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TMI Blog2016 (5) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... AI Ltd. has clarified vide its circular no. NHAI/F&A/TDS, dt. 18.03.2005 and office order F.No. NHAI/F&A/TDS/Vol.VI/2009-10, dt. 27.10.2010, that they are in agreement with the view of the department that tax at source has to be collected from the toll collected by NHAI Ltd. from the licensees or lessees." 2. A single issue in all the three years is raked up by the Revenue Department is about the non collection of TCS from Toll Plaza. An order u/s 206C(1C) read with section 206C(6) and (7) was passed dated 12-10-2010. The assessee is an authority for looking after the construction of national highway. According to the AO the assessee had not collected the tax from the person whom lease or license had been allocated. A spot verification was conducted and the Officers of the Revenue Department visited the place. It was found that the contractor or the concessionaire, namely, M/s Oriental Pathways (Nagpur) P. Ltd. was granted right to toll plaza situated at Karanja Ghadghe) on National Highways No. 6 viz. Nagpur-Amravati Highway. According to the Revenue Department the toll was collected since April, 2008. The allegation is that the TCS was not collected from the said concessionaire. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the sec tion 206(1C) of the Income Tax Act, 1961. So you have defaulted u/s 206C(1C) read with section 201(1) & 201(1A) of the Income Tax Act, 1961 by not collection the tax at source due on this account. You are also requested to explain as why the TDS has not been made on the payments made on a/c of Shifting Charges to Maharashtra State Electricity Distribution Company Ltd." 3. In compliance the assessee has furnished the following reply: " In the case of BOT project, concessionaire construct, develop and maintain the project during the concession period. To recover the cost concessionaire charges toll fee as per the toll rates approved by the Govt. Thus it appears that the provision of sec. 206C(1C) is not applicable. However TCS will be collected on the amount of revenue share paid to NHAI by the concessionaire under sec. 206C(1C) of Income Tax Act 1961." 3.1 The AO has concluded that the concessionaire was entitled to collect the fees from the user of the highway. The right of toll collection has been transferred to M/s Oriental Pathways (Nagpur) Pvt. Ltd. There was a BOT agreement and that agreement has also made a provision for right of collection of toll. As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded that the first appellate authority has wrongly granted relief, hence the view taken deserves to be reversed. 6. Before concluding his arguments learned D.R. Mr. Narendra Kane has drawn our attention on a petition filed before the CIT(Appeals)-II, Nagpur and for ready reference relevant portion is extracted below : " In this case it was found by A.O. during the course of Spot verification conducted on 25.08.2010 that tax at source not collected by the Project Director, NHAI, Amravati as prescribed under section 206(1C) and 206C(7) of the Income-tax Act, 1961 during the F.Y. 2008- 09, 2009-10 and 2010-11. The A.O. was passed order u/s 206C(3) r.w.s. 206(1C) & 206C(7) of the Income-tax Act, 1961 and raised the demand for F.Y. 200809 at Rs. 48,85,693/-, for F.Y. 2009-10 at Rs. 67,04,634/- and for F.Y. 2010-11 at Rs. 33,49,297/-. Aggrieved the above mentioned order the Project Director NHAI, Amravati (the Collector) was filed appeals for the above A.Y.'s. During the proceedings before your honour the concerned collector has canvassed the argument that NHAI is entitled for concession fee of only Rs. 1/- per year as per clause of Page No. 34 of agreement and accordingly, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a toll plaza but for the development of the highway. The concession agreement was made according to which the concessionaire was granted the exclusive right, licence and authority to construct, operate and maintain the project highway. After the period is specified in the said agreement there is a clause for transfer of the project to NHAI upon the termination of the term of the agreement. The concessionaire is authorised to collect fees from the vehicles using the project highway. A concession agreement was executed between NHAI and M/s Oriental Pathways (Nagpur ) Pvt. Ltd. on 10th of March, 2006. As per clause (7) of Chapter 2 of the agreement, fees payable by concessionaire to NHAI was Re.1/- per year during the term of the agreement. Learned A.R. has, therefore, emphasised that during the term of the agreement NHAI was not entitled for any other income. The fees collected from the vehicles is income of the concessionaire. It was appropriated to compensate him for the cost, expenses and charges incurred in connection with the operation and maintenance of project highways. He has clarified that as per the agreement an escrow account was opened with a Nationalised Bank in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escrow account in which the NHAI is the signatory, therefore, TCS was to be collected from M/s OPPL. 9. The argument of the assessee before the learned CIT(Appeals) was that, firstly the provisions of TCS were not applicable. On this issue learned CIT(Appeals) has held that the provisions of section 206C(1C) were applicable on the assessee. Against this verdict of learned CIT(Appeals) the respondentassessee (NHAI) is not in appeal. Rather it is worth to mention that the assessee had accepted that in case of BOT project a concessionaire construct, develop and maintain a project during a specified period. To recover the cost, concessionaire charges toll fees as per the toll rates approved by the Government. The project cost and the profitability was claimed to be out of the provisions of section 206C(1C) of I.T. Act. However, as per assessee's own submissions TCS was required to be collected on the amount of share of revenue paid to NHAI by the concessionaire. Hence learned CIT(Appeals) has opined that TCS was to be collected on the amount payable by the concessionaire. At present the respondent-assessee has not filed any appeal or cross objection in respect of this part of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In addition, all Fees collected by NHAI in exercise of its rights under this Agreement during the Concession Period and all disbursements or payments by NHAI pursuant hereto shall also, subject to the rights of deductions and appropriations there from of NHAI under this agreement, be deposited by NHAI in the Escrow Account. 25.2 Disbursement from Escrow Account 25.2.1 The Concessionaire shall give, at the time of the opening of the Escrow Account, irrevocable instructions by way of an Escrow Agreement substantially in form set forth in Schedule 'Q' (the "Escrow Account") to the Escrow Bank instructing, inter alia, that the deposits into the Escrow Account shall subject to Clause 25.2.3, be appropriated in the following order every month and if not due in a month then appropriated proportionately in such month and retained in the Escrow Account and paid out there from in the month when due unless otherwise expressly provided in the instruction letter : (a) All taxes due and payable by the Concessionaire; (b) All expenses in connection with and relevant to the Construction of Project Highway by way of payment to the EPC Contractor and such other persons as may be specified i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urth is expenses on repair. Fifth is the disbursement of concession fees and any negative grant due to NHAI. The next is loan i.e. debt service payment. Our attention has also been drawn that it is worth to point out that the balance was to be appropriated in accordance with the instructions of the concessionaire, therefore, the escrow account was not to be utilised under the instructions of NHAI. 11. In the light of the above clauses of the agreement we have examined the purpose for which the provisions of section 206C were introduced in the statute. This provision was inserted in the Finance Act which was intended for levy and collection of presumptive tax in the case of trading in certain goods. The basic aim was to collect the tax at source on the sale of goods. By the insertion of this section the Revenue Department was enabled to collect the dues from the person carrying on particular trade. A measure was so enacted to check evasion of revenue. Whenever there is a trade the result is an income which is to be brought to tax so as to facilitate the collection of tax on that income which is bound to arise or accrue at the very inception itself when the sales are made. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation when the concessionaire has retained the toll fees collected and the said concessionaire was under obligation to make the payment of Re.1/- annually to NHAI then on this very very minimal as well as insignificant amount the provisions of section 206C(1C) cannot be applied because it is not practicable. As far as the doubts raised by the Revenue Department that the deposits made in the escrow account would have been used by NHAI to remit to the "consolidated fund of India", this fact can easily be verified from the said escrow account. If no amount of toll fees is recovered by NHAI to be remitted to the consolidated fund of India or otherwise then naturally the impugned deposits of toll fees by OPPL is out of the ambits of the provisions of section 206C(1C) of I.T. Act. Otherwise on the payment of Re.1/- we have already held that it is not practicable to invoke the provisions of section 206C(1C). Subject to the above observations, the ground raised by the Revenue Department do not survive in the eyes of law. For all the years the grounds are dismissed. 13. In the result, the appeals filed by the Revenue are dismissed. Order pronounced in the Open Court on this 31st day of Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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