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TMI Blog2016 (9) TMI 1675X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Kul Bharat, JM For the Revenue : Shri O.P. Bhateja (Addl. CIT). For the Assessee : Shri Vikas Rajvanshi (CA). ORDER PER BENCH : These are three appeals by the revenue directed against the separate orders of ld. CIT (A)-III, Jaipur dated 02.12.2011 pertaining to assessment years 2004-05, 05-06 and 06-07. All these appeals are taken up together and are being disposed off by way of a consolidated order, for the sake of convenience. 2. The common solitary ground, except change in name, raised by the revenue reads as under :- The ld. CIT (A) has erred in law and on facts in holding that the assessee, M/s. National Highway Authority of India (NHAI), was not liable to deduct tax at source, in terms of the provisions of section 194C of the I.T. Act, in respect of the contract money paid by NHAI to the concessionaire (M/s. GVK Jaipur Kishangarh Expressway Pvt. Ltd) under the name of grant , ignoring the fact that the said payment was to be fully applied and utilized towards the construction of the Project Highway and, hence, it was in the nature of contract money payment. 3. Briefly stated the facts are that a TDS verification was carried out on 10.02.2011. During the course of verific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon of Rs. 1,96,23,000/- under section 201(1A). 4. Aggrieved by this order, the revenue is in appeal before the Tribunal. 4.1 The ld.CIT D/R vehemently argued that the ld. CIT (A) was not justified in deleting the addition. He submitted that the assessee has given colour of contractual payment as grant . He submitted that the payment made to the concessionaires is nothing but a contractual payment. Therefore, the assessee was required to deduct tax thereon as per section 194C of the Act. The assessee has grossly failed to do so, therefore, the AO was justified in treating the assessee in default. 4.2. On the contrary, the ld. Counsel for the assessee reiterated the submissions as made in the written submission. The ld. Counsel for the assessee submitted that as per clause XXIII of the agreement with M/s. GVK, the total contributions made by the NHAI of Rs. 211 crores in A.Y. 2004-05, 2005-06 2006-07 towards its shares in respect of the cost of the project. Such contributions have been nomenclature as grant to meet out the capital cost of the project and treated the same as part of the share holders funds or equity support from the above specific intention of the appellant as de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks contract agreement. Accordingly, the AO s findings given in this regard are irrelevant and incorrect. He further submitted that in the works contract agreement, the ownership of the project/assets lies with the principal only and the contractor is not having any sort of rights, be of real ownership or beneficial in nature, in this regard. However, it can be noticed that as per clause XXXVIII of the concession agreement, till the specified time period therein, the BOT concessionaires would have the ownership rights of the project and its assets for all practical and legal purposes. Thus the concessionaires are not only executors of the project, but they also assumed status of the co-owners of the same. The ld. Counsel submitted that in the case of M/s. GVK, the Coordinate Bench of the Tribunal allowed depreciation to the concessionaires on such assets while treating them beneficial ownership in the project as such. He submitted that the AO has erred in not appreciating Escrow Accounting System, as specified in such agreements. By doing so, the AO has given a different meaning or connotation to such phrases than the obvious and literal meaning of such aspects. He submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amily ; (ii) two per cent. where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source (i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice ; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided famil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... association of persons or a body of individuals, if such person, (A) does not fall under any of the preceding sub-clauses ; and (B) is liable to audit of accounts under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor ; (ii) goods carriage shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE ; (iii) contract shall include sub-contract ; (iv) work shall include (a) advertising ; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting ; (c) carriage of goods or passengers by any mode of transport other than by railways ; (d) catering ; (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer. A bare reading of above section, makes it explicit that any person responsible being the contractor for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove unique features of the concession agreements , it is found more like a joint venture in between interested parties to accomplish specific project and making equity participations, by all such parties also. A normal contract agreement does not have such features, therefore, I am agreed with the contention of the ld. AR, that the projects under consideration are not of nature of works-contract, as perceived by the AO, but kind of join venture, as such. Thus the provisions of Sec. 194C wouldn t attract on payment made towards such venture. ii. Nature of contribution of NHAI: As per the Clause XXIII of the agreement with M/s. GVK, the total contributions made by the NHAI of Rs. 211 crores, in A.Y. 2004-05, 2005-06 2006- 07, towards its shares, i.r.o., the cost of the project. Such contributions have been nomenclature as grant to meet out the capital cost of the project and treated the same as part of the share holder funds or equity support. From the above specific intention of the appellant, as declared in the BOT agreements itself, it is quite clear that the above contributions were not a contractual payments to a contractor but amount to capital participation by a members of jo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AI) but also the executors of the project i.e. concessionaires also. Like co-owners of the project, they are also entitled to share the revenue/income, received as toll collection, through the method of Escrow Accounting System. These peculiar features also differentiate the present agreements from the normal works-contract agreement. Accordingly the AO s findings given this regard are found irrelevant and incorrect also. On this ground, also the equity contribution made by the appellant is considered as contractual payment. v. Ownership of the Project :- Normally, it can be seen that in the works-contract agreement, the ownership of the project/assets lies with the principal only and the contractor is not having any sort of rights, be of real ownership or beneficial in nature, in this regard. However, it is found that as per Clause XXXVIII of the concession agreement, till the specified time period therein, the BOT concessionaires would have the ownership rights of the project and its assets for all practical and legal purposes. Thus the concessionaires are not only executors of the project, but they also assumed status of the co-owners of the same. The above perception is also fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatute like Income Tax Act, however, in my considered opinion, the same analogy can be applied even in understanding the meaning and essence of any phrase used in a commercial agreement also. Accordingly it is felt that if the terms like Grant, Equity Participation etc., used in the BOT agreements, for the contribution made by the appellant to the concessionaires, were given their literal and ordinary meaning and context, then obviously such payments could not be considered as a contractual payment and therefore, the same would not fall in the net of Sec. 194C of the Act. Accordingly, it is perceived that the AO was not justified in giving a different meaning and context to such crucial phrases/issues like Grants, Equity participant, Escrow Accounting System etc., in other way then what they stand for in normal circumstances, apparently to arrive at a preconceived conclusion. vii) Misc. Aspects :- a) As per the Definition Clauses of the concession agreements , the definition of contractor has been given as contractor or contractors, if any, which whom the concessionaires has entered into all or any of the project agreements . This also shows that the position/status of the concessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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