TMI Blog2018 (1) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... f the agreement, the assessee was to receive only license fee and an agreed share in additional revenue from HWML. The revenue from Water Bills raised belonged to HWML. Thus there is no payment of any amount of any kind for any service by the assessee to HWML. Under these circumstances, the conclusion of the Assessing Officer that Section 194J of the Act, applies, is bad in law. - Decided in favour of assessee. - C.O. No. 33/Kol/2016 A/o. I.T.A. No. 709/Kol/2016, C.O. No. 34/Kol/2016 A/o. I.T.A. No. 710/Kol/2016, C.O. No. 35/Kol/2016 A/o. I.T.A. No. 711/Kol/2016 - - - Dated:- 30-11-2017 - Sri J. Sudhakar Reddy, Hon ble AM Sri S.S. Viswanethra Ravi, Hon ble JM Shri Anil Kocchar, Advocate, appearing on behalf of the assessee. Shri Soumyajit Dasgupta, Additional CIT, DR., appearing on behalf of the Revenue. O R D E R Per J. Sudhakar Reddy, AM :- These three appeals have been filed by the Revenue against a common order of the Commissioner of Income Tax (Appeals)-24, Kolkata, for the Assessment Years 2010- 11, 2011-12 2012-13, passed u/s 250 of the Income-tax Act, 1961 (hereinafter the Act ), dt. 19/01/2016. Cross-Objections have been filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 1 to para 2.4. of the order of the Assessing Officer for the Financial Year 2009-10, which is extracted for ready reference:- 1.0. A survey u/s. 133A of the LT. ACT, 1961 was conducted at the office premises of Haldia Development Authority, Haldia Unnayan Bhawan, City Centre, P.O. -Debhog, Purba Midnapore, West Bengal-721 657 on 22.01.2013. During the course of survey it was found that the assessee-deductor was the authority, dealing mainly with the plans and executing works relating to basic infrastructure development. The nature or work includes construction of roads, providing water supply, drainage facilities, street lighting. installation of tubewells and other development works within the planning area of Haldia Development Authority (H.D.A). 1.1. In course of survey proceedings, it was observed that the H.D.A. while making certain payments did not deduct TOS as per provisions of the LT. Act, 1961. The issue is discussed below : Service charges paid to Haldia Water Management Ltd. for operation, maintenance and collection of Water Bills: 2.1 A concession agreement was signed on 18.07.2008 between HDA (Haldia Development Authority) and Haldia Water Management Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aws and Applicable Permits and manufacturers guidelines and instructions ... . Hence, it is apparent that HWML is- rendering technical services for the entire water treatment plant and for other auxiliary functions in terms of generation and distribution of water in the city of Haldia. 24. From the details of the agreement and the functioning of HWML, it is evident that transferring of operation and maintenance expenses to the Escrow Ale of HWML from the Revenue collection Account maintained by BOA with PNB, Durgachak , Haldia is nothing but consideration made for rendering technical services by H.W.M.L. Hence the nature of payment is squarely covered for deduction of tax u/s. 194J of the Act. 6. The Assessing Officer records that the assessee i.e. HAD, is only showing license fee as its income and operational maintenance expenses are transferred to ESCROW A/c and that in the accounting procedure followed by the assessee and the scheme of sharing of amount deposited in the revenue collection account, the assessee is taking and accounting only license fee as income in its books of account. The Assessing Officer concluded that the gross receipt of bills collected by HWML cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material facts are that on July 18, 2008 a concession agreement was made between the assessee and the said company in respect of Haldia Water Supply Project. In the said agreement, the word project was defined in clause (aag) Article 1. 1 as follows: - (aag) 'Project' means, subject to the provisions of this Agreement, the development, financing, design, construction of the New Facilities Rehabilitation/ Replacement, Work of the Existing Facilities (iii) Operation a Maintenance (O M) of the Project Facilities and all activities incidental thereto including but without limitation engineering, testing commissioning and insurance (iv) billing and collection of Water Charges; v) transfer of the Project Facilities to the H.D.A. on the Transfer Date; (vi) the payment of Licence Fees by the Concessionaire to the H.D.A. in lieu of the grant of the Concession; and (vii) providing Services in the Service Area. 4.2 In terms of Article 4.1, the assessee granted to the said company the concession forth in the agreement including the exclusive right, licence and authority during subsistence of the agreement to implement the project ( the concession ] and the said company accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be charged by the Concessionaire in accordance with the Water Tariff Notification issued by the H.D.A from time to time in this regard; Article 13 contained detailed provisions regarding invoicing and collection. 4.4 As per Article 4.2 the concession period was 25 years. 4.5 Article 2.2 contained provisions for handing over by the aseesee to the said company all the existing facilities and vacant possession of the site for the new facilities and for issue of written notice to the existing customers that service would be provided by the said company in the name and on behalf of the assessee including billing and collection. 4.6 Article 7.1 contained the obligations of the said company. The said company at its own cost and expense was to, inter alia, provide and manage the supply of water to customers, monitor, manage, operate and repair the project facilities, pay in timely manner to the assessee the licence fee as per the agreement, collect in the name and on behalf of the assessee water charges from the assessee undertake the rehabilitation/ replacement work of the existing facilities, achieve commercial operation date of the new facilities, undertake the design, eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions were made regarding the priority of payment from the said account towards taxes, operation and maintenance expenses of the said company, licence fee to which the assessee was entitled, sharing of additional revenue, admitted claims of either party and transfer of the balance amount to the said company. For payment of operation and maintenance expenses, the Revenue Collection Bank was to act on the claim of the said company duly supported by proof of approval of operation and maintenance budget for the purpose of payment of licence fee to the assessee, the Revenue Collection Bank was to act on the basis of Appendix XVI detailing the licence fees., It was provided, that the, arrangement would be operationalised through a suitable revenue collection agreement entered into by the parties and the Revenue Collection Bank having an irrevocable instruction mandate that there shall be no interference or claim of lien by either party. 4.13. Article 11.6 provided that the said company shall open an escrow account into which all its entitlements will be transferred. 4.14. The revenue collection agreement between the said company, the Revenue Collection Bank, namely, Punjab Nation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clear that the assessee did not engage HWML to render any service. Under the said agreement, dt. 18th July, 2008, the assessee transferred to HWML, for an agreed consideration and for a specified period, its right to supply water to consumers in Haldia and conferred the right to HWML to charge and collect the charge thereto directly from the consumers. The terms conditions of such transfer, is that HWML shall operate and maintain the existing facilities and establish, operate and maintain the new facilities at its cost. The assessee was to share 50 per cent of the cost of rehabilitation/replacement of the existing facility subject to an upper limit of ₹ 5 Crores. The assessee was also to share the increase in the power cost over the base power tariff, equally with HWML. During the currency of the agreement, the assessee was to receive only license fee and an agreed share in additional revenue from HWML. The revenue from Water Bills raised belonged to HWML. Thus there is no payment of any amount of any kind for any service by the assessee to HWML. 10. Under these circumstances, the conclusion of the Assessing Officer that Section 194J of the Act, applies, is bad in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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