TMI Blog2016 (7) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... into a separate agreement cannot be the sole basis to treat the transaction independent of the purchase. In the case on hand, the rate lump sum consideration was fixed for the infrastructure facility. No direct labour was involved in the case on hand. The claim of the assessee that other companies to whom identical payments were made by the assessee have furnished the form 197/197A of the Act for non-deduction of tax, in our view the mere furnishing of form 197A of the Act cannot change the character of the transactions. The ld. AR also submitted that in the earlier years the identical payments were made for the availing of infrastructure facilities but no disallowance was warranted. The ld. DR failed to bring anything on record contrary to the arguments advanced by the ld. AR.Therefore, in our considered view, the provision of Sec. 194C, in the instant case is not applicable to the assessee. Accordingly, we reverse the orders of Authorities Below and grounds raise by assessee are allowed - ITA No. 1517-1519/Kol/2009 - - - Dated:- 20-7-2016 - Shri Waseem Ahmed, Accountant Member And Shri S. S. Viswanethra Ravi, Judicial Member For the Assessee : Shri Soumitra Cho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and therefore shall not be liable to deduction of TDS u/s. 194C of the IT Act amounting to ₹ 3,686/- which is completely arbitrary, unjustified and illegal. 5. For that on the facts of the case, the Ld. CIT(A) was wrong in not accepting the fact that IBP Ltd has paid income tax on the said income from the assessee company, therefore, demand raised u/s. 201(1) amounting to ₹ 3,686/- is completely arbitrary, unjustified and illegal. 6. For that on the facts of the case, the Ld. CIT(A) was wrong in confirming levy of interest u/s. 201(1A) of the IT Act amounting to ₹ 10,36,752/- which is completely arbitrary, unjustified and illegal. 7. For that on the facts of the case, the Ld. CIT(A) was wrong by dittoing the order of the AO thereby confirming the charging of interest u/s. 201(1A) amounting to ₹ 10,36,752/- without considering the Board s Circular dated 29.1.1997 which is completely arbitrary unjustified and illegal. 3. The inter-connected issues raised in grounds No. 2 and 3 by assessee are that L d CIT(A) erred in confirming the order of Assessing Officer by holding the terminal charges paid to Bongigon Refinery Petrocom Chemica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO order for the assessment year 2004-05 that there was tax deficiency of ₹ 3,82,79,751.00 and assessee failed to file any evidence for the payment of the tax. iv) It was noted that loading infrastructure facilities was 100% owned and operated by BRPL. Therefore it was under the control of BRPL. While using the infrastructure facilities for loading of petroleum products for the assessee, it was operated by BRPL. The payment was made as lump sum consideration. Therefore, it cannot be concluded that terminal charges were paid for hire charges / rental charges for the use of aforesaid infrastructure facilities. The claim of assessee that the terminal charges was paid for storing petroleum products purchased from BRPL is not correct as per the agreement. The agreement explicitly provides for the payment towards marketing rights and for the use of infrastructure facilities. v) Infrastructure facilities for the loading of the products is owned and operated by BRPL. vi) As per agreement the infrastructure facilities was controlled and operated by BRPL while loading products and therefore it is not proper to say that BRPL allowed the assessee to utilize infrastructure fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,20,50,892 13,03,068 9,77,249 2003-04 10,51,87,592 21,56,344 10,35,024 The assessee before the ld. CIT(A) pleaded that there was an agreement between BRPL and the assessee-company. As per clause 8.4 of agreement, the payment was to be made for the marketing rights vested with IOC and also loading of products through loading infrastructure which is owned and operated by BRPL. The assessee-company agreed to compensate the BRPL a lump sum of 14 crores per annum. That in the balance sheet of BRPL for the financial year 2001-02 at page 255 in Schedule N which can be seen that BRPL has taken the said income as fees for marketing rights. That the financial year 2002-03 at page no. 198 BRPL has written off the said amount as terminal charges / fees for marketing right amounting to ₹ 6.20 crores. That in the financial year 2003-04 at page 127 the BRPL in his balance sheet in Schedule N has shown reimbursement of infrastructure cost from IOC at 10.51 crores, therefore from the balance sheet of BRPL it can also be very well said that these amounts were not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable on payment of Terminalling Charges. The ground nos. 2, 3 4 are dismissed. Being aggrieved by this order of L d CIT(A) assessee came in second appeal before us. 5. Before us Ld. AR filed three copies of Paper Books comprising pages 1 to 271 respectively and L d AR drew out attention on page 20 of the PB where the clause 8.4 of the Agreement with the assessee and BRPL is recorded and relevant extract is reproduced below:- 8.4 In consideration of the Marketing Rights vested with OOC and also the loading of Products through the loading infrastructure owned and operated by BRPL, IOC hereby agrees to compensate BRPL a lumpsum amount of ₹ 14 crores per annum. This amount shall be payable in four equal quarterly installments. Each installment will be paid on the 15th of the mid month of each quarter. 8.4.1 This quantum of lump-sum amount is payable for each year for period of 5 years. Thereafter the said amount shall be escalated at the rate of 55% (compounded) per year for the balance period of the Agreement. L d AR further submitted that only a lump-sum consideration was paid through the loading infrastructure facilities owned and operated by B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier. [deduct income-tax thereon at the rate of [(a) two per cent for the use of any machinery or plant or equipment; and (b) ten per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings;)] Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amount of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed [one hundred and eighty thousand rupees]: [Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich he was buying the products i.e. BRPL. Thus the loading facility was intricately linked with the every purchase of the products. It was not possible for the assessee to purchase the products without availing the infrastructure facility of BRPL. Thus in our view it shall not be inappropriate to treat the expenses on infrastructure facility at par with the purchase. The method for the payment of infrastructure facility and entering into a separate agreement cannot be the sole basis to treat the transaction independent of the purchase. However we find that in many cases Hon ble courts have held that the loading charges are very much covered under section 194C of the Act including the judgment of Hon ble Supreme Court in the case of Associated Cement Company Ltd. vs. CIT (1993) 61 CCH 0273 ISCC (1993) 111 CTR 0165 : (1993) 201 ITR 0435 : (1993) 67 TAXMAN 0346, the facts of the case are as under : 2. The facts which have led to the need for our decision on the said question, are briefly these : The Associated Cement Co. Ltd., the appellant, issued a letter dt. 5th Nov., 1973 to Mr. S.P. Nag, contractor, Jhunakpani containing the terms and conditions of a contract of loading pack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch it had unsuccessfully impugned before the High Court, in its Writ petition. However, we find that the facts in the above case are different from the case in hand. In the former case the loading charges were paid by the assessee by employing the labour and their rate was fixed on the basis of quantity. However, in the case on hand, the rate lump sum consideration was fixed for the infrastructure facility. No direct labour was involved in the case on hand. 6.1 The claim of the assessee that other companies to whom identical payments were made by the assessee have furnished the form 197/197A of the Act for non-deduction of tax, in our view the mere furnishing of form 197A of the Act cannot change the character of the transactions. The ld. AR also submitted that in the earlier years the identical payments were made for the availing of infrastructure facilities but no disallowance was warranted. The ld. DR failed to bring anything on record contrary to the arguments advanced by the ld. AR. 6.2 Therefore, in our considered view, the provision of Sec. 194C, in the instant case is not applicable to the assessee. Accordingly, we reverse the orders of Authorities Below and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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