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TMI Blog2015 (3) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... or 194C of the Act. In the light of these facts, we are of the considered opinion that 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. Accordingly, we set aside the order of CIT(A) and restore the matter to the file of the Assessing Officer with the direction to reexamine the issue afresh in the terms indicated above. If it is proved that the assessee has deducted the TDS on the transmission charges paid to GAIL for transmission of gas purchased from other agencies, no disallowance can be made, otherwise the Assessing Officer is required to act in accordance with law. - Decided in favour of revenue for statistical purposes. Validity of rectification u/s 154 - Assessee in default on non-deduction of TDS on the payment of transmission charges - AO passed an order under section 154 and substituted section 194C by section 194I having noted that by typographical mistake in the order, section 194C was mentioned in plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO(TDS) treating transportation charges as rent, while over emphasizing on the applicability of section 194C, which was not the main issue raised by the Assessing Officer. 4. That the order of the Ld. CIT (Appeal), Bareilly being erroneous in law and on facts be vacated and order of the Assessing Officer be restored. 3. These appeals are filed late by 14 days and the Revenue has moved applications for condonation of delay in filing of the appeal stating therein that the delay was caused on account of non-receipt of scrutiny reports forwarded by the office of the Assessing Officer to the ld. Commissioner of Income-tax. Therefore, the delay in filing of appeal was on account of bona-fide reasons and hence the delay in filing of the appeals may be condoned. Finding force in the contentions of the Revenue, we condone the delay in filing of the appeals and admit the appeals for hearing. 4. During the course of hearing, our attention was invited to the fact that the assessee s appeals for the impugned assessment years (2007-08 to 2009-10) against the same order of the ld. CIT(A), in which the issue with regard to deduction of TDS was raised was disposed of by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n charges, following the Board Circular dated 17.10.2012. He accordingly partly allowed the appeal of the assessee, as on account of reduced rate of tax, deduction of tax was reduced. Against the order of the ld. CIT(A), assessee preferred an appeal before the Tribunal contending therein that transmission charges are embedded in the cost of gas though transportation charges or transmission charges are claimed separately along with cost of gas in the sale bill. Therefore, the nature of such contract remained to be contract for sale and not a work contract and the assessee was not required to deduct TDS even under section 194C of the Act. The Tribunal has examined this aspect in the light of various judicial pronouncements as well as C.B.D.T. Circular and the Tribunal has noted that the assessee has not only purchased gas from GAIL but also from other sellers i.e. M/s Reliance Industries Limited and the Tribunal was of the view that whenever gas is transported by the seller to the point of delivery, transportation/ transmission charges of gas would be embedded in the cost of gas, though transportation/transmission charges are claimed separately or along with cost of gas in the sale b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded for the transmission of the gas are not exclusively for the use of the assessee, therefore, the payment on transmission charges cannot be equated with the rent for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dful of the decision of the apex court in case of Associated Cement Co. Ltd. v. CIT reported in [1993] 201 ITR 435 (SC), wherein it was observed that section 194C(1) does not require 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the agreement is for purchase and sale of gas. Transportation of gas is only a part of the entire sale transaction. Laying down the pipeline and supplying gas through such pipeline were the steps taken in furtherance 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/Sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we read the judgment of Hon'ble Gujarat High Court along with the Circular issued by the CBDT, we find that it has been made clear by the Revenue that wherever transportation charges are claimed by the seller of gas, the transportation charges would be embedded 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 contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GAIL and also the amount of transmission charges paid by the assessee to GAIL for transportation of gas purchased from other agencies. Accordingly, we set aside the order of CIT(A) and restore the matter to the file of the Assessing Officer with the direction to reexamine the issue afresh in the terms indicated above. If it is proved that the assessee has deducted the TDS on the transmission charges paid to GAIL for transmission of gas purchased from other agencies, no disallowance can be made, otherwise the Assessing Officer is required to act in accordance with law. Needless to mention here, while adjudicating the issue, the Assessing Officer shall afford adequate opportunity of being heard to the assessee in the interest of justice. 8. Since the impugned issue involved in these appeals has already been adjudicated by us in the assessee s appeals, we find no justification to take any contrary view in the appeals of the Revenue in the absence of any incriminating material in support of the Revenue s contentions. 9. Our attention was also invited to the order of the Assessing Officer, but the order passed by the Assessing Officer has not been placed on record. Therefore, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 154 of the Act and substituted section 194C by section 194I of the Act, having noted that by typographical mistake in the order, section 194C of the Act was mentioned in place of section 194I of the Act. He accordingly held the assessee to be in default on account of non-deduction of TDS under section 194I of the Act and also charged interest under section 201(1A) of the Act. 12. An appeal was filed before the ld. CIT(A) and the ld. CIT(A) has disposed of the appeal in the light of the order of the Tribunal passed for assessment years 2007-08 to 2009-10 in the assessee s own case and the ld. CIT(A) has held that in the light of the decision of the Tribunal, this rectification application become infructuous and accordingly held that the order passed under section 154 of the Act and instant appeal are infructuous. The relevant observations of the ld. CIT(A) in this regard are extracted hereunder for the sake of reference:- I have gone through the facts of the case carefully. I have also gone through the Emissions of the AR and the order dated 25.6.2013 of the Hon'ble ITAT Lucknow. Bench A for the AYs 07-08, 08-09 and 09-10 in the assessee's own case. It is a settled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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