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The Income-tax Officer (TDS) , Ward-2 (2) , Amravati Versus The Project Director, National Highways Authority of India, Amravati

2016 (5) TMI 871 - ITAT NAGPUR

Non collection of TCS from Toll Plaza - TCS u/s 206C(1C) - determination of amount payable - whether TCS was to be deducted on amount payable by the concessionaire was only Re. 1/- per year - Held that:- On plain reading of section 206C, it leaves no room for doubt, that the quantum of the amount on which the tax is to be collected at source by the seller has to be only that amount which is to be paid to the seller as price at the time of sale and cannot by any stretch of reasoning be held to in .....

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n on this very very minimal as well as insignificant amount the provisions of section 206C(1C) cannot be applied because it is not practicable. As far as the doubts raised by the Revenue Department that the deposits made in the escrow account would have been used by NHAI to remit to the “consolidated fund of India”, this fact can easily be verified from the said escrow account. If no amount of toll fees is recovered by NHAI to be remitted to the consolidated fund of India or otherwise then natur .....

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ukul K. Shrawat, J.M. All the three appeals have been filed by the Revenue arising from a consolidated order of learned CIT(Appeals)-II, Nagpur dated 16-11-2011 pertaining to the assessment years 2009-10, 2010-11 and 2011-12. In all the three years the facts as well as the issue are identical, therefore, we shall take up the assessment year 2009-10 as a lead year in which the ground raised is as under : Whether on the facts and in the circumstances of the case the Ld. CIT(Appeals)-II, Nagpur, is .....

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oll collected by NHAI Ltd. from the licensees or lessees. 2. A single issue in all the three years is raked up by the Revenue Department is about the non collection of TCS from Toll Plaza. An order u/s 206C(1C) read with section 206C(6) and (7) was passed dated 12-10-2010. The assessee is an authority for looking after the construction of national highway. According to the AO the assessee had not collected the tax from the person whom lease or license had been allocated. A spot verification was .....

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or licence for toll plaza to an another person for the use of the toll plaza shall at the time of debiting of the amount payable by the said licensee or at the time of receipt of such amount from the said licensee collect a sum equal to the percentage specified in section 206C(1C) and the amount so collected to be paid to the Central Government. The AO has reproduced the provisions of section 206C(1C) as well as the Rule prescribed i.e. Rule 37CA. According to the AO, the provisions for collect .....

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nt and the concessionaire are the Licencee or lessee, Vide the agreement you have entrusted the right of collection of toll fees for Toll Plaza at Karanja (Ghadge) on Amravati- Nagpur Highway. Further from the perusal of the agreement it is clearly evident that you have authorized the M/s Oriental Pathways (Nagpur) Pvt. Ltd. for collection of fees from the vehicles at the Toll Plaza on the route after the completion of the Build part of the concession. The excerpts from the Scope of the above ag .....

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an agreement named as Escrow agreement. Vide this agreement, the Concessionaire on your behalf, has to collect toll fees and deposit the same into the Escrow Account The escrow account has to be operated as per the Concession Agreement. Thus the deposit of the fees in this account satisfies the conditions of the sec tion 206(1C) of the Income Tax Act, 1961. So you have defaulted u/s 206C(1C) read with section 201(1) & 201(1A) of the Income Tax Act, 1961 by not collection the tax at source d .....

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vision of sec. 206C(1C) is not applicable. However TCS will be collected on the amount of revenue share paid to NHAI by the concessionaire under sec. 206C(1C) of Income Tax Act 1961. 3.1 The AO has concluded that the concessionaire was entitled to collect the fees from the user of the highway. The right of toll collection has been transferred to M/s Oriental Pathways (Nagpur) Pvt. Ltd. There was a BOT agreement and that agreement has also made a provision for right of collection of toll. As per .....

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the Concessionaire from the users of the Project Highway shall be exclusively deposited therein. In addition, all fees collected by NHAI in exercise of its rights under this Agreement during the Concession Period and all disbursements or payments by NHAI pursuant hereto shall also, subject to the rights of deductions and appropriations there from of NHAI under this Agreement, be deposited by NHAI in the Escrow Account. 3.2 For assessment year 2009-10 the AO has finally held that the assessee had .....

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ng aggrieved by the relief granted, now the Revenue is in appeal. 5. From the side of the Revenue learned D.R. Mr. Narendra Kane supported the action taken by the AO. He has pleaded that there was no logic of asking Re. 1/- annually from M/s Oriental Pathways (Nagpur) Pvt. Ltd. specially when he had collected a huge toll fees. Learned D.R. has also argued that the agreements signed have not safeguarded the interest of the Revenue Department. The project was on BOT basis. Therefore, after the com .....

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e reversed. 6. Before concluding his arguments learned D.R. Mr. Narendra Kane has drawn our attention on a petition filed before the CIT(Appeals)-II, Nagpur and for ready reference relevant portion is extracted below : In this case it was found by A.O. during the course of Spot verification conducted on 25.08.2010 that tax at source not collected by the Project Director, NHAI, Amravati as prescribed under section 206(1C) and 206C(7) of the Income-tax Act, 1961 during the F.Y. 2008- 09, 2009-10 a .....

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concession fee of only ₹ 1/- per year as per clause of Page No. 34 of agreement and accordingly, it was decided in the Para 5.5 of the order under reference that the concerned assessee is liable collect tax @ 2% of the above amount. It appears that the Project Director, NHAI (The collector) has not furnished complete facts before your honour. The documents available on the records show that the NHAI (the collector) also entitled to receive toll, shared revenue and other fees, including ne .....

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another office memorandum dated 21-05-2010 from NHAI is also enclosed which also states that the NHAI entitled to get toll revenue, shared revenue and negative grant and interest on receipts which has to be accounted for in a separate Bank Account opened for the purpose and the entire amount has to be remitted to the consolidated fund of India on quarterly basis. The letter is enclosed as annexure-III. Further, the NHAI issued instructions dated 22-03-2010 to its field formulations stating that .....

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n if it is assumed that a right of collection of toll has been transferred by NHAI to OPPL, the important feature is that whatever the amount received/receivable on grant of licence was minimal. He has clarified that NHAI has implemented a project for widening of existing two lane road to four lane road on BOT basis. A bid was called for the project to invite BOT and entrepreneurs. Learned A.R. has pleaded that the contract was not for the building of a toll plaza but for the development of the .....

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Oriental Pathways (Nagpur ) Pvt. Ltd. on 10th of March, 2006. As per clause (7) of Chapter 2 of the agreement, fees payable by concessionaire to NHAI was Re.1/- per year during the term of the agreement. Learned A.R. has, therefore, emphasised that during the term of the agreement NHAI was not entitled for any other income. The fees collected from the vehicles is income of the concessionaire. It was appropriated to compensate him for the cost, expenses and charges incurred in connection with the .....

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ollect the TCS. He has pleaded that the view taken by learned CIT(Appeals) deserves to be confirmed. 8. We have heard both the sides at length. The assessee National Highways Authority of India is stated to be a Department of Ministry of Road Transport and Highway. A tender was issued for national highway No. 6 to be developed on BOT (Build, Owned, Transfer) basis. The project was granted to develop the National Highways No. 6 to M/s Oriental Pathways (Nagpur) Pvt. Ltd., in short M/s OPPL. The c .....

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206C(1C) of I.T. Act. The AO has reproduced the provisions of section 206C(1C) in the impugned order and the silent feature is that every person who grants a lease or a licence or otherwise transfers any rights either in whole or in part in any toll plaza to another person for the use of such toll plaza for the purpose of business, shall at the time of debiting of the amount payable by the licensee or lessee to his account or at the time of receipt of such amount from the licensee in cash or by .....

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rrangement was made to deposit the toll collection in an escrow account in which the NHAI is the signatory, therefore, TCS was to be collected from M/s OPPL. 9. The argument of the assessee before the learned CIT(Appeals) was that, firstly the provisions of TCS were not applicable. On this issue learned CIT(Appeals) has held that the provisions of section 206C(1C) were applicable on the assessee. Against this verdict of learned CIT(Appeals) the respondentassessee (NHAI) is not in appeal. Rather .....

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o NHAI by the concessionaire. Hence learned CIT(Appeals) has opined that TCS was to be collected on the amount payable by the concessionaire. At present the respondent-assessee has not filed any appeal or cross objection in respect of this part of the applicability of the provisions of section 206C(1C) of I.T. Act. Hence we are not supposed to enter into this matter that whether the provisions of section 206C(1C) are at all applicable under the totality of the circumstances of the case. 9.1 The .....

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ent has drawn our attention on the clauses of the agreement according to which the escrow account was opened. The plea of the assessee is that the amount collected was to be appropriated by the concessionaire to compensate the cost of the project and the maintenance expenses of the highway. As far as the concession fees is concerned there was a specific clause in the agreement that in consideration of the grant of concession under the agreement, the concession fees payable by the concessionaire .....

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to escrow bank to make payment from the escrow account in accordance with the instructions of NHAI. Our attention has been dawn on clause XXV under the head Escrow Account , relevant feature is reproduced for ready reference : 25.1 The Concessionaire shall within 60 days from the date of this Agreements open and establish the Escrow Account with a Bank (the Escrow Account ) and all funds constituting the Financing Package for meeting the Total Project cost shall be credited to such Escrow Accou .....

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row Account 25.2.1 The Concessionaire shall give, at the time of the opening of the Escrow Account, irrevocable instructions by way of an Escrow Agreement substantially in form set forth in Schedule Q (the Escrow Account ) to the Escrow Bank instructing, inter alia, that the deposits into the Escrow Account shall subject to Clause 25.2.3, be appropriated in the following order every month and if not due in a month then appropriated proportionately in such month and retained in the Escrow Account .....

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ing Contractor, if any, subject to the items and ceiling in respect thereof as set forth in the Financing Documents but not exceeding ½ (one twelth) of the annual liability on this account; (d) The whole or part of the expense on repair work or O&M Expenses including Fees collection expenses incurred by NHAI, and 1.25 times of the O&M expenses incurred by the NHAI, if any, in the event of repair and maintenance work being carried out by NHAI (pursuant to the failure on the part of .....

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enses in accordance with the provisions of this Agreement ; (e) All Concession Fees and any Negative Grant Due to NHAI from the Concessionaire under this Agreement; (f) Monthly proportionate provision of Debt Service Payments due in any Accounting Year and payment of Debt Service Payments in the month when due; (g) Reimbursements of expenditure incurred by NHAI, if any, for payment of insurance premia, etc. which are otherwise Concessionaire s responsibility, on account of failure on part of the .....

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in a particular order every month. The first is the liability to pay all taxes. Second is the disbursement of expenses in connection with the construction highway. The third in the sequence is operation and maintenance expenses. The fourth is expenses on repair. Fifth is the disbursement of concession fees and any negative grant due to NHAI. The next is loan i.e. debt service payment. Our attention has also been drawn that it is worth to point out that the balance was to be appropriated in accor .....

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e of goods. By the insertion of this section the Revenue Department was enabled to collect the dues from the person carrying on particular trade. A measure was so enacted to check evasion of revenue. Whenever there is a trade the result is an income which is to be brought to tax so as to facilitate the collection of tax on that income which is bound to arise or accrue at the very inception itself when the sales are made. Therefore, the seller of certain goods is required to collect tax from a bu .....

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nnot by any stretch of reasoning be held to include that amount which has not been recovered or paid directly to the seller. Later on by an insertion of sub-section (1C) the toll plaza has also been included. Therefore, by the insertion of toll plaza, isco facto the term seller is to be read in that context also. 12. In the light of the discussion made herein above pertaining to the intent of the legislation we have to examine the objection of the Revenue Department which has also been raised be .....

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56 authorises the concessionaire to collect and retain the said fees on and from the date of commercial operation till the termination. The emphasis of the NHAI before us is that the amount so collected as a toll fees was deposited in the escrow account to safeguard and monitor certain liabilities but otherwise the surplus remained in the escrow account belong to the concessionaire which was retained by him to recover the cost of the project. It has also been brought to our notice that there was .....

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