THE DCIT, CIRCLE - 3(1),(TDS), Vijayawada V. The Chief Engineer (O & M)/AP GENCO.,

ITA 732/VIZ/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6601 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-05-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 26-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S ARAVINDAKSHM
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Section: 194C; 201(1); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 732 / VIZ /201 3 (ASST. YEAR : 20 04 - 0 5 ) DCIT, CIRCLE - 3(1) (TDS) , VIJAYAWADA. V S . CHIEF ENGINEER (O & M)/APGENCO, RAYALASEEMA THERMAL POWER PROJECT, V.V. REDDY NAGAR, KADAPA DISTRICT. T AN NO. HYDR 02587 E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M. CHANDRAMOULESWARA RAO C A. DEPARTMENT BY : SHRI R.S. ARAVINDAKSHM SR. DR DATE OF HEARING : 13 / 0 9 /201 7 . DATE OF PRONOUNCEMENT : 11 / 1 0 /201 7 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , VIJAYAWADA , DATED 30 /0 9 /201 3 FOR THE ASSESSMENT YEAR 200 4 - 0 5 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE - RAYALASEEMA THERMAL POWER PROJECT, KADAPA, A UNIT OF M/S. A.P. GENCO LTD., IS ENGAGED IN THE BUSINESS OF GENERATION OF ELECTRICITY. THE ASSESSEE FOR THE PURPOSE OF CONSTRUCTION OF ANOTHER POWER STATION, IT HAD ENTERED INTO TWO AGREEMENTS, ONE FOR SUPPLY OF MATERIALS REQUIRED FOR THE POWER PLANT (HEREINAFTER REFERRED TO AS SUPPLY CONTRACT) AND SECOND FOR THE 2 ITA NO. 732/VIZ/2013 PURPOSE OF ERECTION AND COMMISSIONING OF THE PLANT (HEREINAFTER REFERRED TO AS ERECTION CONTRAC T) WITH M/S. BHEL, NEW DELHI ON 27/12/2003. THERE WAS A SURVEY IN THE CASE OF THE ASSESSEE. DURING THE COURSE OF SURVEY, IT IS FOUND THAT THE ASSESSEE HAS DEDUCTED TDS ONLY IN RESPECT OF ERECTION CONTRACT AND NOT ON SUPPLY CONTRACT AND THEREFORE THE ASS ESSING OFFICER RAISED A DEMAND UNDER SECTION 201(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT'). 3 . ON APPEAL , LD. CIT(A) BY FOLLOWING THE DECISION OF THE ITAT, VISAKHAPATNAM IN THE CASE OF NTPC SIMHADRI SUPER THERMAL POWER PROJECT (VSP), VISAKHAPATNAM IN ITA NOS. 68, 101 & 69/V/2012 DATED 22/07/2013 DIRECTED THE ASSESSING OFFICER TO DELETE THE DEMAND RAISED UNDER SECTION 201(1) & 201(1A) OF THE ACT. 4 . ON THE OTHER HAND , L EARNED DEPARTMENTAL REPRESENTATIVE FAIRLY ACCEPTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE. 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITI ES BELOW. 6 . WE FIND THAT THE VERY SAME ISSUE HAS C O ME UP FOR CONSIDERATION BEFORE THE TRIBUNAL. THE TRIBUNAL BY CONSIDERING ALL THE DETAILS DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE , THE RELEVANT PORTION OF THE ORDER IS EX TRACTED AS UNDER: - 8. IN THIS CASE, THE ASSESSEE HAD ENTERED INTO TWO SEPARATE CONTRACTS I.E. SUPPLY CONTRACT & ERECTION CONTRACT. THE ASSESSEE HAS DEDUCTED TDS ON THE ERECTION CONTRACT, BUT NOT ON THE SUPPLY 3 ITA NO. 732/VIZ/2013 CONTRACT ON THE GROUND THAT SECTION 194C HAS NO APPLICATION. THE VERY SAME ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF NTPC SIMHADRI SUPER THERMAL POWER PROJECT (VSP), VISAKHAPATNAM (SUPRA) AND HELD THAT SUPPLY CONTRACT ENTERED BY THE ASSESSEE IS IN THE NATURE O F CONTRACT OF SALE, THE PROVISIONS OF SECTION 194C HAVE NO APPLICATION. THE COMMISSIONER OF INCOME TAX (APPEALS) BY FOLLOWING THE SAME, DIRECTED THE ASSESSING OFFICER TO DELETE THE DEMAND RAISED UNDER SECTION 201(1) & 201(1A) OF THE ACT . THE RELEVANT PO RTION OF THE ORDER IS EXTRACTED HEREUNDER: - 5. I HAVE CAREFULLY GONE THROUGH THE ORDER OF THE ASSESSING OFFICER, SUBMISSIONS MADE BY THE APPELLANT. I HAVE ALSO GONE THROUGH THE ORDER OF THE JURISDICTIONAL HON'BLE ITAT, VISAKHAPATNAM BENCH, VISAKHAPATNAM I N THE CASE OF NTPC, SIMHADRI SUPER THERMAL POWER PROJECT (VSP), VISAKHAPATNAM IN ITA N OS.68, 101 & 69/V/2012 DATED 22/ 7/2013 AND FOUND THAT, IN THIS CASE ALSO, THE ASSESSING OFFICER PASSED ORDERS BY TREATING BOTH THE SUPPLY CONTRACT AND WORKS' CONTRACT AS TWO COMPONENTS OF A COMPOSITE CONTRACT AND TREATED THE APPELLANT AS IN DEFAULT U/S.201(1) AND 201(1A) OF THE ACT AND ON FIRST APPEAL, THE LEARNED CIT(A) HAS AFFIRMED THE VIEW OF THE ASSESSING OFFICER. HOWEVER, THE HON'BLE ITAT H AS SET ASIDE THE ORDERS OF T HE L EARNED CIT(A) AND DIRECTED THE A.O. TO DELETE THE DEMAND S RAISED U/S. 201(1) AND 201(1A) OF THE ACT , BY CONCLUDING THAT THE 'SUPPLY CONTRACT' ENTERED INTO BY THE APPELLANT IS IN THE NATURE OF 'CONTRACT OF SALE' AND HENCE THE PROVISIONS OF SEC.194C SHALL NOT APPLY TO IT. 5.1 SINCE THE FACTS PREVAILED IN THE APPELLANT'S CASE ARE IDENTICAL TO THE FACTS OF THE ABOVE CASE, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE JURISDICTIONAL HON'BLE ITAT, THE APPEALS ARE DECIDED IN FAVOUR OF THE APPELLANT FOR ALL THE FIVE ASSESSMENT YEARS 2004 - 05, 2005 - 06, 2006 - 07, 2007 - 08 AND 2008 - 09 AND THE AO IS DIRECTED TO DELETE THE DEMANDS RAISED IN THE HANDS OF THE APPELLANT. 6. IN THE RESULT, APPEALS FOR A.YS. 2004 - 05, 2005 - 06, 2006 - 07, 2007 - 08 AND 2008 - 09 ARE ALLOWE D. 9. RECENTLY, THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF KARNATAKA POWER TRANSMISSION CORPORATION LTD. (SUPRA) HAS CONSIDERED THE VERY SAME ISSUE AND OBSERVED THAT WHEN IN A COMPOSITE CONTRACT, IF AN INVOICE IS RAISED, SEPARATELY MENTIONING THE V ALUE OF THE MATERIAL SUPPLIED, NO DEDUCTION IS PERMISSIBLE UNDER SECTION 194C. IN CASE WHERE THREE SEPARATE AGREEMENTS ENTERED INTO AND ONE SUCH AGREEMENT IS AGREEMENT FOR SUPPLY OF 4 ITA NO. 732/VIZ/2013 MATERIAL AND BECAUSE THE SAID AGREEMENT IS A PART OF A COMPOSITE TRANSACT ION. SECTION 194C CANNOT BE PRESSED INTO SERVICE TO DEDUCT TAX AT SOURCE. THE WHOLE OBJECT OF INTRODUCING THE SECTION IS THAT IT SHOULD DEDUCT TAX IN RESPECT OF PAYMENTS MADE FOR A WORKS CONTRACT. NO DEDUCTION IS PERMISSIBLE IN RESPECT OF CONTRACT FOR S UPPLY OF MATERIAL FOR CARRYING OUT WORK. IN THE PRESENT CASE, THE ASSESSEE HAS NOT DEDUCTED THE TDS IN RESPECT OF SUPPLY OF MATERIAL FOR CARRYOUT THE WORK. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO BY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF NTPC SIMHADRI SUPER THERMAL POWER PROJECT (VSP), VISAKHAPATNAM (SUPRA) AND ALSO THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF KARNATAKA POWER TRANSMISSION CORPORATION LTD. (SUPRA), WE FIND NO INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WHICH IS HEREBY CONFIRMED AND THE GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 7 . WE FIND THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE CASE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL . T HE RE FORE, BY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL AND ALSO BY FOLLOWING THE JUDGMENT OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. KARNATAKA POWER TRANSMISSION CORPORATION LTD., [(2012) 208 TAXMAN 73 (KAR.)] , WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. 8 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS 1 1 T H DAY OF OCTOBER , 201 7 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 1 T H OCTOBER , 201 7 . VR/ - COPY TO: 5 ITA NO. 732/VIZ/2013 1. THE ASSESSEE - CHIEF ENGINEER (O & M)/ APGENCO, RAYALASEEMA THERMAL POWER PROJECT, V.V. REDDY NAGAR, KADAPA DISTRICT. 2. THE REVENUE - DCIT, CIRCLE - 3(1)(TDS), VIJAYAWADA. 3. THE CIT (TDS), HYDER A BAD. 4. THE CIT(A), VIJAYAWADA. 5. THE D.R. , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.