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Asansol Durgapur Development Authority Versus ITO (TDS) , Durgapur

2017 (9) TMI 579 - ITAT KOLKATA

TDS - activity / job of Municipal Solid Waste Management - The assessee (ADDA) explained that it was merely associated as a Nodal Agency which only released the contribution of ₹ 9,60,00,000/- to GEPIL out of the total cost involved for implementation of Municipal Solid Waste Management Project under the designated areas of 5 ULBs on a Build, Own, Operate & Transfer (BOOT) basis and the same was in no way related to any payment for any professional service. - Held That:- The assessee i .....

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cuments clearly prove that the assessee is acting only at the behest of the State Government and accordingly could be safely concluded that it is only an agent of the Government. - The grant paid under the JNNURM scheme by the State Government in the instant case to GEPIL, disbursed through the assessee in a self financing project under the Concessionaire Agreement, and the primary requirement of section 194C or 194J of the Act squarely fails in the instant case, therefore the assessee is no .....

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ate Shri Abhijit Biswas, Advocate For the Respondent : Shri Saurabh Kumar, Addl. CIT DR ORDER Per M.Balaganesh, AM 1. These appeals are directed against the order of the Learned Commissioner of Income Tax (Appeals) - Durgapur [in short the ld CITA] in Appeal No. 39/CIT(A)/DGP/2013- 14 dated 22.12.2015 and Appeal No. 76/CIT(A)/DGP/2014-15 dated 22.12.2015 against the order of the Learned Income Tax Officer, TDS, Durgapur [ in short the ld AO] treating the assessee as assessee in default under sec .....

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pect of payments released to Gujarat Enviro Protection and Infrastructure Limited [ in short GEPIL] , in the facts and circumstances of the case. 2.1. The brief facts of this issue is that a TDS survey u/s 133A of the Act was conducted in the office premises of assessee simultaneously at Durgapur as well as at Asansol on 12.10.2012. During the course of survey proceedings, it was found that the books of accounts from financial year 2009-10 onwards had not been audited and accounts were yet to be .....

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cial year 2009-10, the assessee had made payment of ₹ 2,60,00,000/- (out of total contribution of ₹ 9,60,00,000/- as per the agreement) to GEPIL , an enviro-infrastructure company, entrusted with the job of Municipal Solid Waste Management, without deduction of tax at source. Similarly the assessee made payment in the second quarter of financial year 2010-11, a sum of ₹ 3,60,92,878/- to GEPIL towards the same purpose. When confronted with the non-applicability of TDS on the sam .....

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ipal Solid Waste Processing and Engineered Sanitary Landfill facilities under their jurisdiction and provided initial contribution of ₹ 2,60,00,000/- as initial contributory support during the concerned financial year. The assessee (ADDA) explained that it was merely associated as a Nodal Agency which only released the contribution of ₹ 9,60,00,000/- to GEPIL out of the total cost involved for implementation of Municipal Solid Waste Management Project under the designated areas of 5 .....

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re that the ULBs supply minimum guaranteed quantity of Municipal Solid Waste to GEPIL, payments are released in time to GEPIL, due compliance of Municipal Solid Waste by GEPIL etc. 2.2. The ld AO on perusal of the concession agreement, bid proposal and written submissions of the assessee observed as under:- 1. That ADDA as a Nodal Agency had awarded a contract under the nomenclature Concession Agreement to M/s GEPIL for execution of a job involving specific professional-cum-technological experti .....

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submission, Grants/ subsidies are always given to an organization having sufficient professional expertise otherwise proper utilization of grant is not feasible and that grant/initial contribution was provided by ADDA only to reduce the cost of waste management. So, to make the project feasible, the so-called grant/initial contribution was provided to M/s GEPIL with the sole purpose of rate reduction towards the cost of the project to such an entity having professional-cum-technological expertis .....

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ompany can create charges for getting finance from the Banks/FIs and that to with the necessary No Objection Certificate from the ADDA and the ULBs is attributing some short of ownership on M/s GEPIL is not at all tenable as those clauses are there in the agreement to enable M/s GEPIL to arrange for the finance, if necessary, as the project is the self financing one. Also GEPIL is not a body whose income is exempted under any provisions of Income Tax Act, 1961. So all the arguments as put forwar .....

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and would be invited with consequential interest u/s 201(1A) of the Act. 3. The next issue to be decided in these appeals is as to whether the assessee could be treated as an assessee in default u/s 201 / 201(1A) of the Act in respect of payments made towards lift installation charges , in the facts and circumstances of the case. 3.1. The ld AO observed that in the financial years 2009-10 and 2010-11, the assessee made three payments for the lift installation charges i.e ₹ 18,870/- on 12. .....

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is not a deferred payment by assessee against the bill raised by OTIS on 12.10.2009. Hence there is no error committed by the assessee in this regard. The ld AO however observed that the subject mentioned payments would fall under the ambit of provisions of section 194J of the Act on the total cost of ₹ 2,87,420/- in the first quarter of financial year 2009-10 and non-deduction of the same would make the assessee as an assessee in default in terms of section 201(1) of the Act and would be .....

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to ₹ 9,03,541/- to Durgapur Ex Servicemen Welfare Security where no tax was deducted at source. The assessee stated that the said agency was having PAN but the same was mistakenly not quoted by the assessee in the TDS returns. The ld AO however concluded that the said payment would suffer TDS at the rate of 20% in the absence of PAN. 5. The ld CITA observed that the assessee was covered by exemption u/s 10(20A) of the Act prior to its omission with effect from 1.4.2003. He observed that th .....

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reement and it was only monitoring the utilization of grant. The ld CITA on the contrary observed that : (1) Operational expenses - All the required personnel shall have to be deployed by the private developer at their own cost ; (2) Further as per Para 14.2.4. of the Bid Document, the mobilization of finance for the execution of the project shall be the responsibility of the private partner within a specified time frame. The public partner is no way shall be responsible for funding the capital .....

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retained every possible control over the development ; (5) GEPIL is not a body whose income is exempted under any provisions of the Income Tax Act, 1961 ; (6) Grants / subsidies are always given to an organization having sufficient professional expertise otherwise proper utiisation of grant is not feasible . He observed that the assessee had submitted that in order to make the project feasible, the so called grant was provided to GEPIL with the sole purpose of rate reduction towards the cost of .....

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deduct tax at source on the payments made to them. 5.1. Similarly for the other payments made by the assessee, the ld CITA confirmed the action of the ld AO by treating the assessee as assessee in default u/s 201 / 201(1A) of the Act, without having any discussion or giving any finding thereon. 6. Aggrieved, the assessee is in appeal before us on the following grounds:- I.T.A. No. 279/Kol/2016 for assessment year 2010-11 A. For that the CIT(Appeals) has erred in confirming the finding of the Ass .....

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rofessional or technical services by the appellant. Section 194J has no application in the undisputed facts of the instant case. B. For that the CIT(Appeals) has erred in confirming the erroneous finding of the Assessing Officer increasing the amount of tax deductible at source under Section 194C of the Act for the 4th Qr. of A.Y. 2010-11 from ₹ 18,404/- to ₹ 33,307/-. There is no discussion or finding on the issue in the said order. C. For that the CIT(Appeals) has erred in holding .....

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. 280/Kol/2016 for assessment year 2011-12 A. For that the CIT(Appeals) has erred in confirming the finding of the Assessing Officer that in respect of the amount paid by the appellant to Gujrat Environment Protection and Infrastructure Limited (in short GEPIL) under the Concession Agreement dated December 23,2008, as and by way of disbursement of a part of the grant provided by the Government of West Bengal, Urban Development Department, Kolkata under the Jawaharlal Nehru National Urban Renewal .....

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payment therefore had to be under Section 194C of the Act and not under Section 194J thereof. C. For that the CIT(Appeals) has erred in upholding the finding of the Assessing Officer that due to alleged non-availability of PAN No. of Durgapur Ex Services Welfare Association tax is required to be deducted at source @ 20% in respect of payments made to the said Association and not @ 2% under Section 194C of the Act. D. For that the CIT(Appeals) has erred in holding that the Assessing Officer had .....

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ated Municipal Solid Waste Management for ULBs of Asansol, Durgapur, Ranigunj , Jamuria and Kulti Urban area on BOOT transfer basis, a Concession Agreement was entered into on 23.12.2008 between Durgapur Municipal Corporation, Asansol Municipal Corporation, Raniganj Municipality, Jamuria Municipality, Kulti Municipality and the asesseee, of the one part, with GEPIL. The Ministry of Environment and Forests, Government of India, formulated the Municipal Solid Wastes (Management and Handling) Rules .....

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and contribution from ULBs as per ratio suggested under JNNURM (i.e 50:20:30). For disbursement of such grants, the Government of West Bengal appointed Kolkata Metropolitan Development Authority (KMDA) as the nodal agency for the state for JNNURM. Funds were made available under JNNURM schemes to KMDA for distribution and release thereof to the concerned projects. KMDA would make available the funds to the assessee who in turn would disburse the same to the Concessionaire i.e GEPIL. Now the sho .....

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:- Section 11 - Constitution of Planning Authority and Development Authority (1) As soon as may be , after declaration of an area as a Planning Area, the State Government may, by notification, constitute for the purpose of this Act a Planning Authority for that area or a Development Authority in respect of the Plannign Area or a part of it. (2) A Planning Authority or a Development Authority , if it is not a local authority or a Government department or agency, shall be a body corporate having p .....

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orporation (statutory or otherwise), or any officer of the State Government, as the Planning Authority or the Development Authority for the area within the jurisdiction of that authority. (5) The provisions of sub-section (3) of this section and sections 12, 14 and 15 shall not apply to a Planning Authority or a Development Authority appointed under sub-section (4) and the provisions of this Act by which such authority is constituted shall continue to apply in respect of the area within the juri .....

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assessee by the State / Central Government. The assessee is merely a disbursing authority and is required to oversee the proper utilization of the funds given for and on behalf of the ULBs of the State Government. We also find that the State Government also directs the assessee to make use of the funds collected such as land premium , ground rent, etc on behalf of the Government and according permission for the same to be invested in bank for onward utilization of its earmarked purposes. This i .....

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Authority, that these amounts are specifically retained in earmarked accounts and eventually reduced as and when they are disbursed for its intended purposes. Hence it could be safely concluded that the assessee is only a pass through agency of these funds and had merely acted as a custodian of funds belonging to the Government. 7.2. Now let us examine the applicability of provisions of section 194C / 194J of the Act with regard to the aforesaid payments. The grant paid under the JNNURM scheme b .....

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is not obligated to deduct tax at source on the subject mentioned payments and hence consequentially the assessee could not be invited with liability u/s 201 and 201(1A) of the Act in respect of payments made to GEPIL. 7.3. We find that in the case of CIT vs Pandavpur Sahakara Sakkara Kharkhane Ltd (1992) 198 ITR 690 (Kar) , it was held that the amount set apart and meant for utilization only as per the directions of the State Govt. represents diversion of income and the same cannot be credited. .....

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he facts before the Ahmedabad Tribunal was that the assessee in that case had paid ₹ 6,93,16,000/- to Gujarat Mineral Development Corporation (GMDC) and Gujarat Mineral Research & Development Society (GMRDS) for construction of Marble Park for Artisans and using of mineral without deducting tax at source u/s 194C of the Act. A show cause notice was isused to that assessee to explain as to why demand may not be raised u/s 201(1) and interest may not be charged for the above default u/s .....

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as pointed by the learned AR, it is evident that the state government had made resolution for providing grant-in-aid to GMDC and GMRDS for ₹ 4,78,76,000/- and ₹ 2,15,00,000/- respectively and these grant-in-aid were routed to the above said corporations through the assessee. Therefore, these are not payments made for carrying out any work; however, instead they are grantin- aid given to the corporation through the assessee by the state government. These facts are evident from the pa .....

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ipal Solid Waste Management in the designated areas. Though the funds continue to remain with the assessee, the ownership or utilization does not vest in it. Hence we hold that when these funds are disbursed to GEPIL, there cannot be any obligation of deduction of tax at source as the payment is effectively made by the Government through the assessee. Accordingly the grounds raised by the assessee in this regard for both the years are allowed. 8. With regard to deduction of tax at source u/s 194 .....

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his issue to the file of the ld AO for adjudication afresh, in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard in this regard. Accordingly, the ground raised in this regard by the assessee is allowed for statistical purposes. 9. With regard to the interest liability of ₹ 77,593/- which has been enhanced by the ld AO, the ld AR stated that the assessee had deposited the admitted tax of ₹ 6,70,224/- and the same was duly communi .....

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this regard by the assessee is allowed for statistical purposes. 10. With regard to the payment amounting to ₹ 9,03,541/- made by the assessee to Durgpaur Ex-Services Welfare Association in the first quarter of Financial Year 2010- 11 (Asst Year 2011-12) , the ld AO held that due to non-availability of PAN of the said party, tax is required to be deducted at source @ 20% and not 2% u/s 194C of the Act. The ld AR submitted that the ld AO had failed to take into consideration that TDS retur .....

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the assessee is allowed for statistical purposes. 11. With regard to the payment made towards lift installation charges, the assessee had deducted tax at source u/s 194C of the Act, but the ld AO held that the same would have to be deducted at higher rate u/s 194J of the Act. We find that this issue is now squarely covered by the Constitution Bench of the Hon ble Supreme Court in the case of Kone Elevator India (P) Ltd vs State of Tamil Nadu reported in (2014) 7 SCC 1 dated 6.5.2014. The relevan .....

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