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TMI Blog2017 (9) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... t and accordingly could be safely concluded that it is only an agent of the Government. The grant paid under the JNNURM scheme by the State Government in the instant case to GEPIL, disbursed through the assessee in a self financing project under the Concessionaire Agreement, and the primary requirement of section 194C or 194J of the Act squarely fails in the instant case, therefore the assessee is not the person responsible for payment within the meaning of provisions of Chapter XVIIB of the Act. Hence we hold that the assessee is not obligated to deduct tax at source on the subject mentioned payments and hence consequentially the assessee could not be invited with liability u/s 201 and 201(1A) of the Act in respect of payments made to GEPIL. - I.T.A Nos. 279 & 280/Kol/2016 - - - Dated:- 8-9-2017 - Shri Aby. T. Varkey, JM And Shri M.Balaganesh, AM For the Appellant Shri Arnab Chakraborty, Advocate Shri Abhijit Biswas, Advocate For the Respondent : Shri Saurabh Kumar, Addl. CIT DR ORDER Per M.Balaganesh, AM 1. These appeals are directed against the order of the Learned Commissioner of Income Tax (Appeals) Durgapur [in short the ld CITA] in Appeal No. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rban Local Bodies (ULB) namely, Durgapur Municipal Corporation [in short DMC] , Asansol Municipal Corporation [ in short AMC] , Raniganj Municipality [in short RM] , Jamuria Municipality [in short JM] and Kulti Municipality [in short KM] , had entered into a concession agreement with GEPIL following a bidding procedure for development of Municipal Solid Waste Processing and Engineered Sanitary Landfill facilities under their jurisdiction and provided initial contribution of ₹ 2,60,00,000/- as initial contributory support during the concerned financial year. The assessee (ADDA) explained that it was merely associated as a Nodal Agency which only released the contribution of ₹ 9,60,00,000/- to GEPIL out of the total cost involved for implementation of Municipal Solid Waste Management Project under the designated areas of 5 ULBs on a Build, Own, Operate Transfer (BOOT) basis and the same was in no way related to any payment for any professional service. The nodal agency (ie the assessee) would be responsible for supervision and liaison during construction period as well as during Operation Maintenance (O M) period which include releasing approvals, handing over sites, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses are there in the agreement to enable M/s GEPIL to arrange for the finance, if necessary, as the project is the self financing one. Also GEPIL is not a body whose income is exempted under any provisions of Income Tax Act, 1961. So all the arguments as put forward by the AR of the ADDA regarding nondeduction of tax at source over the payment of ₹ 2.60 crores, during the fourth quarter of the F.Y. 2009-10 does not hold any ground here. Hence, it can be safely concluded that tax was to be deducted u/s 194J of the Act on the total payment of ₹ 2.60 crore in the fourth quarter of F.Y. 2009-10. The ld AO observed that non-deduction of tax at source on the same would make the assessee as an assessee in default in terms of section 201(1) of the Act and would be invited with consequential interest u/s 201(1A) of the Act. 3. The next issue to be decided in these appeals is as to whether the assessee could be treated as an assessee in default u/s 201 / 201(1A) of the Act in respect of payments made towards lift installation charges , in the facts and circumstances of the case. 3.1. The ld AO observed that in the financial years 2009-10 and 2010- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anizations. The assessee contended that the payment made to GEPIL was out of Central Government grant on behalf of GEPIL which was routed through assessee as nodal agency and assessee did not enter into any agreement and it was only monitoring the utilization of grant. The ld CITA on the contrary observed that : (1) Operational expenses All the required personnel shall have to be deployed by the private developer at their own cost ; (2) Further as per Para 14.2.4. of the Bid Document, the mobilization of finance for the execution of the project shall be the responsibility of the private partner within a specified time frame. The public partner is no way shall be responsible for funding the capital expenditure, over run in construction cost ; (3) Moreover, as the company can create charges for getting finance from banks / FIs and that too with the necessary No Objection Certificate from assessee and the ULBs doesn t attribute any ownership on GEPIL ; (4) That assessee as a nodal agency had awarded a contract under the nomenclature Concession Agreement to GEPIL for sustainable and better environment through Solid Waste Managemetn in the area under its jurisdiction where the noda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 33,307/-. There is no discussion or finding on the issue in the said order. C. For that the CIT(Appeals) has erred in holding that the Assessing Officer had rightly disallowed the amounts involved as per the provisions of Section 40(a)(ia) of the Act. D. For that the CIT(Appeals) has erred in confirming the increase in interest liability by ₹ 77,593/- by the Assessing Officer and that too without any discussion or finding. In the facts and circumstances of the instant case there being no liability to deduct tax under Section 194J of the Act by the appellant, there can be no increased demand of interest. I.T.A. No. 280/Kol/2016 for assessment year 2011-12 A. For that the CIT(Appeals) has erred in confirming the finding of the Assessing Officer that in respect of the amount paid by the appellant to Gujrat Environment Protection and Infrastructure Limited (in short GEPIL) under the Concession Agreement dated December 23,2008, as and by way of disbursement of a part of the grant provided by the Government of West Bengal, Urban Development Department, Kolkata under the Jawaharlal Nehru National Urban Renewal Mission (in short JNNURM), tax was deductible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grants from the Government of India and budgetary support from the State Government and contribution from ULBs as per ratio suggested under JNNURM (i.e 50:20:30). For disbursement of such grants, the Government of West Bengal appointed Kolkata Metropolitan Development Authority (KMDA) as the nodal agency for the state for JNNURM. Funds were made available under JNNURM schemes to KMDA for distribution and release thereof to the concerned projects. KMDA would make available the funds to the assessee who in turn would disburse the same to the Concessionaire i.e GEPIL. Now the short question that arises for our consideration to address the dispute before us is whether the amounts disbursed by the assessee to GEPIL in both the years being grants received through KMDA from the State Government under JNNURM for the subject project would come under the purview of provisions relating to deduction of tax at source under the Act. We find that the ld AR drew our attention to the relevant provisions of The West Bengal Town and Country (Planning and Development) Act, 1979 as under:- Section 11 Constitution of Planning Authority and Development Authority (1) As soon as may be , aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes. This is enclosed in page 4 of the second paper book. All these documents clearly prove that the assessee is acting only at the behest of the State Government and accordingly could be safely concluded that it is only an agent of the Government. Even the financial statements of the assessee reflect that the grants provided by Government of West Bengal Urban Development Department under Jawaharlal Nehru National Urban Renewal Mission ( in short JNNURM) scheme through the Kolkata Metropolitan Development Authority, that these amounts are specifically retained in earmarked accounts and eventually reduced as and when they are disbursed for its intended purposes. Hence it could be safely concluded that the assessee is only a pass through agency of these funds and had merely acted as a custodian of funds belonging to the Government. 7.2. Now let us examine the applicability of provisions of section 194C / 194J of the Act with regard to the aforesaid payments. The grant paid under the JNNURM scheme by the State Government in the instant case to GEPIL, disbursed through the assessee in a self financing project under the Concessionaire Agreement, is not a payment which the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e resolution for providing grant-in-aid to GMDC and GMRDS for ₹ 4,78,76,000/- and ₹ 2,15,00,000/- respectively and these grant-in-aid were routed to the above said corporations through the assessee. Therefore, these are not payments made for carrying out any work; however, instead they are grantin- aid given to the corporation through the assessee by the state government. These facts are evident from the paper books filed by the assessee viz page no. 18 to 29. Therefore, the provisions of section 194C of the Act would not be attracted in the assessee s case and consequentially the provisions of section 201(1) and 201(1A) of the Act will also not be applicable. Therefore, the ground raised by the assessee is allowed in its favour. 7.5. We find that the assessee had acted only as a custodian for disbursement of funds for earmarked purposes as a nodal agency for the smooth implementation of the Municipal Solid Waste Management in the designated areas. Though the funds continue to remain with the assessee, the ownership or utilization does not vest in it. Hence we hold that when these funds are disbursed to GEPIL, there cannot be any obligation of deduction of tax at s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the interest of justice and fairplay, we deem it fit and appropriate, to remand this issue to the file of the ld AO, to verify the earlier TDS returns and if the contention of the assessee is found to be correct, then the appropriate relief should be granted to the assessee thereon. Accordingly, the ground raised in this regard by the assessee is allowed for statistical purposes. 11. With regard to the payment made towards lift installation charges, the assessee had deducted tax at source u/s 194C of the Act, but the ld AO held that the same would have to be deducted at higher rate u/s 194J of the Act. We find that this issue is now squarely covered by the Constitution Bench of the Hon ble Supreme Court in the case of Kone Elevator India (P) Ltd vs State of Tamil Nadu reported in (2014) 7 SCC 1 dated 6.5.2014. The relevant Head Notes of the said judgemetn are reproduced hereunder:- Sales tax and VAT Works Contract Transaction for supply and installation of lift in a building Nature of Works Contract or contract for sale of goods Determination of Composite Contract for supply and installation of lifts , held (per majority) , has to be treated as a works contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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