Income Tax Officer (TDS) Ward,2(2), Amaravati V. The Project Director, National Highways Authority of India, Amaravati

ITA 54/NAG/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3093 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 16-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 201(1); 2

Judgement Text

1 ITA NOS. 54, 55 & 56/NAG/2012. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NOS. 54, 55 & 56/NAG/20 12 ASSESSMENT YEARS : 2009 - 10, 2010 - 11 & 2011 - 12. THE INCOME - TAX OFFICER (TDS), THE PROJECT DIRECTOR, WARD - 2(2), AMRAVATI. VS. NATIONAL HIGHWAYS AUTHORITY OF INDIA, AMRAVATI. PAN NGPNO2148G. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NARENDRA KANE. RESPONDENT : SHRI R.V. LOYA. DATE OF HEARING : 26 - 02 - 2016 DATE OF PRONOUNCEMENT : 31 ST MARCH, 2 016. O R D E R PER MUKUL K. SHRAWAT, J.M. ALL THE THREE APPEALS HAVE BEEN FILED BY THE REVENUE ARISING FROM A CONSOLIDATED ORDER OF LEARNED CIT(APPEALS) - II, NAGPUR DATED 16 - 11 - 2011 PERTAINING TO THE ASSESSMENT YEARS 2009 - 10, 2010 - 11 AND 2011 - 12. IN ALL THE THREE YEARS THE FACTS AS WELL AS THE ISSUE A RE IDENTICAL, THEREFORE, WE SHALL TAKE UP THE ASSESSMENT YEAR 2009 - 10 AS A LEAD YEAR IN WHICH THE GROUND RAISED IS AS UNDER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) - II, NAGPUR, IS CORRECT IN LAW IN HOLDING THAT TCS U/S 206C( 1C) IS COLLECTIBLE ONLY ON THE AMOUNT OF RE1 (ONE RUPEE ONLY) WHICH IS DETERMINED TO BE THE AMOUNT PAYABLE BY LICENSEE OR LESSEE TO THE ACCOUNT OF THE LICENSOR , I.E. NHAI LTD., PARTICULARLY WHEN NHAI LTD. HAS CLARIFIED VIDE ITS CIRCULAR NO. NHA I/F&A/TDS, DT. 18.03.2005 AND OFFICE ORDER F.NO. NHAI/F&A/TDS/VOL.VI/2009 - 10, DT. 27.10.2010, THAT THEY ARE IN AGREEMENT WITH THE VIEW OF THE DEPARTMENT THAT TA X AT SOURCE 2 ITA NOS. 54, 55 & 56/NAG/2012. HAS TO BE COLLECTED FROM THE TOLL COLLECTED BY NHAI LTD. FROM THE LICENSEES OR LESSE ES. 2. A SINGLE ISSUE IN ALL THE THREE YEARS IS RAKED UP BY THE REVENUE DEPARTMENT IS ABOUT THE NON COLLECTION OF TCS FROM TO L L PLAZA. AN ORDER U/S 206C(1C) READ WITH SECTION 206C(6) AND (7) WAS PASSED DATED 12 - 10 - 2010. THE ASSESSEE IS AN AUTHORITY FOR LOOKING AFTER THE CONSTRUCTION OF NATIONAL HIGHWAY. ACCORDING TO THE AO THE ASSESSEE HAD NOT COLLECTED THE TAX FROM THE PERSON WHOM LEASE OR LICENSE HAD BEEN ALLOCATED. A SPOT VERIFICATION WAS CONDUCTED AND THE OFFICE R S OF THE REVENUE DEPARTMENT VISITED T HE PLACE. IT WAS FOUND THAT THE C ONTRACTOR OR THE CONCESSIONAIRE, NAMELY, M/S ORIENTAL PATHWAYS (NAGPUR) P. LTD. WAS GRANTED RIGHT TO TOL L PLAZA SITUATED AT KARANJA GHADGHE) ON NATIONAL HIGHWAYS NO. 6 VIZ. NAGPUR - AMRAVATI HIGHWAY. ACCORDING TO THE REVENUE DEPARTMENT THE TOLL WAS COLLECTED SINCE APRIL, 2008. THE ALL EGATION IS THAT THE TCS WAS NOT COLLECTED FROM THE SAID CONCESSIONAIRE. ACCOR DING TO THE AO, EVERY PERSON WHO GRANTS LEASE OR LICENCE FOR TOLL PLAZA TO AN ANOTHER PERSON FOR THE USE OF THE TOLL PLAZA SHALL AT THE TIME OF DEBITING OF THE AMOUNT PAYABLE BY THE SAID LICENSEE OR AT THE TIME OF RECEIPT OF SUCH AMOUNT FROM THE SAID LICEN SEE COLLECT A SUM EQUAL TO THE PERCENTAGE SPECIFIED IN SECTION 206C(1C) AND THE AMOUNT SO COLLECTED TO BE PAID TO THE CENTRAL GOVERNMENT. THE AO HAS REPRODUCED THE PROVISIONS OF SECTION 206C(1C) AS WELL AS THE RULE PRESCRIBED I.E. RULE 37CA. ACCORDING TO T HE AO , THE PROVISIONS FOR COLLECTION OF TCS ARE AUTOMATIC IN OPERATION. THE ASSESSEE, NATIONAL HIGHWAYS AUTHORITY OF INDIA , AMRAVATI, HAD NOT COLLECTED THE PRESCRIBED AMOUNT OF TCS, HENCE DEFAULTED, FOR WHICH AN EXPLANATION WAS CALLED. A SHOW CAUSE NOTICE WAS ISSUED, RELEVANT PORTIONS ARE REPRODUCED BELOW : IN VIEW OF THE ABOVE OF THE ABOVE PROVISIONS AND AS PER THE CONTRACT BETWEEN YOU & CONCESSIONAIRE (M/S ORIENTAL PATHWAYS (NAGPUR) PVT. LTD.) KNOWN AS CONCESSION AGREEMENT, YOU ARE THE 3 ITA NOS. 54, 55 & 56/NAG/2012. PERSON WHO HAS E NTERED IN TO AGREEMENT AND THE CONCESSIONAIRE ARE THE LICENCEE OR LESSEE, VIDE THE AGREEMENT YOU HAVE ENTRUSTED THE RIGHT OF COLLECTION OF TOLL FEES FOR TOLL PLAZA AT KARANJA (GHADGE) ON AMRAVATI - NAGPUR HIGHWAY. FURTHER FROM THE PERUSAL OF THE AGREEMENT I T IS CLEARLY EVIDENT THAT YOU HAVE AUTHORIZED THE M/S ORIENTAL PATHWAYS (NAGPUR) PVT. LTD. FOR COLLECTION OF FEES FROM THE VEHICLES AT THE TOLL PLAZA ON THE ROUTE AFTER THE COMPLETION OF THE BUILD PART OF THE CONCESSION. THE EXCERPTS FROM THE SCOPE OF THE ABOVE AGREEMENT ARE BEING REPRODUCED AS UNDER. 3.1 SUBJECT TO AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS SED FORTH IN THIS AGREEMENT, NHAI HARE BY GRANTS TO THE CONCESSIONAIRE AND THE CONCESSIONAIRE HEREBY ACCEPTS THE CONCESSION FOR A PERIOD OF 20 (TWENTY) YEARS COMMENCING FROM THE APPOINTED DATE THE EXCLUSIVE RIGHT, LICENCE AND AUTHORITY DURING THE SUBSISTENCE OF THIS AGREEMENT TO IMPLEMENT THE PROJECT AND THE CONCESSION IN RESPECT OF THE PROJECT HIGHWAY. - - - - - - - - - - - - - - - - - - - - - YOU AND CONCESSIONAIRE HAVE ENTERED INTO AN AGREEMENT NAMED AS ESCROW AGREEMENT. VIDE THIS AGREEMENT, THE CONCESSIONAIRE ON YOUR BEHALF, HAS TO COLLECT TOLL FEES AND DEPOSIT THE SAME INTO THE ESCROW ACCOUNT THE ESCROW ACCOUNT HAS TO BE OPERATED AS PER TH E CONCESSION AGREEMENT. THUS THE DEPOSIT OF THE FEES IN THIS ACCOUNT SATISFIES THE CONDITIONS OF THE SEC TION 206(1C) OF THE INCOME TAX ACT, 1961. SO YOU HAVE DEFAULTED U/S 206C(1C) READ WITH SECTION 201(1) & 201(1A) OF THE INCOME TAX ACT, 1961 BY NOT COL LECTION THE TAX AT SOURCE DUE ON THIS ACCOUNT. YOU ARE ALSO REQUESTED TO EXPLAIN AS WHY THE TDS HAS NOT BEEN MADE ON THE PAYMENTS MADE ON A/C OF SHIFTING CHARGES TO MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. 3. IN COMPLIANCE THE ASSESSEE HAS FURNISHED THE FOLLOWING REPLY: IN THE CASE OF BOT PROJECT, CONCESSIONAIRE CONSTRUCT, DEVELOP AND MAINTAIN THE PROJECT DURING THE CONCESSION PERIOD. TO RECOVER THE COST CONCESSIONAIRE CHARGES TOLL FEE AS PER THE TOLL RATES APPROVED BY THE GOVT. THUS IT APPEARS THAT THE PROVISION OF SEC. 206C(1C) IS NOT APPLICABLE. HOWEVER TCS WILL BE COLLECTED ON THE AMOUNT OF REVENUE SHARE PAID TO NHAI BY THE CONCESSIONAIRE UNDER SEC. 206C(1C) OF INCOME TAX ACT 1961. 4 ITA NOS. 54, 55 & 56/NAG/2012. 3.1 THE AO HAS CONCLUDED THAT THE CONCESSIONAIRE WA S ENTITLED TO COLLECT THE FEES FROM THE USER OF THE HIGHWAY. THE RIGHT OF TOLL COLLECTION HAS BEEN TRANSFERRED TO M/S ORIENTAL PATHWAYS (NAGPUR) PVT. LTD. THERE WAS A BOT AGREEMENT AND THAT AGREEMENT HAS ALSO MADE A PROVISION FOR RIGHT OF COLLECTION OF TOL L. AS PER THE AGREEMENT THE FEES COLLECTED BY CONCESSIONAIRE WAS REQUIRED TO BE DEPOSITED IN ESCROW ACCOUNT. THE AO HAS REPRODUCED THE SAID CLAUSE AS UNDER : THE ARTICLE XXV, ESCROW ACCOUNT STATE - THE C ONCESSIONAIRE SHALL WITHIN 60 DAYS FROM THE DATE OF THIS AGREEMENT OPEN AND ESTABLISH THE ESCROW ACCOUNT WITH A BANK (THE ESCROW BANK) AND ALL FUNDS CONSTITUTING THE FINANCING PACKGE FOR MEETING THE TOTAL PROJECT COST SHALL BE CREDITED TO SUCH ESCROW AC COUNT. DURING OPERATIONS PERIOD ALL FEES COLLECTED BY THE C ONCESSIONAIRE FROM THE USERS OF THE PROJECT HIGHWAY SHALL BE EXCLUSIVELY DEPOSITED THEREIN. IN ADDITION, ALL FEES COLLECTED BY NHAI IN EXERCISE OF ITS RIGHTS UNDER THIS AGREEMENT DURING THE CONCESS ION PERIOD AND ALL DISBURSEMENTS OR PAYMENTS BY NHAI PURSUANT HERETO SHALL ALSO, SUBJECT TO THE RIGHTS OF DEDUCTIONS AND APPROPRIATIONS THERE FROM OF N H AI UNDER THIS AGREEMENT, BE DEPOSITED BY NHAI IN THE ESCROW ACCOUNT. 3.2 FOR ASSESSMENT YEAR 2009 - 10 THE AO HAS FINALLY HELD THAT THE ASSESSEE HAD NOT COLLECTED TCS ON THE TOLL FEES COLLECTED BY THE CONCESSIONAIRE, HENCE LIABLE TO PAY TCS DEMAND OF RS.40,42,188/ - RAISED AGAINST THE ASSESSEE. 4. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHO RITY, LEARNED CIT(APPEALS) HAS EXAMINED THE FAC T S OF THE CASE AND THEREUPON HELD THAT THE AMOUNT PAYABLE BY THE LICENSOR/CONCESSIONAIRE WAS ONLY RE. 1/ - PER YEAR WHICH HAD BEEN PAID TO THE ASSESSEE. THEREFORE, THERE WAS NO INFRINGEMENT OF THE PROVISIONS OF SECTION 206 OF I.T. ACT. BEING AGGRIEVED BY THE RELIEF GRANTED, NOW THE REVENUE IS IN APPEAL. 5. FROM THE SIDE OF THE REVENUE LEARNED D.R. MR. NARENDRA KANE SUPPORTED THE ACTION TAKEN BY THE AO. HE HAS PLEADED THAT THERE WAS NO LOGIC OF ASKING RE. 1/ - ANN UALLY FROM M/S ORIENTAL PATHWAYS (NAGPUR) PVT. LTD. SPECIALLY WHEN HE 5 ITA NOS. 54, 55 & 56/NAG/2012. HAD COLLECTED A HUGE TOLL FEES. LEARNED D.R. HAS ALSO ARGUED THAT THE AGREEMENTS SIGNED HAVE NOT SAFEGUARDED THE INTEREST OF THE REVENUE DEPARTMENT. THE PROJECT WAS ON BOT BASIS. THEREFO RE, AFTER THE COMPLETION OF CONSTRUCTION OF THE ROADS, THE CONTRACTOR WAS REQUIRED TO TRANSFER THE PROJECT TO NATIONAL HIGHWAY AUTHORITY (NHAI). FURTHER THE TOLL FEES COLLECTED WAS ALSO REQUIRED TO BE DEPOSITED IN AN ESCROW ACCOUNT JOINTLY HELD BY BOTH T HE PARTIES. ON DEPOSITING THE TOLL FEES IN THE SAID ESCROW BANK ACCOUNT THE NHAI WAS MANDATORILY REQUIRED TO COLLECT THE PRESCRIBED TCS. HE HAS, THEREFORE, CONCLUDED THAT THE FIRST APPELLATE AUTHORITY HAS WRONGLY GRANTED RELIEF, HENCE THE VIEW TAKEN DESER VES TO BE REVERSED. 6. BEFORE CONCLUDING HIS ARGUMENTS LEARNED D.R. MR. NARENDRA KANE HAS DRAWN OUR ATTENTION ON A PETITION FILED BEFORE THE CIT(APPEALS) - II, NAGPUR AND FOR READY REFERENCE RELEVANT PORTION IS EXTRACTED BELOW : IN THIS CASE IT WAS FOUND BY A.O. DURING THE COURSE OF SPOT VERIFICATION CONDUCTED ON 25.08.2010 THAT TAX AT SOURCE NOT COLLECTED BY THE PROJECT DIRECTOR, NHAI, AMRAVATI AS PRESCRIBED UNDER SECTION 206(1C) AND 206C(7) OF THE INCOME - TAX ACT, 1961 DURING THE F.Y. 2008 - 09, 2009 - 10 AND 2010 - 11. THE A.O. WAS PASSED ORDER U/S 206C(3) R.W.S. 206(1C) & 206C(7) OF THE INCOME - TAX ACT, 1961 AND RAISED THE DEMAND FOR F.Y. 200809 AT RS.48,85,693/ - , FOR F.Y. 2009 - 10 AT RS.67,04,634/ - AND FOR F.Y. 2010 - 11 AT RS.33,49,297/ - . AGGRIEVED THE ABOVE MEN TIONED ORDER THE PROJECT DIRECTOR NHAI, AMRAVATI (THE COLLECTOR) WAS FILED APPEALS FOR THE ABOVE A.Y.S. DURING THE PROCEEDINGS BEFORE YOUR HONOUR THE CONCERNED COLLECTOR HAS CANVASSED THE ARGUMENT THAT NHAI IS ENTITLED FOR CONCESSION FEE OF ONLY RS.1/ - PE R YEAR AS PER CLAUSE OF PAGE NO. 34 OF AGREEMENT AND ACCORDINGLY, IT WAS DECIDED IN THE PARA 5.5 OF THE ORDER UNDER REFERENCE THAT THE CONCERNED ASSESSEE IS LIABLE COLLECT TAX @ 2% OF THE ABOVE AMOUNT. IT APPEARS THAT THE PROJECT DIRECTOR, NHAI (THE COLLEC TOR) HAS NOT FURNISHED COMPLETE FACTS BEFORE YOUR HONOUR. THE DOCUMENTS AVAILABLE ON THE RECORDS SHOW THAT THE NHAI (THE COLLECTOR) ALSO ENTITLED TO RECEIVE TOLL, SHARED REVENUE AND OTHER FEES, INCLUDING NEGATIVE GRANT. THE COPY OF OFFICE MEMORANDUM DATED 22.05.2009 OF NHAI EXPLAINING THAT NHAI 6 ITA NOS. 54, 55 & 56/NAG/2012. NEED TO ENSURE THAT ALL THE ABOVE RECEIPTS ARE ACCOUNTED IN A CLEARLY IDENTIFIED MANNER, IS ENCLOSED HEREWITH AS ANNEXURE - I FOR READY REFERENCE. FURTHER, THE NHAI HAS ISSUED LETTER DATED 28 - 07 - 2011 TO ALL ITS PROJECT DIRECTORS INCLUDING THE ASSESSEE THAT ALL THE ABOVE MENTIONED RECEIPTS HAVE TO BE REMITTED TO THE CONSOLIDATED FUND OF INDIA THE SAID LETTER IS ENCLOSED AS ANNEXURE - II OF THIS LETTER. FURTHER, ANOTHER OFFICE MEMORANDUM DATED 21 - 05 - 2010 FROM NHAI IS ALSO E NCLOSED WHICH ALSO STATES THAT THE NHAI ENTITLED TO GET TOLL REVENUE, SHARED REVENUE AND NEGATIVE GRANT AND INTEREST ON RECEIPTS WHICH HAS TO BE ACCOUNTED FOR IN A SEPARATE BANK ACCOUNT OPENED FOR THE PURPOSE AND THE ENTIRE AMOUNT HAS TO BE REMITTED TO TH E CONSOLIDATED FUND OF INDIA ON QUARTERLY BASIS. THE LETTER IS ENCLOSED AS ANNEXURE - III. FURTHER, THE NHAI ISSUED INSTRUCTIONS DATED 22 - 03 - 2010 TO ITS FIELD FORMULATIONS STATING THAT THE MATURITY AMOUNT OF ALL THE FDS MAINTAINED WITH BANK MAY BE DEPOSITED IN CONSOLIDATED FUND OF INDIA. THE SAME IS ENCLOSED AS ANNEXURE IB AND V. IN THIS CONNECTION, THE ISSUE OF NON DEDUCTION OF TDS WAS TAKEN UP WITH DIT(TDS) WHO VIDE HIS LETTER DATED 21 - 01 - 2011 HAS CLARIFIED THE ISSUE WHICH IS ENCLOSED AS PAGE NO.6. THE REL EVANT PARA OF THE LETTER IS REPRODUCED AS UNDER FOR READY REFERENCE : - - - - -- - - - - - - - -- - - - - - - - - -- - 7. FROM THE SIDE OF THE RESPONDENT - ASSESSEE, LEARNED A.R. MR. R.V. LOYA APPEARED AND ARGUED THAT EVEN IF IT IS ASSUMED THAT A RIGHT OF C OLLECTION OF TOLL HAS BEEN TRANSFERRED BY NHAI TO OP PL, THE IMPORTANT FEATURE IS THAT WHATEVER THE AMOUNT RECEIVED/RECEIVABLE ON GRANT OF LICENCE WAS MINIMAL. H E HAS CLARIFIED THAT NHAI HAS IMPLEMENTED A PROJECT FOR WIDENING OF EXISTING TWO LANE ROAD TO FO UR LANE ROAD ON BOT BASIS. A BID WAS CALLED FOR THE PROJECT TO INVITE BOT AND ENTREPRENEURS. LEARNED A.R. HAS PLEADED THAT THE CONTRACT WAS NOT FOR THE BUILDING OF A TOLL PLAZA BUT FOR THE DEVELOPMENT OF THE HIGHWAY. THE CONCESSION AGREEMENT WAS MADE ACCOR DING TO WHICH THE CONCESSIONAIRE WAS GRANT E D THE EXCLUSIVE RIGHT, LICENCE AND AUTHORITY TO CONSTRUCT, OPERATE AND MAINTAIN THE PROJECT HIGHWAY. AFTER THE PERIOD IS SPECIFIED IN THE SAID AGREEMENT THERE IS A CLAUSE FOR TRANSFER OF THE PROJECT TO NHAI UPON THE TERMINATION OF THE TERM OF THE AGREEMENT. THE CONCESSIONAIRE IS AUTHORISED TO COLLECT FEES FROM THE VEHICLES USING THE PROJECT HIGHWAY. A CONCESSION AGREEMENT WAS EXECUTED BETWEEN NHAI AND M/S ORIENTAL PATHWAYS (NAGPUR ) PVT. LTD. ON 10 TH OF 7 ITA NOS. 54, 55 & 56/NAG/2012. MARCH, 20 06. AS PER CLAUSE ( 7) OF CHAPTER 2 OF THE AGREEMENT, FEES PAYABLE BY CONCESSIONAIRE TO NHAI WAS RE.1/ - PER YEAR DURING THE TERM OF THE AGREEMENT. LEARNED A.R. HAS, THEREFORE, EMPHASISED THAT DURING THE TERM OF THE AGREEMENT NHAI WAS NOT ENTITLED FOR ANY OT HER INCOME. THE FEES COLLECTED FROM THE VEHICLES IS INCOME OF THE CONCESSIONAIRE. IT WAS APPROPRIATED TO COMPENSATE HIM FOR THE COST, EXPENSES AND CHARGES INCURRED IN CONNECTION WITH THE OPERATION AND MAINTENANCE OF PROJECT HIGHWAYS. HE HAS CLARIFIED THAT AS PER THE AGREEMENT AN ESCROW ACCOUNT WAS OPENED WITH A NATIONALISED BANK IN THE NAME OF THE CONCESSIONAIRE. THE METHODOLOGY WAS THAT THE AMOUNT DEPOSITED AND WITHDRAWN IN THE SAID ESCROW ACCOUNT IS GUIDED BY TH E NATIONAL POLICY AND THE WITHDRAWALS WERE M ADE BY THE CONCESSIONAIRE FOR THE PURPOSES SPECIFIED IN THE AGREEMENT. HE HAS CONCLUDED THAT SINCE NHAI IS ENTITLED FOR RE.1/ - ANNUALLY, THEREFORE, THERE WAS NO OCCASION TO COLLECT THE TCS. HE HAS PLEADED THAT THE VIEW TAKEN BY LEARNED CIT(APPEALS) DESERV ES TO BE CONFIRMED. 8. WE HAVE HEARD BOTH THE SIDES AT LENGTH. THE ASSESSEE NATIONAL HIGHWAYS AUTHORITY OF INDIA IS STATED TO BE A DEPARTMENT OF MINISTRY OF ROAD TRANSPORT AND HIGHWAY. A TENDER WAS ISSUED FOR NATIONAL HIGHWAY NO. 6 TO BE DEVELOPED ON BOT (BUILD, OWNED, TRANSFER) BASIS. THE PROJECT WAS GRANTED TO DEVELOP THE NATIONAL HIGHWAYS NO. 6 TO M/S ORIENTAL PATHWAYS (NAGPUR) PVT. LTD. , IN SHORT M/S OPPL. THE COST OF THE PROJECT WAS STATED TO BE APPROXIMATELY RS.212 CRORES. THE COST WAS TO BE MET BY M/S OPPL, THROUGH OWN FINANCE, EQUITY, PARTICIPATION, GRANT OF GOVERNMENT AND OTHER SOURCES. THE PROJECT WAS FOR A FIXED TERM OF 20 YEARS. THE COST OF THE PROJECT AS WELL AS THE PROFITABILITY WAS TO BE RECOVERED BY M/S OPPL. THE COST WAS TO BE RECOVERED T HROUGH COLLECTION OF TOLL DURING THE PERIOD OF LEASE. THE OBJECTION OF THE REVENUE DEPARTMENT IS THAT THERE WAS INFRINGEMENT OF PROVISIONS OF SECTION 206C(1C) OF I.T. ACT. THE AO HAS REPRODUCED THE PROVISIONS OF SECTION 206C(1C) IN THE IMPUGNED ORDER AND T HE SILENT FEATURE IS THAT EVERY PERSON WHO GRANTS A LEASE OR A LICENCE OR 8 ITA NOS. 54, 55 & 56/NAG/2012. OTHERWISE TRANSFERS ANY RIGHTS EITHER IN WHOLE OR IN PART IN ANY TOLL PLAZA TO ANOTHER PERSON FOR THE USE OF SUCH TOLL PLAZA FOR THE PURPOSE OF BUSINESS, SHALL AT THE TIME OF DEBITIN G OF THE AMOUNT PAYABLE BY THE LICENSEE OR LESSEE TO HIS ACCOUNT OR AT THE TIME OF RECEIPT OF SUCH AMOUNT FROM THE LICENSEE IN CASH OR BY CHEQUE OR DRAFT, WHICHEVER IS EARLIER, COLLECT FROM LICENSEE A SUM EQUAL TO THE PERCENTAGE SPECIFIED IN THE SAID PROV ISION. THE ALLEGATION OF THE AO IS THAT THE TCS AS PER THE SAID PROVISION WAS NOT COLLECTED FROM THE LICENSEE (IN THE CASE OF THE ASSESSEE CALLED CONCESSIONAIRE). A SPOT INSPECTION WAS MADE AT TOLL PLAZA SITUATED AT KARANJA GHADGE ON NATIONAL HIGHWAY NO. 6, NAGPUR - AMRAVATI HIGHWAY. IT WAS FOUND THAT THE TOLL WAS COLLECTED SINCE APRIL, 2008 AND AS PER THE CONCESSION AGREEMENT AN ARRANGEMENT WAS MADE TO DEPOSIT THE TOLL COLLECTION IN AN ESCROW ACCOUNT IN WHICH THE NHAI IS THE SIGNATORY, THEREFORE, TCS WAS TO BE COLLECTED FROM M/S OPPL. 9. THE ARGUMENT OF THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) WAS THAT, FIRSTLY THE PROVISIONS OF TCS WERE NOT APPLICABLE. ON THIS ISSUE LEARNED CIT(APPEALS) HAS HELD THAT THE PROVISIONS OF SECTION 206C(1C) WERE APPLICABLE O N THE ASSESSEE. AGAINST THIS VERDICT OF LEARNED CIT(APPEALS) THE RESPONDENT - ASSESSEE (NHAI) IS NOT IN APPEAL. RATHER IT IS WORTH TO MENTION THAT THE ASSESSEE HAD ACCEPTED THAT IN CASE OF BOT PROJECT A CONCESSIONAIRE CONSTRUCT, DEVELOP AND MAINTAIN A PROJEC T DURING A SPECIFIED PERIOD. TO RECOVER THE COST, CONCESSIONAIRE CHARGES TOLL FEES AS PER THE TOLL RATES APPROVED BY THE GOVERNMENT. THE PROJECT COST AND THE PROFITABILITY WAS CLAIMED TO BE OUT OF THE PROVISIONS OF SECTION 206C(1C) OF I.T. ACT. HOWEVER, AS PER ASSESSEES OWN SUBMISSIONS TCS WAS REQUIRED TO BE COLLECTED ON THE AMOUNT OF SHARE OF REVENUE PAID TO NHAI BY THE CONCESSIONAIRE. HENCE LEARNED CIT(APPEALS) HAS OPINED THAT TCS WAS TO BE COLLECTED ON THE AMOUNT PAYABLE BY THE CONCESSIONAIRE. AT PRESEN T THE RESPONDENT - ASSESSEE HAS NOT FILED ANY APPEAL OR CROSS OBJECTION IN RESPECT OF THIS PART OF THE APPLICABILITY OF THE PROVISIONS OF 9 ITA NOS. 54, 55 & 56/NAG/2012. SECTION 206C(1C) OF I.T. ACT. HENCE WE ARE NOT SUPPOSED TO ENTER INTO THIS MATTER THAT WHETHER THE PROVISIONS OF SECTION 206C(1C) ARE AT ALL APPLICABLE UNDER THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE. 9.1 THE CONTROVERSY WHICH IS TO BE ADDRESSED BY US IS THE AMOUNT ON WHICH THE TCS WAS REQUIRED TO BE DEDUCTED BY THE ASSESSEE. AS FAR AS THE VIEW EXPRESSED BY LEARNED CIT(APPEALS) IS CONCERNED, HE HAS HELD THAT THE AMOUNT PAYABLE BY THE CONCESSIONAIRE WAS ONLY RE. 1/ - PER YEAR. THE TCS WAS TO BE DEDUCTED ON THIS AMOUNT. NATURALLY ON THIS MINIMAL AMOUNT OF RE. 1/ - NO TCS LIABILITY CAN BE INFESTED UPON THE ASSESSEE. 9.2 FOR THE PURPOSE TO ASCERTAIN THE AMOUNT WHICH WAS SUBJECTED TO TCS THE REVENUE DEPARTMENT HAS DRAWN OUR ATTENTION ON THE CLAUSES OF THE AGREEMENT ACCORDING TO WHICH THE ESCROW ACCOUNT WAS OPENED. THE PLEA OF THE ASSESSEE IS THAT THE AMOUNT COLLECTED WAS TO BE APPROPRIATED BY THE CONCESSIONAIRE TO COMPENSATE THE COST OF THE PROJECT AND THE MAINTENA NCE EXPENSES OF THE HIGHWAY. AS FAR AS THE CONCESSION FEES IS CONCERNED THERE WAS A SPECIFIC CLAUSE IN THE AGREEMENT THAT IN CONSIDERATION OF THE GRANT OF CONCESSION UNDER THE AGREEMENT, THE CONCESSION FEES PAYABLE BY THE CONCESSIONAIRE TO NHAI SHALL BE RE. 1/ - PER YEAR DURING THE TERM OF THE AGREEMENT. NEXT COMES THE CLAUSE UNDER WHICH PARTIES HAVE AGREED TO OPEN A ESCROW ACCOUNT. AS PER CLAUSE 17.3 CONSIDERING THE ADVERSE CIRCUMSTANCES OR THERE WAS CHANGE IN THE COMMITMENT THEN A PROVISION HAS BEEN MAD E THAT IN CASE NHAI HAS TO RECOVER FROM THE CONCESSIONAIRE, THE AMOUNT WILL BE RECOVERED DIRECTLY FROM THE ESCROW ACCOUNT AND FOR THAT PURPOSE THE CONCESSIONAIRE THEREBY EXPRESSLY AUTHORISE NHAI BY GIVING IRREVOCABLE INSTRUCTION TO ESCROW BANK TO MAKE PAYM ENT FROM THE ESCROW ACCOUNT IN ACCORDANCE WITH THE INSTRUCTIONS OF NHAI. OUR ATTENTION HAS BEEN DAWN ON CLAUSE XXV UNDER THE HEAD ESCROW ACCOUNT, RELEVANT FEATURE IS REPRODUCED FOR READY REFERENCE : 10 ITA NOS. 54, 55 & 56/NAG/2012. 25.1 THE CONCESSIONAIRE SHALL WITHIN 60 DAYS FROM T HE DATE OF THIS AGREEMENTS OPEN AND ESTABLISH THE ESCROW ACCOUNT WITH A BANK (THE ESCROW ACCOUNT) AND ALL FUNDS CONSTITUTING THE FINANCING PACKAGE FOR MEETING THE TOTAL PROJECT COST SHALL BE CREDITED TO SUCH ESCROW ACCOUNT. DURING OPERATIONS PERIOD ALL F EES COLLECTED BY THE CONCESSIONAIRE FROM THE USERS OF THE PROJECT HIGHWAY SHALL BE EXCLUSIVELY DEPOSITED THEREIN. IN ADDITION, ALL FEES COLLECTED BY NHAI IN EXERCISE OF ITS RIGHTS UNDER THIS AGREEMENT DURING THE CONCESSION PERIOD AND ALL DISBURSEMENTS OR P AYMENTS BY NHAI PURSUANT HERETO SHALL ALSO, SUBJECT TO THE RIGHTS OF DEDUCTIONS AND APPROPRIATIONS THERE FROM OF NHAI UNDER THIS AGREEMENT, BE DEPOSITED BY NHAI IN THE ESCROW ACCOUNT. 25.2 DISBURSEMENT FROM ESCROW ACCOUNT 25.2.1 THE CONCESSIONAIRE SHALL GIVE, AT THE TIME OF THE OPENING OF THE ESCROW ACCOUNT, IRREVOCABLE INSTRUCTIONS BY WAY OF AN ESCROW AGREEMENT SUBSTANTIALLY IN FORM SET FORTH IN SCHEDULE Q (THE ESCROW ACCOUNT) TO THE ESCROW BANK INSTRUCTING, INTER ALIA, THAT THE DEPOSITS INTO THE ESC ROW ACCOUNT SHALL SUBJECT TO CLAUSE 25.2.3, BE APPROPRIATED IN THE FOLLOWING ORDER EVERY MONTH AND IF NOT DUE IN A MONTH THEN APPROPRIATED PROPORTIONATELY IN SUCH MONTH AND RETAINED IN THE ESCROW ACCOUNT AND PAID OUT THERE FROM IN THE MONTH WHEN DUE UNLESS OTHERWISE EXPRESSLY PROVIDED IN THE INSTRUCTION LETTER : (A) ALL TAXES DUE AND PAYABLE BY THE CONCESSIONAIRE; (B) ALL EXPENSES IN CONNECTION WITH AND RELEVANT TO THE CONSTRUCTION OF PROJECT HIGHWAY BY WAY OF PAYMENT TO THE EPC CONTRACTOR AND SUCH OTHER P ERSONS AS MAY BE SPECIFIED IN THE FINANCING DOCUMENTS; (C) O&M EXPENSES INCLUDING FEES COLLECTION EXPENSES INCURRED BY THE CONCESSIONAIRE DIRECTLY OR THROUGH O&M CONTRACTOR AND/OR TOLLING CONTRACTOR, IF ANY, SUBJECT TO THE ITEMS AND CEILING IN RESPECT THE REOF AS SET FORTH IN THE FINANCING DOCUMENTS BUT NOT EXCEEDING (ONE TWELTH) OF THE ANNUAL LIABILITY ON THIS ACCOUNT; (D) THE WHOLE OR PART OF THE EXPENSE ON REPAIR WORK OR O&M EXPENSES INCLUDING FEES COLLECTION EXPENSES INCURRED BY NHAI, AND 1.25 TIMES OF THE O&M EXPENSES INCURRED BY THE NHAI, IF ANY, IN THE EVENT OF REPAIR AND MAINTENANCE WORK BEING CARRIED OUT BY NHAI (PURSUANT TO THE FAILURE ON THE PART OF THE CONCESSIONAIRE IN DOING SO) TO MAINTAIN AND/OR REPAIR THE PROJECT HIGHWAY OR A PART THEREOF UP TO AND IN ACCORDANCE WITH THE SPECIFICATIONS AND STANDARDS AND/OR FAILURE ON THE PART OF THE CONCESSIONAIRE TO COMMENCE REMEDIAL WORKS WITHIN 30 (THIRTY) DAYS OF RECEIPT OF NOTICE IN THIS REGARD FROM NHAI OR THE INDEPENDENT CONSULTANT, IF ANY, INCLUDIN G THOSE ON ACCOUNT OF EXERCISE OF ANY OF ITS RIGHTS UNDER THIS AGREEMENT PROVIDED NHAI CERTIFIES TO THE ESCROW AGENT THAT NHAI HAD INCURRED SUCH EXPENSES IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT ; 11 ITA NOS. 54, 55 & 56/NAG/2012. (E) ALL CONCESSION FEES AND ANY NEGATIVE GRANT DUE TO NHAI FROM THE CONCESSIONAIRE UNDER THIS AGREEMENT; (F) MONTHLY PROPORTIONATE PROVISION OF DEBT SERVICE PAYMENTS DUE IN ANY ACCOUNTING YEAR AND PAYMENT OF DEBT SERVICE PAYMENTS IN THE MONTH WHEN DUE; (G) REIMBURSEMENTS OF EXPENDITURE INCURRED BY NH AI, IF ANY, FOR PAYMENT OF INSURANCE PREMIA, ETC. WHICH ARE OTHERWISE CONCESSIONAIRES RESPONSIBILITY, ON ACCOUNT OF FAILURE ON PART OF THE CONCESSIONAIRE TO KEEP SUCH INSURANCE(S) EFFECTIVE AND IN FORCE. (H) ANY PAYMENTS AND DAMAGES DUE AND PAYABLE BY TH E CONCESSIONAIRE TO NHAI PURSUANT TO THIS AGREEMENT INCLUDING RECOVERY DUE TO REDUCTION IN THE SCOPE OF WORK AND REPAYMENT OF REVENUE SHORTFALL LOANS; AND (I) BALANCE IN ACCORDANCE WITH THE INSTRUCTIONS OF THE CONCESSIONAIRE 10. DURING THE COURSE OF HE ARING IT WAS EXPLAINED THAT THERE WAS CONDITION FOR THE DISBURSEMENT FROM THE SAID ESCROW ACCOUNT. THE AMOUNT IS TO BE APPROPRIATED IN A PARTICULAR ORDER EVERY MONTH. THE FI R ST IS THE LIABILITY TO PAY ALL TAXES. SECOND IS THE DISBURSEMENT OF EXPENSES IN CO NNECTION WITH THE CONSTRUCTION HIGHWAY. THE THIRD IN THE SEQUENCE IS OPERATION AND MAINTENANCE EXPENSES. THE FOURTH IS EXPENSES ON REPAIR. FIFTH IS THE DISBURSEMENT OF CONCESSION FEES AND ANY NEGATIVE GRANT DUE TO NHAI. THE NEXT IS LOAN I.E. DEBT SERVICE P AYMENT. OUR ATTENTION HAS ALSO BEEN DRAWN THAT IT IS WORTH TO POINT OUT THAT THE BALANCE WAS TO BE APPROPRIATED IN ACCORDANCE WITH THE INSTRUCTIONS OF THE CONCESSIONAIRE, THEREFORE, THE ESCROW ACCOUNT WAS NOT TO BE UTILISED UNDER THE INSTRUCTIONS OF NHAI. 11. IN THE LIGHT OF THE ABOVE CLAUSES OF THE AGREEMENT WE HAVE EXAMINED THE PURPOSE FOR WHICH THE PROVISIONS OF SECTION 206C WERE INTRODUCED IN THE STATUTE. THIS PROVISION WAS INSERTED IN THE FINANCE ACT WHICH WAS INTENDED FOR LEVY AND COLLECTION OF PRESU MPTIVE TAX IN THE CASE OF TRADING IN CERTAIN GOODS. THE BASIC AIM WAS TO COLLECT THE TAX AT SOURCE ON THE SALE OF GOODS. BY THE INSERTION OF THIS SECTION THE REVENUE DEPARTMENT WAS ENABLED TO COLLECT THE DUES FROM THE PERSON CARRYING ON PARTICULAR TRADE. A MEASURE WAS SO ENACTED TO CHECK EVASION 12 ITA NOS. 54, 55 & 56/NAG/2012. OF REVENUE. WHENEVER THERE IS A TRADE THE RESULT IS AN INCOME WHICH IS TO BE BROUGHT TO TAX SO AS TO FACILITATE THE COLLECTION OF TAX ON THAT INCOME WHICH IS BOUND TO ARISE OR ACCRUE AT THE VERY INCEPTION ITSELF W HEN THE SALES ARE MADE. THEREFORE, THE SELLER OF CERTAIN GOODS IS REQUIRED TO COLLECT TAX FROM A BUYER. THE AMOUNT PAYABLE IS THAT AMOUNT WHICH IS PAYABLE AT THE TIME OF DEBITING THE AMOUNT TO THE ACCOUNT OF THE BUYER. THE AMOUNT IS THE PURCHASE PRICE WHIC H THE BUYER PAYS TO THE SELLER FOR THE GOODS SOLD. 11.1 HERE IT IS PERTINENT TO MENTION THAT ON PLAIN READING OF SECTION 206C, IT LEAVES NO ROOM FOR DOUBT, THAT THE QUANTUM OF THE AMOUNT ON WHICH THE TAX IS TO BE COLLECTED AT SOURCE BY THE SELLER HAS TO BE ONLY THAT AMOUNT WHICH IS TO BE PAID TO THE SELLER AS PRICE AT THE TIME OF SALE AND CANNOT BY ANY STRETCH OF REASONING BE HELD TO INCLUDE THAT AMOUNT WHICH HAS NOT BEEN RECOVERED OR PAID DIRECTLY TO THE SELLER. LATER ON BY AN INSERTION OF SUB - SECTION (1C) THE TOLL PLAZA HAS ALSO BEEN INCLUDED. THEREFORE, BY THE INSERTION OF TOLL PLAZA, ISCO FACTO THE TERM SELLER IS TO BE READ IN THAT CONTEXT ALSO. 12. IN THE LIGHT OF THE DISCUSSION MADE HEREIN ABOVE PERTAINING TO THE INTENT OF THE LEGISLATION WE HAVE TO EXAMINE THE OBJECTION OF THE REVENUE DEPARTMENT WHICH HAS ALSO BEEN RAISED BEFORE THE CIT(APPEALS) THAT IN A SITUATION WHEN AN ESCROW ACCOUNT HAS BEEN JOINTLY OPENED BY THE LESSER AND THE LESSEE , THEN THE AMOUNT DEPOSITED BY THE CONCESSIONAIRE CAN BE TREA TED AS PAYMENT TO NHAI. AS FAR AS THE NATURE OF COLLECTION AND THE DEPOSIT OF THE SAID COLLECTION IN THE ESCROW ACCOUNT IS CONCERNED, OU R ATTENTION HAS BEEN DRAWN ON A NOTIFICATION ISSUED BY MINISTRY OF ROAD TRANSPORT DATED 21 ST APRIL, 2008 ACCORDING TO WHICH IN EXERCISE OF THE POWERS CONFE RRED NATIONAL HIGHWAYS ACT, 1956 AUTHORISES THE CONCESSIONAIRE TO COLLECT AND RETAIN THE SAID FEES ON AND FROM THE DATE OF COMMERCIAL OPERATION TILL THE TERMINATION. THE EMPHASIS OF THE NHAI B EFORE US IS THAT THE AMOUNT SO COLLECTED AS A TOLL FEES WAS DEPOSITED IN THE ESCROW ACCOUNT TO SAFEGUARD AND MONITOR CERTAIN LIABILITIES BUT OTHERWISE THE SURPLUS REMAINED 13 ITA NOS. 54, 55 & 56/NAG/2012. IN THE ESCROW ACCOUNT BELONG TO THE CONCESSIONAIRE WHICH WAS RETAINED BY HIM TO RE COVER THE COST OF THE PROJECT. IT HAS ALSO BEEN BROUGHT TO OUR NOTICE THAT THERE WAS A SCHEDULE OF USER FEES WHICH HAS ALSO SUBSCRIBED THAT THE CONCESSIONAIRE SHALL COLLECT FEES FROM THE VEHICLES FOR THE USE OF THE HIGHWAY AS PER THE RATES SPECIFIED AND FURTHER AUTHORISES THE SAID CONCESSIONAIRE TO RETAIN THE FEES SO COLLECTED. IN THIS BACKGROUND, INTER ALIA, WE ARE OF THE CONSCIENTIOUS OPINION THAT IN A SITUATION WHEN THE CONCESSIONAIRE HAS RETAINED THE TOLL FEES COLLECTED AND THE SAID CONCESSIONAIRE WAS UNDER OBLIGATION TO MAKE THE PAYMENT OF RE.1/ - ANNUALLY TO NHAI THEN ON THIS VERY VERY MINIMAL AS WELL AS INSIGNIFICANT AMOUNT THE PROVISIONS OF SECTION 206C(1C) CANNOT BE APPLIED BECAUSE IT IS NOT PRACTICABLE . AS FAR AS THE DOUBTS RAISED BY THE REVENUE D EPARTMENT THAT THE DEPOSITS MADE IN THE ESCROW ACCOUNT WOULD HAVE BEEN USED BY NHAI TO REMIT TO THE CONSOLIDATED FUND OF INDIA , THIS FACT CAN EASILY BE VERIFIED FROM THE SAID ESCROW ACCOUNT. IF NO AMOUNT OF TOLL FEES IS RECOVERED BY NHAI TO BE REMITTE D TO THE CONSOLIDATED FUND OF INDIA OR OTHERWISE THEN NATURALLY THE IMPUGNED DEPOSITS OF TOLL FEES BY OPPL IS OUT OF THE AMBITS OF THE PROVISIONS OF SECTION 206C(1C) OF I.T. ACT. OTHERWISE ON THE PAYMENT OF RE.1/ - WE HAVE ALREADY HELD THAT IT IS NOT PRACTI CABLE TO INVOKE THE PROVISIONS OF SECTION 206C(1C). SUBJECT TO THE ABOVE OBSERVATIONS, THE GROUND RAISED BY THE REVENUE DEPARTMENT DO NOT SURVIVE IN THE EYES OF LAW. FOR ALL THE YEARS THE GROUNDS ARE DISMISSED. 13. IN THE RESULT, THE APPEALS FILED BY THE R EVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MARCH, 2016. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K . SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED: 31 ST MARCH, 2016. 14 ITA NOS. 54, 55 & 56/NAG/2012. COPY FORWARDED TO : 1. THE PROJECT DIRECTOR, NATIONAL HIGHWAYS AUTHORITY OF INDIA, MATRUCHHAYA, PLOT NO. 33, OPP. BANK OF MAHARASHTRA, SAI NAGAR, AMRAVATI - 444607. 2. I.T.O. (TDS), WARD - 2(2), AMAVATI. 3. COMMISSIONER OF INCOME - TAX - ,NAGPUR. 4. CIT(APPEALS) - II, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER WAKODE. ASSISTANT REGISTRAR, ITAT, NAGPUR