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TMI Blog2016 (8) TMI 1548X X X X Extracts X X X X X X X X Extracts X X X X ..... l in nature. CIT(A) has not adjudicated this ground mainly on exemption of entity. Hence, the ground raised by the revenue is dismissed. Whether M/s. APIIC is a corporation established by the State Government of Andhra Pradesh and not by the Central Government so as to enjoy the exemption available u/s. 196(iii)? - There is no dispute that APIIC established under State Act. In the present case, CIT(A) has allowed the exemption by treating the APIIC as a concern u/s 194A(iii)(b) of the Act. On careful observation, the concern which is exempt u/s 194A(iii)(b) should be a financial corporation established by or under central, state or provincial Act. On the record submitted before us does not clarify that APIIC is a financial corporation. Since we are not sure about the type of financial corporation, we remit this issue back to the file of the AO to determine the status. In case it is found that it is a financial corporation, the exemption may be granted. Whether Provision for Expenses is made on adhoc basis, no TDS is deductible on such provision, which is in contravention to the provisions of section 194(2) ? - CIT(A) has allowed as no TDS is deductible on such provision, which is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 29,72,42,976/- u/s 201(1) of the Act. Since the assessee has failed to deduct the tax of ₹ 29,72,42,976/- the AO computed the corresponding interest u/s 201(1A) at ₹ 17,83,45,620/-. 4. Aggrieved, the assessee preferred an appeal before the CIT(A). 5. As regards Interest Payment of ₹ 11,55,83,000/-, paid to APIIC, the CIT(A) observed that no TDS is deductible as per the provisions of section 194A(3)(B) as any interest paid to any financial corporation established under Central, State or Provincial Act are exempt from TDS. He, therefore, held that since APIIC is a state govt. undertaking, no TDS is leviable on payment to APIIC. 5.1 As regards Lease Premium & Rental Payments of ₹ 16.04 crores (15.50 crores of premium + 54.40 lakhs of rent) was paid to APIIC, before the CIT(A), the assessee made the following submissions: (a) That with the motive of giving boost to industrial development in Vizag region, the government of A.P. had created Special Purpose Vehicle to provide water supply to the industries in Visakhapatnam region. In this process, the Government of A.P., had to provide 1000 plus acres of land to the appellant. This land was to be acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g capital asset are not liable to TDS. Moreover, since the income of the payee (i.e. APIIC) is exempt u/s.11 of I.T. Act, 1961 as held by the Hon'ble ITAT vide order in ITA No. 1471/Hyd/2010 dated 22.11.2011, there is no need to deduct the TDS on payments made to such exempt entity. Accordingly, this issue is allowed in favour of the appellant. 5.3 As regards the contract payments of ₹ 8.37 crores ( a) Operation & maintenance charges - ₹ 2.97 cr., b) Power Charges - ₹ 2.68 cr. and c) Water Abstraction charges - ₹ 2.72 cr.), the CIT(A) observed that regarding the power charges and water abstraction charges, AO reported that since the payments were made to Government of AP, they are exempt from TDS provisions. Hence, these issues were allowed by CIT(A) in favour of assessee. 5.4 Regarding the Contract payments of ₹ 9,90,000/- it was submitted by the appellant that, this amount represents the provision for expenses which were estimated on adhoc basis as payable to L&T. It was further submitted that no invoice was raised by L&T and the provision was reversed back in F.Y. 2009-10. Though the Assessing Officer in his remand report held that TDS is liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption from the deductee, it has to apply to the DIT (Exemption) with the request in proper form, only upon approval from DIT (Exemption) in writing, the exemption is allowed not otherwise. In our considered view, the grounds raised by the revenue are correct. In the present case, the CIT(A) has made the passing comment that APIIC is a exempt entity, but, the CIT(A) has allowed the ground of assessee treating the transaction as capital in nature. CIT(A) has not adjudicated this ground mainly on exemption of entity. Hence, the ground raised by the revenue is dismissed. 9.2 With regard to ground No. 3, APIIC is a corporation established by state govt. of AP and not by Central Govt., to enjoy exemption u/s 196(iii). There is no dispute that APIIC established under State Act. In the present case, CIT(A) has allowed the exemption by treating the APIIC as a concern u/s 194A(iii)(b) of the Act. On careful observation, the concern which is exempt u/s 194A(iii)(b) should be a financial corporation established by or under central, state or provincial Act. On the record submitted before us does not clarify that APIIC is a financial corporation. Since we are not sure about the type of financi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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