ACIT, (TDS), TDS Circle-1(1) ,Hyderabad, Hyderabad V. A.P. Gas Power Corporation Limited, Hyderabad, Hyderabad

ITA 674/HYD/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98492 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2015
• Appeal Filed By: Department
• Bench Allotted: SMC
• Next Hearing Date: 08-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2015
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: V SIVA KUMAR
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 674/HYD/2015 ASSESSMENT YEAR: 2007-08 ASST. COMMISSIONER OF INCOME TAX (TDS), TDS CIRCLE-1(1), HYDERABAD VS M/S. A.P. GAS POWER CORPORATION LIMITED, HYDERABAD [PAN: AABCA9105C] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI RAMA KRISHNA BANDI, DR FOR ASSESSEE : SHRI V. SIVA KUMAR, AR DATE OF HEARING : 08-09-2015 DATE OF PRONOUNCEMENT : 18-09-2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS REVENUES APPEAL AGAINST THE ORDER OF COMM ISSIONER OF INCOME TAX (APPEALS)-8, HYDERABAD DATED 24-03-2015. THE ISSUE IN THIS APPEAL IS WITH REFERENCE TO LEVY OF INTEREST ON THE REASON OF SHORT DEDUCTION OF TAX U/S 201(1A). 2. ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATIO N AND SALE OF POWER. DURING THE YEAR IT DEBITED ITS P&L A/C WITH OPERATION AND MAINTENANCE CHARGES OF RS. 11,07,26,520/- AND REPAI RS AND MAINTENANCE OF PLANT & MACHINERY OF RS. 9,44,32,957 /-. IN THE COURSE OF VERIFICATION OF TDS, AO FOUND OUT THAT ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH A.P. GENCO LTD., ON 25-03-2006 FOR O PERATION AND I.T.A. NO. 674/HYD/2015 M/S. A.P. GAS POWER CORPORATION LIMITED :- 2 -: MAINTENANCE OF PLANTS. ASSESSEE HAD DEDUCTED TDS U /S. 194C ON THE AMOUNTS PAID TO A.P. GENCO LTD. AO WAS OF THE OPIN ION THAT ASSESSEE SHOULD HAVE DEDUCTED TAX U/S. 194J AT 10% ON O&M CH ARGES. SINCE A.P. GENCO TO WHOM THE PAYMENTS WERE MADE HAD ALREA DY PAID TAXES ON O&M CHARGES RECEIVED BY IT, DEMAND U/S. 201(1) WAS NOT RAISED, BUT INTEREST U/S. 201(1A) WAS LEVIED TO AN EXTENT OF RS . 4,73,189/-. 3. AO CONSIDERED THE O&M CHARGES AS TECHNICAL SERVI CES RENDERED BY A.P. GENCO ON THE FOLLOWING REASONS: A. THE PAYMENTS MADE BY THE APPELLANT TO AP GENCO WERE SUBJECTED TO SERVICE TAX. THEREFORE, SUCH SERVICES AMOUNT TO PROFESSIONAL/TECHNICAL SERVICES U/S. 194J. B. AS PER CLAUSES OF AGREEMENT, THERE ARE DIFFERENT TYPES OF PAYMENTS FOR DIFFERENT PURPOSES. THEREFORE, THE EN TIRE PAYMENT CANNOT BE CATEGORIZED AS THE PAYMENT FOR CONTRACT W ORK. C. THE ASSESSEES RELIANCE ON THE DECISION OF ITAT, AHMADABAD BENCH, IN THE CASE OF GUJARAT STATE ELECT RICITY CORPORATION VS. ITO 82 TTJ 456, CAN BE DISTINGUISH ED ON THE FACTS. 4. BEFORE THE CIT(A) IT WAS EXPLAINED THAT: A. THAT APPELLANT COMPANY IS ENGAGED IN THE BUSIN ESS OF GENERATION AND SALE OF POWER FOR WHICH IT HAD SET U P ITS POWER PLANTS. O&M OF SUCH POWER PLANTS WAS ENTRUSTED TO AP GENCO BY VIRTUE OF A CONTRACT DATED 25.03.2006. B. ALL THE PAYMENTS MADE TOWARDS O&M OF POWER PLANT BEING CONTRACT OF WORK, TDS IS LIABLE U/S. 194C @ 2%. C. THE DECISION OF HON'BLE ITAT, AHMADABAD BENCH, I N THE CASE OF GUJARAT STATE ELECTRICITY CORPORATION IS SQ UARELY APPLICABLE. THOUGH THE ASSESSING OFFICER STATED THAT THE FACTS ARE DISTINGUISHABLE, HE HAS NOT EXPLAINED AS TO HOW THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE WITH THE FACTS OF GUJARAT STATE ELECTRICITY CORPORATION. I.T.A. NO. 674/HYD/2015 M/S. A.P. GAS POWER CORPORATION LIMITED :- 3 -: D. THE INTEREST U/S. 201(1A) CANNOT BE LEVIED WHERE THE DEDUCTEE HAS ALREADY ADMITTED THE AMOUNTS RECEIVED AND PAID THE TAXES THEREON. 5. ON CONSIDERATION OF SUBMISSIONS OF ASSESSEE, LD. CIT(A) DELETED THE LEVY OF INTEREST BY STATING AS UNDER: 6. THE INFORMATION ON RECORD IS CAREFULLY CONSIDER ED. THE AGREEMENT FOR OPERATION AND MAINTENANCE OF 272 MW G AS TURBO POWER STATION, VIJJESWARAM, ENTERED BETWEEN THE APP ELLANT AND AP GENCO VIDE AGREEMENT DATED 25.03.2006 WAS CAREFULLY CONSIDERED. AS PER THIS AGREEMENT, THE DEDUCTEE WAS UNDER OBLIG ATION TO CARRY OUT THE WORK IN 26 AREAS, SOME OF WHICH ARE BRIEFLY MENTIONED AS UNDER: OPERATION AND MAINTENANCE OF ALL PLANTS AND EQUIP MENT AND AMENITIES PLANT AND OFFICE PREMISES UPKEEP FIRE FIGHTING SERVICES CHEMICALS PROCUREMENT, STORAGE AND USAGE AND HAND LING SEWAGE AND WASTE MANAGEMENT FUEL HANDLING, UNLOADING, PUMPING, DISPOSAL, ACCO UNTING AND SCHEDULING MAINTENANCE OF SAFETY, HEALTH AND SECURITY OF PER SONNEL INCIDENT REPORTING PERFORMANCE MONITORING RECORD KEEPING PROCUREMENT OF ALL SPARES, CHEMICALS, MATERIALS, ET C. ENGINEERING AND DOCUMENTATION ARCHIVE MANAGEMENT PERSONNEL ADMINISTRATION BUDGETING, COST CONTROL AND ACCOUNTING SETTLEMENT OF INSURANCE CLAIMS SECURITY, LIAISON AND PUBLIC RELATIONS MAINTENANCE OF GREEN BELT MAINTENANCE OF COMPANY OWNED VEHICLES MAINTENANCE OF QUARTERS MAINTENANCE OF EQUIPMENT/SYSTEM NOT SPECIFICALLY COVERED IN THE ABOVE ITEMS. FROM THE CAREFUL READING OF THE AGREEMENT ONE CAN UNDERSTAND THAT, THROUGH THIS CONTRACT THE APPELLAN T HAD GIVEN THE COMPLETE OPERATION AND MAINTENANCE OF THE POWER PLA NT AT VIJJESWARAM TO AP GENCO. IT IS NOT A CASE WHERE SER VICES WERE PROVIDED IN CERTAIN TECHNICAL ASPECT. THE AGREEMENT IS FOR COMPLETE OPERATION, MAINTENANCE, RUNNING OF PLANT, EQUIPMENT , PREMISES, I.T.A. NO. 674/HYD/2015 M/S. A.P. GAS POWER CORPORATION LIMITED :- 4 -: PERSONNEL, ETC. FURTHER, THE DEFINITION OF PROFESSI ONAL SERVICES AS PER EXPLANATION (A) OF SECTION 194J ARE AS UNDER: 'PROFESSIONAL SERVICES'; MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOU NTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ADV ERTISING OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR TH E PURPOSES OF SECTION 44AA OR OF THIS SECTION. FURTHER, THE TECHNICAL SERVICES AS DEFINED U/S, 9(1 )(VII) EXPLANATION (2) ARE AS UNDER: FOR THE PURPOSES OF THIS CLAUSE, 'FEES FOR TECHNICA L SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CON SIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR C ONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TE CHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR A NY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDE RTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'SALARIES'. THE SERVICES LISTED ABOVE DO NOT FALL WITHIN THE PU RVIEW OF DEFINITION OF PROFESSIONAL/TECHNICAL SERVICES. FURTHER, THE FACTS OF THE PRESENT CASE ARE IDENTICA L WITH THE FACTS OF GUJARAT STATE ELECTRICITY CORPORATION VS. ITO (CITED SUPRA) WHEREIN THE HON'BLE ITAT, AHMADABAD BENCH HELD; .. ON A CAREFUL READING OF THE ENTIRE AGREEMENT DATED 14-10 -1998, WE ARE OF THE VIEW THAT THE PAYMENT MADE BY THE APPELLANT COM PANY TO GEB WAS A PAYMENT MADE FOR CARRYING OUT THE MEGA PROJEC T OF ENTIRE OPERATION AND MAINTENANCE OF POWER PLANTS UNDERTAKE N BY THE GEB. SUCH PAYMENT WOULD COME WITHIN THE LIMB OF EXCLUSIO NARY PART, VIZ. 'CONSIDERATION FOR LIKE PROJECT' EXCLUDED IN THE DE FINITION OF 'FEES FOR TECHNICAL SERVICES' GIVEN IN EXPLANATION 2 TO SECTI ON 9(1)(VII) OF THE ACT. SUCH PAYMENT CANNOT ALSO BE TREATED AS PAYMENT OF FEES FOR PROFESSIONAL SERVICES AS CONTEMPLATED IN SECTION 19 4J. THE AGREEMENT EXECUTED BETWEEN APPELLANT-COMPANY AND GE B IS NOT AN AGREEMENT SIMPLICITER FOR ACQUIRING TECHNICAL SERVI CES OR PROFESSIONAL SERVICES FROM THEM BUT IT IS AN AGREEMENT REQUIRING GEB TO EXECUTE THE WORK CONTRACT OF OPERATING AND MAINTAINING THE MEGA POWER PROJECT. SUCH A CONTRACT WILL COME WITHIN THE AMBIT AND SCOPE OF SECTION 194C OF THE ACT IN VIEW OF THE AFORESAID JU DGMENT OF HON'BLE APEX COURT. THE ASSESSEE HAD, THEREFORE, RIGHTLY DE DUCTED TAX AT SOURCE AS PER SECTION 194C OF THE ACT.' I.T.A. NO. 674/HYD/2015 M/S. A.P. GAS POWER CORPORATION LIMITED :- 5 -: IN VIEW OF THE ABOVE DISCUSSION, THE PAYMENT MADE B Y THE APPELLANT FOR CARRYING OUT ENTIRE OPERATION AND MAI NTENANCE OF POWER PLANT CANNOT BE TREATED AS FEES FOR PROFESSIO NAL/TECHNICAL SERVICES, THEREFORE, THE LIABILITY OF TDS IS UNDER 194C AND NOT U/S. 194J. AS THE APPELLANT HAD CORRECTLY DEDUCTED TDS U /S.194C, THE QUESTION OF LEVYING INTEREST U/S. 201(1A) DOES NOT ARISE. 6. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO N OT SEE ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A). NOTHING WAS BROUGHT ON RECORD TO COUNTER THE FINDINGS OF LD. CIT(A). AS SEEN FROM T HE COPY OF THE AGREEMENT PLACED ON RECORD ALONG WITH DECISIONS REL IED ON BY THE LD. COUNSEL, WE AGREE WITH THE FINDINGS OF CIT(A) THAT A.P. GENCO HAS UNDERTAKEN THE ENTIRE CONTRACT WORK FOR OPERATION A ND MAINTENANCE OF PLANTS, EQUIPMENTS, AMENITIES, FIRE FIGHTING SERVIC ES ETC., WHICH IS COVERED UNDER THE PROVISIONS OF SECTION 194C AND NO T BY SECTION 194J. LD. CIT(A) ALSO ANALYSED THE ISSUE KEEPING IN MIND THE DECISION OF COORDINATE BENCH OF ITAT AHMEDABAD IN THE CASE OF G UJARAT STATE ELECTRICITY CORPORATION VS. ITO [82 TTJ 456]. FOR THE REASONS STATED BY THE CIT(A), WE ALSO WITH ASSESSEES CONTENTIONS AN D DISMISS THE REVENUES GROUNDS. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH SEPTEMBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 18 TH SEPTEMBER, 2015 TNMM I.T.A. NO. 674/HYD/2015 M/S. A.P. GAS POWER CORPORATION LIMITED :- 6 -: COPY TO : 1. ASST. COMMISSIONER OF INCOME TAX (TDS), TDS CIRC LE-1(1), B BLOCK, 4 TH FLOOR, INCOME TAX TOWERS, AC GUARDS, MASAB TANK, HYDERABAD. 2. M/S. A.P. GAS POWER CORPORATION LIMITED, 201, 2 ND FLOOR, MY HOME SAROVAR PLAZA, SECRETARIAT ROAD, HYDERABAD. 3. CIT (APPEALS)-8, HYDERABAD. 4. CIT-(TDS), HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.