THE Dy. CIT, CIRCLE - 3(1)(TDS), Vijayawada V. THE Project Director, Vijayawada

ITA 69/VIZ/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1107 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P BALA SRINIVAS
• Assessee Lawyers: K RAVI
• Section: 133A; 194C; 201(1)

Judgement Text

ITA NO.69/VIZAG/2013 PROJECT DIRECTOR, NHAI, VIJAYAWADA 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.NO.69/VIZAG/2013 ( / ASSESSMENT YEAR: 2009-10) DCIT, CIRCLE - 3(1),(TDS), VIJAYAWADA VS. PROJECT DIRECTOR, NHAI, VIJAYAWADA [TA N: HYDO00805A ] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NO.60/VIZAG/2013 (ARISING OUT OF I.T.A.NO.69/VIZAG/2013) ( / ASSESSMENT YEAR: 2009-10) PROJEC T DIRECTOR, NHAI, VIJAYAWADA VS. DCIT, CIRCLE - 3(1),(TDS), VIJAYAWADA ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI P. BALASRINIVAS, AR / RESPONDENT BY : SHRI K. RAVI, DR / DATE OF HEARING : 24.05.2016 / DATE OF PRONOUNCEMENT : 10.06.2016 ITA NO.69/VIZAG/2013 PROJECT DIRECTOR, NHAI, VIJAYAWADA 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSI ONER OF INCOME TAX (APPEALS), VIJAYAWADA DATED 06-11-2012 AND IT PERTA INS TO THE ASST. YEAR 2009-10. 2. BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE, NA TIONAL HIGHWAY AUTHORITY OF INDIA (NHAI) IS AN AUTONOMOUS BODY CRE ATED UNDER THE NHAI ACT, 1988 UNDER THE MINISTRY OF SHIPPING, ROAD TRANSPORT AND HIGHWAYS TO CARRY OUT THE DEVELOPMENT AND MAINTENAN CE OF HIGHWAYS ACROSS THE COUNTRY. THE NHAI, UNDER THE AEGIS OF CE NTRAL GOVERNMENT, DEVELOPS NATIONAL HIGHWAYS ON ITS OWN OR PUBLIC PRI VATE PARTNERSHIP AND COLLECTS USER FEE FROM THE USERS OF NATIONAL HIGHWA YS. AS SUCH, THE ASSESSEE ESTABLISHED THREE TOLL PLAZAS AT SINGARAYA KONDA FOR COLLECTION OF USER FEE AND ENGAGED THE SERVICES OF FIVE AGENCI ES FOR COLLECTION OF TOLL FEES. 3. A SURVEY OPERATION UNDER SEC. 133A OF THE INCOME TAX ACT, 1961 WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSES SEE ON 24.03.2011. DURING THE COURSE OF SURVEY OPERATION, IT WAS NOTIC ED THAT THE ASSESSEE IS ENGAGED THE SERVICES OF CONTRACTORS FOR COLLECTI ON OF TOLL FEES AND ITA NO.69/VIZAG/2013 PROJECT DIRECTOR, NHAI, VIJAYAWADA 3 DEDUCTED TDS @ 2.266% UNDER SEC. 194C OF THE INCOME TAX ACT, 1961. THE A.O. WAS OF THE OPINION THAT THE CONTRACT BETWE EN NHAI AND THE AGENCIES IS A CONTRACT OF AGENCY AND THE AGENTS ARE APPOINTED AS AGENTS ON BEHALF OF NHAI TO COLLECT TOLL FEE AND HENCE, AN Y PAYMENT MADE IN PURSUANCE OF THE SAID CONTRACT OF AGENCY PARTAKES T HE NATURE OF COMMISSION WITHIN THE MEANING OF SECTION 194H OF TH E INCOME TAX ACT, 1961. THEREFORE, ISSUED A SHOW CAUSE NOTICE AND ASK ED TO EXPLAIN WHY THE ASSESSEE SHALL NOT BE TREATED AS ASSESSEE IN DE FAULT U/S 201(1) AND 201(1A) OF THE ACT. IN RESPONSE TO SHOW-CAUSE NOTI CE, THE ASSESSEE HAS FILED A WRITTEN SUBMISSION DATED 30-03-2011 AND CON TENDS THAT THE NATURE OF WORK ENTRUSTED TO CONTRACTORS IS A MERE S UPPLY OF LABOUR FOR EXECUTION OF WORK AS DEFINED UNDER SEC. 194C OF THE ACT, ACCORDINGLY THE PAYMENTS ARE COVERED UNDER SEC. 194C AND IT HAS RIG HTLY DEDUCTED TDS U/S 194C OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS FOLLOWED THE GUIDELINES ISSUED BY CENTRAL GOVT. FROM TIME TO TIME INCLUDING THAT OF THE FORM, METHOD AND MANNER OF AGREEMENT AND THE RA TES OF TDS UNDER SUCH AGREEMENTS. IT WAS FURTHER SUBMITTED THAT THE AGENCIES WERE ENTRUSTED THE WORK OF TOLL FEE COLLECTION AND THE C ONSIDERATION IS PAID IN TERMS OF TOTAL SALARY/WAGE PAID TO THE NUMBER OF PE RSONAL DEPLOYED FOR THE WORK PLUS 14% SERVICE CHARGE ON TOTAL SALARY PA ID TO PERSONAL. IT WAS FURTHER SUBMITTED THAT COMMISSION IS CARVED OUT FROM THE VALUE OF ITA NO.69/VIZAG/2013 PROJECT DIRECTOR, NHAI, VIJAYAWADA 4 TRANSACTION, WHEREAS IN ITS CASE THE CONSIDERATION IS PAID IN TERMS OF SALARY/WAGES PLUS SOME PERCENTAGE OF SERVICE CHARGE ON THE TOTAL SALARY PAID TO PERSONNEL, THEREFORE IT CANNOT BE CONSIDERE D AS COMMISSION WITHIN THE MEANING OF SEC. 194H OF THE INCOME TAX A CT, 1961. 4. THE A.O. AFTER CONSIDERING THE EXPLANATION OF TH E ASSESSEE HELD THAT THE SERVICES PROVIDED BY THE AGENCIES IS IN TH E NATURE OF PRINCIPLE AND AGENT RELATIONSHIP, CONSEQUENTLY, ANY PAYMENTS MADE IN PURSUANCE OF THE SAID CONTRACT IS OF AGENCY PARTAKES THE NATU RE OF COMMISSION WITHIN THE MEANING OF SECTION 194H OF THE ACT, AND ACCORDINGLY, TAX IS DEDUCTIBLE UNDER THE SAID SECTION AT THE RATE PRESC RIBED. BUT, THE ASSESSEE HAS DEDUCTED TAX AT THE RATE APPLICABLE TO WORK CONTRACT UNDER SEC. 194C. THE A.O. FURTHER HELD THAT THE AGENTS HA VE BEEN ENTRUSTED THE WORK OF TOLL FEES COLLECTION ON BEHALF OF NHAI AND PAID SERVICE CHARGES AS PER THE AGREEMENT. THERE MAY BE INSTANCE OF COMMISSION IS BEING PAID AS A PERCENTAGE OF VALUE OF THE TRANSACT ION, BUT IT IS NOT CORRECT TO SAY THAT COMMISSION SHOULD BE CALCULATED ON THE BASIS OF FIXED PERCENTAGE ON THE VALUE OF CONTRACT AND THERE IS NO THING WRONG IF THE COMMISSION IS PAID ON A DIFFERENT YARDSTICK. THE FA CTS AND CIRCUMSTANCES OF THE INSTANT CASE ARE FOUND TO BE FALLING WITHIN THE DEFINITION OF COMMISSION AS MENTIONED IN SECTION 194H. THEREFORE, HELD THE ASSESSEE ITA NO.69/VIZAG/2013 PROJECT DIRECTOR, NHAI, VIJAYAWADA 5 AS AN ASSESSEE IN DEFAULT UNDER SEC. 201(1) AND 201 (1A) OF THE INCOME TAX ACT 1961 AND COMPUTED THE SHORT DEDUCTION OF TA X AND INTEREST. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A). BEFORE CIT(A), THE ASSESSEE R EITERATED THE SUBMISSIONS MADE BEFORE A.O.. THE ASSESSEE FURTHER SUBMITTED THAT THE A.O. RESORTED TO GENERAL PROVISIONS OF LAWS UNDER T HE CONTRACT ACT AND OTHER ENACTMENTS AND HAS SELECTIVELY CHOSEN TO ANAL YSIS ABOUT THE WORKS CONTRACT AND PRINCIPLE TO PRINCIPLE ARGUMENT AND PR INCIPLE TO AGENT ARGUMENT TO SUIT HIS CONVENIENCE AND LEFT OTHER IMP ORTANT ASPECTS OF THE AGREEMENT SO AS TO COME TO THE CONCLUSION THAT IT I S A CONTRACT FOR AGENCY AND THE IMPUGNED PAYMENTS ARE COVERED UNDER THE PROVISIONS OF SEC. 194H OF THE ACT. IT WAS FURTHER SUBMITTED THAT IT HAS ENGAGED THE SERVICES OF AGENCIES TO PROVIDE MANPOWER FOR TOLL F EE COLLECTION IN DESIGNATED TOLL PLAZAS OF NATIONAL HIGHWAYS. AS PER THE TERMS OF AGREEMENT, THE AGENCIES REQUIRED TO PROVIDE AS MANY AS REQUIRED NUMBER OF PERSONS ON THEIR OWN TERMS AND CONDITIONS WITHOUT ANY OBLIGATION TO THE NHAI. IT IS THE RESPONSIBILITY OF THE AGENCIES TO APPOINT THEIR STAFF AND COMPLETE THE WORK. THE AGENCIES HAV E BEEN PAID CONSIDERATION ON THE BASIS OF TOTAL WAGES/SALARY PA YABLE TO THE PERSONNEL EMPLOYED PLUS 14% SERVICE CHARGES ON THE TOTAL SALARY PAYABLE TO THE STAFF. THEREFORE, IT IS MERE SUPPLY OF LABOUR FOR EXECUTION ITA NO.69/VIZAG/2013 PROJECT DIRECTOR, NHAI, VIJAYAWADA 6 OF WORK CONTRACT, BUT NOT A CONTRACT FOR AGENCY SO AS TO APPLY THE PROVISIONS OF SEC. 194H OF THE ACT. THE CIT(A) AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HELD THAT IT IS A SIMP LE CONTRACT HAVING ALL THE INGREDIENTS OF WORKS CONTRACT. THE CONTRACT BET WEEN THE NHAI AND THE AGENCIES IS ON PRINCIPLE TO PRINCIPLE BASIS, BU T NOT ON PRINCIPLE TO AGENT BASIS. WITH THESE OBSERVATION, HELD THAT THE I MPUGNED PAYMENTS ARE COVERED UNDER THE PROVISIONS OF SEC. 194C, BUT NOT UNDER THE PROVISIONS OF SEC. 194H OF THE INCOME TAX ACT, 1961 . AGGRIEVED BY THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSEE, NA TIONAL HIGHWAY AUTHORITY OF INDIA (NHAI) IS AN AUTONOMOUS BODY CRE ATED UNDER THE NHAI ACT, 1988 UNDER THE MINISTRY OF SHIPPING, ROAD TRANSPORT AND HIGHWAYS TO CARRY OUT THE DEVELOPMENT AND MAINTENAN CE OF HIGHWAYS ACROSS THE COUNTRY. THE NHAI, UNDER THE AEGIS OF CE NTRAL GOVERNMENT, DEVELOPS NATIONAL HIGHWAYS ON ITS OWN OR PUBLIC PRI VATE PARTNERSHIP AND COLLECTS USER FEE FROM THE USERS OF NATIONAL HIGHWA YS. AS SUCH, THE ASSESSEE ESTABLISHED THREE TOLL PLAZAS AT SINGARAYA KONDA FOR COLLECTION OF USER FEE AND ENGAGED THE SERVICES OF FIVE AGENCI ES FOR COLLECTION OF TOLL FEES. THE ASSESSEE HAS ENTERED INTO AGREEMENT WITH THE CONTRACTOR ITA NO.69/VIZAG/2013 PROJECT DIRECTOR, NHAI, VIJAYAWADA 7 AND AS PER THE TERMS AND CONDITIONS OF AGREEMENT, T HE CONTRACTOR REQUIRED TO EMPLOY AS MANY REQUIRED NUMBER OF PERSO NS TO CARRY OUT THE WORK. IT IS THE RESPONSIBILITY OF THE AGENCIES TO A PPOINT THEIR STAFF AND COMPLETE THE WORK. THE AGENCIES HAVE BEEN PAID CONS IDERATION ON THE BASIS OF TOTAL WAGES/SALARY PAYABLE TO THE PERSONNE L EMPLOYED PLUS 14% SERVICE CHARGES ON THE TOTAL SALARY PAYABLE TO THE STAFF. THE ASSESSEE HAS MADE THE PAYMENTS AND DEDUCTED THE TAX AT SOURC E @ 2.266% UNDER THE PROVISIONS OF SEC. 194C OF THE ACT. THE A .O. WAS OF THE OPINION THAT THE CONTRACT BETWEEN NHAI AND THE AGEN CIES IS A CONTRACT OF AGENCY AND THE AGENTS ARE APPOINTED AS AGENTS ON BEHALF OF NHAI TO COLLECT TOLL FEE AND HENCE, ANY PAYMENT MADE IN PUR SUANCE OF THE SAID CONTRACT OF AGENCY PARTAKES THE NATURE OF COMMISSIO N WITHIN THE MEANING OF SECTION 194H OF THE INCOME TAX ACT, 1961 . ACCORDINGLY, HELD ASSESSEE AS AN ASSESSEE IN DEFAULT UNDER SEC. 201(1 ) AND 201(1A) OF THE ACT AND COMPUTED THE SHORT DEDUCTION OF TDS AND INT EREST. 7. THE ONLY ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS WHETHER THE CONTRACT BETWEEN THE ASSESSEE AND THE AGENCIES, IS ONE FOR SUPPLY OF MANPOWER/LABOUR FOR EXECUTION OF WORKS CONTRACT ATT RACTING TDS PROVISIONS OF SECTION 194C OF THE ACT, OR IS THE CO NTRACT FOR AGENCY ATTRACTING PROVISIONS OF SECTION 194H OF THE ACT. A CCORDING TO THE A.O., IT IS A CONTRACT FOR AGENCY, THEREFORE, THE PROVISIONS OF SECTION 194H OF THE ITA NO.69/VIZAG/2013 PROJECT DIRECTOR, NHAI, VIJAYAWADA 8 ACT APPLIES. THE A.O. HAS GIVEN ELABORATE REASONS FOR COMING TO THE CONCLUSION THAT THE IMPUGNED PAYMENTS ARE COMING WI THIN THE PROVISIONS OF SECTION 194H OF THE ACT. IT IS THE C ONTENTION OF THE ASSESSEE THAT THE CONTRACT ENTERED INTO WITH AGENCI ES IS FOR THE PURPOSE OF TOLL FEE COLLECTION. THE ASSESSEE FURTHER CONTE NDED THAT THE CONTRACTOR NEEDS TO EMPLOY HIS OWN STAFF TO CARRY O UT THE WORK AND THE PAYMENT HAS BEEN MADE ON THE BASIS OF TOTAL WAGES/S ALARY OF STAFF EMPLOYED PLUS 14% SERVICE CHARGES ON THE TOTAL SALA RY PAID TO STAFF EMPLOYED FOR THE WORK, THEREFORE, THE A.O. WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THE PAYMENTS ARE COVERED U/S 19 4H OF THE ACT. 8. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESEE FOR THE REASON THAT IT IS A MERE CONTRACT FOR SUPPLY OF LABOUR FOR EXEC UTION OF WORK, BUT NOT A CONTRACT OF AGENCY AS DEFIED UNDER THE PROVISIONS O F SEC. 194H OF THE ACT. THE A.R. REFERRED TO THE AGREEMENT BETWEEN THE NHAI AND THE CONTRACTORS. ON PERUSAL OF THE AGREEMENT, WE FIND T HAT THE COLLECTING ENTITY IS HAVING POWER UNDER ITS BUSINESS RULES TO PROVIDE SERVICES ON CONTRACT BASIS THROUGH ITS PERSONNEL. THE COLLECTIN G AGENCY IS LIABLE TO PROVIDE ITS SERVICES OF TOLL FEES COLLECTION WORK U NDER ITS OWN ORGANIZATIONAL STRUCTURE AND ON DEPLOYMENT OF PERSO NNEL AS PER CLAUSE 11 OF THE AGREEMENT WITHOUT BINDING ON THE NHAI FOR THE SAID EMPLOYEES UNDER CLAUSE 12 OF THE AGREEMENT. AS PER CLAUSE 17 OF THE ITA NO.69/VIZAG/2013 PROJECT DIRECTOR, NHAI, VIJAYAWADA 9 AGREEMENT, A SERVICE CHARGE OF 14% SHALL BE PAID ON TOTAL REMUNERATION PAYABLE TO THE PERSONNEL DEPLOYED FOR THE WORK. NOR MALLY, COMMISSION IS PAID IN TERMS OF VALUE OF TRANSACTION, WHEREAS IN T HE INSTANT CASE CONSIDERATION IS PAID IN TERMS OF REMUNERATION PAYA BLE TO THE PERSONNEL DEPLOYED IN TO THE WORK PLUS SERVICE CHARGE OF 14% ON THE TOTAL REMUNERATION PAYABLE TO THE PERSONNEL EMPLOYED. THE REFORE, WE ARE OF THE VIEW THAT THE CONTRACT BETWEEN THE ASSESSEE AND THE AGENCIES IS A MERE CONTRACT FOR SUPPLY OF LABOUR FOR EXECUTION OF WORK CONTRACT AS DEFINED UNDER THE PROVISIONS OF SEC. 194C, BUT NOT A CONTRACT OF AGENCY AS DEFINED UNDER SEC. 194H OF THE ACT. WE FURTHER O BSERVED THAT ON PERUSAL OF THE NATURE OF WORK AND CONTRACT BETWEEN ASSESSEE AND AGENCIES, THERE IS NO ELEMENT OF CONTRACT IN THE NA TURE OF PRINCIPLE TO AGENT SO AS TO INVOKE THE PROVISIONS OF SEC. 194H O F THE ACT. IT IS MERELY A CONTRACT FOR SUPPLY OF LABOUR FOR EXECUTION OF WO RK CONTRACT AS DEFINED UNDER SEC. 194C, HAVING ALL THE INGREDIENTS OF A CO NTRACT OF PRINCIPLE TO PRINCIPLE BASIS. THE ASSESSEE HAS RIGHTLY DEDUCTED TDS @ 2.266% UNDER THE PROVISIONS OF SEC. 194C OF THE ACT. THE A.O. WI THOUT APPRECIATING THE FACTS SIMPLY, HELD THAT THE PAYMENTS ARE IN THE NAT URE OF COMMISSION WHICH ATTRACTS TDS UNDER SEC. 194H. THE CIT(A) HAS RIGHTLY DELETED THE ADDITIONS. WE DO NOT SEE ANY ERROR OR INFIRMITY IN T HE ORDER OF CIT(A). ITA NO.69/VIZAG/2013 PROJECT DIRECTOR, NHAI, VIJAYAWADA 10 HENCE, WE INCLINED TO UPHELD CIT(A) ORDER AND REJEC T THE APPEAL FILED BY THE REVENUE. 9. THE CROSS OBJECTION FILED BY THE ASSESSEE IS SUP PORTING THE CIT(A) ORDER. WE, THEREFORE FOR THE REASONS RECORDED IN TH E PRECEDING PARAGRAPHS, DISMISSED THE CROSS OBJECTION FILED BY THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO. 69/V/2013 AND CROSS OBJECTION FILED BY THE ASSESSEE IN CO. NO. 60/V/2013 ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 10 TH JUN16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 10.6.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-3(1)(TDS), VIJA YAWADA 2. / THE RESPONDENT THE PROJECT DIRECTOR, NATIONAL HIGHWAYS AUTHORITY OF INDIA, (CMU, SINGARAYAKONDA), PLOT NO.21, TEACHERS COLONY, GURUNANAK ROAD, VIJAYAWADA-520 008. 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM