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TMI Blog2014 (1) TMI 1126X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 relates to raising of demand u/s. 201(1) and 201(1A) r.w.s. 194-1 on payment made to Proveg Communication Pvt Ltd. AO has dealt with the issue involved in this ground as under:- "the assessee company made payment of M/s Proveg Communication Pvt. Ltd. The A.O. had stated that the assessee Co. had submitted a letter dtd. 1/5/2008 regarding hiring the hoardings at 17 major locations in Gujarat and fixed the monthly rate of Rs. 34,24,2607/-. The A.O. observed that the assessee Co. had made payment of Rs. 6,85,43,740/- to the aforesaid contractor during the year under consideration. However, the assessee had deducted tax @ 2% u/s 194C as against 10% u/s 1941 of the Act. As the tax was deducted @ 2% only on the above payment, there was a short deduction of tax by 8% + SC+EC. The assessee was show-caused and replied as under... After considering assessee's reply AO held that assessee was liable for 10% TDS as against 2% deducted." 4. Assessee's submission before Ld. CIT(A) was as under:- "The appellant has placed an order vide a letter No. GSPC / CC / 2008 dated 01-05-2008 with M/s. Praveg Communication Pvt. Ltd., 102 Shanti Arcade, 132 Ring R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay PCPL for the charges of the hoardings as a part of the advertisement contract. However this entire procedure is a part of the wide understanding of rendering advertisement related services. We draw your kind attention to the Circular No. 715 dated 8th August 1995 of CBDT, wherein it has been categorically mentioned that when contract for putting up a hoarding is in the nature of advertising contract, the provisions of the Section 194C of the Act will govern the tax deduction issue. You are aware that CBDT Circulars are binding to the tax authorities and hence the ratio pronounced by the CBDT circular has to be followed by you. Hence, GSPC has rightful deducted tax U/s 194C of the Act. In fact the rote of tax for "Advertisers" is 1% plus applicable surcharge and cess however GSPC has deducted tax at 2% plus applicable surcharge and cess. Under the circumstances, GSPC is not liable to deduct tax at the rate of 10% plus applicable surcharge and cess as per the provisions of Section 194-I of the Act. Without prejudice to what is stated above, even if it is presumed that GSPC has paid rental charges for hiring of hoardings to PCPL, GSPC is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dencing through the letter dated 21-01-2010 for the above refund of Rs 20,63, 973/- for the A.Y. 2009- 10. You will appreciate that the details submitted are in line with the above referred two judgments. Hence there is no liability for TDS in view of the same. 2.7 In view of the above, the appellant humbly submits that the contentions of the learned AO is bad in law and hence the same should be deleted." 5. After taking into consideration these submissions of the assessee Ld. CIT(A) allowed the appeal of the assessee by observing as under: "3.3 I have considered the order of the AO, fcts of the case and appellant's submission. Appellant paid to M/s Proveg Communication Ltd for the purpose of Brand Building and taking hoardings for advertisement included sever other services apart form hiring hoardings. Appellant relined upon ITAT, Mumbai decision in the case of ITO. Vs. Roshan Publicity Pvt. Ltd. Reported in 4 SOT 105. In the said decision it was held that in acquiring the right of displaying advertisement at hoarding site and making payment to hoarding site owners does not involve lease, sub-lease or tenancy and therefore, sec. 194-I is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2% only i.e. u/s 194C on gas transportation charges paid to Gujarat State Petronet Ltd. Whereas this payment is of rental nature and as such you were required to deduct tax @ 10%. The total amount paid for transportation of gas charges is approximately Rs. 12 crores. Short deduction @ 8% comes to Rs. 96 lacs + SC + EC as applicable." 4.3 The appellant has submitted reply on 04-03-2009 which is reproduced as under for your reference. You hove observed that GSPC has deducted tax at the rate of 2% U/s 194C for the payment mode for "Gas Transportation Charges" of Rs. 12 Crores to Gujarat State Petronet Limited (GSPL) instead of TDS @ 10% U/s. 194-I as the same is of rental nature. You have further observed that payment is also made to GSPL by GSPC towards "Pipeline Payment Charges / Connectivity Charges" after deducing tax at the rate 2% U/s 194C instead of deducing tax at the rate of 10% U/s 194-I. We draw our kind attention to starting paragraph of your show cause notice which is reproduced below. "A survey U/s. 133A (1) of the IT Act was carried out at your office premises at the address captioned above on 17th and 18th March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of 'Transportation of Goods". Payments are made to GSFL for transportation of Gas. The payment is for Gas Transportation Charges. You have wrongly classified it as "Pipeline Payment Charges / Connectivity Charges". Gas Transportation Charges are paid only and only to ensure that the Gas reaches to the consumer and it is not for hiring of pipelines. Hence, viewed from any angle there is no question of hire and therefore the provisions of Section 194J are not applicable. GSPC is not in the business of hiring of pipelines. What is contemplated is "Gas transportation charges" which is also the heading corrected reflected in its accounts and thing being in the nature of works contract, the provisions of Section 194C are attracted. You will therefore appreciate that question of payment of tax for shortfall of Ps. 96 lacs plus surcharge and cess as mentioned by you does not arise. 4.4 The learned A.O. has grossly erred in ignoring the "ruling of Bombay High Court in the case of Indian National Ship Owners Association (lNSA) stating as under. "The High Court also opined that the scope of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding judgement of Hon'ble Gujarat High Court in the case CIT Vs. Rishikesh Apartments Co -op. Housing Society Limited (2002) 253 ITR 310. If the payee has paid the advance tax, if payable then there is no revenue loss to the exchequer and in that event no interest can be levied U/s 201[IA] of the Act. 4.9 The learned A.O. has grossly erred in not considering the following two judgment quoted by the appellant through letter dated 04-01-2010. 1. Children's Education Society Vs. DCIT (TDS) (2009) 319 ITR 409, Karnataka High Court 2. Hindustan Cocacola Beverages Pvt Ltd. Vs. CIT (2007) 293 ITR 226 It has been held in the aforesaid two judgments that once tax has been already paid by the deductee the same together with interest and penalty cannot be recovered from the deductor even though deductor had failed to deduct tax at source. The appellant has also submitted that tax paid by GSPL amounts to Rs. 54,65,16,254/- against tax payable of Rs. 54,65,16,254/-. The appellant has also submitted documentary evidencing through the letter dated 21-01-2010. The det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne is covered by this. Having considered the facts of the case, the gas transmission agreement, mode and basis for payment use of pipeline for transmitting gas for many consumers, operation and maintenance of pipeline by GSPL and no possession or exclusive right to use the pipeline at any given point of time, I am of the clear view that the payment for gas transmission by the appellant will not attract the provisions of Sec. 1941. In view of this, the appellant has not committed default u/s 201(1) and accordingly tax U/S 201(1] and interest u/s 201(1A) is not payable by the appellant." 11. Since Ld. CIT(A)'s above finding is in conformity with the finding of the Tribunal in the case of ACIT vs. Gujarat State Petronet Ltd in ITA No. 3317/Ahd/2010 & CO No. 17/Ahd/2011 A.Y. 2009-10 dated 08-03-2013 on identical issue wherein following was held. "5. We have considered the rival contentions and perused the material on record. The first payment namely vehicle hiring charges has not been prescribed u/s. 1941 Vehicles and Chauffers supplied by the contractor and was under the complete control of the contractor. Thus, we confirm the order of the CIT(A) on this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same together with interest and penalty cannot be recovered from the deductor even though deductor had failed to deduct tax at source in view of decision of Children's Education Society Vs. DCIT (TDS) (2009) 319 ITR 409 Karnataka High Court and decision of Hindustan Cocacola Beverages Pvt Ltd. Vs CIT (2007) 293 ITR 226 (SC). In view of the above, the appellant humbly submits that the contention of the learned CIT(A) is bad in law and hence the same should be deleted ITEM NO. II: PAYMENT TO 3RD I EVENT MANAGEMENT - Rs. 28,16,500/- 1.2 The learned CIT(A) has erred in law and on facts of the case by holding that appellant has made payment of Rs 28,16.500/- for arrangement of corporate cricket tournament which are squarely covered u/s. 194J and accordingly appellant is required to deduct tax at source. He has failed to appreciate that appellant has made payment to 3rd I Event management for managing and organizing the "GSPC Invitation 20-20 Corporate Cricket Tournament 2008" and therefore appellant is required to deduct tax as per provisions of section 194C. The learned CIT(A) has also erred in law and on facts in confirming the action of the learned As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to and from offshore. 1.2 The learned A.O. has found the following; in his show cause notice dated 27-03-2009 which is reproduced as under for your reference. "It is also observed that tax @ 2% has been deducted while making payment to Global Helicops Ltd. as the Global Helicorp Co. has provided you a certificate dated 9th July, 2008 u/s 197 read with 194 - 1 authorizing the payer to deduct tax @ 2% only, however as the certificate was issued on 09/07/2008, GSPC was required to deduct tax @ 10% plus SC + EC on payment of Rs. 4.5 crores made before issue of certificate. As tax was deducted @ 2% only on the above payment, there is short deduction of tax by 8% + SC + EC. You Ore therefore asked to show cause why tax was not deducted@ 10 % on payments to Global Helicorp Com Made before 09/07 2008." 1.3 The appellant has submitted reply on 04-05-2009 which is reproduced as under for your reference. "With reference to the above we have to state that GSPC has entered into contract with Global Vectra Helicorp Limited - GVHL previously known as Global Helicorp Private Limited (GHPL) from 25th May 2004 for "Heli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 8th August 1995, wherein it has been clearly stated that provisions of section 194C of the income Tax Act 1961 will be applicable when a plane or bus or other mode of transport is chartered. Under the circumstances, you will appreciate that the term "Other mode of transport" includes "Helicopter". Under the circumstances, GSPC had correctly deducted tax for the period beginning from 1st June 2007 till the date of issue of certificate/s 197 read with Section 194-1 of income Tax Act, 1961 by income tax department. This ratio will also apply to payments made to GVHL prior to 1st June 2007. You are aware that CBDT Circulars are binding to the tax authorities and hence the ratio pronounced by the CBDT circular has to be followed by you. Hence, GSPC was not liable to deduct tax at the rate of 10% under the provisions of Sections 194-1 of the Income Tax Act 1961 for the period beginning from 1st June 2007 till 9lh July 2008. You will appreciate that what is contemplated is Helicopter Services and the main object is "Air Logistic Support" for Crew and Personnel of GSPC. That as per CBDT Circular No. 715 doted 8th August 1995, it amounts to transport which is chartered and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e organizations specified in the sub section can get carried out through a contractor under a contract. It includes obtaining by the specified organizations supply of labour under a contract with a contractor for carrying out its work. 1.6 The learned AQ. has grossly erred in not considering the appellant's contention that as per CBDT Circular No. 681 dated 8th March 1994, clarifying that the scope of activities covered under provisions of section 194 C of the Act as follows; "The provisions of section 194C shall apply to all types of contracts for carrying out any work including transport contracts, service contracts advertisement contracts, broadcasting contracts, telecasting contracts labour contracts, material contracts and work contracts. 1.7 The learned A.O. has grossly erred in ignoring the judgment of Hon'ble Kerala High Court in the matter of CBDT v. Cochin Goods Transport Association wherein the Hon'ble Kerala High Court held as under. "Following the Associated Cement Co. Ltd's case (SC), we hold that, a transport contract simpliciter falls within the ambit of subsection and,(1) of section 194 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 194C whereas AO considered the same as covered by Sec. 1941 considering the same as rent of equipment and the differential tax deducted and interest thereon was raised as liability. Appellant hired the Helicopter service for logistic support for its employees and consultants. As per details submitted by the appellant, the contract with GVHL is for hiring Helicopter on rental basis which is also for associated services. The facts remains that appellant's contract is not for transportation but for hiring of Helicopter services therefore, it falls in the category of equipment rent. Even GVHL has applied for lower deduction u/s 197 r.w.s. 194-1 with regard to the payment received from appellant. In view of these clear facts, the transaction is for hiring of Helicopter and not for transportation. The decisions relied upon by the appellant are therefore, not relevant. In view of this I confirm the action of the ITO. ItS in levying tax and interest u/s 201(1) & 201(1A) on payment to GVHL. 2.3.1 Appellant's related ground in view of apex court's decision in the case of Hindustan Coca-Cola Ltd. is that the recipient GVHL had paid taxes on receipt and filed the return of income, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore this contract between assessee and GVHL falls under section 194C of the Act. This view of ours gets support from the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. Reliance Engineering Associates P. Ltd [2012] 209 taxman 351. In that case, the assessee had engaged the services of contractors for rendering transportation services for goods and passengers by buses, cars, sumos utility vans etc. It had not taken possession of those vehicles from the contractors and the responsibility of operating and maintaining of the vehicles was of the contractor. The assessee made deduction of tax in accordance with provision u/s. 194C. The revenue authorities however held that carriages for the purpose of carrying goods and passengers would be treated to be machineries within the meaning of explanation to section 194I and therefore the assessee was liable to deduct higher amount of tax as per section 194I. On appeal the Tribunal decided in assessee's favour. On revenue's appeal Hon'ble jurisdictional High Court confirmed the order of ITAT by holding as under: - "There was no dispute that a contract was entered into under clause (iv) of Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: - "4.1 The assessee company made payment to 3rd I Event Management. The assessee company issued a work order dtd. 23/05/2008 to 3rd I Event Management Group for managing and organizing the "GSPC Invitation 20-20 Corporate Cricket Tournament 2008" for an amount of Rs. 28, 16,500/-. The work order was placed offer inviting quotations from the interested parties. Further, 3rd I Event Management have also charged service charges @ 12% for the services provided to GSPC. Accordingly, the assessee Co. has made payment to the contractor and deducted the tax at source @ 2% only as against 10 % u/s 194-J of the Act. Since the payment was made to the person who managed the event (i.e. even management), the assessee was required to deduct the tax as per the provisions of Section 194J of the Act. As the tax was deducted @ 2% only on the above payment, there was short deduction of tax by 8% +5C+EC. The assessee was show-caused ... After considering assessee's reply AO raised demand U/s 201(1) and 201(1A). 20. Assessee's submission was as under:- "3.1 The appellant has issued a work order vide letter dated 23- 05-2008 to 3rd I Event Management Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194J of the Act, is applicable only to 1) any payment by way of fees for professional services 2) any payment by way of fees for technical services 3) any payment by way of royalty We will analyze the aforesaid points one by one with reference to the payment made to 3rd I 1) Payment by way of fees for professional services: Professional services mean the services rendered by person carrying on the following professions (a) legal profession; (b) medical profession; (c) architectural profession; (d) profession of accountancy; (e) profession of technical consultancy; (f) profession of inferior decoration; (g) profession of advertising (i.e. actor, director and cameraman providing professional services to an advertising agency) (h) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Without prejudice to what is stated above, the appellant humbly pleads the as per the binding Judgment of Hon'ble Gujarat High Court in the case CIT Vs Rishikesh Apartments Co -op- Housing Society limited (2002) 253 ITR 310, if the payee has paid the advance tax, if payable then there is no revenue loss to the exchequer and in that event no interest can be levied U/s 201(IA) of the Act. The learned A.O. has grossly erred in not considering the following the two judgment quoted by the appellant through letter dated 04-01- 2010. 1. Children's Education Society Vs. DCIT (TDS) (2009) 319 ITP 409 Karnataka High Court 2. Hindustan Cocacola Beverages Pvt. LTd. Vs. CIT (2007) 293 ITR 226 (SC) It has been held in the aforesaid two judgments that once tax has been already paid by the deductee the same together with interest and penalty cannot be recovered from the deductor even though deductor had failed to deduct tax at source. 3.7 In view of the above, the appellant humbly submits that the contention of the learned. A.O. is bad in law and hence the same should be deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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