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Indian Oil Corporation Ltd. Versus DCIT, Circle-58 (TDS) , Kolkata

2016 (7) TMI 1187 - ITAT KOLKATA

TDS liability - tds on terminalling charges - segregation of agreement into purchase and works contract - Held that:- From the facts we find that in the instant case the assessee was buying the petroleum products from BRPL. Besides the above the loading services were also provided by BRPL in connection with the purchase of the petroleum product. For the loading services the assessee was making the payment separately to BRPL. The petroleum products were purchased by the assessee in bulk and regul .....

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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. - 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 fo .....

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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 Chowdhury, Advocate For the Revenue : Shri Niloy Boran Som, JCIT-DR ORDER Per Waseem Ahmed, Accountant Member:- Three appeals by the same assessee are directed against the different orders of Commissioner of Income Tax .....

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ll the appeals raised by the assessee except figure, therefore we heard them together and deem it appropriate to dispose them by way of this common order. Accordingly we are taking the facts of the case for AY 2004-05 as a lead case for the sake of convenience, we pass a consolidated order for all the appeals. Effective grounds have been raised out of which ground No.1 is of general nature and does not require separate adjudication. The grounds raised are as under:- 1. For that on the facts of t .....

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n as per Clause 8.4, the said amount of ₹ 10,51,87,592/- crores was aid to BRP Ltd against marketing rights vested with IOC and for also using the loading of Products through loading infrastructure operated by BRP Ltd, therefore, the said amount was not liable for deduction of TDS u/s. 194C of the IT Ac, therefore the finding of the Ld. CIT(A) is completely arbitrary, unjustified and illegal. 4. For that on the facts of the case, the Ld. CIT(A) was wrong in not accepting the fact that the .....

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. 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 consideri .....

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wned by Central Government and engaged in oil business. There was a survey on the premises of assessee on 04.11-2004 under section 133A of the Act. During the survey it was observed by AO that assessee has paid terminalling charges to BRPL without Deducting Tax at Source (TDS for short) u/s 194C of the Act. Accordingly, AO issued show cause notice upon the assessee for non-deduction of TDS on the payment of terminalling charges as mandated u/s. 194C of the Act. In response to the notice, the ass .....

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petroleum products. The assessee also furnished the copy of the computation of total income and assessment orders of BRPL to justify that the payee has included the terminalling charges in its income. Accordingly the assessee submitted that the transactions for the payment of terminalling charges are out of the purview of TDS provision. However AO has disregarded the plea of the assessee and while doing so the AO also considered certain clauses of the agreement. The reasons for the rejections ar .....

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AO also observed from the assessment order submitted along with computation of income that there was outstanding demand of the tax on BRPL for the financial year 2002-03 and 2003-04. It was very clear from 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 cont .....

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y 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 facilities. vii) The terminalling charges paid by assessee is not forming part of purchase price and anal .....

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of said products. ix) As per the agreement with BRPL the assessee was to make the payment for the marketing rights and for availing the infrastructure facility for loading of the petroleum products. But the payment made during the year to BRBL cannot be bifurcated between the above two services. However it is very much glaring that the payment is made towards the use of infrastructure facilities as the assessee has debited the entire amount as terminalling charges. In view of above, AO inferred .....

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ts and therefore not allowable due to non deduction of TDS. In view of above, AO has held that assessee is in default within the meaning of Sec. 201(1) of the Act and accordingly charged interest u/s. 201(1A) of the Act. 4. Aggrieved, assessee preferred an appeal before L d CIT(A) where assessee submitted that the payments made to BRPL in these three years are as follows on which the AO has calculated the non-deduction of TDS u/s. 201(1) and interest u/s. 201(1A) which are as follows:- FY Amount .....

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. 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 .....

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ng any contract job, therefore, 194C of the Act is not attracted and the assessee was not liable to deduct TDS. Hence, no TDS was deducted by the assessee-company. That in the earlier years, similar payment was made to BRPL on which no TDS was deducted and the Department has accepted this as marketing fees. Therefore AO was wrong in holding these payments as terminal charges and was wrong in holding that the assessee-company was liable to deduct TDS u/s. 194C of the IT Act and thereby raised the .....

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seen that the AO has made an exhaustive and detailed analysis of the agreement between M/s BRP Ltd and the appellant, in his order dated 31.03.2008. On perusal of agreement and the reasons given by the AO I agree with the Assessing Officer that the provisions of section 194C of the Act were applicable on the payment of Terminalling Chargers to M/s BRP Ltd. and M/s IBP Ltd. and the appellant was required to deduct the tax at source on such payment. From the submission of the appellant before the .....

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of above, I uphold the view of the AO that the provisions of section 194C of the Act were applicable 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 relevan .....

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rs. 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 BRPL, the payment of terminal charges was paid for availing infrastructure facilities. Therefore, this transaction is not covered under the provision of Sec. 194C of the Act. He again submitted that in case revenue was to cover the .....

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h applicable in relation to assessee s appeals and he relied on the orders of Authorities Below. 6. We have heard rival contentions and perused the materials available on record. From the foregoing discussion, we find that assessee in the instant case, has made the payment of terminalling charges without deducting TDS. We find from the assessment order, AO that assessee s transactions were very much attracted towards the provisions of Sec. 194C of the Act and nondeduction of TDS has made assesse .....

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facilities and as such, there was no work contract of the nature as specified u/s. 194C of the Act. It is also pertinent to note that Legislative has brought amendment to Sec. 194-I of the Act for making such transactions subject to TDS but which came into force with effect from 1-6-2007 only. The dispute in the instant case relate to the period prior to the amendment u/s 194-I of the Act. At this juncture it is important to produce the relevant provisions of section 194-I of the Act which reads .....

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e 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 rupee .....

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ere the income by way of rent is credited or paid to a business trust, being a real estate investment trust, in respect of any real estate asset, referred to in clause (23FCA) of section 10, owned directly by such Explanation - For the purposes of this section,- business trust.] [(i) 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 (including fa .....

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provisions of this section shall apply accordingly.] From the plain reading of the section, we find that the rent paid for availing the infrastructure facility are subject to TDS under section 194-I of the Act which is effective from 1.6.2007. In the case on hand the disputes relate to the years before the insertion of the provisions of section 194-I of the Act. For making a transaction subject to TDS under section 194-C of the Act there has to be written or unwritten works contract. Now it is i .....

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r basis for which loading facility was provided by BRPL. The assessee for availing the loading facility was making the payment to the same party from which 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 p .....

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(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 packed cement bags from its Packing Plants Nos. 1 and 2 into wagons or trucks. Under cl. 12 of those terms and conditions, there was a stipulation that the c .....

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tor of the difference in D.A. over the amount of ₹ 1.21 paise and annual increment, etc., payable from month to month to every worker by him as per the Second Wage Board Recommendation. As the contractor carried out his work according to the terms and conditions in the contract during the years 1973-74 and 1974-75, the appellant made payments of the sums payable to him under cl. 12 of the contract and the sums reimbursable to him under cl. 13 thereof. But the deductions made under s. 194C( .....

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ant under ss. 276B(1), 281 and 221 of the Act in respect of asst. yrs. 1973-74 and 1974-75 for short deductions out of the sums paid to contractor without observing the requirement of s. 194C(1) of the Act. Another notice dt. 8th May, 1978, relating to the asst. yrs. 1974-75 to 1977-78 of a similar nature, was also served on the Principal Officer of the appellant. The appellant, although impugned both the said notices in a Writ Petition filed under Articles 226 and 227 of the Constitution before .....

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r 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 a .....

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. Next issue raised by assessee in ground No.4 is that Ld. CIT(A) erred in confirming the action of AO by holding that loading and unloading facility amounting to ₹ 1,79,847/- was terminalling charges and attracting the provisions of section 194C of the Act. 8. We have decided the identical issue in favour of assessee raised in the grounds of appeal nos. in 2 & 3. Following the same precedent, we also decide this issue in favour of assessee accordingly. 9. Next issue raised by assessee .....

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