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TMI Blog2013 (7) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... yment but this aspect has not been clarified by any of the lower authorities as they have treated the entire payment of transmission charges as has been made u/s 194I or 194C of the Act. In the light of these facts, this aspect is required to be examined by the lower authorities as to how much transmission charges are paid by the assessee to GAIL for transportation of the gas purchased by it from GAIL and also the amount of transmission charges paid by the assessee to GAIL for transportation of gas purchased from other agencies - restore the matter to the file of AO with the direction to reexamine the issue afresh - in favour of assessee for statistical purposes. - I.T.A. Nos.78, 79 & 80/Lkw/2013, S.P. Nos. 8, 9 & 10/Lkw/2013 - - - Dated:- 25-6-2013 - Shri Sunil Kumar Yadav And Shri J. Sudhakar Reddy,JJ. For the Appellant : Shri R. B. Shukla, Advocate Shri Ashish Raj Shukla, Advocate For the Respondent : Shri Alok Mitra, D. R. ORDER Per Sunil Kumar Yadav:- These appeals are preferred on behalf of the assessee against the respective orders of CIT(A) on various common grounds. For the sake of reference, we extract the grounds raised in I.T.A. No.79/Lkw/2013 as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature of service provided to the appellant by GAIL and is not the same as purchase price of gas even though the appellant has paid VAT on the transmission charges. 8. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in holding that the once service tax is levied by GAIL on transmission charges then the payment for transmission charges do not partake the same character as payment of cost of sales. 9. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in borrowing the definition of service from Service Tax Act for holding that transmission charges is a payment for work contract. He further erred in holding that as VAT is also charged on work contract and therefore transmission charges get detached from the sale price of the gas. 10. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in holding that TDS in the present case is not being levied on any work contract but is being levied u/s 194C read with Expln. (iv) thereof ignoring subsection 1 of that section. 11. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in holding the entire amount paid / credited as per Form 16A issued to Bihar Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice of the gas (including transmission charges), in its return of income and has paid taxes thereon and therefore no further tax can be recovered from the assessee. (vii) Certificate u/s 197 issued by the ACIT(TDS), Patna for deduction of TDS at a lower rates than prescribed u/s 194C 194I on the amount paid to Bihar State Warehousing Corporation. 16. The assessee craves leave to raise a new ground, or alter, modify or delete any of the above grounds." 2. Though the order of CIT(A) is assailed on various grounds but they all relate to the non deduction of TDS on payment of transmission charges u/s 194C of the I.T. Act, 1961 (hereinafter called the "Act") and chargebility of interest u/s 201(1A) of the Act. 3. The facts, in brief, culled out from the orders of the lower authorities on the impugned issue are that the assessee appellant is a company engaged in the manufacturing of fertilizers. During the course of survey/verification carried out at the business premises of the assessee company, it was found that the assessee has purchased natural gas from GAIL and same was transported to manufacturing unit of the assessee through the pipeline of GAIL for which the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I of the Act applied by him. The CIT(A) accordingly partly allowed the appeal and directed the Assessing Officer to recompute the short deduction of tax. 5. Aggrieved, the assessee has preferred these appeal and reiterated the contentions as raised before the CIT(A). the learned Counsel for the assessee has invited our attention to the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Krishak Bharati Co-operative Ltd. [2012] 249 ITR 68 (Guj) with the submissions that the identical issue was examined by their Lordships of Hon'ble Gujarat High Court. In the said case the Hon'ble High Court has categorically held that the contract itself envisaged that gas would be supplied by the seller to the assessee at the receiving point of the assessee factory and for such purposes the seller would be laying down its pipeline and other equipments and would maintain such paraphernalia. The seller would also have the right to use such pipelines and equipments for the purpose of distributing gas to other gas customers. The ownership of the gas was passed on from the seller to the assessee only at the point of delivery and not before. Their Lordships have further held that the agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aising the sale bill (whether the transportation charges are embedded in the cost of gas or shown separately) does not alter the basic nature of such contract which remains essentially a contract for sale and not a works contract as envisaged in section 194C of the Act. Hence, in such circumstances, the provisions of Chapter XVII-B of the Act are not applicable on the component of gas transportation charges paid by the purchaser to the owner/seller of the gas. The use of different modes of transportation of gas by owner/seller will not alter the position. 5.2 The learned Counsel for the assessee Shri R. B. Shukla further contended in the alternative that the assessee would not be deemed in default u/s 201(1) of the Act in respect of such amounts of TDS which was since directly paid by the deductee with reference to receipt of transmission charges in its returns of income of the relevant years. In support of this contention he placed reliance upon the Circular No. 275/201/95-IT(B) dated 29/01/97 and judgment of Apex Court in the case of Hindustan Coca Cola Beverage P. Ltd. vs. CIT [2007] 293 ITR 226 (SC) and the judgment of Hon'ble jurisdictional High Court in the case of Jagran P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further invited our attention to the facts of the case of CIT vs. Krishak Bharati Co-operative Limited on which heavy reliance is placed by the assessee with the submission that the transmission charges were charged in the sale invoice of gas but in the case of the assessee, the transmission charges were raised through a separate invoice. Therefore, the contract for purchase of gas and transmission of it are two separate independent contracts and on transmission charges for transportation of the gas, the assessee is required to deduct TDS u/s194C of the Act. The another distinguishable factor was also pointed out by the learned D.R. with the submission that in the case of Krishak Bharati Co-operative Limited the assessee was required to pay monthly transmission charges at a fixed amount whereas in the instant case the transmission charges depends upon the quantity of gas transmitted by the GAIL. Whenever the gas was purchased by the assessee from other parties, the GAIL has transported the same through its pipe line for which transmission charges were also paid by the assessee. The assessee has admitted that on transmission charges for transportation of gas purchased from others, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of deduction of TDS u/s 194I of the Act. 7.1 The CIT(A) did not agree with the invocation of provision of section 194I of the Act for the purpose of deduction of TDS but he was of the view that the TDS is required to be deducted u/s 194C of the Act as the GAIL was required to transport the gas to the assessee for which transmission charges were paid. The CIT(A) accordingly approved the order of the Assessing Officer but invoked the provisions of section 194C of the Act for making deduction for TDS on payment of transmission charges. Therefore, now the issue before us is "whether the transmission charges paid by the assessee to GAIL is one of the essential component of the sale contract of gas as per the contract executed between the assessee and the GAIL or the transmission of gas is an independent contract?" During the course of hearing, the learned Counsel for the assessee has invited our attention to the order of the Tribunal in the case of Krishak Bharati Co-operative Limited vs. Income Tax Officer, I.T.A. No.1702 and 1703/Ahd/2007 in which the identical issue was raised and the Tribunal has held that the transportation charges for gas supply contract are part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a contract to carry out a work or the contract to supply labour to carry out work should be confined to "works contract". However, in the present case, we are not faced with such a situation. We only find that there was no contract between GAIL and the assessee for carriage of goods. Transportation of gas by GAIL was only in furtherance of contract of sale of gas. 20. In view of the above discussion, we are of the opinion that the Tribunal committed no error in coming to the conclusion that the case was not covered under section 194C of the Act. It may be that the transportation component of gas was paid separately by the assessee to GAIL. Here also the transportation charges did not depend on the consumption of quantity of gas but was of fixed monthly charges to be borne by the assessee as part of the agreement between the parties. The ownership of the gas vested in GAIL till it was transported and delivered to the assessee's premises at the outlet of the gas metering station. The pipeline was laid down by GAIL and was permitted to be utilized for further onward transportation of gas to other consumers. 21. Combined effect of the above observations and conclusions would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance of such a contract. There was a clear understanding of the parties that the ownership of gas would pass on to the buyer at the delivery point which clearly shows that transport of gas by the seller was a step towards execution of contract for sale of gas and there was no contract for carriage of goods. The Court added that Transportation of gas was only in furtherance of contract for sale of gas. The Hon'ble High Court then decided that in such a case the supply of gas is under a 'contract for sale' and not under a 'works contract' as envisaged under section 194C of the Act and hence in such a case TDS provisions are not applicable. 3. The matter has been examined by the Board. The main stakeholders in this Industry are the - Owners/Sellers of the gas (which could be a Gas Distribution Company); Transporters of gas (which could be the Owners/Sellers of the gas or a third party/parties) and the purchasers/ end-users of the gas. The Owner/Seller of the gas may transfer the ownership of the gas to the purchaser either at the point of delivery at the premises of the purchaser or at any intermediate point. 4. It is clarified that in case the Owner/Seller of the gas sells as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bedded in the cost of gas and it makes no difference whether it may be shown in the consolidated sale bill or the invoices for transportation charges was raised separately. Undisputedly, invoices for transportation charges were raised separately in the instant case but in the light of judgment of Hon'ble Gujarat High Court and Circular of CBDT, it would not make much difference as it was raised by the seller of the gas and transportation charges are embedded in the cost of gas, though claimed separately. Through, this circular it has been made very clear by the Board that in case the owner/seller of the gas sells/transports the gas to the purchaser till the point of delivery, where the ownership of gas is transferred, the manner of raising the sale bill (whether the transportation charges are embedded in the cost of gas or shown separately) does not alter the basic nature of such contract which remains essentially a contract for sale and not a works contract as envisaged in section 194C of the Act. Through this circular it has also been made clear that wherever the gas is transported by a third agency and not by the seller, the transportation charges claimed by the third agency sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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