TMI Blog2014 (1) TMI 1126X X X X Extracts X X X X X X X X Extracts X X X X ..... transmission charges are based on gas quantity transmitted - The charges are not based on time or length of the pipeline - This also indicates that appellant did not use any equipment but the same were used by GSPL transmitted gas through its pipeline - For bringing any payment in the nature of rent within the purview of section 194-1, there has to be use of asset or equipment by the payer. If the same is used by the receiver for the work of the payer, it will fall within the provisions of see. 194C - Sec. 194C clearly includes carriage of goods and passenger by any mode of transport other than railways, the transportation of gas through pipeline is covered by this - The gas transmission agreement, mode and basis for payment use of pipeline for transmitting gas for many consumers, operation and maintenance of pipeline by GSPL and no possession or exclusive right to use the pipeline at any given point of time clearly indicates that the payment for gas transmission by the appellant will not attract the provisions of Sec. 194I - Decided against Revenue. Demand u/s 201(1) – Payment for hiring helicopter services - Held that:- Assessee had executed a service contract with M/s Global ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) interest charged u/s. 201(1A) of the I T Act of Rs. 60,57,478/- for Asst. Year 2009-10 by the AO by treading the hiring of hoarding u/s. 194C of the Act against 194I of the Act by the AO. 2. The Ld. CIT(A) erred in law as well as facts of the case in deleting the order passed u/s. 201(1) interest charged u/s. 201(1A) of the I T Act of Rs. 77,28,335/- for A.Y. 2009-10 by the AO by treating the hiring of pipelines connection u/s. 194C of the Act as against 1941 of the Act by the AO." 3. Ground No. 1 relates to raising of demand u/s. 201(1) and 201(1A) r.w.s. 194-1 on payment made to Proveg Communication Pvt Ltd. AO has dealt with the issue involved in this ground as under:- "the assessee company made payment of M/s Proveg Communication Pvt. Ltd. The A.O. had stated that the assessee Co. had submitted a letter dtd. 1/5/2008 regarding hiring the hoardings at 17 major locations in Gujarat and fixed the monthly rate of Rs. 34,24,2607/-. The A.O. observed that the assessee Co. had made payment of Rs. 6,85,43,740/- to the aforesaid contractor during the year under consideration. However, the assessee had deducted tax @ 2% u/s 194C as against 10% u/s 1941 of the Act. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... play of hoarding of advertisement. PCFL itself does not own the "Hoardings" and it is natural for them to obtain the same from "Hoarding Owners" on rental basis. It is obvious that GSPC has to pay PCPL for the charges of the hoardings as a part of the advertisement contract. However this entire procedure is a part of the wide understanding of rendering advertisement related services. We draw your kind attention to the Circular No. 715 dated 8th August 1995 of CBDT, wherein it has been categorically mentioned that when contract for putting up a hoarding is in the nature of advertising contract, the provisions of the Section 194C of the Act will govern the tax deduction issue. You are aware that CBDT Circulars are binding to the tax authorities and hence the ratio pronounced by the CBDT circular has to be followed by you. Hence, GSPC has rightful deducted tax U/s 194C of the Act. In fact the rote of tax for "Advertisers" is 1% plus applicable surcharge and cess however GSPC has deducted tax at 2% plus applicable surcharge and cess. Under the circumstances, GSPC is not liable to deduct tax at the rate of 10% plus applicable surcharge and cess as per the provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst tax payable of Rs. 10,07,430/-. The appellant has also submitted documentary evidencing through the letter dated 21-01-2010 for the above refund of Rs 20,63, 973/- for the A.Y. 2009- 10. You will appreciate that the details submitted are in line with the above referred two judgments. Hence there is no liability for TDS in view of the same. 2.7 In view of the above, the appellant humbly submits that the contentions of the learned AO is bad in law and hence the same should be deleted. 5. After taking into consideration these submissions of the assessee Ld. CIT(A) allowed the appeal of the assessee by observing as under: 3.3 I have considered the order of the AO, fcts of the case and appellant's submission. Appellant paid to M/s Proveg Communication Ltd for the purpose of Brand Building and taking hoardings for advertisement included sever other services apart form hiring hoardings. Appellant relined upon ITAT, Mumbai decision in the case of ITO. Vs. Roshan Publicity Pvt. Ltd. Reported in 4 SOT 105. In the said decision it was held that in acquiring the right of displaying advertisement at hoarding site and making payment to hoarding site owners does not involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted TDS @ 2% only i.e. u/s 194C on gas transportation charges paid to Gujarat State Petronet Ltd. Whereas this payment is of rental nature and as such you were required to deduct tax @ 10%. The total amount paid for transportation of gas charges is approximately Rs. 12 crores. Short deduction @ 8% comes to Rs. 96 lacs + SC + EC as applicable. 4.3 The appellant has submitted reply on 04-03-2009 which is reproduced as under for your reference. You hove observed that GSPC has deducted tax at the rate of 2% U/s 194C for the payment mode for "Gas Transportation Charges" of Rs. 12 Crores to Gujarat State Petronet Limited (GSPL) instead of TDS @ 10% U/s. 194-I as the same is of rental nature. You have further observed that payment is also made to GSPL by GSPC towards "Pipeline Payment Charges / Connectivity Charges" after deducing tax at the rate 2% U/s 194C instead of deducing tax at the rate of 10% U/s 194-I. We draw our kind attention to starting paragraph of your show cause notice which is reproduced below. "A survey U/s. 133A (1) of the IT Act was carried out at your office premises at the address captioned above on 17th and 18th March 2009. During the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not for hiring of pipelines. Hence, viewed from any angle there is no question of hire and therefore the provisions of Section 194J are not applicable. GSPC is not in the business of hiring of pipelines. What is contemplated is "Gas transportation charges which is also the heading corrected reflected in its accounts and thing being in the nature of works contract, the provisions of Section 194C are attracted. You will therefore appreciate that question of payment of tax for shortfall of Ps. 96 lacs plus surcharge and cess as mentioned by you does not arise. 4.4 The learned A.O. has grossly erred in ignoring the "ruling of Bombay High Court in the case of Indian National Ship Owners Association (lNSA) stating as under. "The High Court also opined that the scope of Section 194C covers carriage of goods and passengers, and freight payments are to be dealt with under Section 194C and not Section 194-I. In other words, one can say that the court has impliedly restarted the principle of "specific overrides general", That is. where Section 194C specifically covers cases of carriage of goods and passengers, then Section 194-1, which is more general in nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 409, Karnataka High Court 2. Hindustan Cocacola Beverages Pvt Ltd. Vs. CIT (2007) 293 ITR 226 It has been held in the aforesaid two judgments that once tax has been already paid by the deductee the same together with interest and penalty cannot be recovered from the deductor even though deductor had failed to deduct tax at source. The appellant has also submitted that tax paid by GSPL amounts to Rs. 54,65,16,254/- against tax payable of Rs. 54,65,16,254/-. The appellant has also submitted documentary evidencing through the letter dated 21-01-2010. The details submitted are in line with the above referred two judgments. Hence there is no liability for TDS in view of the same. 10. Ld. CIT(A) after taking into consideration the above submission of the assessee has given relief to the assessee by observing as under:- 5.3. I have considered the facts of the case, the Assessing Officer's order and appellant's submission. Appellant made payments of transmission of gas for which it deducted tax u/s 194C. However, the A.O. considered the payment as rent in view of amended definition of Sec. 194I for use of equipment such as gas pipelines. In the order, A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding is in conformity with the finding of the Tribunal in the case of ACIT vs. Gujarat State Petronet Ltd in ITA No. 3317/Ahd/2010 CO No. 17/Ahd/2011 A.Y. 2009-10 dated 08-03-2013 on identical issue wherein following was held. 5. We have considered the rival contentions and perused the material on record. The first payment namely vehicle hiring charges has not been prescribed u/s. 1941 Vehicles and Chauffers supplied by the contractor and was under the complete control of the contractor. Thus, we confirm the order of the CIT(A) on this issue. Similarly, the second payment for connectivity charges were paid to GPSC against the agreement for using of pipeline connection of GAIL for gas transportation. This pipeline was owned by the GAIL and was opened to service to its other clients also, which was in nature of carriage of goods and covered U/S.194C of the IT Act. Thus, on second issue also, the ld. CIT(A) found justified and we do not find the reason of any intervention in the order of the CIT(A) on this issue. The third and last payment was gas transportation charges. The appellant paid these payments for gas transportation purposes to Gujarat Gas Company Ltd. and avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Rs 28,16.500/- for arrangement of corporate cricket tournament which are squarely covered u/s. 194J and accordingly appellant is required to deduct tax at source. He has failed to appreciate that appellant has made payment to 3rd I Event management for managing and organizing the "GSPC Invitation 20-20 Corporate Cricket Tournament 2008" and therefore appellant is required to deduct tax as per provisions of section 194C. The learned CIT(A) has also erred in law and on facts in confirming the action of the learned Assessing officer to recover short deduction of tax of Rs 2,26,278/- and interest of Rs 18,102/- U/s. 201(1A) on short fall of TDS u/s. 201(1). In view of the above the appellant humbly submits that the contention of the learned CIT(A) is bad in law and hence the same should be deleted. 14. The AO has dealt the issue in respect of payment to Global Vectra Helicopter Ltd as under: " The assessee Company has executed a service contract with M/s Global Vectra Helicrop Ltd. Lts office is situated at Mumbai. As per the LOI, the assessee company desires for hiring of Helicopter service for its offshore drilling sites and fixed the monthly rent for operating the Heli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asked to show cause why tax was not deducted@ 10 % on payments to Global Helicorp Com Made before 09/07 2008." 1.3 The appellant has submitted reply on 04-05-2009 which is reproduced as under for your reference. "With reference to the above we have to state that GSPC has entered into contract with Global Vectra Helicorp Limited - GVHL previously known as Global Helicorp Private Limited (GHPL) from 25th May 2004 for "Helicopter Services" and since then it has been making the payment to GVHL after deduction of tax U/s 194C of the Act. You will appreciate that payment for "Helicopter Services" are mainly for the air logistic support for crew and personnel of GSPC and/or any of its consultants and/or suppliers etc and supply of essential cargo to and from offshore. Thus in nut shell the "Helicopter Services" is for transportation purpose only i.e. transportation of personnel and cargo. The same is evident from the details mentioned in the contract between GSPC and GVHL as well as prospectus filed by GVHL with SEBI. You will further appreciate that the contract is not merely for Hiring a Helicopter on rental basis but if also includes all the associated services such as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% under the provisions of Sections 194-1 of the Income Tax Act 1961 for the period beginning from 1st June 2007 till 9lh July 2008. You will appreciate that what is contemplated is Helicopter Services and the main object is "Air Logistic Support" for Crew and Personnel of GSPC. That as per CBDT Circular No. 715 doted 8th August 1995, it amounts to transport which is chartered and the correct rate of tax would be 2% and the provisions of Section 1941 are not applicable. To summarize the same, we further state that 1 The Certificate issued though is under Sec. 194-1 the rate of tax in the computation is much less and GSPC has correctly paid fox of the rate of 2%. Though the TDS Authority has invoked Sec. 194-1 vide Certificate dated 9th July, 2008, CBDT Circular No. 715 dated 8th August, 1995 states that where plane or other mode of transport is chartered, the rate of tax would be 2% as this would be falling within Sec. 194-C. 2. Plane includes Helicopter, even "Other mode of transport" would include Helicopters. 3. Circular of CBDT is binding and, therefore, viewed from any angle the rate of tax applicable for TDS purpose would be 2 %. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sociated Cement Co. Ltd s case (SC), we hold that, a transport contract simpliciter falls within the ambit of subsection and,(1) of section 194C and therefore, deduction at source at the rate of two per cent from the amounts credited to the account of the contractor can be made by a person responsible for paying any sum for the transport contract." Thus you will appreciate that what GSPC has done is correct and is considerate step considering the various interpretational issues involved in making the decision." 1.8 The learned A.O. has grossly erred in law and on facts in levying interest under Section 20l (lA) of the Act. Without prejudice to what is stated above, the appellant humbly pleads that as per the binding judgment or Hon'ble Gujarat High Court in the case CIT Vs. Rishikesh Apartments Co-op. Housing Society Limited (2002) 253 ITR 310, if the payee has paid the advance tax, if payable then there is no revenue loss to the exchequer and in that event no interest can be levied U/s 201 (1A) of the Act. 1.9 The learned AO has grossly erred in not considering the following judgment quoted by the appellant through letter dated 04- 01-2010. 1. Children ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the tax demand is not recoverable from the appellant. I agree with the appellant that wherever the income subject to TDS has been offered for tax and taxes have been paid on the same, the demand u/s 201(1) cannot be enforced. ITO.TDS. is therefore, directed to verify the appellant's claim and if the taxes have been paid on the Income received by the deducted demand u/s 201(1) will be reduced. Interest u/s 201(1A) will however, be leviable in view of the same decision of apex court. 17. Before us learned counsel of the assessee reiterated the submission made before Ld. CIT(A) and placed reliance on the decision of Hon ble Gujarat High Court in the case of CIT vs. Reliance Engineering Associated Pvt. Ltd wherein on similar facts it was held that agreement for hiring services of contractors for rendering transportation services for goods and passengers by buses cars sumos utility vans etc would be covered u/s. 194C and not u/s. 194I. Reliance was also placed on the decision of Bombay Bench of the Tribunal in the case of Skill Infrastructure Ltd. Ld. DR however relied on the order of lower authorities. 18. After hearing both the parties and perusing the record, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4C for carrying various goods and passengers by trailer, utility vans, water tankers, sumos, etc, and thus, it clearly comes within the meaning of work. [Para 6] So far the definition of rent as provided in section 194-I is concerned, accordingly to the same, rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any: (a) Land; or (b) Building (include factory building); or (c) Land appurtenant to a building (include factory building); or (d) Machinery; or (e) Plant ; or (f) Equipment; or (g) Furniture; or (h) Fittings, Whether or nor any or all of the above are owned by the payee. On comparison of the two Explanations added to sections 194-I and 194C, it appears that it was never the intention of the Legislature to overlap any of the items mentioned within the meaning of rent by including the same within the meaning of work under section 194C. Since the agreement for carriage of goods by vehicles other than railways comes within the purview of explanation of work within the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have made payment to 3m I event Manager of Rs. 13,32,140/- after deducing TDS @ 2% u/s 194C, whereas this services rendered by 3rd I Event Manager is of professional skills and therefore attracts TDS provision u/s 194 1 of the I T Act. You are hereby asked to show cause why tax was not deducted u/s 194 1 of the IT Act." 3.3 The appellant has submitted reply on 04-05-2009 which as reproduced as under for your reference. "With reference to the above, we have to state that GSPC has issued an order to 3rd I event Manager - 3rd I primarily to organize a "Corporate Cricket Tournament involving GSPC, ONGC Reliance, TATA, Indian Railways and Income Tax. The entire responsibly of the management of the cricket tournament for a period of 12 days was on the shoulders of 3rd I. The responsibility of 3rd I among other things include the following. 1) arrangement for cricket balls/stumps 2) lighting 3) generator and fuel 4) decoration 5) sound 6) medical kits 7) manpower 8) ground expenses 9) photographs 10) refreshment 11) dinner 12) room booking 13) fire cracker 3rd I was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he recipient or consideration which would be income of the recipient is chargeable under the head "Salaries" From the above, you will be able to ascertain that services rendered by 3rd I to GSPC are not covered by technical services mentioned herein above and hence payments made by GSPC to 3rd I are certainly not covered by the second category. 3.4 The learned AO, has grossly erred in ignoring the decision of ITAT Ahmedabad 'C Bench in the case of Gujarat State Electricity Corporation Limited vs. Income Tax Officer wherein it was held that in the case of agreement for operation and maintenance of power project, payment made by the appellant company to Gujarat State Electricity Board for entire operation and maintenance of power plant under a comprehensive contract could not be treated as payment of fees for professional services as contemplated in sec, 194J. Such payment would come within the limb of exclusive part, viz "consideration for like project' excluded fn the definition of "fees for technical services" given in Expln. to sec 9 (1A) (vii). Deduction of tax at source at 2% as per section 194C was justified. 3.5 The learned A.O. has grossly erred in law and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been paid on the income received by the dedcutee, demand u/s 201(1) will be reduced. Interest u/s 201 (1A) will however, be leviable in view of the same decision of apex court. 22. Before us learned counsel of the assessee reiterated the submission made before Ld. CIT(A) and submitted that though services provided by M/s 3rd Eye Event Management are managerial in nature but the same services were not taken by the assessee for managing its business but these services were taken for managing a 20-20 cricket tournament only. Therefore payment made to M/s 3rd Eye Event Management is not covered by the provisions of section 194 J. This argument advanced by the assessee is devoid of any merit as the expenses incurred by the assessee on organizing of cricket tournament have been claimed by the assessee against its business income as if the same were incurred for business purposes. Therefore it cannot be said that managerial consultation services of Third Eye Event were not for its business. The assessee cannot take contrary stand to avoid its TDS liability. Therefore we have no hesitation in upholding the order of Ld. CIT(A) and the same is hereby upheld. This ground of CO is di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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