ITO (TDS) 1(3), MUMBAI V. BHARAT SANCHAR NIGAM LTD, MUMBAI

ITA 6952/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78751 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL NAHATA
• Keywords: Non-deduction of tax
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI . . , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NOS. 6952 TO 6954/MUM/2011 ( / ASSESSMENT YEARS: 2007-08 TO 2009-10) I.T.O. (TDS)-1(3), ROOM NO. 806, 8 TH FLOOR, SMT. K. G. MITTAL AYURVEDIC HOSPITAL BLDG., CHARNI ROAD (W), MUMBAI-400 002 / VS. BHARAT SANCHAR NIGAM LTD. CIVIL DVN. NO. 111, 2 ND FLOOR, BSNL, WIRELESS STATION COMPOUND, LINKING ROAD, SANTAZCRUZ (W), MUMBAI-400 054 ./ ./PAN/GIR NO. AABCB 5576 G ( /APPELLANT ) : ( !' / RESPONDENT ) # $ / APPELLANT BY : SHRI S. M. KESHKAMAT !' # $ / RESPONDENT BY : SHRI SUNIL NAHATA % &'( # )* / DATE OF HEARING : 17.04.2014 +,- # )* / DATE OF PRONOUNCEMENT : 17.04.2014 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS A SET OF THREE APPEALS, I.E., FOR THREE CON SECUTIVE YEARS BEING ASSESSMENT YEARS (A.Y.) 2007-08 TO 2009-10 BY THE REVENUE, AGI TATING THE SEPARATE ORDERS FOR THESE YEARS BY THE COMMISSIONER OF INCOME TAX (APPEALS)-1 4, MUMBAI (CIT(A) FOR SHORT) OF EVEN DATE 29.07.2011, ALLOWING THE ASSESSEES APPEA LS CONTESTING THE ORDERS U/SS.201(1) AND 201(1A) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER). 2 ITA NOS. 6952 TO 6954/MUM/2011 (A.YS. 07-08 TO 09-1 0) ITO VS. BHARAT SANCHAR NIGAM LTD. 2. THE ASSESSEE-COMPANY IS IN THE BUSINESS OF PROVI DING TELECOMMUNICATION NETWORK AND SERVICES ACROSS THE COUNTRY. IT OPERATES THROUG H THREE WINGS, ARCHITECTURAL, CIVIL AND ELECTRICAL, WHICH PROVIDE ALL THE INFRASTRUCTURAL S ERVICES AS REQUIRED FOR ITS TELECOM BUSINESS, I.E., FROM THE INITIAL SURVEY OF LAND, PR EPARATION OF DRAWINGS, DESIGNS, ETC., CONSTRUCTION, FOLLOWED BY EQUIPMENT PURCHASE, INSTA LLATION, MAINTENANCE, ETC. FOR THE SMOOTH FUNCTIONING OF ITS BUSINESS, IT ENTERS INTO MAINTENANCE CONTRACTS WITH VARIOUS PARTIES. 3. THE ISSUE ARISING IN THE INSTANT APPEALS IS THE EXIGIBILITY TO TAX DEDUCTION AT SOURCE (TDS) OF THE PAYMENTS UNDER REFERENCE MADE/ALLOWED BY THE ASSESSEE TO THE DIFFERENT CONTRACTORS DURING THE RELEVANT YEARS. IN FACT, TAX HAS BEEN DEDUCTED, AND THE ISSUE IS WITH REFERENCE TO THE CORRECT PROVISION OF LAW UNDER WHI CH THE SAME IS REQUIRED TO BE DEDUCTED; THE REVENUE RAISING DEMAND U/S.201(1) FOR THE SHORT -FALL IN THE TAX DEDUCTED (AND DEPOSITED) AS WELL AS FOR THE INTEREST THEREON U/S. 201(1A) W.R.T. THE TAX DEDUCTIBLE UNDER A DIFFERENT PROVISION. WE SHALL THEREFORE ADDRESS THE ISSUE WITH REFERENCE TO THE NATURE OF THE PAYMENTS INVOLVED. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 THE ISSUE ARISING FOR ADJUDICATION STANDS BROAD LY DELINEATED HEREINABOVE. THE FIRST CATEGORY OF PAYMENT UNDER REFERENCE RELATES TO THE COMPREHENSIVE MAINTENANCE CONTRACTS FOR ITS VARIOUS EQUIPMENTS, INSTALLATIONS, VIZ. AIR CONDITIONERS, LIFTS, VEHICLES AND ENGINE ALTERNATOR SERVICES, ENTERED IN TO BY THE ASSESSEE WITH VARIOUS PARTIES. WHILE THE CASE OF THE ASSESSEE IS THAT THE SAME, BEING CONTRACTUAL, T HE PAYMENTS THERE-UNDER ATTRACT DEDUCTION OF TAX AT SOURCE U/S.194C, I.E., QUA A CONTRACT FOR WORKS, THAT OF THE REVENUE IS THAT AS THE WORK IS OF TECHNICAL NATURE, THE SAME I S COVERED U/S.194-J, I.E., THE SECTION WHICH COVERS PAYMENTS FOR PROFESSIONAL OR TECHNICAL SERVICES, PRESCRIBING TAX DEDUCTION AT A HIGHER RATE. TRUE, WHERE THERE ARE TWO PROVISIONS , ONE GENERAL AND THE OTHER SPECIFIC, COVERING A PARTICULAR TRANSACTION/S, IT IS THE SPEC IFIC PROVISION WHICH WOULD PREVAIL AND STAND TO BE APPLICABLE IN PREFERENCE TO THE GENERAL ONE. SO HOWEVER, THE LD. AUTHORIZED REPRESENTATIVE (AR) DURING THE COURSE OF THE HEARIN G, ON THE BASIS OF THE MATERIAL ON 3 ITA NOS. 6952 TO 6954/MUM/2011 (A.YS. 07-08 TO 09-1 0) ITO VS. BHARAT SANCHAR NIGAM LTD. RECORD, VIZ., THE COPIES OF THE TENDERS FLOATED; WO RK ORDERS; THE AGREEMENTS, TERMS AND CONDITIONS THEREOF, INCLUDING THOSE SPECIFYING THE NATURE OF THE WORK, QUALIFICATION OF THE PERSONNEL, THE MAINTENANCE SCHEDULE TO BE ADHERED T O, ETC. (PB-I PGS. 25-26, 29, 45, 71- 76, 91, 111, 186), EXHIBITED THE CONTRACTS TO BE RE GULAR, MAINTENANCE CONTRACTS AND NO MORE. IN FACT, AS ALSO CLARIFIED BEFORE THE ASSESSI NG AUTHORITY, THE ASSESSEE HAS AN ELECTRICAL WING, MANNED BY ENGINEERS, AND IS THUS E QUIPPED TO PROVIDE THE NECESSARY GUIDANCE/ASSISTANCE TO CARRY OUT THE ELECTRO MECHAN ICAL WORKS BY THE CONTRACTOR. IN FACT CIRCULAR NO. 715 (INFRA) BY CBDT CLARIFIES ROUTINE, NORMAL MAINTENANCE CONTRACTS, WHICH DO NOT INVOLVE RENDERING OF TECHNICAL SERVICES, AS COVERED BY SECTION 194-C, AS AGAINST S. 194-J, EVEN WHERE THE CONTRACT INCLUDES SUPPLY OF S PARES (IN ANSWER TO Q # 29). THE WORD WORK STANDS DEFINED UNDER EXPLANATION III TO SECTION 194C IN AN INCLUSIVE MANNER TO INCLUDE PROVISION OF CERTAIN SP ECIFIED SERVICES, VIZ., ADVERTISING, CATERING, BROADCASTING AND TELECASTING, CARRIAGE OF GOODS OR PASSENGERS, ETC. THE MAINTENANCE WORK WOULD, THEREFORE, CLEARLY FALL WIT HIN THE AMBIT OF WORK AS DEFINED U/S.194C. AGAIN, TRUE, THE SAME MAY INVOLVE WORK OF SOME TECHNICAL NATURE OR THE PERSONS CARRYING IT OUT AS BEING TECHNICALLY QUALIF IED. IT IS IN FACT NOBODYS CASE THAT THE SAME COULD BE PERFORMED BY PERSONS WHO ARE NOT TECH NICALLY QUALIFIED OR SKILLED. BUT, AS EXPLAINED BY THE TRIBUNAL IN TATA AIG GENERAL INSURANCE CO. LTD. VS . ITO [2011] 43 SOT 215 (ITAT- MUM), IT IS THE NATURE OF THE WOR K FOR WHICH THE PAYMENT IS MADE AND NOT TO WHOM IT IS, THAT IS RELEVANT. TO ILLUSTR ATE, TAKING THE EXAMPLE OF THE PRESENT ASSESSEE, IF THE WORK OUT-SOURCED WAS FOR THE PREPA RATION OF THE TECHNICAL DRAWINGS, DESIGNS, ETC., WHICH COULD NOT BE MADE BUT BY AND/O R UNDER THE DIRECT SUPERVISION OF EXPERIENCED ENGINEERS, IT COULD VALIDLY BE CONSIDER ED AS FOR OR TOWARD PROFESSIONAL OR TECHNICAL SERVICES, COVERED U/S.194J. THE WORK SPEC IFIED, AS APPARENT FROM THE MATERIAL ON RECORD, AND EVEN AS CLARIFIED BY THE LD. CIT(A) (RE FER PARA 5.3 OF HIS ORDER), IS TOWARD MAINTENANCE OF AIR CONDITIONERS, LIFTS, ETC., INVOL VING CLEANING AND CHECKING OF PARTS, ADJUSTING THE ENGINE VALVES, TIGHTENING ELECTRICAL CONTROLS, ETC. THIS IS ALSO CLARIFIED FROM THE BILLS ISSUED BY THE CONTRACTORS, WHICH EVIDENCE THE WORK INVOLVED TO BE IN THE NATURE OF REPAIRS AND MAINTENANCE OF THE PREMISES AND OTHE R ELECTRO MECHANICAL GADGETS. THIS, IT 4 ITA NOS. 6952 TO 6954/MUM/2011 (A.YS. 07-08 TO 09-1 0) ITO VS. BHARAT SANCHAR NIGAM LTD. MAY BE APPRECIATED, IS THE NORMAL, REGULAR WORK FOR THE PERSONS IN THOSE FIELDS, AS FOR EXAMPLE FOR A CAR MECHANIC, REPAIRING A CAR IN THE NORMAL COURSE; AN ELECTRICIAN FIXING AN ELECTRICAL PROBLEM. IN FACT, THE WORK OF A COBBLER, A CARPENTER, BARBER, WEAVER, ET. AL. IS ALL HIGHLY SKILLED AND SPECIALIZED, WHEN CONSIDERED FRO M THE STAND POINT OF A COMMON, LAY PERSON. HOWEVER, THE TECHNOLOGY INVOLVED OR, RATHER , THE INTERFACE THEREWITH, AS REQUIRED, IS FAIRLY SIMPLE AND OF LOW CALIBRE; THE GADGETS IN VOLVED BEING OF EVERYDAY USE AND, THEREFORE, OF COMMON USER AND REPAIR. THAT IS, THE JOB INVOLVES WORK OF REGULAR, LOW- TECHNICAL NATURE, WHICH COULD THUS BE CONTRACTED OU T ON A PRE-DETERMINED BASIS IN-AS- MUCH THE ROUTINES INVOLVED OR TO BE FOLLOWED ARE WE LL ESTABLISHED. THIS IS PRECISELY WHAT STANDS MEANT BY THE TRIBUNAL IN TATA AIG GENERAL INSURANCE CO. LTD. (SUPRA) WHEN IT EMPHASIZED ON THE WORK FOR WHICH THE PAYMENT IS BEI NG MADE. IN OUR VIEW, THEREFORE, THE PAYMENTS MADE HAVE BEEN CORRECTLY CLASSIFIED FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE U/S.194-C, AS AGAINST U/S. 194-J BEING INSISTED UPON BY THE REVENUE, EVEN AS STATED BY THE LD. CIT(A), D RAWING ON DECISIONS, AMONG OTHERS, IN THE CASE OF TATA AIG GENERAL INSURANCE CO. LTD. (SUPRA) AND DY. CIT V/S. PARASRAMPURIA SYNTHETICS LTD. [2008] 20 SOT 248) (DEL). WE DECIDE ACCORDINGLY, A ND THE ASSESSEE SUCCEEDS. 4.2 THE NEXT PAYMENT UNDER REFERENCE IS TOWARD VEH ICLE HIRING. WHILE THE ASSESSEE CONSIDERS THE SAME AS LIABLE TO TAX DEDUCTION AND, ACCORDINGLY, DEDUCTED TAX U/S.194-C, IN THE VIEW OF THE REVENUE THE SAME STANDS TO BE COVER ED U/S. 194-I. SECTION 194-I DEFINES RENT TO MEAN A PAYMENT, BY WHATEVER NAME CALLED, UN DER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT [EMPHASIS, OURS] FOR THE USE OF (EITHER SEPARATELY OR TOGETHER) ANY LAND; BUILDING; LAND APPURTENANT THER ETO; MACHINERY; PLANT; EQUIPMENT; FURNITURE; OR FITTINGS. A VEHICLE OR MOTOR CAR WOUL D STAND TO BE INCLUDED WITHIN THE PURVIEW OF THE WORDS PLANT OR MACHINERY. ACCORD INGLY, THE ARRANGEMENT FOR PROVIDING CARS TO THE ASSESSEES PERSONNEL FOR THEIR WORK WOU LD STAND TO BE COVERED BY SECTION 194- I. IN FACT, WE OBSERVE THAT THE LD. CIT(A) DOES NOT DISPUTE THIS PER SE . HIS DECISION IS ON THE BASIS OF THE NATURE OF THE SERVICES CONTRACTED, I.E., NOT TOWARD CAR HIRING AS SUCH BUT FOR 5 ITA NOS. 6952 TO 6954/MUM/2011 (A.YS. 07-08 TO 09-1 0) ITO VS. BHARAT SANCHAR NIGAM LTD. A FACILITY OF TRANSPORTATION FROM ONE PLACE TO ANOT HER, WITH THE RATES FIXED FOR A PARTICULAR VEHICLE WITH REFERENCE TO DISTANCE AND TIMING. THE CARS ARE NOT AT THE DISPOSAL OF THE ASSESSEE. THE ASSESSEE BEFORE US HAS RELIED ON CBDT CIRCULARS , AS UNDER, BESIDES HAS ALSO PLACED DECISIONS BY THE TRIBUNAL IN A COMPILATION: A) CBDT CIRCULAR NO. 715 DATED 08.08.1995 (PB-III, PG. NOS.1-5) B) CBDT CIRCULAR NO. 558 DATED 28.03.1990 (PG. NO.6) C) CBDT CIRCULAR NO. 1/2008 DATED 10.01.2008(PG. NO.7) D) CBDT CIRCULAR NO. 681 DATED 08.03.1994 (PG. NO.8-11 ) OUR FIRST OBSERVATION IN THE MATTER IS THAT N ONE OF THE CIRCULARS RELIED UPON, WHICH WE HAVE PERUSED, ARE DIRECTLY ON THE POINT. OUR SEC OND OBSERVATION IN THE MATTER IS, AS AFORE-STATED, THAT IF THE VEHICLE IS HIRED ON A ONE -OFF BASIS, OR WHERE A PICK AND DROP FACILITY IS PROVIDED, WHAT IS BEING AVAILED OF OR C ONTRACTED FOR ARE ESSENTIALLY SERVICES, SO THAT THE ASSESSEE PAYS FOR A SPECIFIED WORK, IN WHI CH CASE IT WOULD WITHOUT DOUBT STAND TO BE COVERED U/S. 194-C, I.E., THE SECTION UNDER WHIC H TAX STANDS DEDUCTED AND PAID BY THE ASSESSEE. WHY, THEREFORE, SHOULD THERE BE AN INSISTENCE ON A PARTICULAR VEHICLE ? THE MATTER IS ESSENTIALLY FACTUAL, SO THAT IT WOULD STA ND TO BE DECIDED ON THE BASIS OF THE NATURE AND THE PARAMETERS OF THE ARRANGEMENT. THE ARRANGEM ENT IN THE PRESENT CASE IS TO MAKE AVAILABLE A CAR (VEHICLE) FOR A DESIGNATED PERSON O R CLASS OF PERSONS, FOR A PARTICULAR TIME/USER, OF COURSE COUPLED WITH OTHER FACILITIES. THE VEHICLE IS DECIDEDLY AT THE DISPOSAL OF THE USER. STIPULATIONS AS TO DISTANCE AND TIME I S ONLY TOWARD REGULATING THE SAID AVAILABILITY AND, BESIDES, HAVE A DIRECT IMPLICATIO N ON THE CHARGE/S (TO BE) RAISED AS WELL IN-AS-MUCH AS PAYMENTS FOR USER BEYOND DEFINED USER PARAMETERS, VIZ. AS TO TIME (SAY, 8 OR 12 HRS. A DAY, OR FROM 9 A.M. TO 6 P.M.) OR MILE AGE (AS, SAY, 1500 KMS PER MONTH), ETC., WOULD ATTRACT A HIGHER CHARGE. WHY, EVEN WHERE A HI RE IS ON A REGULAR BASIS, THE SAME WOULD ASSUME THE NATURE OF RENT, AS CLARIFIED BY THE CBDT PER ITS CIRCULAR NO. 715 (SUPRA), RELIED UPON BY THE ASSESSEE, WITH REFERENC E TO THE HIRE OF A HOTEL ROOM (REFER Q. NO. 20 AND ANSWER THERETO). A VEHICLE WOULD ONLY ST AND TO BE COVERED BY THE DEFINITION OF 6 ITA NOS. 6952 TO 6954/MUM/2011 (A.YS. 07-08 TO 09-1 0) ITO VS. BHARAT SANCHAR NIGAM LTD. PLANT OR MACHINERY, WHICH ARE BOTH GENERIC TERM S OF WIDE AMPLITUDE, EVEN AS, ADMITTEDLY, THE SPECIFIC DEFINITION THEREOF U/SS. 4 3, 44BB, ETC. MAY NOT BE APPLICABLE FOR THE PURPOSES OF S.194-I. IN OUR CLEAR VIEW, THEREFORE, THE ARRANGEMENT IS NO T TOWARD THE PROVISION OF CARRIAGE SERVICES, AS UNDERSTOOD BY THE FIRST APPEL LATE AUTHORITY, BUT FOR MAKING AVAILABLE CARS FOR THE ASSESSEES PERSONNEL. AT THE SAME TIME , CLEARLY, THE ARRANGEMENT ALSO INCLUDES MAKING AVAILABLE SERVICES OF A CHAUFFEUR AS WELL AS MEETING THE FUEL COST OF TRANSPORTATION. THE SAME CANNOT BY ANY MEANS BE CON SIDERED AS TOWARD CAR RENTAL. SUBJECT TO A REASONABLE DEDUCTION IN RESPECT OF CHARGES IN ITS RESPECT, BASED ON THE MATERIALS AND/OR INFORMATION LED BY THE ASSESSEE, WHICH WOULD THOUGH STAND TO BE CONSIDERED AS TOWARD CONTRACTUAL SERVICES COVERED BY SECTION 194- C, THE BALANCE AMOUNT WOULD FALL TO BE GOVERNED BY U/S.194-I. OUR DECISION, BEING BASED ON FINDING/S OF FACT, THE ASSESSEES RELIANCE ON CASE LAW WOULD BE OF NO MOMENT, THOUGH IN FACT NONE WAS SPECIFICALLY REFERRED TO. THE ASSESSEE BEFORE US, ON OUR VIEW AFORE-STATED BE ING INDICATED DURING HEARING, RAISED, AS ALSO BEFORE THE LD. CIT(A), AN ALTERNATE PLEA, I.E., THAT IN THE CASE OF REVERSAL, WHOLLY OR PARTLY, ON MERITS, THE DECISION BY THE LD . CIT(A) QUA ANY PAYMENT, THE ASSESSING OFFICER (A.O.) BE CONSTRAINED TO RAISE A DEMAND U/S.201(1) OF THE ACT IN VIEW OF THE DECISION BY THE APEX COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGE P. LTD. VS. CIT [2007] 293 ITR 226 (SC), RESTRAINING THE RECOVERY OF DEMAND TOWARD NON-DEDUCTION OF TAX AT SOURCE WHERE THE TAX ON THE RELEVANT INCO ME STANDS PAID BY THE DEDUCTEE. THE SAME MAY HAVE IMPLICATION ON THE DEMAND RAISED U/S. 201(1A) AS WELL. THE PLEA IS ONLY IN CONSISTENCE WITH THE WELL SETTLED LAW THAT THE T DS PROVISIONS ARE ONLY A MODE AND MANNER OF COLLECTING THE TAX OF THE DEDUCTEE (THROU GH THE DEDUCTOR), SO THAT THERE COULD BE NO DOUBLE PAYMENT OF TAX, EVEN AS IN FACT CLARIFIED BY THE BOARD ITSELF PER ITS CIRCULAR (DATED 29.01.1997), RELIED UPON BY THE HONBLE APEX COURT IN HINDUSTAN COCA COLA BEVERAGE P. LTD . (SUPRA). THE ONUS, HOWEVER, TO EXHIBIT SO, I.E., THAT THE TAX ON THE RELEVANT INCOME HAS BEEN ASSESSED OR BROUGHT TO TAX , SO THAT NO FURTHER TAX IS REQUIRED TO BE DEDUCTED/PAID IN ITS RESPECT, IS ON THE ASSESSEE . THE A.O. IS, ACCORDINGLY, DIRECTED TO 7 ITA NOS. 6952 TO 6954/MUM/2011 (A.YS. 07-08 TO 09-1 0) ITO VS. BHARAT SANCHAR NIGAM LTD. ALLOW THE ASSESSEE REASONABLE OPPORTUNITY TO SATISF Y HIM IN THIS REGARD AND, CONSEQUENTIALLY, DECIDE THE MATTER AFTER DUE VERIFI CATION, ISSUING DEFINITE FINDINGS OF FACT. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE REVENUES APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 17, 201 4 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % ( MUMBAI; /& DATED : 17.04.2014 '.&../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. % 0) ( ) / THE CIT(A) 4. % 0) / CIT CONCERNED 5. 3'45 !)&67 , * 67- , % ( / DR, ITAT, MUMBAI 6. 589 :( / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , % ( / ITAT, MUMBAI