Indian Oil Co. Ltd., (WRP), RAJKOT-GUJARAT V. The Asstt. Commr. of Income Tax, TDS Circle, RAJKOT-GUJARAT

ITA 739/RJT/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89146 (ITAT-RAJKOT)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-03-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 16-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: PM MAHARSHI
• Keywords: Non-deduction of tax
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ./ ITA NO.739/RJT/2014 / ASSTT. YEAR: 2012-13 INDIAN OIL CORPORATION LTD. (WESTERN REGION PIPELINE) LTD. SMPL, GAURIDAD, MORBI ROAD RAJKOT. VS ACIT, TDS CIR. RAJKOT. ./ ITA NO.22/RJT/2015 / ASSTT. YEAR: 2012-13 DCIT, TDS CIR. RAJKOT. VS INDIAN OIL CORPORATION LTD. (WESTERN REGION PIPELINE) LTD. SMPL, GAURIDAD, MORBI ROAD RAJKOT. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI P.M. MAHARSHI, CA REVENUE BY : SHRI AVINASH KUMAR, DR / DATE OF HEARING : 19/03/2015 / DATE OF PRONOUNCEMENT: 27/03/2015 / O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT( A)-II, RAJKOT DATED 10.11.2014 FOR THE ASSTT.YEAR 2012-13. ITA NO.739/RJT/2014 ASSTT.YEAR 2012-13 (ASSESSEE S APPEAL) 2. THE FIRST GROUND OF APPEAL IS DIRECTED AGAINST T HE ORDER OF THE CIT(A) IN CONFIRMING THE ORDER OF THE AO TREATING T HE ASSESSEE AS ASSESSEE-IN-DEFAULT UNDER SECTION 201(1) OF THE ACT FOR ITA NO.739/RJT/2014 AND 22/RJT/2015 2 RS.14,48,42,236/- FOR NON-DEDUCTION OF TAX UNDER SE CTION 194C OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE MA DE YEAR END PROVISION FOR CONTRACT CHARGES AND AUDIT FEES AMOUN TING TO RS.14,48,42,326/- AS UNDER: TAN NO. BASE AREA AMOUNT OF PROVISION (IN RS) RK100147A VADINAR 5,03,32,830 RK100185A GAURIDAD 4,04,51,272 AHM100286G VIRAMGAM 2,31,73,365 JDH101132F SENDRA 60,72,250 JPR101156B CHAKSU 1,04,02,404 BRD100200E KOYALI 1,44,10,205 TOTAL 14,48,42,326 THE AO WAS OF THE VIEW THAT THE ASSESSEE SHOULD HAV E DEDUCTED TDS IN RESPECT OF ENTIRE YEAR END PROVISIONS AMOUNTING TO RS.14,48,42,326/- MADE BY THE ASSESSEE IN RESPECT OF CONTRACT LIABIL ITIES. THEREFORE, HE TREATED THE ASSESSEE AS ASSESSEE-IN-DEFAULT UNDER S ECTION 201(1) AND ALSO LIABLE FOR INTEREST UNDER SECTION 201(1A) OF T HE ACT FOR NON- DEDUCTION OF TAX AT SOURCE. HE HELD THAT THE ASSES SEE TO BE LIABLE FOR TDS UNDER SECTION 201(1A) OF RS.29,08,158/- AND INT EREST UNDER SECTION 201(1A) OF RS.7,27,250/- AGGREGATING TO RS.36,35,40 8/-. 4. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AGAI NST THIS ORDER OF THE AO. THE CIT(A) HELD THAT THE ASSESSEE IS NOT I N DEFAULT UNDER SECTION 201 IN RESPECT OF RS.14,48,42,326/- AND HEL D AS UNDER: 4.9 AFTER HOLDING THAT THE APPELLANT WAS REQUI RED TO DEDUCT TAX U/S.194C(2), THE QUESTION WHICH REQUIRES TO BE FURT HER CONSIDERED IS WHETHER THE APPELLANT HAS TO BE HELD IN DEFAULT IN RESPECT OF THE TAX NOT DEDUCTED BY IT. IN THIS REGARD, IT IS SEEN THAT THE TOTAL YEAR END PROVISION WAS RS. 14,48,42,236/-. HOWEVER, AS P ER THE TAX AUDIT REPORT SUBMITTED BY THE APPELLANT,.RS.4,98,43 ,087/- HAVE BEEN DISALLOWED U/S.40(A)(IA) IN THE COMPUTATION OF INCOME. ALSO, ITA NO.739/RJT/2014 AND 22/RJT/2015 3 RS.9,49,99,239/- HAVE BEEN TREATED AS LIABILITY OF TDS DISCHARGED SUBSEQUENT TO END OF FINANCIAL YEAR, I.E . TAX DEDUCTED AND DEPOSITED IN GOVERNMENT ACCOUNT, BEFORE SIGNING OF TAX AUDIT REPORT/DUE DATE OF FILING OF RETURN. IT IS THUS ME NTIONED BY' THE APPELLANT THAT AS THE ENTIRE AMOUNT HAS BEEN EITHER : .DISALLOWED U/S.40(A)(IA) OR TAX HAS BEEN DEDUCTED AND DEPOSITE D IN GOVERNMENT ACCOUNT BEFORE DUE DATE OF FILING OF RET URN, THE APPELLANT SHOULD NOT BE HELD TO BE IN DEFAULT U/S.2 01. I HAVE VERIFIED THE APPELLANT'S CONTENTION AND THE AUDIT R EPORT. THE APPELLANT'S CONTENTION IS FOUND TO BE CORRECT FROM THE AUDIT REPORT. THE APPELLANT HAS DEDUCTED THE TAX AND PAID IT TO T HE GOVERNMENT ACCOUNT IN RESPECT OF RS.9,49,99,239/-AND THE REMAI NING AMOUNT OF PROVISION OF RS.4,98,43,087/- ON WHICH TAX HAS N OT BEEN DEDUCTED HAS BEEN DISALLOWED AND ADDED BACK TO THE INCOME U/S.40(A)(IA). THE APPELLANT IS THUS NOT HELD TO BE IN DEFAULT U/S.201 IN RESPECT OF RS. 14,48,42,236/-. 4.10 TO SUMMARISE, THE APPELLANT WAS REQUIRED TO DE DUCT TAX ON THE YEAR END PROVISIONS MADE BY IT. HOWEVER, AS TAX HAS BEEN DEDUCTED SUBSEQUENTLY BEFORE DUE DATE OF FILING OF RETURN AND THE REMAINING AMOUNT BEING DISALLOWED AND ADDED BACK TO THE TOTAL INCOME WHILE FILING RETURN OF INCOME, THE APPELLANT IS NOT HELD TO BE IN DEFAULT U/S.201. THIS GROUND OF APPEAL IS PAR TLY ALLOWED. 5. THE AR OF THE ASSESSEE COULD NOT EXPLAIN WHAT IS THE GRIEVANCE OF THE ASSESSEE ARISING OUT OF THE ABOVE ORDER OF THE CIT(A), WHO HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THERE FORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 6. THE GROUND NO.2 AND 3 OF THE APPEAL ARE AS UNDER : 2. THE LD.ACIT (TDS) ERRED IN LAW AS WELL AS ON FA CTS IN RISING DEMAND FOR SHORT DEDUCTION OF TDS ON INDIAN OIL COR PORATION LTD. HAVING TAN NO.RKT100185D ON PROVISIONS OF RS.10,43, 91,054/- PERTAINING TO OTHER TDS ASSESSEES WHO ARE HAVING S EPARATE TAN NOS. LTD. CIT(A)-II ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE SAME. 3. LD.ACIT(TDS HAS ERRED IN LAW AS WELL AS ON FACT S IN LEVYING INTEREST U/S.201(1A) OF THE I.T.AT,1961 ON ACCOUNT OF FAILURE TO DEDUCT TAX ON THE YEAR END PROVISIONS OF RS.14,48,42,236/- AND LD.CIT(A)-II ERRED IN CONFIRMING THE LEVY OF INTEREST U/S.201(1A ) OF THE I.T.ACT. 7. AT THE TIME OF HEARING, THE AR OF THE ASSESSEE H AS NOT PRESSED THESE GROUNDS, HENCE, THEY ARE DISMISSED AS NOT PRE SSED. ITA NO.739/RJT/2014 AND 22/RJT/2015 4 ITA NO.722/RJT/2015 ASSTT.YEAR 2012-13 (REVENUES APPEAL) 8. THE GROUND NO.1 OF THE APPEAL OF THE REVENUE REA DS AS UNDER: 1. THE LD.CIT(A) ERRED IN LAW AS WELL AS FACTS OF THE CASE IN HOLDING THAT SINCE THE ASSESSEE HAS DISALLOWED THE AMOUNT OF PROVISIONS U/S.40(A)(IA) OF THE ACT IN THE RETURN O F INCOME FILED FOR A.Y.12-13, IT SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT FOR NON- DEDUCTION OF TAX AT SOURCE U/S.194C OF THE ACT ON P ROVISIONS AT RS.4,98,43,087/- 9. BRIEF FACTS OF THE CASE ARE THAT THE AO TREATED THE ASSESSEE AS ASSESSEE-IN-DEFAULT FOR NON-DEDUCTION OF TDS UNDER SECTION 194C OF THE ACT FOR AN AMOUNT OF RS.14,48,42,326/-. HOWEVER, TH E CIT(A) HELD THAT THE ASSESSEE WAS NOT IN DEFAULT UNDER SECTION 201(1 ) FOR RS.4,98,43,087/-, AS FOR THIS AMOUNT, THE ADDITION WAS MADE TO THE INCOME OF THE ASSESSEE BY INVOKING THE PROVISIONS O F SECTION 40(A)(IA) OF THE ACT. 10. BEING AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 11. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE WAS TREATED AS ASSESSEE-IN-DEFAULT IN RESPECT OF RS.14,48,42,326/- BY THE AO FOR NOT DEDUCTING TAX A T SOURCE UNDER SECTION 194C OF THE ACT. 12. ON APPEAL, THE CIT(A) HELD THAT OUT OF RS.14,48 ,42,326/- TDS ON RS.9,49,99,239/- HAVE BEEN TREATED AS LIABILITY OF TDS DISCHARGED SUBSEQUENT TO END OF FINANCIAL YEAR I.E. TAX DEDUCT ED AND DEPOSITED IN GOVERNMENT ACCOUNT BEFORE SIGNING OF TAX AUDIT REPO RT/DUE DATE OF FILING OF RETURN, AND THE BALANCE AMOUNT OF RS.4,98,43,087 /- WAS DISALLOWED IN THE ASSESSMENT OF THE ASSESSEE BY INVOKING THE P ROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE CIT(A), IN VIEW OF DISAL LOWANCE OF ENTIRE EXPENSES OF RS.4,98,43,087/- UNDER SECTION 40(A)(IA ) OF THE ACT HELD THAT THE ASSESSEE IS NOT AN ASSESSEE-IN-DEFAULT IN RESPECT OF THE SAME. ITA NO.739/RJT/2014 AND 22/RJT/2015 5 11. AGGRIEVED BY THE SAID ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US IN RESPECT OF RS.4,98,43,087/-. 13. THE DR CONTENDED THAT THE DISALLOWANCE UNDER SE CTION 40(A)(IA) IS INDEPENDENT OF LIABILITY UNDER SECTION 201 OF THE A CT. ON OTHER HAND, AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 14. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ASSE SSEE WAS LIABLE TO DEDUCT TDS UNDER SECTION 194C IN RESPECT OF RS.4,98 ,43,087/- AND THE ASSESSEE FAILED TO DO SO DURING THE RELEVANT PREVIO US YEAR. 15. SIMPLY BECAUSE THE AMOUNT WAS DISALLOWED IN THE ASSESSMENT MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA ), DOES NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE CANNOT BE TREATED AS ASSESSEE-IN- DEFAULT UNDER SECTION 201 IN RESPECT OF THE SAME AM OUNT. RATHER, WHEN THE ASSESSEE IS FOUND TO BE AN ASSESSEE-IN-DEFAULT IN RESPECT OF THE TDS AMOUNT, THEN OUT OF MANY CONSEQUENCES, ONE OF THE C ONSEQUENCES, IS DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. W E, THEREFORE, DO NOT AGREE WITH THE ORDER OF THE CIT(A) IN RESPECT OF NO T TREATING THE ASSESSEE AS ASSESSEE-IN-DEFAULT IN RESPECT OF RS.4, 98,43,087/-, ON THE GROUND THAT THE SAID AMOUNT WAS DISALLOWED UNDER SE CTION 40(A)(IA) OF THE ACT. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) TO THE ABOVE EXTENT. 16. HOWEVER, WE FIND THAT THE ASSESSEE HAS ALSO TAK EN OTHER GROUNDS OF APPEAL BEFORE THE CIT(A) FOR ITS CONTENTIONS THA T IT SHOULD NOT BE TREATED AS ASSESSEE-IN-DEFAULT IN RESPECT OF RS.4,9 8,43,087/-. THE SAME WAS NOT ADJUDICATED UPON BY THE CIT(A) AS HE D ECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON THE ABOVE GROUND. IN THE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, IT SHALL BE IN THE INTEREST OF JUSTICE TO RESTORE THE ISSUE BACK TO THE FILE OF CIT(A) IN RESPECT OF THE AMOUNT OF RS.4,98,43,087/- FOR DECIDING THE OTHER GROUNDS OF APPEAL AFTER ALLOWING ITA NO.739/RJT/2014 AND 22/RJT/2015 6 REASONABLE OPPORTUNITY OF HEARING TO BOTH THE PARTI ES. WE ORDER ACCORDING. THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED, 17. THE GROUND NO.2 OF THE APPEAL OF THE REVENUE RE ADS AS UNDER: 1. THE LD.CIT(A) ERRED IN LAW AS WELL AS FACTS OF THE CASE IN HOLDING THAT TAX IS REQUIRED TO BE DEDUCTED AT SOUR CE U/S.194C OF THE ACT ON PAYMENT OF PEST CONTROL CHARGES AND THE SAME IS NOT PROFESSIONAL SERVICES AND THEREFORE TAX NOT DEDUCTE D U/S.194J OF THE ACT. 18. THE BRIEF FACTS OF THE CASE ARE THAT THE AO HEL D THAT THE ASSESSEE HAD PAID RS.24,100/- FOR PEST CONTROL SERVICES ON W HICH SHOULD HAVE BEEN DEDUCTED UNDER SECTION 194J. THE ASSESSEE HAD DEDUCTED TAX U/S.194C. THE AO COMPUTED THE NET SHORTFALL OF THE TAX AT RS.1,911/-. 19. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE CONTE NDED THAT THE ONLY ORDINARY PEOPLE WITHOUT ANY TECHNICAL QUALIFIC ATION WERE SENT TO SPRAY CHEMICALS FOR TERMITE RESISTANCE AND THERE WA S NO PROFESSIONAL ACTIVITY. THE ASSESSEE HAS RELIED ON THE DECISIO N OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF STATE OF GUJARAT V. BHARAT PEST CONTROL IN CIVIL APPLICATION NO.261 OF 2013 DTD.28. 6.2013 WHEREIN IT WAS HELD THAT THE PEST CONTROL SERVICES ARE FALLING IN THE DEFINITION OF WORK CONTRACT. THEREFORE, IT WAS THE SUBMISSION OF THE ASSESSEE THAT IN VIEW OF THE DECISION OF THE HONBLE GUJARAT HIGH COURT, THE ASSESSEE HAS PROPERLY DEDUCTED TAX U/S.194C OF THE ACT. 20. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FOLLOWING THE ABOVE DECISION OF THE HONBLE GUJARAT HIGH COURT ALLOWED THE APPEAL OF THE ASSESSEE. 21. BEING AGGRIEVED BY THIS ORDER OF THE CIT(A), TH E REVENUE IS IN APPEAL BEFORE. 22. BEFORE US, DR RELIED ON THE ORDER OF THE AO, WH EREAS, AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). ITA NO.739/RJT/2014 AND 22/RJT/2015 7 23. WE FIND THAT NO SPECIFIC ERROR IN THE ORDER OF THE CIT(A) COULD BE POINTED OUT BY THE DR. HE COULD NOT CITE ANY CONTR ARY DECISION IN SUPPORT OF THE CLAIM OF THE REVENUE THAT THE TAX WA S REQUIRED TO BE DEDUCTED AT SOURCE UNDER SECTION 194J AND NOT UNDER SECTION 194C OF THE ACT. FURTHER, NO MATERIAL WAS BROUGHT ON RECOR D BY THE REVENUE TO SHOW THAT ANY TECHNICAL SERVICES WERE AVAILED BY TH E ASSESSEE FOR DOING PEST CONTROL IN ITS PREMISES. HENCE, WE FIND NO GO OD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFI RMED, AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 24. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED AND THAT OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 27 TH MARCH, 2015 AT RAJKOT. SD/- SD/- ( SHAILENDRA KUMAR YADAV ) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 27/3/2015