Income Tax Appellate Tribunal - Amritsar
National Highway Aurhority Of India, ... vs Assessee on 22 August, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR.
BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER
AND SH. B.P.JAIN, ACCOUNTANT MEMBER
I.T.A. Nos.434 to 436(Asr)/2011
Assessment years:2008-09 to 2010-2011
PAN :AMRMI0867D
M/s. National Highway Authority of India vs. The Income Tax Officer,
Opp. Fortis Hospital Dream Land, (TDS), Amritsar.
Amritsar.
(Appellant) (Respondent)
Appellant by:Sh. Nirmal Mahajan, CA
Respondent by:Sh. Laxman Singh, CIT(DR)
Date of hearing:22/08/2012
Date of pronouncement:30/08/2012
ORDER
PER BENCH ;
The assessee has filed the present three appeals against the common order of the CIT(A), Amritsar, dated 11.05.2011 for the assessment years 2008-09 to 2010-2011. As the issue involved in all these appeals is common, therefore, these were heard together and are being disposed of by this consolidated order for the sake of convenience.
2 ITA Nos. 434 to 436(Asr)/2011
2. The grounds raised in ITA No.434(Asr)/2011 which are common in all other appeals are reproduced as under:
"1. That the CIT(A) after adjudicating that payment made to PSEB for shifting of poles is compensation and not a contract payment covered u/s 194C and there is no contract between NHAI and PSEB is not justified in holding that PR is liable to deduct TDS on labour charges paid to PSEB. It is against his own adjudication.
2. Any other ground which may be raised at the time of hearing."
3. Brief facts of the case relating to the issue in dispute are that consequent upon inspection u/s 133A on 06.12.2010, certain discrepancies noticed regarding non deduction of TCS/TDS and ensuring its timely deposit into central government account. During the course of inspection, it was noticed that NAHI, Amritsar Branch entered into a contract called 'concession agreement with M/s. Jalandhar Amritsar Tollways Ltd. and M/s. Rohan Rajdeep Tollroads Pvt. Ltd. thereby granting licences to the parties giving them rights to operate as per the agreement such as to collect fee from vehicles for using the project No.1 and after receipt of directions u/s 144A, the A.O. proceeded to create demand u/s 206(6) for non-deposit of TCS amounting to Rs.29,01 lacs on the total collections and consequentially charged interest thereon u/s 206C(7) amounting to Rs.1.26 lacs. The second phase A.O. has created demand u/s 201(1) for non deduction of TDS/non- 3 ITA Nos. 434 to 436(Asr)/2011 deposit of TDS amounting to RS.5,56,495/- u/s 201(1) and after charging interest u/s 201(1A) therein created a further demand of Rs.1,61,311/- for the assessment years 2008-09 to 2010-2011 respectively by holding that in spite of having made contract payments to PSEB, the responsible person/appellant failed to deduct and deposit requisite TDS thereon. Its year- wise details are duly incorporated in the AO's order. Whereas AO's stand is that these being contract payments according to sections 206C(6) and section 194C, the toll tax collections and contract payments made to PSEB attracts TDS provisions and for RP's failure to comply with these provisions, by holding it an assessee in default has created the above demand.
4. The A.O. completed the assessment vide order dated 30.12.2010 under section 201(1)/201(1A) of the Income-tax Act, 1961 (In short, 'the Act') with support of the judgment of Hon'ble Supreme Court in the case of Associated Cement Co. Ltd. (1993) 201 ITR 435 as well as Board's Circular No.275/04/2008-IT(B).
5. Aggrieved by the order passed by the A.O., the assessee filed the appeal before the ld. first appellate authority, who vide consolidated order dated 11.05.2011 partly allowed the appeal of the assessee. Now, the 4 ITA Nos. 434 to 436(Asr)/2011 assessee is aggrieved by the impugned order of the ld. first appellate authority and is in appeal before this Bench.
6. At the time of hearing, the ld. counsel for the assessee drew our attention towards written submissions dated 20.04.2011 filed by the assessee before the ld. first appellate authority. He mainly relied upon the same. For the sake of convenience, the written submissions dated 20.04.2011 filed by the assessee before the ld. first appellate authority are reproduced as under:
"The appellant National Highway Authority of India (NHAI) is an autonomous body created by the Government of India under the special Act of Parliament. It is responsible for various road developments which include four laning and six laning of various highways. For this it has to acquire land, get it cleared of structures and does the development work. A survey was conducted by the Income-tax Officer, TDS-I, Amritsar at the premises of the appellant. During the course of inspection he could not find any discrepancies in the amounts already subjected to TDS and he raised a new issue regarding deduction of tax at source in respect of payment of compensation being made to PSEB for removing its towers and poles coming on the way of development. A.O. did not agree with the contention of the appellant and raised a demand of Rs. 531409/- treating such payment as contract payment liable to TDS u/s. 194C of Income-tax Act, 1961. It is against this order of AO that the appellant is in appeal.
Ground No.1:
It is general Ground No.2.
As stated above the NHAI is responsible for the four/six laning of the National Highways throughout India and for this purpose it acquires land at various places and pays the compensation for acquiring land 5 ITA Nos. 434 to 436(Asr)/2011 and also for superstructure build on that land. The superstructures can be buildings, petrol pumps, other business assets and also utilities like sewerage pipes and also towers/poles for electricity supply. After completion of survey of the land and keeping in view the drawings, whatever structures come on the way, their owners are compensated as per system being adopted and are asked to remove their structures. The owners of buildings demolish their building and remove debris. Same way petrol pump owners shift or remove their pumps. Whereas utilities are concerned they cannot be removed permanently but shifted from land coming on way of NHAI to some adjoining land so that supply of utilities continues and the poles/towers of PSEB come under the utilities . For this purpose, the PSEB is duly informed and asked to remove the poles/towers coming in the way of development. For this purpose the correspondence is duly exchanged and the same was duly filed with the A.O. Same is being enclosed herewith forming page 8 to 38 of documents annexed with this reply. On the basis of this request, the PSEB submits is estimates to the NHAI showing its cost and the same are approved by the committee. A set of estimate is enclosed herewith. Page 1 to 7 of documents annexed with this reply. After approval of the estimates, the payment is made to the PSEB with a request to remove its towers/poles. In compliance of the same the PSEB removes poles/towers from the land of NHAI and to continue its supply erects poles/towers at the new site.
Here it is pertinent to mention that the tower/poles and electricity lines are property of the PSEB and at all stages the same are under the control of the PSEB. At no stage the NHAI gets ownership/control of those poles/towers/lines. For payment to be covered under 194C foremost thing is that the NHAI should have ownership/control over poles/towers/lines either while it is asking PSEB to shift the same or after shifting the same it should get control/ownership. The ownership/control is the foremost thing. Here, it is neither ownership nor control and both were with the PSEB before shifting and remain the same even after shifting. So at no stage the appellant becomes owner of the lines/towers. NHAI just pays compensation to PSEB the way other persons whose structures come on the way are compensated and they remove their structures.
For applicability for section 194C, there should be relationship of contractor and contracted. Here the same is missing and relationship 6 ITA Nos. 434 to 436(Asr)/2011 is that the person compensating and person getting compensated. The basis ingredient being missing, it cannot be a case of contract under section 194C. This being mere compensation, section 194C does not apply and the AO is not justified in imposing section 194C and raising demand.
The National Highway for which the demand has been raised is being developed on BOOT basis and as per concessionaire agreement the NHAI is to give vacant possession of land to the party constructing under BOOT. For getting the same NHAI has to compensate all structure holders. So it is compensation and not contract.
In our reply dated 27-01-2011 ( copy enclosed) we have written to the AO as under :
"As regards to payment to PSEB, we again confirm and state that it is not a contract but compensation being paid to different persons for different assets. As stated by the learned Addl. CIT TDS, it is not correct that the poles become property of the NHAI. The transmission lines which are being supported by the towers are property of the PSEB. NHAI pays compensation not only for land but for superstructure also and even after payment of compensation, the owners are asked to clear the same and give vacant possession of land to the NHAI. Same way the NHAI given compensation to the PSEB and PSEB removes its structure and vacates the land. Hence at no stage it becomes property of the NHAI and at no stage it is a contract. In case you still feel that NHAI enters into contract with the PSEB and towers are property of NHAI and you have any information contrary to our statement, the same may be confronted to us."
In response to same the Assessing Officer, did not produce or confront any document to us to show that the NHAI is owner of those towers/poles/lines and it has given contract to PSEB. The assessment order is silent on this point.
Gound.No.3 Without prejudice to our arguments in grounds No. 2 and not surrendering that it is not a contract, just for the sake of arguments, 7 ITA Nos. 434 to 436(Asr)/2011 even if we hold contention of the AO as correct, section 194C(3) is applicable to the assessee. Section 194C (3) is as under :
(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.
From the section it is crystal clear that in cases where cost of material and cost of labour is bifurcated in the invoice, only labour portion is liable to TDS. Here the estimates are in detail and labour part is duly defined. Same was requested to the AO vide letter dated 27-01-2011. In case contention in ground 2 is not accepted, even then TDS can be deducted on labour part only.
Gound.No.4 & 5:
Without prejudice to our second ground of appeal, even if for the sake of arguments we hold contention of the AO right, the matter of the assessee is covered under Explanation to section 191 of the Act. It says there cannot be double taxation and in case the deductee has paid the tax, the deductor is liable only to the interest till the date of filling of return. The reliance is being placed on 288 ITR 379 (Del) in which the honourable Delhi High Court has held as under: "Assessee who was obliged to, but had not deducted tax at source, could not be asked to pay the same where the deductee has paid it ; interest under section 201(IA) is not chargeable for any period after the date on which tax has been actually paid by the payee."
Keeping in view the above the assessee is liable to interest only till the date of filling of return by the deductee. Further in 320ITR671, the honourable Delhi High Court has held as under:
" we note that Tribunal has followed the decision of this Court in CIT Vs. Adidas India Marketing (P) Ltd, 288 ITR 379 (Del) in which this Court held that the assessee who was obliged to but had not deducted tax at source, would not have asked to pay the same where dueductee 8 ITA Nos. 434 to 436(Asr)/2011 had paid tax on the amount received by him as his income. The Tribunal further noted that since the deductee is Government of India undertaking, it cannot be presumed that it has not paid tax. We put it to the counsel for the appellant as to whether any notice was issued by the AO to the AAI, so that there is not double taxation, the counsel for the appellant stated that this was not clear from the filed. Similarly, the counsel in reply to the Court query also said that there is nothing on record to suggest that any proceedings have been intimated against AAI for not paying taxes.
Another issue which was urged by the counsel for the appellant was that the interest which has been ordered by the Tribunal is only till the due date of filing of the return of the AAI wherein it should have been till the date of actual payment of tax by the AAI. The Tribunal in our opinion has rightly held that since AAI is a Government undertaking, the taxes may be presumed to have been paid lastly by due date of filing of the return of income and, therefore, the liability of the assessee to pay interest on the amount which was to be deducted as TDS ends with the due date of filing of the return by the AAI"
During the course of assessment the AO was made aware of this pronouncement but the distinguished it in his order by saying that PSEB is an autonomous body liable to tax and not a government department. This contention of the AO is wrong as all autonomous bodies created by the government are liable to tax then only the provision of TDS come into state legislation. So the above judicial pronouncement is squarely applicable. Keeping in view the above if the contention of the appellant in ground number 2 is not accepted, the justice may be done by applying the above pronouncement. Keeping in view the above, it is prayed that justice may please be done to the appellant by deleting the illegal demand raised by the AO. We hope that you will be satisfied with the above reply. In case any further clarification is required please let us know."
7. On the contrary, the Ld. DR relied upon the order passed by the ld. first appellate authority and stated that the ld. first appellate authority has 9 ITA Nos. 434 to 436(Asr)/2011 passed a well reasoned order and rightly directed the AO to revise his orders by creating TDS demand only on the labour components/portion duly specifically indicated in the approved PSEB estimates by invoking the provisions of section 194C(3) of the Act. He further stated that the direction given by the Ld. CIT(A) in the impugned order is legal and is according to the facts and circumstances of the present case and lastly he relied upon the order passed by the ld. first appellate authority.
8. We have heard both the parties and perused the records available with us especially the written submissions filed before the Ld. first appellate authority which the Ld. AR has only relied upon before us. The Ld. first appellate authority has also reproduced the written submissions filed by the Ld. AR of the assessee in his impugned order at pages 3 to 7 (para6), which we have reproduced above in para 6. The Ld. first appellate authority has thoroughly considered the decision cited by the assessee and the findings given by the AO on the issue in dispute in the impugned order. The main argument advanced by the ld. counsel for the assessee is that since the assessee had paid compensation to PSEB for re-setting their electric towers and poles coming on the way on which neither TCS or TDS is attracted as per provisions of section 206C(6) and/or u/s 194C of the I.T.Act, 1961. The 10 ITA Nos. 434 to 436(Asr)/2011 AO was not justified in creating demand in dispute. The Ld. first appellate authority has considered the submissions of the assessee and has held that whether compensation payment made can be treated as contract payment in absence of any contract entered into between the assessee and PSEB. According to the assessee for applicability of section 194C there should be relationship of contractor and contractee. Here the same is missing and relationship is that of a person compensating and person getting compensation therefore. The assessee has also furnished reply dated 27.01.2011 before the AO in which the assessee has not admitted the observation of the Addl. CIT (TDS) by stating that it is not correct that the poles/towers becomes property of the assessee, they remained the property of the PSEB. The assessee has made the payment not only for land but also for super-structure and even after payment compensation, the owners were asked to clear the same and give vacant possession of land to the assessee. 8.1 The said arguments have been advanced by the assessee before the ld. first appellate authority and mainly stated that NHAI has given compensation and no contract and since provisions of section 194C are not attracted and the question of any valuation by the assessee does not arise. The Ld. CIT(A) has thoroughly dealt with the said argument of the assessee's counsel in para 7.3 at page 9 by holding that the assessee himself agreeing with the AO's 11 ITA Nos. 434 to 436(Asr)/2011 finding that the provisions of section 194C(3) are applicable to the assessee. From the plain reading of sub-section (3) of section 194C it transpired that in cases where cost of material and cost of labour is bifurcated in the invoice, only labour portion is liable to TDS. The Ld. first appellate authority has thoroughly examined the issue in dispute and rightly held that PSEB approved estimates and labour part is duly defined and identifiable, then the TDS u/s 194C can be deducted on labour part only. The Ld. first appellate authority vide para 7.3 at page 9 has rightly appreciated the contentions of the assessee and rightly directed the AO to revise his order by creating TDS demand only on the labour components/portion duly specifically indicated in the approved PSEB estimates by invoking the provisions of section 194C(3) of the Act, and also directed to charge interest u/s 201(1A) in accordance with the provisions of section 191 by restricting its calculations upto the date of filing of return by the PSEB for all the assessment years involved from 2008-09 to 2011-12. For the sake of convenience, the relevant paragraph 7.3 at page 9 is reproduced as under:
"7.3. Vide ground No3, the appellant has himself agreeing with the AO's findings that provisions of section 194C(3) are applicable to the appellant. From the plain reading of sub-section (3) of Section 194C it transpired that in cases where cost of material and cost of labour is bifurcated in the invoice, only labour portion is liable to TDS. Here the PSEB approved estimates are in detail and labour part is duly 12 ITA Nos. 434 to 436(Asr)/2011 defined and identifiable, then the TDS u/s 194C can be deducted on labour part only. Being fully convinced with the alternative plea of the appellant, I am inclined to agree with the appellant and accordingly hereby direct the A.O. to revise his orders by creating TDS demand only on the labour components/portion duly specifically indicated in the approved PSEB estimates by invoking the provisions of Section 194C(3) of the I.T..Act, 1961. The A.O. is further directed to charge interest u/s 201(1A) in accordance with the provisions of Section 191 by restricting its calculations upto the date of filing of return by the PSEB for all the assessment years involved from 20008-
09 to 2011-12."
8.2. Keeping in view the facts and circumstances of the case and the discussions above relating to the issue in dispute, we are of the considered opinion that the ld. first appellate authority has rightly directed the A.O. to revise his orders by creating TDS demand only on the labour components/portion duly specifically indicated in the approved PSEB estimates by invoking the provisions of section 194C(3) of the Act, with further direction to charge interest under section 201(1A) in accordance with the provisions of section 191 of the Act, by restricting its calculations upto the date of filing of return by the PSEB for all the assessment years in dispute.
8.3. As discussed above, we find no infirmity in the impugned order because the ld. first appellate authority has passed a well reasoned order keeping in view the facts and circumstances of the present case. 13 ITA Nos. 434 to 436(Asr)/2011 Accordingly, we uphold the common impugned order for all the assessment years, in dispute by dismissing the appeals filed by the assessee.
9. In the result, all the three appeals filed by the assessee are dismissed.
Order pronounced in the open court on 30th August, 2012.
Sd/- Sd/-
(B.P. JAIN) (H.S. SIDHU)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: August, 2012
/SKR/
Copy of the order forwarded to:
1. The Assessee:M/s. National Highway Authority of India, Amritsar.
2. The ITO (TDS-1), Amritsar.
3. The CIT(A), Asr.
4. The CIT, Asr.
5. The SR DR, ITAT, Amritsar.
True copy By order (Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar.