TMI Blog2012 (10) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... hether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in coming to the conclusion that the contract between the gas suppliers and the assessee is a contract for sale of goods and not work contract so as to attract the provisions of Section 194C of the Income Tax Act? [ii] Whether the Income Tax Appellate Tribunal has committed an error in applying the ratio of various judgments of the Honourable Supreme Court where the facts and issues were different? [iii] Whether, on the facts and in the circumstances of the case, the impugned order passed by the Income Tax Appellate Tribunal is contrary to the evidence and material on the record of the case and is suffering from non-application of mind and, hence, perverse or not?" 2. The respondent assessee is a Co-operative Society principally engaged in the manufacturing of fertilizers. For its such activities, it consumes natural gas. Such gas is supplied by different agencies through pipelines. 3. It is the case of the Revenue that while purchasing gas from gas supplying agencies, the assessee entered into a work contract for transport of such gas from seller's premise to the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing the factual position, the payment for the purchase of natural gas and as per the contract of the assessee, it is only asking for supply of natural gas from the producers for the purpose of use of this gas for burning in assessee's factory for manufacturing of urea. Clearly this is a contract for sale goods and not a work contract as held by the lower authorities. In view of the above, we quash the orders of the lower authorities and allow the appeals of the assessee." 7. Counsel for the Revenue drew our attention to the provisions contained in clause (c) of Explanation III to Section 194C of the Act and vehemently contended that the Tribunal erred in reversing the orders passed by the Revenue authorities. He submitted that Section 194C of the Act was clearly attracted. The case on hand was covered by clause (c) of Explanation III to Section 194C of the Act. He submitted that the assessee had agreed to bear the transportation charges separately and that such charges were to be paid monthly. Our attention was drawn to Article 4.02 of the contract between the assessee and GAIL, wherein it was provided inter alia that the buyer i.e (the assessee) in addition to price of gas ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Commission Act,1956); (3 of 1956) [or] (j) any firm,] shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, [deduct an amount equal to- (i) one per cent in case of advertising, (ii) in any other case two per cent, of such sum as income-tax on income comprised therein.] (2) **** Explanation I-*** Explanation II-*** Explanation III- For the purposes of this section, the expression "work" shall also include- (a) **** (b) **** (c) carriage of goods and passengers by any mode of transport other than by railways; (d) ****" 11. From the above statutory provision, it can be seen that in case of carrying out of any work in pursuance of any contract between the contractor and any of the specified bodies provided under different clauses of sub-section (1) of Section 194C of the Act, which includes cooperative society, there had to be a deduction of 1% or 2%, as the case may be, at the time of credit of such sum to the account of the contractor or at the time of payment in cash or by issuance of cheque or draft or any other mode ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivery located at the BUYER's Premises. The above monthly transportation charges shall be increased by 3% ( three percent) on yearly rest basis with effect from 01.04.1997( First April one Thousand Nine hundred and Ninety Seven). The BUYER shall pay the above monthly transportation charges to the SELLER in addition to payment of invoice for supply of GAS to be raised as per Article 11 12 hereinafter. Provided further, in case monthly transportation charges are not paid by the BUYER within 3(three) working days of presentation of invoice, the SELLER will present the invoice for the same to a Bank against Letter of Credit and draw the amount. 4.04 The BUYER shall make all proper and adequate arrangement for receiving GAS at the outlet of Gas Metering Station at its own risk and cost. Should any defect in the BUYER's intake arrangement arise, the same shall be rectified by the BUYER themselves. 4.05 For effecting deliveries of GAS as aforesaid the SELLER shall install and maintain at its own risk and cost, the piping control, regulation and metering equipment in the aforesaid Gas Metering Station and all other accessories. The said equipment so installed by the SELLER shall remai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no contract for carriage of goods. We are not unmindful of the decision of the Apex Court in case of Associated Cement Co. Ltd. vs. Commissioner of Income-Tax and another reported in 201 ITR 435, wherein it was observed that Section 194C(1) does not require that a contract to carry out a work or the contract to supply labour to carry out work should be confined to "works contract". However, in the present case we are not faced with such a situation. We only find that there was no contract between GAIL and the assessee for carriage of goods. Transportation of gas by GAIL was only in furtherance of contract of sale of gas. 18. In view of the above discussion, we are of the opinion that the Tribunal committed no error in coming to the conclusion that the case was not covered under Section 194C of the Act. It may be that the transportation component of gas was paid separately by the assessee to GAIL. Here also the transportation charges did not depend on the consumption of quantity of gas but was of fixed monthly charges to be borne by the assessee as part of the agreement between the parties. The ownership of the gas vested in GAIL till it was transported and delivered to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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