CLAUSE (VII) TO SUB SECTION 1 OF SECTION 9 OF THE ACT. TH E SAID EXPLANATION TO CLAUSE (VII) OF SUB SECTION 9(1) OF THE ACT, DEFINE S THE TECHNICAL SERVICES AND ASSIGNED THE SAME MEANING AS REFERRED TO IN SEC TION 9 OF THE ACT. AS PER THE SAID DEFINITION, FEES FOR TECHNICAL SERV ICES MEANS ANY CONSIDERATION FOR RENDERING OF ANY MANAGERIAL, TECH NICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TE CHNICAL OR OTHER PERSONNEL), BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLING, MINING AND LIKE PROJECT UNDERTAKEN BY T HE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RESPONDE NT CHARGEABLE UNDER THE HEAD SALARIES. THEREFORE, ASSUMING FOR A MOMENT THAT THE SERVICES PROVIDED BY THE CONTRACTOR IS COMING WITHI N THE MEANING OF FEES FOR TECHNICAL SERVICES, ANY SERVICES PROVIDED IN RE LATION TO MINING ACTIVITY IS KEPT OUTSIDE THE PURVIEW OF THE PROVISIONS OF SE CTION 194J OF THE ACT. THEREFORE, THE A.O. WAS NOT CORRECT IN HOLDING THE ASSESSEE AS AN ASSESSEE IN DEFAULT FOR NOT DEDUCTING THE TDS U/S 1 94J OF THE ACT. ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 7 5. ALTERNATIVELY, THE ASSESSEE FURTHER SUBMITTED TH AT THE RECIPIENT CONTRACTOR HAS ALREADY PAID THE TAXES ON THE CONSID ERATION PAID BY THE COMPANY, THEREFORE, AS PER THE PROVISIONS OF SECTIO N 191 OF THE ACT NO TAX CAN BE DEMANDED FOR FAILURE TO DEDUCT TDS, IF T HE RECIPIENT HAS PAID THE TAXES ON SUCH INCOME, WHICH WAS FURTHER CONFIRM ED BY THE BOARD CIRCULAR NO.275/201/95-IT(B) DATED 29.1.1997, WHERE IN IT WAS CLARIFIED THAT NO DEMAND VISUALIZED U/S 201(1) OF THE ACT SHO ULD BE ENFORCED AFTER THE DEDUCTOR HAS SPECIFIED THE OFFICER IN CHA RGE OF TDS THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE ASSESSEE. THE AS SESSEE FURTHER SUBMITTED THAT IT HAS FURNISHED THE INCOME TAX RETU RN COPIES OF THE CONTRACTOR AND ALSO OBTAINED A CERTIFICATE FROM THE CONTRACTOR, WHEREIN THE CONTRACTOR SPECIFICALLY STATED THAT HE HAD PAID THE TAXES ON THE CONSIDERATION RECEIVED FROM THE COMPANY. THEREFORE , THE A.O. WAS NOT CORRECT IN HOLDING THAT THE ASSESSEE AS AN ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT. IN SUPPORT OF HIS ARGUMENTS, RELIED UP ON THE JUDGEMENT OF HONBLE SUPREME COURT OF INDIA, IN THE CASE OF HIND USTAN COCA-COLA BEVERAGES PVT. LTD. VS. CIT 293 ITR 226. 6. THE CIT(A), AFTER CONSIDERING THE RELEVANT SUBMI SSIONS OF THE ASSESSEE, HELD THAT IT TRANSPIRES FROM THE RECORDS AND AS PER THE SERVICE ORDER AND SCOPE OF WORK, M/S. DIVINE ESTABLISHMENT, IS RESPONSIBLE FOR ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 8 EXTRACTING SPECIFIED QUANTITY OF LIME STONE WITHIN THE SPECIFIED TIME LIMIT BY DEPLOYING ITS TRAINED MAN POWER AS PER THE REQUI REMENT OF THE ASSESSEE. ON PERUSAL OF THE AGREEMENT COPY, IT WAS UNDISPUTEDLY CLEAR THAT THE SERVICES PROVIDED BY THE CONTRACTOR IS A M ERE CONTRACT FOR SUPPLY OF LABOUR FOR EXECUTION OF WORKS CONTRACT, W HICH IS COMING UNDER THE DEFINITION OF WORKS CONTRACT AND ACCORDINGLY, T HE ASSESSEE HAS RIGHTLY DEDUCTED THE TDS U/S 194C OF THE ACT. THE CIT(A) F URTHER HELD THAT THE COMPANY HAD PROVIDED THE HEAVY EARTH MOVING MACHINE RY OWNED BY IT TO THE CONTRACTOR AND THE CONTRACTOR NEEDS TO DEPLO Y AS MANY AS REQUIRED NUMBER OF MANPOWER TO OPERATE THE MACHINER IES AND TO EXTRACT MINIMUM QUANTITY LIME STONE. THUS, PROVIDING LABOU R FOR EXTRACTING LIME STONE AND PAYMENTS AS PER QUANTITY EXTRACTED FROM M INES ON HOURLY BASIS IS A CONTRACT FOR WORK AND THE PROVISIONS OF SECTION 194C OF THE ACT ARE APPLIED. IN AS MUCH AS USE OF HEAVY MACHINERY OWNED BY THE COMPANY AND PROVIDED TO THE CONTRACTOR, THE A.O. BY MISTAKEN OF FACTS CONSIDERED THAT THE HEAVY MACHINERY WAS PROVIDED BY THE CONTRACTOR TO THE COMPANY AND IN SUCH CIRCUMSTANCES WRONGLY CONCL UDED THAT THE PROVISIONS OF SECTION 194J AND 194I OF THE ACT WERE APPLICABLE. THE FACT BEING THAT PROVIDING MEN TO RUN THE MACHINERY, IN T HE MINES OWNED BY THE ASSESSEE TO EXTRACT LIME STONE AND THE PAYMENTS ON HOURLY BASIS IS NOTHING BUT A SIMPLE CONTRACT FOR WORK. WITH THESE O BSERVATIONS, THE ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 9 CIT(A), DIRECTED THE A.O. TO DELETE THE ADDITIONS. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. D.R. SUBMITTED THAT THE CIT(A) ERRED IN COMING TO THE CONCLUSION THAT THE PAYMENTS ARE COVERED U/S 194C O F THE ACT, THOUGH IN THE SERVICE ORDER, IT WAS CLEARLY MENTIONED AS CONT RACT FOR PROVIDING TECHNICAL SERVICES WHICH ARE COVERED U/S 194J OF TH E ACT. THE LD. D.R. FURTHER ARGUED THAT AS PER THE SERVICE ORDER, THE A SSESSEE HIMSELF HAS ADMITTED THAT IT IS AN AGREEMENT FOR PROVIDING TECH NICAL SERVICES. THE CONTRACTOR HAS RAISED INVOICES FOR PROVIDING TECHNI CAL SERVICES, THEREFORE, THE CIT(A) WAS GROSSLY ERRED IN HOLDING THAT THE PA YMENTS ARE COVERED U/S 194C OF THE ACT. THE D.R. FURTHER ARGUED THAT M INING ACTIVITY INVOLVES A TECHNICAL EXPERTISE. A NORMAL LABOUR CA NNOT EXTRACT THE LIME STONE FROM THE MINES. EXTRACTION OF LIME STONE REQ UIRES OPERATION OF HEAVY EARTH MOVING MACHINERIES AND OPERATION OF EAR TH MOVING MACHINERIES REQUIRES EXPERTISE. THE CONTRACTOR M/S. DIVINE ESTABLISHMENT, CHENNAI IS AN EXPERT IN MINING ACTIV ITY, THEREFORE, THE ASSESSEE HAS ENTRUSTED THE WORK OF EXTRACTION OF LI ME STONE TO THE CONTRACTOR. THE TERMS AND CONDITIONS OF THE AGREEME NT ENTERED INTO WITH THE CONTRACTOR AND ALSO THE SERVICE ORDER CLEARLY S PEAKS ABOUT PROVISION ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 10 OF PROVIDING TECHNICAL SERVICES, THEREFORE, THE A.O . HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 194J OF THE ACT AND HIS O RDER SHOULD BE UPHOLD. 8. ON THE OTHER HAND, THE LD. A.R. OF THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE CIT(A). THE LD. A.R. FURTHER SUBM ITTED THAT THE SERVICE PROVIDED BY THE CONTRACTOR IS A MERE CONTRACT FOR S UPPLY OF MAN POWER FOR EXECUTION OF WORKS CONTRACT AND NOT A CONTRACT FOR PROVISION OF PROVIDING TECHNICAL SERVICES. THE LD. A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH THE CON TRACTOR. THE TERMS AND CONDITIONS OF THE CONTRACT CLEARLY SHOWS THAT I T IS A CONTRACT FOR EXTRACTION OF LIME STONE. IT WAS FURTHER ARGUED TH AT THE CONTRACTOR NEEDS TO DEPLOY AS MUCH AS REQUIRED NUMBER OF LABOU RERS TO OPERATE THE HEMM AND ALSO EXTRACT REQUIRED QUANTITY OF LIME STO NE. THE ASSESSEE COMPANY HAS PROVIDED THE REQUIRED NUMBER OF HEMM AN D CONTRACTOR RESPONSIBILITY IS TO OPERATE THE MACHINES AND EXTRA CT THE LIME STONE. THE PAYMENT HAS BEEN MADE ON HOURLY BASIS. THEREFOR E, THE A.O. WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT IT IS A CONTRACT FOR PROVISION OF PROVIDING TECHNICAL SERVICES. THE A.R. FURTHER SUBMITTED THAT ASSUMING FOR A MOMENT THAT IT IS A CONTRACT FOR TEC HNICAL SERVICES AND THE IMPUGNED PAYMENTS ARE COMING WITHIN THE PROVISI ON OF SECTION 194J OF THE ACT, ANY SERVICES RENDERED IN RELATION TO TH E ACTIVITY OF MINING IS ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 11 KEPT OUTSIDE THE PURVIEW OF THE PROVISIONS OF SECTI ON 194J OF THE ACT. THE LD. A.R. FURTHER SUBMITTED THAT SECTION 194J OF THE ACT HAS DEFINED THE TERM FEES FOR TECHNICAL SERVICES. EXPLANATION (B) PROVIDED TO SECTION 194J(1) OF THE ACT, DEFINED THE TERM FEES FOR TECHN ICAL SERVICES AND ASSIGNED THE SAME MEANING AS IN EXPLANATION 2 TO CL AUSE (VII) OF SUB SECTION (1) OF SECTION 9 OF THE ACT. AS PER CLAUSE (VII) OF SUB SECTION 1 OF SECTION 9, THE TERM FEES FOR TECHNICAL SERVICES WOU LD MEAN ANY CONSIDERATION (INCLUDING ANY LUMPSUM CONSIDERATION) FOR RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES ( INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONA L), BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY OR MIN ING AND LIKE OTHER PROJECT UNDERTAKEN BY THE RECIPIENT. THOUGH, PAYMEN TS ARE IN THE NATURE OF TECHNICAL SERVICES, THE PAYMENT MADE TOWARDS MIN ING ACTIVITY IS KEPT OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 194J O F THE ACT. THEREFORE, THE A.O. WAS NOT CORRECT IN INVOKING THE PROVISIONS OF SECTION 194J OF THE ACT. 9. ALTERNATIVELY, THE A.R. SUBMITTED THAT THE RECIP IENT HAS ALREADY PAID THE TAXES ON THE AMOUNT PAID BY THE COMPANY. THEREFORE, IN VIEW OF THE PROVISIONS OF SECTION 191 OF THE ACT AND ALS O AS PER THE CIRCULAR ISSUED BY THE CBDT VIDE CIRCULAR NO.275/201/95-IT(B ) DATED 29.1.1997, ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 12 IT WAS CLARIFIED THAT NO DEMAND CAN BE VISUALIZED U /S 201(1) OF THE ACT AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER IN CHARGE OF THE TDS THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE ASSESSEE. IN THE PRESENT CASE ON HAND, THE CONTRACTOR M/S. DIVINE ESTABLISHMENT, CHENNAI HAVE FURNISHED THEIR INCOME TAX RETURNS AND INCLUDED THE CONSIDERATION RECEIVED FROM THE ASSESSEE COMPANY AND PAID THE TAX ES. IT WAS FURTHER SUBMITTED THAT THE CONTRACTOR ISSUED A CERTIFICATE, WHEREIN IT IS CATEGORICALLY STATED THAT IT HAS INCLUDED THE CONSI DERATION RECEIVED FROM THE COMPANY IN ITS INCOME TAX RETURNS AND PAID THE TAXES DUE ON SUCH INCOME. UNDER THESE CIRCUMSTANCES, THE A.O. WAS NO T CORRECT IN COMING TO THE CONCLUSION THAT THE ASSESSEE AS AN ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT. IN SUPPORT OF HIS ARGUMENTS, RELIED UP ON THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA -COLA BEVERAGES PVT. LTD. VS. CIT(SUPRA). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. THE FACTUAL MATRIX OF THE CAS E IS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF CEMENT . THE ASSESSEE OWNED LIME STONE MINES FOR CAPTIVE CONSUMPTION OF R AW MATERIAL TO BE USED IN THE MANUFACTURE OF CEMENT. THE ASSESSEE HAS ENGAGED THE SERVICE OF CONTRACTOR M/S. DIVINE ESTABLISHMENT, CH ENNAI FOR EXTRACTION ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 13 OF LIME STONE FROM THE MINES OWNED BY THE COMPANY. THE ASSESSEE HAS ENTERED INTO AGREEMENT WITH THE CONTRACTOR AND ISSU ED A SERVICE ORDER. ACCORDING TO THE ASSESSEE, THE PAYMENTS MADE TO THE CONTRACTORS ARE COVERED UNDER THE PROVISIONS OF SECTION 194C OF THE ACT. A SURVEY OPERATION U/S 133A OF THE ACT, WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF SURVEY, IT W AS NOTICED THAT THE ASSESSEE HAS DEDUCTED TDS U/S 194C ON PAYMENT TO M/ S DEVINE ESTABLISHMENT, CHENNAI. IT WAS FURTHER OBSERVED TH AT AS PER THE SCOPE OF WORK AND TERMS AND CONDITIONS OF THE CONTRACT, T HE PAYMENT TO THE CONTRACTORS ARE COMING UNDER THE PROVISIONS OF SECT ION 194J OF THE ACT. THEREFORE, THE A.O. HAS PASSED ORDER U/S 201(1) OF THE ACT AND COMPUTED THE TAX BY INVOKING THE PROVISIONS OF SECT ION 194J OF THE ACT. IT WAS THE CONTENTION OF THE ASSESSEE THAT THE SERV ICE PROVIDED BY THE CONTRACTOR IS A MERE CONTRACT FOR SUPPLY OF MAN POW ER FOR EXECUTION OF WORKS CONTRACT. AS PER THE TERMS OF AGREEMENT ENTE RED INTO WITH THE CONTRACTOR, THE ASSESSEE HAS TO PROVIDE REQUIRED HE MM FOR EXTRACTION OF LIME STONE. THE CONTRACTOR HAS TO DEPLOY AS MANY AS REQUIRED NUMBERS OF MANPOWER AND EXTRACT THE REQUIRED QUANTITY OF LI ME STONE. THE CONSIDERATION IS PAID ON HOURLY BASIS. THE TERMS AN D CONDITIONS OF THE CONTRACT FURTHER PROVIDES FOR PROVISION OF PROVIDIN G REQUIRED CONSUMABLES FOR MAINTENANCE OF THE MACHINERIES BY T HE ASSESSEE. ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 14 UNDER THESE CIRCUMSTANCES, THE A.O. WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THE PAYMENTS ARE COVERED U/S 194J O F THE ACT. 11. THE SOLE ISSUE CAME UP FOR OUR CONSIDERATION IS WHETHER THE CONTRACT ENTERED INTO BY THE ASSESSEE WITH M/S. DIV INE ESTABLISHMENT, IS ONE FOR SUPPLY OF MANPOWER FOR EXECUTION OF WORKS C ONTRACT ATTRACTING TDS PROVISIONS OF SECTION 194C OF THE ACT OR IS THE CONTRACT FOR PROVIDING TECHNICAL SERVICES ATTRACTING THE PROVISIONS OF SEC TION 194J OF THE ACT. ACCORDING TO THE A.O., IT IS A CONTRACT FOR PROVIDI NG TECHNICAL SERVICES, THEREFORE, THE PROVISIONS OF SECTION 194J OF THE AC T APPLIES. THE A.O. HAS GIVEN ELABORATE REASONS FOR COMING TO THE CONCL USION THAT THE IMPUGNED PAYMENTS ARE COMING WITHIN THE PROVISIONS OF SECTION 194J OF THE ACT. IT WAS THE CONTENTION OF THE ASSESSEE THA T THE CONTRACT ENTERED INTO WITH M/S. DIVINE ESTABLISHMENT, IS FOR THE PUR POSE OF EXTRACTION OF LIME STONE. THE ASSESSEE FURTHER CONTENDED THAT TH E CONTRACTOR NEEDS TO PROVIDE ONLY MANPOWER REQUIRED FOR EXTRACTION OF LIME STONE OR OPERATING THE HEMM PROVIDED BY THE COMPANY. THE AS SESSEE COMPANY OWNED THE HEMM AND THE MAINTENANCE EXPENDITURE INCL UDING FUEL FOR OPERATING HEMM IS PROVIDED BY THE ASSESSEE COMPANY. THE PAYMENT HAS BEEN MADE ON HOURLY BASIS. THEREFORE, THE A.O. WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THE PAYMENTS ARE COVE RED U/S 194J OF THE ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 15 ACT. THE ASSESSEE HAS FILED A PAPER BOOK CONTAININ G THE COPIES OF AGREEMENTS ENTERED INTO WITH THE CONTRACTOR AND OTH ER RELEVANT DETAILS SUCH AS INVOICES AND SERVICE ORDER. ON PERUSAL OF THE DOCUMENTS FURNISHED BY THE ASSESSEE, WE FIND THAT THE ASSESSE E HAS ENTERED INTO AN AGREEMENT WITH THE CONTRACTOR FOR PROVIDING SERVICE S OF LABOUR FOR EXTRACTION OF LIME STONE. AS PER THE SERVICE ORDER AND SCOPE OF WORK, THE CONTRACTOR WAS RESPONSIBLE FOR EXTRACTING SPECI FIED QUANTITY OF LIME STONE WITHIN A SPECIFIED TIME LIMIT BY DEPLOYING HI S MANPOWER AS PER THE REQUIREMENT OF THE COMPANY FROM TIME TO TIME. THE S UPPLY OF THE MANPOWER INCLUDES SUPPLY OF TRAINED MANPOWER REQUIR ED FOR OPERATING THE HEAVY EARTH MOVING MACHINERIES WHICH WERE OWNED BY THE COMPANY. WE FURTHER OBSERVED THAT THE A.O. HIMSELF HAS ADMITTED THAT THE PREDOMINANT OBJECTIVE OF THE CONTRACT FOR WHICH THE ASSESSEE ENGAGED THE SERVICES OF M/S. DIVINE ESTABLISHMENT, IS TO CARRY OUT MINING AND MAKE THE REQUIRED QUANTITY OF LIME STONE AVAILA BLE TO THE ASSESSEE WITHIN A SPECIFIED TIME. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT TH E SERVICE PROVIDED BY THE CONTRACTOR M/S. DIVINE ESTABLISHMENT TO THE ASS ESSEE IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND THE IMPUGNED PAY MENTS ARE COVERED UNDER THE PROVISIONS OF SECTION 194J OF THE ACT. ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 16 12. THE ASSESSEE FURTHER CONTENDED THAT THOUGH THE PAYMENTS ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES, WHICH CO MES UNDER THE PROVISIONS OF SECTION 194J OF THE ACT, ANY SERVICES RENDERED IN RELATION TO MINING IS KEPT OUTSIDE THE PURVIEW OF THE PROVISION S OF SECTION 194J OF THE ACT. THE LD. A.R. INVITED OUR ATTENTION TO THE PROVISIONS OF SECTION 194J OF THE ACT AND ALSO TO THE DEFINITION OF FEES FOR TECHNICAL SERVICES AS DEFINED U/S 9(1)(VII) OF THE ACT. WE HAVE GONE THRO UGH THE PROVISIONS OF SECTION 194J OF THE ACT AND ALSO THE DEFINITION OF FEES FOR TECHNICAL SERVICES AS DEFINED U/S 9(1)(VII) OF THE ACT. SECT ION 194J OF THE ACT DEFINED THE TERM FEES FOR TECHNICAL SERVICES AND AS PER THE DEFINITION FEES FOR TECHNICAL SERVICES IS HAVING THE SAME MEAN ING ASSIGNED TO IT IN EXPLANATION 2 TO CLAUSE (VII) TO SUB SECTION 1 OF S ECTION 9 OF THE ACT. THE SAID EXPLANATION 2 TO CLAUSE (VII) OF SECTION 9(1) OF THE ACT READS AS UNDER: EXPLANATION [2] FOR THE PURPOSES OF THIS CLAUSE, FEES FOR TECHNICAL SERVICES MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SE RVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIEN T CHARGEABLE UNDER THE HEAD SALARIES. A CAREFUL STUDY OF EXPLANATION 2 ABOVE, IT IS CLEA R THAT ANY ACTIVITY RELATING TO MINING IS NOT CONSIDERED AS FEES FOR TE CHNICAL SERVICES. THEREFORE, EVEN ASSUMING THAT THE IMPUGNED PAYMENTS ARE COMING ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 17 UNDER THE PROVISIONS OF SECTION 194J OF THE ACT, ST ILL ANY PAYMENTS IN RELATION TO MINING ACTIVITY CANNOT BE CONSIDERED AS FEES FOR TECHNICAL SERVICES, SO AS TO APPLY THE PROVISIONS OF SECTION 194J OF THE ACT. 13. COMING TO THE ALTERNATIVE PLEA OF THE ASSESSEE. THE ASSESSEE MADE AN ALTERNATIVE PLEA THAT THE ASSESSEE CANNOT B E HELD AS ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT, FOR THE REASON TH AT THE RECIPIENT OF THE CONSIDERATION HAS ALREADY PAID THE TAX BY FILING TH E RETURNS. AS PER THE PROVISIONS OF SECTION 191 OF THE ACT, IN THE CASE O F INCOME IN RESPECT OF WHICH PROVISIONS IS NOT MADE UNDER THIS CHAPTER FOR DEDUCTING INCOME TAX AT THE TIME OF PAYMENT AND IN ANY CASE WHERE IN COME TAX HAS NOT BEEN DEDUCTED IN ACCORDANCE WITH PROVISIONS OF THIS CHAPTER, INCOME TAX SHALL BE PAYABLE BY THE ASSESSEE DIRECT. THE LD. A .R. FURTHER SUBMITTED THAT THE SAID POSITION HAS BEEN REITERATED BY THE C BDT IN CBDT INSTRUCTION NO.275/201/95/IT(B) ON 29.1.1997, WHICH WAS FURTHER SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA-COLA BEVERAGES PVT. LTD. VS. JCIT (2 004) 293 ITR 226. THEREFORE, SUBMITTED THAT THE ASSESSEE HAS PROVED T HE OFFICER INCHARGE OF TDS BY FILING THE INCOME TAX RETURNS OF THE RECI PIENT ASSESSEE AND ALSO CERTIFICATE FROM THE RECIPIENT, WHEREIN IT HAS BEEN CATEGORICALLY STATED THAT THE CONSIDERATION RECEIVED BY THE RECIP IENT HAS BEEN INCLUDED ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 18 IN THE FINANCIAL STATEMENT AND RELATED TAXES HAS BE EN PAID. THEREFORE, THE A.O. WAS NOT CORRECT IN HOLDING THE ASSESSEE AS AN ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT ONCE THE RECIPIENT ASS ESSEE HAS PAID THE TAXES ON THE CONSIDERATIONS RECEIVED FROM THE DEDUC TOR, THAN THE A.O. CANNOT HOLD THE ASSESSEE AS AN ASSESSEE IN DEFAULT IN VIEW OF THE PROVISIONS OF SECTION 191(1) OF THE ACT AND ALSO IN VIEW OF THE CIRCULAR ISSUED BY THE CBDT VIDE CIRCULAR NO. (SUPRA). THIS POSITION HAS FURTHER STRENGTHENED BY THE DECISION OF HONBLE SUPREME COU RT, IN THE CASE OF HINDUSTAN COCA-COLA BEVERAGES PVT. LTD. (SUPRA). TH E HONBLE COURT CATEGORICALLY HELD THAT NO DEMAND CAN BE VISUALIZED , ONCE THE ASSESSEE PROVED TO THE SATISFACTION OF THE OFFICER INCHARGE OF TDS THAT THE RECIPIENT HAS CONSIDERED THE PAYMENT AND DISCHARGED THE TAX LIABILITY. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE DOCUMEN TS AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS FURNISHED THE INCOME TAX RETURNS ON THE RECIPIENT FOR THE RELEVANT ASSESSMENT YEARS. THE ASSESSEE ALSO FURNISHED A CERTIFICATE FROM THE RECIPIENT, WHEREIN THE RECIPIENT HAS CATEGORICALLY STATED THAT HE HAS PAID THE TAXES ON THE CONSIDERATION RECEIVED FROM THE ASSESSEE COMPANY. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. WAS NOT CORRECT IN COMING TO THE CONC LUSION THAT THE ASSESSEE AS AN ASSESSEE IN DEFAULT U/S 201(1) OF TH E ACT. THEREFORE, WE ITA NOS.454&455/VIZAG/2013 M/S. DALMIA CEMENT (BHARAT) LTD., JAMMALAMADUGU TAL UK 19 ARE OF THE VIEW THAT ON BOTH COUNTS, THE DEMAND RAI SED BY THE A.O. CANNOT SUSTAIN IN THE EYES OF LAW. HENCE, WE DIREC T THE A.O. TO DELETE THE ADDITIONS MADE U/S 201(1) OF THE ACT. 12. IN THE RESULT, THE APPEALS FILED BY THE REVENUE IN ITA NOS.454 & 455/VIZAG/2013 ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29 TH APR16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 29.04.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT CIRCLE-3(1)(TDS), VIJAY AWADA 2. / THE RESPONDENT M/S. DALMIA CEMENT (BHARAT) LTD ., CHINNAKOMERLA POST, MYLAVARAM MANDAL, JAMMALAMADUGU TALUK, KADAPA DISTRICT. 3. + / THE CIT(TDS), VIJAYAWADA 4. + / THE CIT(TDS), HYDERABAD 5. + ( ) / THE CIT (A), VIJAYAWADA 6. # . , . , # / DR, ITAT, VISAKHAPATNAM 7 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM