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Dy. Commissioner of Income Tax Versus M/s. Lanco Amarkantak Power (P) Ltd

Liability to TDS u/s 194J - payment of service charges to Chhattisgarh State Industrial Development Corporation Ltd - whether the nature of the payment is Professional fee? - CIT(A) deleted tds liability as the service charges paid by treating the same as payment to govt. - Held that:- As decided in assessee's own case wherein on similar issue on perusal of the remand report by the AO, find no mention about to whom the lease rentals were paid. It only deals with payment of service charges. Even .....

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have been paid. Thus respectfully following the decision of the Coordinate Bench, we deem it just and proper to remit these matters to the file of the AO for verifying the fact to whom the lease rentals and services charges have been paid - Decided in favour of revenue for statistical purposes - ITA No.1261/Hyd/2014 - Dated:- 20-3-2015 - Shri P.M. Jagtap And Smt.Asha Vijayaraghavan JJ. For the Appellant : Shri Ramakrishna Bandi, DR For the Respondent : Shri S. Rama Rao ORDER Per Smt. Asha Vijay .....

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3,51,998 is transferred to capital work-in-progress and is representing payment of service charges to Chhattisgarh State Industrial Development Corporation Ltd. According to the AO, the said payment should have been subjected to deduction of tax at source u/s 194J of the Act. AO after considering the explanation of the assessee held that the nature of the payment is Professional fee u/s 194J of the Act, the assessee ought to have deducted TDS u/s 194J of the Act and since the assessee has not de .....

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ch are as under: The Assessing Officer is the Income-Tax Officer, Ward-14(3), Hyderabad. In all the above cases the only issue is with .regard to deduction of tax in respect of payment of lease rentals and service ITA No.1261 of 2014 Lanco Amarkantak Power Pvt Ltd Hyderabad charges to Chhattisgarh State Industrial Development Corporation Ltd. (CSIDC). According to the Assessing Officer, the appellant herein has to deduct tax at source in respect of the payment of lease rentals made to CSIDC. Bef .....

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tisgarh allotted Ac.260.92 cents of land at Pathadi village, Korba District of Chhattisgarh for establishing electrical power generation and distribution unit. The ground rent is fixed at ₹ 13,00,732/- for first 30 years; All the agreements are similarly worded. The appellant submitted before the Assessing Officer that the amount is shown separately by the CSIDC as payable to the State government. It can be seen from the final accounts drawn on 31-03-2005 that the amount of lease rents are .....

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e appellant has not deducted tax, the company is treated in default. The Assessing Officer did not consider the fact that the amount was paid to government and no TDS need be made in view of the Sec. 196 of the Act. It is submitted that for the purpose of establishing the power plant in Chhattisgarh, the lands were to be allotted by the Govt. For this purpose the government allotted its own land, besides acquisition of private ITA No.1261 of 2014 Lanco Amarkantak Power Pvt Ltd Hyderabad lands. C .....

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of compensation for the lands allotted by the government. Such compensation payable is paid by the assessee to the government through CSIDC. The government also incurs expenditure in acquiring the land from the private parties. Such expenditure incurred by the government in the process of acquisition of the lands is reimbursed by the assessee through CSIDC and the said payment is called the service charges. The assessee humbly submits that even the service charges are paid to the government. Fu .....

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e land. Therefore, there is no requirement for deduction of tax at source against service charges. In so far as lease rents are concerned, the same were paid to government. The appellant submits that the Assessing Officer did not consider the fact whether the provisions of Sec. 194-1 have application to the facts or not. It is submitted that according to Sec. 194-1 any person who is making payment of rent at the time of credit of such income to the account of the payee tax has to be deducted at .....

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is not justified in passing an order treating the appellant as in default and charging interest and the TDS. In the circumstances, the appellant prays the Hon'ble Commissioner of Income- Tax (Appeals) to kindly cancel the orders passed by the Assessing Officer . 4. The CIT (Appeals)-II, Hyderabad, vide her letter dated 11-2- 2011 had called for a remand report from ITO 14(3)' Hyderabad. The AO, vide his letter dated 18-5-2011, after perusing Rule 10 of the Chattisgarh Industries (allotme .....

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as from that of Govt. Of Chhattisgarh. On the contention of the assessee that the above ITA No.1261 of 2014 Lanco Amarkantak Power Pvt Ltd Hyderabad services charges were shown separately under capital account, the AO opined that that would not in any way mitigate the liability of TDS on account of deductor as the deductee i.e. SCIDC had not offered the above service charges for income as it was held in the case of Hindustan Coca-cola Beverage Ltd vs. CIT (163 Taxman 355 (SC). 5. Before the CIT .....

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sgarh State Industrial Development Corporation Ltd. The assessee also filed copy of the final accounts of the said Corporation which shows that the amounts received from the assessee were credited to the account of the Government. In view of the above, the assessee pleaded that the payments were made ITA No.1261 of 2014 Lanco Amarkantak Power Pvt Ltd Hyderabad to the Government of Chhattisgarh and, therefore, no deduction of tax at source need be made. Further it is also submitted that the servi .....

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ied and interest should be limited to the date of filing of return of income by the Chhattisgarh State Industrial Development Corporation Ltd. 7. The ld CIT (A) held that he had verified the record and found that the amounts were paid towards acquisition of land which is not governed by the provisions of sec 194J of the Act. The CIT (A) also found that Chhattisgarh State Industrial Development Corporation Ltd is the representative on behalf of the Govt. Of Chhattisgarh and therefore, the provisi .....

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provisions u/s 194J of the I.T. Act by treating the same as payment to govt. 3. The CIT (A) erred in ignoring the fact that Chattisgarh State Industrial Development Corporation (CSIDC) is separate legal entity assessed to tax and not part of the State Govt. and hence the service charges paid to it are governed by the provisions u/s 194J of the I.T. Act . 9. We have heard both the parties and perused the record carefully. Similar issue was adjudicated by the Tribunal relating to the issue of dem .....

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ely as an agent of State Govt. or whether the lease rentals were paid to CSIDC itself. On perusal of summary of the ITA No.1261 of 2014 Lanco Amarkantak Power Pvt Ltd Hyderabad state government which forms part of the final accounts of CSIDC as on 31.03.2005 it is seen that it is a statement showing receipts on behalf of the state govt. from entrepreneurs wherein the lease rentals also finds place. It is also a fact that in course of the appeal proceedings before the CIT (A) a remand report was .....

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