Income Tax Appellate Tribunal - Jodhpur
M/S. Oil India Ltd., Jodhpur vs Assessee on 5 June, 2013
[1]
IN THE INCOME TAX APPELLATE TRIBUNAL
JODHPUR BENCH, JODHPUR
BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER
AND SHRI N. K. SAINI, ACCOUNTANT MEMBER
I.T.A. Nos.24 & 25/Jodh/2012
Assessment Year:2008-2009 & 2009-2010
M/s Oil India Limited, Vs. Dy. C.I.T. (TDS),
12, Old Residency Road, Jodhpur.
Jodhpur.
PAN:AAACO2352C
(Appellant) (Respondent)
Appellant by : Shri N. M. Ranka,
Shri N. K. Jain
Shri Kishan Goyal
Respondent by : Dr. Deepak Sehgal, CIT, D.R.
Date of hearing : 05/06/2013
Date of pronouncement : 31/07/2013
ORDER
PER N. K., SAINI:
These two appeals by the assessee are directed against the separate orders each dated 31/10/2001 for the assessment years 2008-09 and 2009-
10. The issues involved in these appeals, which were heard together, are common, therefore, these are being disposed of by this consolidated order for the sake of convenience.
2. First we will deal with I.T.A. No.24/Jodh/2012. In this appeal the assessee has raised the following grounds:
[2]"1. The Authorities below have erred in law and in facts while passing order u/s 201/201(A) of the I. T. Act.
2. The Authorities below have erred in law and in facts while upholding provisions of Section 194J instead of Section 194C on certain payments to contractors for executing work with technical description, particularly when appellant company has not paid any fee for such work but paid for executing the work as per contract.
3. The Authorities below have seriously erred in law and in facts while misinterpreted the provisions of Section 194J of the I.T. Act and ignored the definition of the term 'fee for technical services' in Explanation 2 to section 9(1)(vii) of the Income-tax Act, 1961 read with Instruction No. 1862, dated 22/10/1990, issued by Hon'ble CBDT and uphold the applicability of the Provision of Section 194J instead of Section 194C of the I.T. Act, without any tenable basis and/or reason in the facts and circumstances of the case.
4. The Authorities below have erred in law and in facts while applying provisions of Section 194I of the I.T. Act, instead of Section 194C on certain payments to contractors for Hiring of Crane fitted of Motor Vehicle, particularly when such payments are duly covered by Section 194C of The I.T. Act, without any tenable basis and/or reason in the facts and circumstances of the case.
5. That We may kindly be permitted, to reserve the right to amend, modify, alter and/or add new ground/s of the appeal at the time of hearing."
3. The assessee has also raised an additional ground vide application dated 11/02/2013 stating therein that while briefing the appeal with senior counsel the assessee had been advised to take the following additional [3] ground as precautionary measure though it stands already covered in the original grounds of appeal:
"That on the facts and in totality of circumstances, the Learned Assessing Officer grossly erred in levying tax u/s 201 and in charging interest u/s 201(1A) of the Act; the Learned Lower Authorities grossly erred in calculating and levying as per Annexure A and such interest being compensatory not punitive, levy is unauthorized and without jurisdiction."
4. During the course of hearing, the learned counsel for the assessee stated that the above additional ground is purely a legal ground, so it may be admitted as per ratio laid down by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT [1998] 262 ITR 383 (SC). The learned CIT, D.R. did not object for the admission of the above additional ground. Therefore, the additional ground is admitted, although the assessee has already taken the same ground vide ground No. 1.
5. Ground No. 5 of this appeal is general in nature while the additional ground and ground No. 1 are correlated, in our opinion, no specific finding is required for these grounds as the same will be dealt while deciding ground nos. 2, 3 and 4.
6. Vide ground No. 2 and 3 of the appeal, the grievance of the assessee relates to the application of provisions of section 194J instead of 194C of the I.T. Act, 1961 (hereinafter referred to as the "Act") in respect of payments made to the contractors.
[4]7. The Facts related to this issue, in brief, are that a survey u/s 133A of the Act was carried out on 4th and 5th March, 2009 at the business premises of the assessee. The A.O. observed that in the course of survey, it was found that during the financial year 2007-08 following payments were made by the assessee for obtaining technical services:
S.NO. Name and Address of the contractor/ Amount of deductees Payment
1. Mercantile Associates, Dibrugarh (Assam) Rs.3,79,16,220
2. Purvanchal Banijya Vikas, Guwahati (Assam) Rs.12,86,024
3. HLS Asia Ltd., Noida (U.P.) Rs.6,91,45,621
4. Exploroil Otech (India) Pvt. Ltd., New Delhi Rs.60,25,000 The submissions of the assessee before the A.O. were that the above said payments were not in the nature of fees for technical services because the same were made for carrying out simple works contract and accordingly TDS on such payments was rightly made u/s 194C of the Act. The Assessing Officer, however, was of the view that the provisions of section 194J of the Act were applicable for the following reasons:
"(i) Section II of contract No. RPF/2016 dated 27.09.2005 with M/s HLS Asia Ltd., Noida showed that the deductee provided wire line logging, perforation and data processing services.
(ii) Under para 2, 2.1 & 2.2 of contract No. RPI/2091 dated 10.08.2005 the deductee, M/s Mercantile Associates, Dibrugarh was to provide man management services as also personnel to carry out normal drilling operations.[5]
(iii) Under para 3.1 & 3.2 of contract No. RPI/2091 dated 10.08.2005 the deductee, M/s Purvanchal Banijiya Vikas, Guwahati was to provide trained and well experienced personnel to carry out drilling operations.
(iv) Under para 4 (4.1 to 4.5) of contract No. RPI/2095 dated 24.12.2004 the deductee, M/s Exploroil Otech India Pvt. Ltd., New Delhi was to provide manpower and requisite equipment to carry out normal drilling operations."
The Assessing Officer was of the view that the payments to the above deductees was not for simple works contract but for performance of contract which involved specialized technical knowledge, expertise and qualified manpower. Reliance was placed on the following case laws:
1. Associated Cement Ltd. Vs. CIT 201 ITR 43 (SC)
2. SRF Finance Ltd. Vs. CBDT 211 ITR 861 (Delhi)
3. Bombay Goods Transport Goods Association Vs. CBDT 76 Taxman 334 (Bombay)
4. Chamber of Income Tax Consultants Vs. CBDT 209 ITR 660 (Bombay)
5. Calcutta Goods Transports Association Vs. UOI 219 ITR 486 (Calcutta)
6. Muradabad Chartered Accountants Association Vs. CBDT 264 ITR 374 (Allahabad)
7. Continental Construction Ltd. Vs. CIT 195 ITR 81 (SC)
8. CBDT Vs. Oberoi Hotel 231 ITR 148 (SC) The Assessing Officer did not accept this contention of the assessee that the payments to the deductees were covered in the exclusionary part of explanation (2) to section 9(a)(vii) of the Act on the ground that none of the deductees carried out any construction or assembling or mining or like projects for the assessee and no specific evidence to justify the claim made was furnished. The assessee for the above said contention placed reliance on the following case laws:[6]
1. ITAT, Ahmedabad decision in the case of Gujarat State Electricity Corporation Ltd. Vs. ITO 82 TTJ 456
2. Sky Cell Communication Ltd. Vs. DCIT 251 ITR 53 (Mad) However, the Assessing Officer was of the view that the aforesaid decisions, relied by the assessee, were distinguishable on facts. The Assessing Officer held that the assessee ought to have deducted tax at source u/s 194J and not u/s 194C of the Act. He accordingly considered the assessee in default for a sum of Rs.1,01,07,835/- for short deduction of tax u/s 201(1) of the Act and Rs.25,84,605/- on account of interest thereon u/s 201(1A) of the Act.
8. Being aggrieved, the assessee carried the matter to learned CIT(A) and submitted that the assessee company is registered under the Companies Act, 1956 having its Registered office at Duliajan, District- Dibrugarh, Assam and Corporate office at Oil House, Plot No. 19, Sector 16A, NOIDA, Uttar Pradesh, owned by Government of India and was primarily engaged in the business of exploration, development, extraction, transportation of crude oil and natural gas, transportation of finished petroleum products and production of liquefied petroleum gas. It was further stated that as a part of its mining activities, the company had a Project Office in Rajasthan at Jodhpur where the assessee engaged contractors from time to time for different oilfield services, such as Seismic Survey, Hiring of Drilling Rigs, Wire Line Logging Services, Mud Logging Services, Hiring of Crane, Transportation by Trucks/Trailers, Man Management Services, Cementing Services etc. towards achievement of its objectives. It was contended that the assessee at Jodhpur, in line with the [7] practices followed in its other offices/projects as also in other upstream oil & gas companies under Ministry of Petroleum and Natural Gas (MOPNG), had consistently been collecting TDS from the contractors (recipients) u/s 194C of the Act and depositing the same with the Government Authorities. The assessee explained in detail the activities involved in mining of Oil & Gas as follows :-
"Step-1 Obtain Environmental Clearance - In order to obtain Environmental Clearance a study called Environmental Impact Studies (EIA) was required to be done through contractors who had experience in conducting EIA Studies. Asia Consulting Engineers was engaged to carry out EIA Studies. Since, EIA was a pre-requisite to start a mining operations, it fell under the definition of mining activities.
Step 2 Seismic Survey: This involved the following activities A) Data Acquisition B) Data Processing C) Interpretation D) Support Services Step 3 Drilling: This involved the following activities :-
(a) Boring holes: The Boring of holes in the ground was done with the help of equipment called Rig. Rig consisted of several detachable parts and included Masts (tall structure), draw works (for reeling wire ropes), Rotary Table (for rotational force) and Top Drive (for rotating the. drilling strings), Mud Pumps (for pumping mixture of chemicals in the well) amongst [8] others. These Rig parts were transported by trailers and trucks (The contract was awarded to RR Enterprise) to the well site. These Rig parts were loaded and unloaded on the trailers and trucks and assembled in the well site with the help of cranes (The contract was awarded to Choudhary Transport). Boring holes in the ground also required a lot more equipment and materials. The main amongst them were Casings (Steel Pipes), Drill Pipes (used for boring holes with external rotational force), Bits (conical earth-cutting device), Chemicals, and Cement etc. All these materials were transported by trailers and trucks (The contract was awarded to RR Enterprise) to the well site. Here also cranes (The contract was awarded to Choudhary Transport) were used for loading and unloading purposes. As soon as all materials were transported to the well site and the Rig was assembled, actual boring started. As the Bit attached to the Drill Pipes started cutting the earth with rotational force, the Bit and Drill Pipes slowly moved downwards. At this moment, Casings were lowered in the holes as the depth increased. Lowering of casings in the hole was done with the help of cranes (The contract was awarded to Choudhary Transport) and Rig Masts.
Casings were lowered to prevent the earth from caving in.
(b) Cementing Services: Cementing was done with the help of equipments called Bulk Handling Plant, Cementing Silos and other small-equipments. The services included (The Contract was awarded to Purvanchal Banijaya Vikash)-
1. Operation and Maintenance of the Bulk Handling Plant (used for mixing cement) owned by OIL.
2. Mixing of Cement in the Bulk Handling Plant.
3. Storage and transportation of cement in Silos.
4. Putting mixed cement in gaps between the earth and the casing wall for packing with the help of a pump.
5. Packing it with the help of a hydraulic packer.
[9](c) Mud Engineering Services: At the time of boring the hole sub-surface pressure of different intensity was encountered. To neutralize the down-hole pressure a mixture of different chemicals (called mud) was prepared and pumped in to the hole through Bit (it had openings) and Drill Pipes with the help of an equipment called Mud Pump. The services included (This Contract was awarded to Exploroil Otech (I) (P) Ltd.)
1. Operation and Maintenance of Mud Pump and Mud Plant.
2. Ascertaining the proportion of different chemicals on the basis of well profiles.
3. Mixing the chemicals in the Mud Plant.
4. Pumping the Mud in the hole with the help of the Mud Pump.
(d) Wire line Logging Services: It was a technique to ascertain the well status. This was done with the help of equipment called Logging Truck. The essential services included (This Contract was awarded to HLS India Ltd)-
1. Supply, operation and maintenance of the Logging Truck, Tools and Cables and required numbers of logging crews.
2. There were different high-tech logging tools and cables.
The tools were lowered with the help of cables which were attached to the computers on board the Logging Truck.
3. At the time of drilling holes, these tools were lowered along with drilling strings.
4. This was done to ascertain the well pressure, nature and characteristics of drilling cuts (earth cuttings), fluid characteristics etc.
5. Tools attached to logging cables gathered well information/data and transmitted those data to the logging truck and computer onboard the logging truck.
6. These were done to ascertain the depth of the well, the presence or otherwise of Oil & Gas, to determine Mud [10] Chemicals and its mixture. These data were gathered and processed online real-time basis so that, appropriate action could be taken by the Drilling Engineers while Drilling.
7. Preparation of logs on the basis of the data gathered during logging operation.
8. Interpretation of the log and report there on as to the existence or otherwise of Oil & Gas in the well. If presence of Oil & Gas was indicated then at what depth.
9. Perforation of well: Once, on the basis of the data gathered from logging operations, it was established the presence of Oil & Gas in the well, perforation was done. Perforation was making series of holes in the Casing to make ways for Oil & Gas to come out.
(e) Man Management for Rig: Since, the company did not have the required manpower to operate and maintain the Rig, a Man Management Contract had been entered. The essential services under the contract included (This Contract was awarded to Mercantile Associates) -
1. Assembling of the Rig for drilling operation and dismantling of the Rig after completion of drilling.
2. Transportation of Rig materials
3. Operation of the Rig at the time of boring a hole.
4. Maintenance of the Rig.
5. Supply of required number of crews for Operation and Maintenance of the Rig.
6. Catering Services.
(f) Man Management for Cementing: Since the company did not have the required number of crews, the company outsourced a Man Management Contract, The essential services included ((The Contract was awarded to Purvanchal Banijaya Vikash)-
1. Supply of required numbers of crews for Operation and Maintenance of company's Bulk Handling Plant and Silos.
[11]2. Mixing Cement and pumping the same in the hole as per the direction of the company's engineers.
(g) Transportation: Hired trailers and Trucks were extensively used for transporting different equipments (The contract was awarded to RR Enterprise).
(h) Crane: Cranes were used for loading, unloading, Rig Assembling and Dismantling and other services during drilling as described above (The contract was awarded to Choudhary Transport).
(i) Security: Since huge items of equipments and other materials were stored in the drilling site, necessary arrangements were required to be made for security to prevent theft of the said materials (The contract was awarded to Hindustan Purva Sainik Cooperative Society Ltd).
Step 4 Production."
It was further stated that TDS u/s 194C of the Act was deducted in consonance with the past accepted history of assessee's own case as well as other similar cases. It was further stated that the TDS returns in respect of such TDS made u/s 194C were regularly submitted for past several years and no objection was ever raised by the Department. Therefore, the order u/s 201/201(A) of the Act had been passed in apparent disregard of the accepted past history of assessee's own case and other similar cases in violation of the Rule of Consistency. The reliance was placed on the following case laws:
(i) Official Liquidator Vs. Dayanand And Others. 10 SCC 1.
(ii) Joint CIT Vs. Mandideep Eng. & PKG. India P. Ltd. 292 ITR 1 (SC).[12]
(iii) Suryaveer Singh Vs. DCIT 4 DTR 269 (iv) Sardar Kehar Singh Vs. CIT 195 ITR 769 (Raj) (v) Radhaswami Satsang Vs. CIT. 193 ITR 321 (SC) (vi) Pukhraj Rikhab Das Vs. CWT 203 ITR 770 (Raj) (vii) CIT Vs. Narendra Doshi 254 ITR 606 (SC).
(viii) UOI Vs. Kaumudini Narayan Dalai 249 ITR 219 (SC)
(ix) Berger Paints India Ltd. Vs. CIT 266 ITR 99 (SC).
(x) CIT Vs. A.R.J. Security Printers 264 ITR 276 (Del) It was contended that the provisions of Section 194J could not be invoked in the assessee's case because it had not paid any fees for professional consultancy work but paid the amount based on the actual execution of work on the field of exploration block of the assessee company and in accordance with the work executed as per their bills with the details of the work done by the respective contractors and the company paid after deduction of TDS u/s 194C of the IT Act. It was submitted that all the contracts were in connection with prospecting for, or extraction or exploration or production of mineral oils and were clearly covered by the exclusionary part, viz. consideration for any construction, assembly, mining or like project, excluded in the definition of "fees for technical services"
given in Explanation 2 to clause (vii) of sub-section (1) of section 9 which indicates that the payments made to contractors for execution of mining contracts, by no stretch of imagination could be regarded as payment by way of fee for technical services as contemplated in section 194J of the Act. The reliance was placed on the following case laws:
(i) Gujarat State Electricity Corporation Ltd, Vs. ITO, Ahmedabad 82 TTJ 456 (Ahd).
(ii) Skycell Communication Ltd. & Anr. Vs. DCIT 251 ITR 53 (Mad.)
(iii) CIT V/s Estel Communications (P) Ltd. 217 CTR 102 (Del.) [13]
(iv) Pacific Internet (India) P. Ltd. Vs. ITO-TDS BCAJ March, 2009 at page 795.
(v) Millennium Infocom Technologies Ltd. Vs. ACIT 117 TTJ 456 (Del.).
(vi) Jaipur Vidyut Vitran Nigam Ltd. Vs. DCIT 123 TTJ 888 (JP.)
(vii) Principal Officer, Jaipur Vidyut Vitran Nigam Ltd. Vs. ITO 26 DTR 154 (Jp)(Trib).
(viii) Dell Inter-nation Services India (P) Ltd. In Re (10 DTK 249).
(ix) CIT Vs. Bharti Cellular Ltd. 220 CTR 258 (Del.).
It was further submitted that as per the provisions of section 44BB of the Act, the presumptive income which was subject to Income Tax under Income Tax Act, 1961, was only 10% of the gross receipts, though the said Section was not applicable to resident contractors, yet it could reasonably be inferred that taxable income (profit) of the contractors engaged in similar mining activities was 10% of the gross receipts and if the chargeable presumptive income in case of non residents for executing similar mining contracts was 10% of the gross receipts as per section 44BB of the Act, then deduction of tax u/s 194J would tantamount to deduction of tax equivalent to the entire chargeable income of the recipients and such an action was grossly in violation of law and the principles of fair play, equity and justice. The reliance was placed on the following case laws:
(i) Director of Income-tax Vs. Jindal Drilling and Industries Ltd.
320 ITR 104 (Delhi)
(ii) Geofizyka Torun SP. Z.O.O., In re 320 ITR 268 (AAR)
(iii) Seabird Exploration FZ LLC, in re 320 ITR 286 (AAR)
(iv) Wavefield Inseis ASA, In re 320 ITR 290 (AAR)
(v) Oil India Limited Vs. CIT 212 ITR 225 (Ori.)
(vi) Commissioner of Income Tax vs. Oil And Natural Gas
Commission 255 ITR 413 (Raj,)
(vii) Commissioner of Income Tax Vs. Compaigne General-De-
Geophysique Through Oil India 267 ITR 634 (Raj.)
(viii) CIT & Anr. Vs. O.N.G.C. 264 ITR 340 (Uttaranchal) [14]
(ix) Commissioner of Income Tax Vs. ONGC 276 ITR 585 (Uttaranchal).
It was further submitted before the learned CIT(A) that the scope of section 194C of the Act was very wide and applied to all types of contracts for carrying out any work including transport contracts, services contracts, labour contracts, material contracts and works contracts, except what had been specifically excluded or which were governed by any special provision. It was contended that the Assessing Officer had wrongly assumed as if section 194C applies only to simple work contract which presumption was clearly contrary to the plain language of section 194C of the Act. The reliance was placed on the Circular No. 666 dated 8th October 1993 issued by the CBDT and the judgment of Hon'ble Supreme Court in the case of Associated Cement Company Vs. Commissioner of Income Tax 201 ITR 435 (SC). It was further contended that the Instruction No.1862 issued on 22/10/1990 by the CBDT explained the scope of mining or like project in respect of 'mining' or prospecting for, or extraction or production of mineral oil, which includes rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas and the assessee was carrying on only such activities in the year under consideration. As such any payment connected with such drilling operation could not be treated as fee for technical services for the purpose of explanation 2 to the section 9(1)(vii) of the I.T. Act. The reliance was placed the following case laws:
(i) ONGC (as representative assessee of Alberta Research Council, Canada) vs. Joint CIT Spl. Range, Dehradun 133 TTJ 0663 (DELHI)
(ii) Geofizyka Torun Sp. Z. O. O., In Re 320 ITR 0268 (AAR) [15]
(iii) DCIT vs. ONGC as agent of Foramer France 70 ITD 0468 (DELHI)
(iv) Assistant Commissioner of Income-tax, Circle 1, Dehradun vs. Paradigm Geophysical Pty. Ltd. 122 ITD 0155 (DELHI)
(v) Seabird Exploration FZ LLC, In Re 320 ITR 0286 (AAR)
(vi) Director of Income-tax vs. Jindal Drilling and Industries Ltd.
320 ITR 0104 (DELHI) It was further stated that the payments made by the assessee company, if presumed to be considered as fee for technical services, even than the said payments were specifically excluded from the definition of fee for technical services by virtue of exclusion clause in Explanation 2 to section 9(1)(vii) of the Act, read with Instruction No. 1862, dated 22/10/1990, issued by CBDT in respect of definition of fee for technical services and duly supported by various Hon'ble courts decision and the said payments were out of purview of section 194J of the Act and the assessee company had correctly deducted the TDS u/s 194 C of the Act.
8.1 The learned CIT(A), after considering the submissions of the assessee, observed that the res judicata is not applicable in taxation matters, therefore, the contentions of the assessee that the Assessing Officer had ignored the past history, were not tenable. He further observed that the doctrine of res judicata rests on the principle that no one should be taxed twice for the same cause and there should be finality of litigation but for taxation matters, each assessment year is final only for that year and does not cover later years because it determine only tax for a particular period. He further observed that the issue of applicability of section 194J viz-a-viz 194C was examined for the first time in the assessee's case and the contracts between the assessee and the deductees were never scrutinized before as it was only during the year under consideration [16] pursuant to survey u/s 133A in the case of the assessee. The learned CIT(A) examined the nature of contracts between the assessee and the deductees as under:
"(1) Contract with HLS Asia Ltd. dated 27.09.2005 was for wire line logging, data processing and perforation services (page 4 of P.B.). Even in the definition clause of the contract the work had been defined to mean each and every activity required for the successful performance of the services described in section II. The appellant was paying the deductee consideration for the provision of services. The services were spelt out in detail in section II of the contract. The contractor was to provide experienced personnel for the services. The price schedule also mentioned payment of service charges.
(2) Contract with Mercantile Associates dated 10.08.2005 was for man management services for operation and maintenance (page 65 of P.B.). Even in the definition clause of the contract the work had been defined to mean each and every activity required for the successful performance of the services described under this contract. The appellant was paying the deductee consideration for the provision of services. The services were spelt out in detail in para 7 of the contract. The contractor was to provide experienced personnel for the services (para 4.6). The price schedule also mentioned payment of mobilization charges.
(3) Contract with Purvanchal Banijaya Vikas dated 31.05.2005 was for providing services for bulk handling plant and related services (page 108 of P.B.). Even in the definition clause of the contract the work had been defined to mean each and every activity required for the successful performance of the services described under this contract. The appellant was paying the deductee consideration for the provision of services. The services were spelt out in detail in para 3.2 of the contract. The [17] contractor was to provide experienced personnel for the services. The price schedule also mentioned payment of operation and maintenance charges.
(4) Contract with Exploroil Otech (India) Pvt Ltd. dated 24.12.2004 was for providing mud engineering services (page 135 of P.B.). Even in the definition clause of the contract the work had been defined to mean each and every activity required for the successful performance of the services described under this contract. The appellant was paying the deductee consideration for the provision of services. The services were spelt out in detail in Annexure-1 of the contract. The contractor was to provide experienced personnel for the services. The price schedule also mentioned payment of mobilization charges.
8.2 On the basis of the above, the learned CIT(A) held that the contractors (deductees) were providing technical services to the assessee and were not simply executing any work and that they were not engaged in any mining activity as such it could not be said that both were covered within explanation 2 to section 9(1)(vii) of the Act and Instruction No. 1862. The learned CIT(A) also observed that the differential treatment between the resident and non resident contractors u/s 44BB was not tenable because the same does not govern the applicability or otherwise of the TDS provisions. The learned CIT(A) upheld the action of the Assessing Officer by observing that the assessee was liable to deduct tax at source u/s 194J instead of 194C of the Act on the payment made to the contractors.
9. Now the assessee is in appeal. The learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee was primarily engaged in the business of exploration, development, extraction, transportation of crude oil and natural [18] gas, transportation of finished petroleum products & production of liquefied petroleum gas and that as a part of its "mining activities" for exploration of oil fields, the assessee has a Project Office at Jodhpur in Rajasthan. It was contended that the assessee had found oil fields and further exploration and extracting is going on at Jaisalmer, Barmer and other places, for that purpose the assessee engaged contractor from time to time for different oilfield services, such as Seismic Survey, Hiring of Drilling Rigs, Wire-line Logging Services, Mud Logging Services, Hiring of Cranes, Transportation by Trucks/Trailers, Man Management Services, Cementing Services etc. towards achievement of its stated objectives of extraction of oil and gas. The learned counsel for the assessee also explained the various activities involved in mining of oil and gas, since we have already reproduced those in the former part of this order, as the same were submitted to the learned CIT(A) also, therefore, for the cost of repetition these are not reproduced herein. However, the learned CIT(A) had not given the details relating to step-4 i.e. production, which was explained by the learned counsel for the assessee in the following words:
Step-4 Production: Once Oil or Gas is struck and perforation is done at the required depth, Oil or Gas comes out of the well (MINE) spontaneously. However, to maintain steady production or increase the production some activities are undertaken. The major activities undertaken in this regard include -
(A) Installation of Oil Collecting Stations (OCS)/Gas Gathering Stations (GGS). These installations accumulate Oil/Gas from different wells for onward dispatch to the customers.
(B) Installation of flow lines and long distance pipelines for establishment of connectivity between the Oil/Gas Wells [19] (MINES) and the OCS/GGS. Oil/Gas is transported through Flow lines and pipelines in to the OCS/GGS.
(C) Installation of Christmas Trees and other well head fittings on the wells. The function of this equipment is control the well pressure and flow of Oil/Gas from the well (Mine).
(D) Installation of different kinds of valves to control the flow of Oil/Gas.
(E) Installation of Sucker Rod Pump (SRP) for lifting Oil from the well (MINE).
(F) Installation of Heater-Separator Unit for separation of Oil, Gas and formation of water.
(G) Operation and Maintenance of the OCS/GGS and other plants & equipments such as SRP, Heater Separator Unit.
(H) Installation, Operation and Maintenance of Chemical Dozing Plant. This is used to inject different chemicals into the fluid produced from Oil/Gas wells (Mines) for separation of Oil, Gas and water in the Heater Separator Unit.
(I) Operation and Maintenance of Flow lines and long distance pipelines.
(J) Work-over Operation (i.e. servicing the well) for steady production of Oil/Gas.
(K) Installation of flow meter and check meter for measuring the delivery of Oil/Gas to the customers.
(L) Periodical reading of Flow Meters/Check Meters.
(M) Well stimulation services to maintain/ enhance production of Oil and Gas.
(N) Monitoring Oil and Gas well (Mine) pressure.[20]
(O) Installation, Operation, Maintenance of SCADA (Supervisory Control and Data Acquisition). This is an online computerized communication system for monitoring operation of pipelines/Flow lines on real time basis.
(P) Transportation of equipments/tools and personnel."
10. It was further stated that the assessee in line with the practices followed in its other offices/projects as also in other upstream Oil & Gas Companies under MOPNG, and as advised by its Tax Experts, have consistently been deducting TDS from the contractors (recipients) u/s 194C of the Act and depositing the same with the Government Authorities. It was emphasized that the Income-tax Authorities at Jodhpur as well as at other places have consistently treated contracts as work contract liable to deduction u/s 194C of the Act. It was also stated that neither in the case of the assessee nor in the case of other Oil Companies, different view had ever been taken by the tax authorities and even the Assessing Officers assessing for various years as well as the statutory auditors and tax auditors have found due compliance of the provisions of tax deductions at source. It was contended that the Assessing Officer created a huge arbitrary, illegal, unjustified and unsustainable demand but collected coercively in order to meet its revenue collection target. It was further contended that the DCIT (TDS) invoked the provisions of section 194J of the Act by treating payments made to the contractors as Fees for Technical Services as against tax deductible and deducted at source u/s 194C of the Act on the payments made for execution of works contracts in connection with prospecting for, or extraction or exploration or production of mineral oils (Contract for Mining Activities) against circular/clarification of C.B.D.T. and binding precedents submitted before him. It was pointed out that the [21] Assessing Officer failed to follow the decision of the Hon'ble Supreme Court in the case of Associated Cement Co. Ltd. Vs. C.I.T. (1993) 201 ITR 435 (SC) wherein the meaning of "works contract" had been explained. It was submitted that the learned CIT(A) without appreciating the detail submissions of the assessee held as under:
(i) The Contractors were providing technical services and the appellant was liable to deduct tax at source u/s. 194J instead of 194C; (Page 20 of the impugned order).
(ii) The assessee was liable to deduct tax u/s. 1941 in respect of Choudhary Transport (Page 22 of the impugned order). Crane hired is machinery (Page 25 of the impugned order). Same is for R.R. Enterprises (Page 26);
(iii) No deduction certificate for M/s. Hindustan Purv Sainik Human Welfare Multi Purpose Co-Op. Society is not for the relevant year. (Page 26);
(iv) As per the evidences filed, the deductees, viz. the contractors had filed their respective returns of income for the period under consideration wherein the taxes have been paid by them. In view of the above said decisions no TDS is recoverable from the appellant when the deductees have filed their returns of income and paid taxes. (Page 31); and
(v) Since all the details are now available, the AO is directed to recalculate the interest, as found chargeable from the due date of deduction to the date of payment of taxes by them."
11. It was stated that the Assessing Officer during the course of appellate proceedings before the learned CIT(A), collected relevant material from [22] some of the Assessing Officers of the deductee contractors which revealed that some of the contractors claimed refund to him. The payments were made by the assessee and the entire amount of prepaid tax relating to those contractors consisted of TDS and advance tax but the learned CIT(A) ignored the said material and held that deduction should have been made u/s 194J and not 194C of the Act and gave following finding:
"(i) Not ordinary contracts - (page 7)
(ii) Activities involved technical knowledge & expertise (Page 7)
(iii) Associated Cement Ltd. contention not acceptable on account of High Court judgments (Page 8-10)
(iv) Section 194C not applicable (Page 10)
(v) Exclusionary part of Explanation not applicable (Page 10) It was vehemently argued that the Assessing Officer as well as learned CIT(A) grossly erred in rejecting the claim on the premise that each one of the contractors was bound to provide personnel for execution of the said work, however, ignored this vital fact that such employees were employees of the contractors and without the contractors, the assessee could not have been able to execute different step in the mining work. The learned counsel for the assessee also referred to circular No. 202 dated 05/07/1976 and submitted that the said circular reveals that as per section 44AB of the Act, presumptive income in case of non-resident engaged in the business of providing services or facilities in connection with or supplying plant and machinery on hire, used, or to be used, in the prospecting for or extraction or production of mineral oils, shall be determined equal to 10% of the amount paid or payable to the assessee for such services and that the expression "mineral oil" includes petroleum and natural gas and these expressions have been defined in section 9(1)(vii) of the Act read with Explanations thereof, for which Departmental Circular No. 202 dated 5th [23] July, 1976 stands issued. It was emphasized that a plain reading of Explanation 2 to section 9(1)(vii) defining fees for technical services clearly shows that consideration received for any construction, assembly, mining or like project undertaken by the recipient does not fall within the ambit of the term "fees for technical services" and that the various High Courts in the assessee's own case and various other similar cases have held that the services for exploration, prospecting and production of mineral oil cannot be regarded as fees for technical services u/s 9(1)(vii) and presumptive income will be assessable u/s 44BB. The reliance was placed on the following case laws:
(i) Director of Income-tax vs. Jindal Drilling and Industries Ltd.
[2010] 320 ITR 104 (Delhi)
(ii) Geofizyka Torun SP.Z.O.O., In re [2010] 320 ITR 268 (AAR)
(iii) Seabird Exploration FZ LLC , In re [2010] 320 ITR 286 (AAR)
(iv) Wavefield Inseis ASA, In re [2010] 320 ITR 290 (AAR)
(v) Oil India Limited vs. CIT [1995] 212 ITR 225 (Ori.)
(vi) CIT vs. Oil and Natural Gas Commission [2002] 255 ITR 413 (Raj.)
(vii) CIT & Anr. Vs. O.N.G.C. [2003] 264 ITR 340 (Uttaranchal)
(viii) Jaipur Vidyut Vitran Nigam Ltd. vs. DCIT [2009] 123 TTJ 888 (JP)
(ix) Gujarat State Electricity Corporation Ltd. vs. Income Tax Officer, Ahmedabad "C" Bench [2004] 82 TTJ (Ahd) 456 [2004] 3 SOT 368 (Ahd.)
(x) Radhaswami Satsang Vs. CIT (1992) 193 ITR 321 (S.C.) [24] It was further stated that Instruction No. 1862, dated 22/10/1990, issued by CBDT for definition of fee for technical services and explanation in respect of scope of Mining or like project in respect of rendering services for carrying out drilling operation in connection with extraction of mineral oil is very important and the scope of mining or like project in respect of 'mining' 'prospecting' for, or extraction or production of mineral oil, which includes rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas etc. and the assessee had carried out such activities in the year under consideration. As such any payment connected with such drilling operations was not fee for technical services for the purposes of explanation 2 to the section 9(1)(vii) of the Act read with Section 194J of the Act. The reliance was placed the following case laws:
(i) ONGC (as representative assessee of Alberta Research Council, Canada) vs. Joint CIT Spl. Range, Dehradun (2010) 133 TTJ 0663 (DELHI)
(ii) Geofizyka Torun Sp. Z.O.O., In Re [2010] 320 ITR 268 (AAR)
(iii) DCIT vs. ONGC as agent of Foramer France [2009] 70 ITD 468 (Delhi)
(iv) ACIT, Circle-1, Dehradun vs. Paradigm Geophysical Pty. Ltd.
[2010] 122 ITD 155
(vi) Seabird Exploration FZ LLC. In Re [2010] 320 ITR 26 (AAR) It was argued that the scope of section 194C of the Act is very wide and it applies to all types of contracts for carrying out any work including transport contracts, services contracts, labour contracts, material contracts and works contracts, except what has been specifically excluded but the Assessing Officer as well as the learned CIT(A) wrongly assumed as if section 194C applies only to simple work contract. The said presumption was clearly contrary to the plain language of section 194C and judgment of [25] the Hon'ble Apex Court in the case of Associated Cement Company V/s Commissioner of Income Tax (1993) 201 ITR 435 (SC). It was also stated that the CBDT has issued various circulars from time to time to explain the wide meaning and scope of section 194C of the Act. It was submitted that the assessee had rightly deducted tax at source as per provisions contained in section 194C of the Act from payments made to all the concerned contractors since beginning and that the assessee had not paid any fees for technical services but has paid the amount in terms of contract for execution of the work detailed therein, based on the actual execution of work on field of the exploration block of the assessee company and in accordance to the work executed as per their bills with the details of the work done by the respective contractor, after verification of execution of the works contract. Therefore, the tax had been rightly deducted u/s 194C of the Act and as was done in the past. He accordingly prayed to delete the demand of tax and interest sustained by learned CIT(A).
12. In his rival submissions, the learned CIT, D.R. strongly supported the orders of the authorities below and further submitted that during the course of survey conducted u/s 133A of the Act carried out on 4/3/2009 & 5/3/2009 at the business premises of the assessee, it was found that the certain payments were in the nature of fees for technical services rendered to the assessee company, but the assessee treated them as payments towards simple work contracts and accordingly deducted tax at source as per the provisions of section 194C of the Act instead of the provisions section 194J of the Act. It was stated the assessee company had made payments of Rs.11,42,72,865/- during the Financial Year 2007-08 for obtaining technical services as per the following details:
[26]S.NO. Name and Address of the deductees Amount of payment (Rs.)
1. Mercantile Associates, Dibrugarh (Assam) 3,79,16,220
2. Purvanchal Banijya Vikas, Guwahati (Assam) 12,86,024
3. HLS Asia Ltd. Noida (UP) 6,91,45,621
4. Expldroil Otech (India) Pvt Ltd., New Delhi. 60,25,000 11,43,72,865 It was submitted that the service providers were required to carry out various activities for the assessee and specific detail of job to be performed was mentioned in contracts elaborately which revealed that all the contracts were not ordinary contracts because all the activities required to be performed as per the contracts involved technical knowledge and expertise.
Therefore, the provisions of section 194J were applicable and not of Section 194C of the Act. The learned CIT, D.R. had also given the written submissions explaining therein the nature of services rendered by the service providers, which read as under:
1. M/s HLS Asia Limited Noida (U.P):-
M/s HLS Asia Limited was rendering services for Oil India Ltd. such as hiring wire line logging, perforation and data processing services having adequate experience in logging, data processing and perforation services to provide the service for the fields in Rajasthan in open and cased hole logging, perforation, data processing and related services.
Apart from this, company has also carried out services of Natural Gamma Ray services, Gamma ray Spectroscopy Services, Side wall core sampling services with gamma ray positioning, Stonley wave travel time with standard spacing of transmitter & receiver, Borehole Seismic services for vertical seismic profiling, Tool for high resolution bore hole images using micro electric arrays, Formation pressure measurement, Cement Bond evaluation services etc. etc. [27]
2. M/s Mercantile Associates, Dibrugarh (Assam):-
Company has provided Man-Management Services for an initial period of two years to Company for drilling of approximately fifteen (15) On-Shore oil/gas wells by deploying one number newly acquired (Company owned) 1000 HP Mobile Diesel Electrical Drilling Rig having two Power Packs for the SCR Module to power the mud pumps solid control equipment and other associated equipment/tools/accessories. Drilling will be carried out under supervision of Company and well depths are expected to be in the range of 700-2600 mtrs. (approx). However, the number of wells and well depths may vary at the discretion of the Company Company has provided personnel to carry out normal drilling operation including coring/round trips, lowering of casing pipes, primary testing, completion, and all other associated with the well drilling and completion programme to be furnished by Company before commencement of work.
All rig equipment/tools/accessories well consumable sand crane service will be provided by Company. Company will also provide Mud engineering, Mud Logging, Cementing and Wire line Logging and Perforation Services including respective Engineers and equipment/tools required in connection with the drilling operations through separate service contracts.
3. M/s Purvanchal Banijya Vikas, Guwahati (Assam) M/s Purvanchal Banijya Vikas Guwahati has provided the service Of installation/dismantling and maintenance of bulk handling plant. Service of Installation of the field storage silos, cutting pods compressors etc. at every drilling location were also provided. For these purposes necessary trained and well experienced personnel as per operational requirement for the job at company's drilling location were also deputed. Company has undertaken the operation and all maintenance work required for the Bulk Handling Plants, Compressors.[28]
4. M/s Exploroil Otech (India) Pvt. Ltd. New belhi This company has rendered mud Engineering services with manpower and requisite equipment for smooth drilling of the wells mentioned in Jaisalmer and Bikaner -Nagaur Basins, Western Rajasthan India.
The Scope of the Service is to provide expertise and state of the art technology for Mud Engineering Services. The service providers has also provided all necessary equipment services.
Company's personnel shall carry out the mud engineering work at well site as per International Standard and must be Capable of handling mud losses shifted of moderate to severe magnitude as per International Standards and trouble shooting of all mud related problems.
5. M/s Asian Consulting Engineers Pvt. Ltd.
From this company, OIL INDIA LIMITED hires the services of carrying out a Metalled Environmental Impact Assessment (E.J.A.) Studies of its two exploration Blocks in Rajasthan prior to seismic survey, drilling of twenty exploratory wells and production testing of these wells.
Environment Impact Assessment study includes collection of Primary and secondary baseline data through field investigations, environmental monitoring and from secondary sources viz; maps, Reports and scientific literature etc. The collected data then be analyzed for identification of impacts and arrive at cost effective mitigation measures.
The overall activities includes potable water monitoring in the vicinity, Air pollution quality monitoring, Flora and Fauna in the area, if any, Socio-economic study, Source of air pollution. Source of water pollution.
12.1 The learned CIT, D.R. also gave a write-up on the analysis of nature of services, which reads as under:
[29]"From the above details it is clear without any doubt that all the impugned contracts were not ordinary contracts. It is so because all the activities required to be performed as per these contracts involved technical knowledge and expertise. The operations of the company in Rajasthan are not ordinary operations. Being one of the very few players the field of highly technical job of oil and gas exploration in India it is obvious that the company is not expected to carry out ordinary civil or electrical etc. construction work. Its operations being highly technical in nature almost always require a great deal of technical knowledge, expertise and skill from the service providers.
Contractor Mercantile Associates's personnel team shall consist with electrical engineer, rig electrician, mechanic (ICE), mechanic (pump), welder, mechanical engineer, instrumentation technician, radio operator etc. etc. Contractor Purvanchal Banijya Vikas, Guwahati was required to carry out installation/ dismantling, operation and maintenance of bulk handling plant. Under this contract company was required to conduct following activities/tasks:-
(i) After Initial inspection at first drilling location the contractor will install the BHP (Bulk Handling Plant) to make it ready for feeding of the field storage silos through cutting pods.
(ii) Installation of the field storage silos, cutting pods, compressors etc. at every drilling location including hooking up lines and fittings for pumping cement/barites/bentonite to the rig system.
(iii) Dismantling of field storage silos, cutting pods, compressors lines and fittings etc. at drilling locations at the end of operation.
(iv) To inspect filter pads of all the silos and surge tanks for accumulation of cement etc. and any other materials on the exposed surface and arrange to clean these [30] periodically either with brushes or through compressed air agitation.
(v) To clean, charge, discharge and vent lines of the silos and surges tanks blowing compressed air prevent hardening of cement, barytes, bentonite, etc, including cleaning and disposal of waste accumulation at the plant premises as and when required (but not less than once in every 15 days) to maintain a clean working environment.
(vi) To arrange removal of condensed water, moisture in all silos, surge tanks and maintain the same clean and dry.
(vii) To check and grease all valves, butterfly valves, flange holts, threads, etc. in the system as necessary and also check manhole gaskets and victaulic joint gaskets and all pipe fittings including connections for leakage.
(viii) To provide necessary trained and well experienced personnel as per operational requirement for the job at Company's drilling location round the clock.
(ix) To undertake the operation and all maintenance work required for the bulk Handling Plants, Compressors (specifications of the compressor: Atlas Copco make air compressors; Model - VI 250, capacity 250 to 300 CFM, W.P. 40 psi, run by parking P6-354 diesel engine), storage silos and their accessories.
Exploroil Tech has rendered services of mud engineering through qualified and trained mud engineers having minimum qualification and experiences they carried out the work of mud engineering at well site as per international standards.
Viewed in this context one can easily understand that the works like man-management services, mud engineering services, services of various operational crews, services of electrical engineers, rig electricians, radio operators, [31] instrumentation technicians, mechanical engineers etc. etc. for which the aforesaid contracts were made by the company, cannot be termed as non-technical or simple work contracts by any stretch of imagination. It is so because all these services required a very high degree of technical knowledge, expertise and skill from the side of the contractors.
The contention of assessee company that its case is covered in the exclusionary part of Explanation-2 to sub-section
(vii) of section (9) is also not tenable. Since services rendered like man-managements services, mud engineering services, services of various operational: crews, services of electrical engineers, rig electricians, radio operators, instrumentation technicians, mechanical engineers etc. etc. by these contractors are not fallen in the purview of mining or like project. This fact is clear from the reading of the above quoted extracts from the relevant agreements. None of the above said technical services providers can be said to have carried out any construction or assembling or mining or like projects for the company. These service providers also did not receive any payment in the nature of salary from the company in respect of any such services.
The entire discussion made so far in the above paras proves that services given by all the aforesaid service providers clearly fall in the purview of section 194J of the Act being in the nature of technical services rendered to the company. Therefore all the arguments advanced by the assessee company in support of its contention that these services fall in the purview of section 194C are not acceptable.
Accordingly, it is established that for the payment made in Financial Year 2007-08 and 2008-09 the company was liable to deduct tax at source, on the payments made to these deductees as per the provisions of section 194J of the Act instead of section 194C which is clearly non applicable to such payments."
13. We have considered the submissions of both the parties and carefully gone through the material available on record. In the instant case, it is an [32] admitted fact that the assessee was engaged in the business of exploration, development, extraction, transportation of crude oil and natural gas, transportation of finished petroleum products and production of liquefied petroleum gas. For the aforesaid business the assessee engaged the contractors having the expertise in the respective fields. The assessee treated the contract with the service providers as the work contract and accordingly deducted TDS u/s 194C of the Act. On the contrary, the Assessing Officer was of the view that the contract with the service providers was not a simple work contract but a technical service contract. Therefore, the provisions of section 194J were applicable instead of provisions contained in section 194C of the Act. In the present case, we have to analyze as to whether the provisions contained in section 194C of the Act were applicable or not. The provisions contained in section 194C of the Act read as under:
"194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to--
(i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;
(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.[33]
(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 family.
(5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed [twenty] thousand rupees :
Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds [fifty] thousand rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section.
(6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum.[34]
(7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed.
Explanation.--For the purposes of this section,--
(i) "specified person" shall mean,--
(a) the Central Government or any State Government; or
(b) any local authority; or
(c) any corporation established by or under a Central, State or Provincial Act; or
(d) any company; or
(e) any co-operative society; or
(f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or
(g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or
(h) any trust; or
(i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or
(j) any Government of a foreign State or a foreign enterprise or any association or body established outside India; or
(k) any firm; or
(l) any person, being an individual or a Hindu undivided family or an 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;
[35](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.] 13.1 From the plain reading of the above provisions, it is crystal clear that these are applicable for carrying out any work. The definition of the work as per clause (iv) of the explanation appended to this section is an inclusive definition which includes advertising, broadcasting, carriage of goods or passengers by any mode of transport other than by railways, catering, manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but exclude 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. The definition of the work for the purpose of section 194C of the Act has been analysed by the Hon'ble Apex Court in the case of Associated Cement Ltd. Vs. CIT 201 ITR 43 (SC) wherein it has been held as under:
"When the percentage amount required to be deducted under the sub section (1) of section 194C as income tax is on the sum credited to the account of or paid to a contractor in [36] pursuance of a contract for carrying out a work or supplying labour for carrying out work, of any of the organizations specified therein, there is nothing in the sub-section which could make the Court to hold that the contract to carry out a work or the contract to supply labour to carry out a work should be confined to 'works contract' as was argued on behalf of the appellant. There is no reason to curtail or to cut down the meaning of plain words used in the section. "Any work"
means any work and not a "works contract", which has a special connotation in the tax law. Indeed in the sub-section, the 'work' referred to therein expressly includes supply of labour to carry out a work. It is a clear indication of legislature that the 'works' in subsection is not intended to be confined to or restricted to 'works contract'. 'Work' envisaged in the sub- section, therefore, has a wide import and covers 'any work' which one or the other of the organizations specified in the sub-section can get carried out through a contract under a contract and further it includes obtaining by any of such organizations supply of labour under a contract with a contractor for carrying out its work.. Therefore a person who credits to the account of or pans to a contractor any sum payable by any of the organizations specified in s. 194C(1) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the specific specified organization is liable to deduct two per cent of such sum as income-tax as required under that sub-section."
13.2 From the ratio laid down in the aforesaid decision, it is clear that the work envisaged in section 194C of the Act has vide import and covers any work which can be got carried out through a contract under a contract and includes obtaining by any of such organizations, supply of labour under a contract with a contractor for carrying out its work. Therefore, the Assessing Officer was not justified in observing that section 194C of the Act applies only to simple work contract. The work contract for execution of the contracts relating to exploration, extraction and production of mineral [37] oil in, which the assessee is engaged, has been stated to be not a contract for technical services in Explanation (2) to section 9(1)(vii) of the Act, which reads as under:
"Explanation [2].--For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries."
13.3 From the above it is crystal clear that consideration for mining is not included in fees for technical services. The CBDT to clarify the meaning of "mining" has issued Instruction No.1862 dated 22/10/1990, copy of which is placed at page No. 748 of the assessee's compilation. The said Instruction reads as under:
"1. The expression "fees for technical services" has been defined in Explanation 2 to section 9(1)(vii) of the Income-tax Act, 1961 as under:
"Explanation 2: for the purpose of this clause, 'fees for technical services' means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining, or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head 'Salaries'".[38]
2. The question whether prospecting for, or extraction or production of, mineral oil can be termed as 'mining' operations, was referred to the Attorney General of India for his opinion. The Attorney General has opined that such operations are mining operations and the expressions 'mining project' or 'like project' occurring in Explanation 2 to section 9(1) (vii) of the Income tax Act would cover rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas.
3. In view of the above opinion, the consideration for such services will not be treated as fees for technical services for the purpose of Explanation 2 to section 9(1)(vii) of the Income-tax Act, 1961. Payments for such services to a foreign company, therefore, will be income chargeable to tax under the provisions of section 44BB of the Income-tax Act, 1961 and not under the special provision for the taxation of fees for technical services contained in section 115A read with section 44D of the Income-tax Act, 1961."
13.4 In the above said instruction, at para 2, it is made clear that prospecting for, or extraction or production of, mineral oil can be termed as 'mining' operations and the expressions 'mining project' or 'like project' occurring in Explanation 2 to section 9(1)(vii) of the Act would cover rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas. It is an admitted fact that the assessee is engaged in the project of carrying out drilling operation in exploration or extraction of oil and natural gas and for that purpose he obtained the services of various parties on contract basis. Therefore, as per Instruction No. 1862 dated 11/10/1990 issued by the Central Board of Direct Taxes (CBDT), the services sought by the assessee were not the technical services. It is well settled that the Circulars issued by the CBDT are binding on the Income Tax authorities. In this regard, the [39] Hon'ble Madras High Court in the case of N. Mahalingam Vs. C.W.T. 256 ITR 453 held as under:
"that the Income-tax Department has consistently followed the circular. No reason had been stated as to why that circular was disregarded in the instant case. The assessee was as much entitled to the benefit of the circular as any other assessee similarly placed. That circular being one which is beneficial to the assessee, is also binding on the Department and the stand taken by the Department inconsistent with the circular could not be sustained."
13.5 A similar view has been taken by the Hon'ble Allahabad High Court in the case of Sir Shadi Lal Enterprises Ltd. vs. Union of India And Others [2003] 262 ITR 166 (All), wherein it has been held as under:
"The circulars of the Central Board of Direct Taxes are binding on the tax authorities."
13.6 Therefore, in view of the above instructions issued by the CBDT, the Assessing Officer was not justified in treating the contract entered into by the assessee with various parties for exploration or extraction of mineral oil and natural gas as a contract for technical services.
13.7 As regards to the fee for technical services, the CBDT has issued a Circular No. 202 dated 05/07/1976, which reads as under (as mentioned at page Nos.624 and 625 of the Income Tax Law by Chaturvedi and Pithisaria):
"The expression "fees for technical services" has been defined to mean any consideration (including any lump sum consideration) for the rendering of managerial, technical or consultancy services, including the provision of services of [40] technical or other personnel. It, however, does not include fees of the following types, namely:
(i) Any consideration received for any construction, assembly, mining or like project undertaken by the recipient. Such consideration has been excluded from the definition on the ground that such activities virtually amount to carrying on business in India for which considerable expenditure will have to be incurred by a non-resident and accordingly it will not be fair to tax such consideration in the hands of a foreign company on gross basis or to restrict the expenditure incurred for earning the same to 20 per cent of the gross amount as provided in new s. 44D of the IT Act. Consideration for any construction, assembly, mining or like project will, therefore, be chargeable to tax on net basis, i.e., after allowing deduction in respect of costs and expenditure incurred for earning the same and charged to tax at the rates applicable to the ordinary income of the non-
resident as specified in the relevant Finance Act." (Emphasis supplied by us) 13.8 From the above circular, it is clear that any mining or like project undertaken by the recipient, the expression 'fees for technical services' is not applicable. On the basis of above, it can be said that the services for mining, obtained by the assessee, were not the technical services. As such the Assessing Officer was not justified in holding that the provisions of section 194J of the Act were applicable because the assessee entered into contract for technical services with the service providers. Therefore, the learned CIT(A) was not justified in confirming the action of the Assessing Officer. In the instant case, it is an admitted fact that the assessee deducted TDS as provided u/s 194C of the Act and that tax was duly deposited with the Government, therefore, the Assessing Officer was not justified in raising the impugned demand u/s 201/201(1A) of the Act. In [41] the present case, it is also relevant to point out that the assessee, in line with the practice followed in its other offices/projects as also in other upstream oil & gas companies under Ministry of Petroleum and Natural Gas (MOPNG), had consistently been collecting TDS from the contractors (recipients) u/s 194C of the Act and depositing the same with the Government Authorities and the Income Tax Department in all the earlier years treated consistently the contract as "work contract" liable to TDS (Tax deduction at source) u/s 194C of the Act. On the issue relating to consistency, the Hon'ble Supreme Court in the case of Radhasoami Satsang vs. CIT 193 ITR 321 has held as under:
"Strictly speaking, res judicata does not apply to income-tax proceedings.Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment years has been found as a face one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year."
From the ratio laid down in the aforesaid case, it is clear that when the facts are similar, the consistency is to be maintained. Similarly, the Hon'ble Supreme Court in the case of CIT Vs. J.K. Charitable Trust (308 ITR
161) has held as under:
"Where the facts situation in all the assessment years is same, and if the Revenue has not appealed from the decision of an earlier year, it's appeal from the decision from a succeeding year will be dismissed."
13.9 In the present case since the facts for the year under consideration are similar to the facts involved in the earlier years wherein the Department had accepted the tax deducted at source u/s 194C of the Act, so keeping in [42] view the principle of consistency also, the Assessing Officer was not justified in deviating from the earlier stand. It is although well settled that "res judicata" is not applicable in the income tax proceedings since each and every assessment year is separate and independent year however, the principle of consistency is to be maintained when the facts are identical. We, therefore, considering the totality of the facts of the present case as discussed herein above, are of the view that the learned CIT(A) was not justified in confirming the action of the Assessing Officer. In that view of the matter, the impugned demand u/s 201(1) and 201(1A) raised by the Assessing Officer and confirmed by the learned CIT(A) is deleted.
14. Vide ground No. 4 the grievance of the assessee relates to the application of provisions of section 194I of the Act instead of section 194C with respect to payments made to contractors for hiring of crane.
15. The facts related to this issue, in brief, are that the Assessing Officer during the course of assessment proceedings noticed that the assessee made total payment of Rs.88,51,120/- to M/s Choudhary Transport, New Delhi and deducted TDS u/s 194C of the Act treating it as payment to transport contractor. The Assessing Officer observed that the payments to these contactors have been made for hiring of two diesels hydraulic truck mounted mobile cranes of 30 and 40 metric tones with operator and crew. The Assessing Officer was of the view that the TDS ought to have been deducted u/s 194I of the Act for the following reasons:
"(i) On examination of the contract between the assessee and the deductee showed that the contract for hiring of two diesels hydraulic truck mounted mobile cranes of 30 and 40 metric tones with operator and crew.[43]
(ii) The vehicles contracted could never be utilized as transport vehicles i.e. to carry goods or passengers as provided in explanation III to section 194C.
(iii) The vehicles were required to carry out crane services.
(iv) The decision of Gujarat High Court in the case of Gujco Carriers Vs. CIT 256 ITR 50 relied upon by the A/R was not applicable to the facts of the present case as the same was given in the context of claim for higher depreciation.
(v) The decision of Madras High Court in the case of CIT V/s Shri Ram Transport Finance Co. Ltd. (254 ITR 558) which defined the nature of cranes to be more applicable to the facts of the assessee's case.
(vi) The certificate U/s 197/194I dated 30.06.2008 for F.Y. 2008-2009 issued by the ITO(TDS), Ward-51(6), New Delhi to M/s Choudhary Transport clearly mentioned that the payments made to the deductee were in the nature of rent. Such certificate was never objected to either by the deductee or the deductor.
(vii) The fact that cranes were treated as machinery was supported by the following decisions:-
(a) CIT Vs. Standard Batteries Ltd. (201 ITR 977) (Bom.)
(b) CIT Vs. Mahindra Ugine Steel Co. Ltd. (233 ITR 204) (Bom.)
(c) Kandla Port Trust Vs. ACIT (296 ITR 88) (AT) (Rajkot)
(d) DCIT Vs. ABG Heavy Industries Ltd. (303 ITR 328) (AT) (Mumbai)
(e) Sanco Trans Ltd. Vs. ACIT (61 ITD 317) (ITAT Madras) Accordingly the Assessing Officer held that the assessee was liable to deduct tax at source u/s 194I in respect of payments made to M/s Choudhary Transport.[44]
16. Being aggrieved, the assessee carried the matter to learned CIT(A) and submitted that there was no discussion about the payments made to M/s R.R. Enterprises in the order passed u/s 201/201(A) on the amount paid to the said party which had only been included in Annexure-A of the said order while computing the alleged short deduction and interest thereon. As regards to the payment made to M/s Choudhary Transport, it was stated that the same was covered u/s 194C only since those contracts clearly revealed that the work of lifting, loading, transportation, unloading of heavy goods was entrusted to the said contractors and the work of operation, maintenance etc. of the cranes was also the responsibility of the said contractors. It was further stated that the operator and crew were also provided by the said contractors, therefore, the contract clearly came within the definition of work of carriage of goods by any mode of transport other than by railways, which was specifically covered within the definition of expression 'work' given in section 194C of the Act. It was pointed out that the provisions contained in Explanation (ii) below section 194C(7) provided that "goods carriages" shall have the same meaning assigned to it in Explanation to sub-section (7) of section 44AE of the Act. The reliance was placed the following case laws:
(i) M/s Birla Cement Works and Ors. Vs. State of Rajasthan AIR 2003 (Raj.) 251
(ii) Gujco Carriers Vs. CIT 256 ITR 50 (Guj.) It was submitted that the Assessing Officer has brushed aside the above judgments by observing that these judgments were given in the context of the claim of higher depreciation. It was stated that the contract for user of crane was not a simple contract of crane taken on rent or hire as the [45] owners of the crane had undertaken the responsibility of operating and maintaining the cranes in the mining areas of the assessee and had also undertaken to keep the cranes in worthy running condition and agreed to provide the services of operators and other staff required for maintenance and running of cranes. Therefore, such contract clearly comes within the ambit and scope of works contract as contemplated in section 194C of the Act, as per Circular No. 558 dated 28/03/1990 in which it had been clarified that where buses were given on hire along with driver holding valid license, conductor and such other facilities, such contracts, though may appear to be a simple hire contract but it will be regarded as a works contract for purpose of section 194C of the Act.
16.1 The learned CIT(A), after considering the submissions of the assessee, observed that the cranes hired by the assessee from M/s Choudhary Transport were in the nature of machinery, therefore, those could not be construed to mean goods carriages as defined in section 194C(7) of the Act. He further observed that section 194I specifically provides for deduction of tax at source for use of any machinery or plant or equipment and the assessee having made the payment to M/s Choudhary Transport for the use of machinery i.e. cranes, was liable to deduct tax u/s 194I and not u/s 194C of the Act. The learned CIT(A) sustained the action of the Assessing Officer considering the same to be justified. As regard to the contention of the assessee that the payment made to M/s R. R. Enterprises was only covered in Annexure-A to the assessment order and not in the body of the order, the learned CIT(A) was of the view that it was of hardly any consequence as the Annexure was very much part of the assessment order.
[46]17. Now the assessee is in appeal. The learned counsel for the assessee reiterated the submissions made before the authorities below. It was further submitted that the copies of contracts executed with the parties for hiring of diesel hydraulic trucks mounted mobile cranes with operators and crew, revealed that the work of lifting, loading, transportation and unloading of heavy goods was entrusted to the said contractors and the work of operation, maintenance etc. of the cranes was also the responsibility of the said contractors. It was stated that the operator and crew were also provided by the said contractors, therefore, such contracts clearly come within the definition of work of carriage of goods by any mode of transport other than by railways, which was specifically covered within the definition of expression 'work' given in section 194C of the Act. It was stated that the provision contained in Explanation (ii) below section 194C(7) provides that "goods carriages" shall have the same meaning assigned to it in Explanation to sub-section (7) of section 44AE of the Act. It was stated that the truck with Cranes were "heavy goods vehicle" and not "machinery". The reliance was placed the following case laws:
(i) M/s Birla Cement Works and Ors. Vs. State of
Rajasthan AIR (2003) (Raj.) 251
(ii) Gujco Carriers vs. CIT [2002] 256 ITR 50 (Guj)
(iii) CIT vs. Popular Art Palace Pvt. Ltd., Hon'ble Rajasthan High Court in C.O. No. 20/2003 in D.B. Appeal No.171/2009 by order dated 08/04/2003 It was further submitted that the contract for user of crane was not a simple contract of crane taken on rent or hire because the owners of the crane had undertaken the responsibility of operating and maintaining the [47] cranes in the mining areas of the assessee and had also undertaken to keep the cranes in worthy running condition. They also agreed to provide the services of operators and other staff required for maintenance and running of cranes. Therefore, such contract clearly came within the ambit and scope of works contract as contemplated in section 194C of the Act. A reference was made to Circular No. 558 dt. 28.3.1990 wherein it had been clarified that where buses were given on hire along with driver holding valid license, conductor and such other facilities, such contracts, though may appear to be a simple hire contract but it would be regarded as a works contract for the purposes of section 194C of the Act. It was accordingly submitted that the tax deducted at source as per the provisions of section 194C of the Act was justified. It was also contended that the tax had been deducted at source from payments made to those contractors as per section 194C of the Act in all the past years and such practice was always accepted by the Department. As such the Rule of Consistency also supports the action of the assessee for deduction of tax at source as per section 194C of the Act and the provisions of section 194I of the Act were not applicable in relation to such contracts.
18. In his rival submissions, the learned CIT D.R. strongly supported the orders of the authorities below and further submitted that the cranes cannot be described as a transport vehicle carrying either goods or passengers which is a pre requisite for applying provisions of section 194C of the Act. He further submitted that the impugned vehicles as per the terms and conditions of the relevant contracts were required to carry out crane services in the area of assessee company's operation in the state of Rajasthan. Therefore, those vehicles could never have been utilized as [48] transport vehicles either to carry goods or passengers as envisaged in Explanation-III to section 194C of the Act. It was pointed out that these cranes required specific parameters of the lifting capacity and operating radius of the cranes etc. making it obvious that the impugned contracts were for hiring cranes only. The reliance was placed the decision of Hon'ble Madras High Court in the case of CIT vs. Shri Ram Transport Finance Co. Ltd. [2002] 254 ITR 558.
19. It was also pointed out that the ITO, TDS ward 51(6), New Delhi had issued a certificate u/s 197/194I of the Act to M/s Choudhary Transport on 30/06/2008. As per this certificate for the Financial Year 2008-09, the tax at source was to be deducted @ 0.30% plus surcharge and cess as applicable in respect the payments being made to this concern. It was further stated that the said certificate was effective between 24/06/2008 to 31/03/2009 and the Assessing Officer clearly mentioned that the payments to M/s Choudhary Transport were in the nature of rent and were accordingly covered u/s 194I of the Act which was sufficient to prove without any doubt that the payment made for hiring of cranes were covered u/s 194I of the Act. Neither the payees nor the company had ever raised any objection in respect to this certificate.
20. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case the assessee was having a contract with M/s Choudhary Transport, New Delhi for hiring of two diesel hydraulic truck mounted mobile cranes. The cranes were fitted on hydraulic trucks. The assessee deducted TDS as per the provisions of section 194C of the Act which applies to any person [49] responsible for paying any sum to any recipient (contractor) for carrying out any work. The work for this section has been defined in clause (iv) of the explanation which states that the work shall include carriage of goods or passenger by any mode of transport other than by railway. Now question arises as to whether hydraulic truck fitted with crane can be used to carry the goods or passengers. In this regard, the Assessing Officer had not uttered even a single word, he simply stated that the vehicles contracted could never be utilized as transport vehicle.
21. The issue as to whether the mobile crane would fall within the expression of motor lorries, which means motor trucks has been decided by the Hon'ble Gujarat High Court in the case of Gujco Carriers Vs. CIT 256 ITR 50 (Guj.) wherein it has been held as under:
"The origin of the word "lorry" is uncertain. "Lorry" means (i) "a large strong motor vehicle for transporting goods, etc.", (ii) "a long flat low wagon", or (iii) "a truck used on railways or tramways", as per the Concise Oxford Dictionary. Lorry or truck would mean not only any motor vehicle designed to carry freight or goods but also to perform special services like fire fighting. Motor vehicles like fire trucks, fork lift trucks and crane trucks which are designed for special services fall within the category of "motor trucks" (also called "motor lorries"). The word "crane" when used for an inanimate object means a machine for moving heavy objects usually by suspending them from a projecting arm or beam. Crane is any of a diverse group of machines that not only lift heavy objects but also shift them horizontally. Movable cranes are mounted on railway, cars, motor trucks or chassis equipped with caterpillar treads and the hoisting machinery is mounted so as to counterpoise part of the load on the boom and thereby, prevent the entire crane from overturning while carrying the load. A mobile crane mounted on a truck constitutes a single unit known as "truck crane" which is adapted for use on roads for special services. The trucks on [50] which the crane is mounted is constructed and adapted specially to carry the crane. "Goods carriage" as defined in section 2(14) of the Motor Vehicles Act, 1988, means any motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods. Unloading in the context of truck crane where the crane remains mounted and attached to the truck when carried and even at the destination where it is put to use is not a relevant factor at all. Though not required to be loaded or unloaded like other goods transported in carriage of freight, the crane remains fixed, mounted on the truck which has been adapted for use solely for its carriage and such truck crane is used for the special service of lifting and moving heavy objects. This is why such a mobile crane is registered as a heavy motor vehicle which is a heavy goods vehicle as defined in section 2(16) of the Motor Vehicle Act."
(Emphasis supplied) 21.1 From the ratio laid down in the aforesaid referred to case, it is clear that the lorry or truck would mean not only any motor vehicle designed to carry freight or goods but also to perform special services. Motor vehicles like fire trucks, fork lift trucks and crane trucks which are designed for special services fall within the category of "motor trucks". The provisions of section 194C of the Act are applicable for carriage of goods or passenger by any mode of transport other than by railway. In the present case, trucks are fitted with crane and mobile crane mounted on a truck. So it can not be said that the truck fitted with crane cannot be used for carriage of goods. The Hon'ble Jurisdictional High Court in the case of CIT vs. Popular Art Palace Pvt. Ltd. in Appeal No. 111/2002 order dated 04/07/2003 held that lift is not plant & machinery. In the present case also the Assessing Officer treated the crane fitted with truck as plant & machinery and held that the provisions of section 194I were applicable for deducting TDS.
[51]However, the provisions contained in section 194I of the Act are applicable for plant & machinery or for land and building or land appurtenant to a building or , plant, equipment, furniture or fittings but as we have already observed in the earlier part of this order that cranes are not the plant & machinery as per the ratio laid down by the Hon'ble Jurisdictional High Court in the case of CIT vs. Popular Art Palace Pvt. Ltd. (supra) and Hon'ble Gujarat High Court in the case of Gujco Carriers Vs. CIT (supra). Therefore, the provisions of section 194J of the Act were not applicable. In that view of the matter, we allow the appeal of the assessee on this issue and set aside the order passed by the learned CIT(A).
22. In I.T.A. No.25/Jodh/2012, ground No. 1 to 4 are the same as were in I.T.A. No.24/Jodh/2012 (supra). Therefore, our findings given in former part of this order shall apply mutatis mutandis for this appeal also.
23. The only remaining issue in the appeal for the assessment year 2009- 2010, vide ground No. 5, relates to the rejection of non deduction certificate in the case of M/s Hindustan Purva Sainik Human Welfare Multi Purpose Co-operative society Ltd.
24. The facts related to this issue, in brief, are that the assessee made a payment of Rs.27,02,003/- to the aforesaid society towards providing security services on contracts basis. The Assessing Officer noticed that in the course of survey it was found that for part of the year the assessee company had not deducted tax at source on this payment. On enquiry the assessee replied to the Assessing Officer that ITO, ward 1(1) Udaipur had issued a "No Deduction Certificate" to the payee society on 10/06/2003 and accordingly when the payee submitted this certificate, in later part of the [52] financial year, tax was not deducted on the payments made to it. The Assessing Officer observed that copy of the said certificate issued on 10/06/2003 did not mention the period for which it was applicable. When it was pointed out to the assessee, it was stated that since there was no period mentioned in the said certificate, it was presumed that it was effective for the Financial Year under consideration. The Assessing Officer enquired from ITO, Ward 1(1), Udaipur who informed that for Financial Year 2005-06 and 2006-07 also "No Deduction Certificate" were again issued to the aforesaid society. However, he could not confirm that for Financial Year 2008-09 also such certificate was ever given. The Assessing Officer was of the view that the assessee was required to ensure before making the payment to the above said society as to whether for the financial year under consideration any "No Deduction Certificate" was ever issued by the concerned Assessing officer. He, therefore, held that the assessee company did not fulfill its legal obligations to deduct tax at source on the impugned payment. Accordingly, it was held that assessee was liable to deduct tax at source u/s 194C of the Act in the Financial Year under consideration on the payment made to the above society. Accordingly, the assessee company was treated as "assessee in default" in terms of section 201(1) of the Act.
25. The assessee carried the matter to learned CITA) and submitted that the Assessing Officer made enquiries from the ITO, Ward 1(1 ), Udaipur who informed that separate certificates had been issued for Financial Year 2005-06 and 2006-07 but the said ITO did not confirm whether any such certificate had been given or not for Financial Year under consideration. It was contended that the enquiries made by the Assessing Officer must have [53] also convinced him that the income of the said society was not taxable as the same was exempt u/s 80P of Act and the ITO Ward 1(1) did not dispute the correctness and validity of the "No Deduction Certificate" issued on 10/06/2003, in which no validity period was mentioned. It was further stated that the liability for alleged non-deduction of tax at source and interest thereon had been created in apparent violation of "No Tax Deduction Certificate" issued by the Assessing Officer and if the certificate had been issued without mentioning the validity period, the same has to be regarded as valid, true and rightly applicable for all years until the said certificate is withdrawn, modified or cancelled, particularly when the income of the payee was exempt u/s 80P of the Act.
25.1 The learned CIT(A), after considering the submissions of the assessee, observed that "No Tax Deduction Certificate" did not mention the period as was the case in Financial Year 2005-2006 and 2006-2007. He further observed that this certificate was apparently issued on 10/06/2003 i.e. much before the certificate issued on 25/11/2005 and 27/04/2006 and the certificates were later in time prescribed the validity period and the earlier certificate, i.e. issued on 10/06/2003 is superseded by the later certificates issued for Financial Year 2005-2006 and 2006-2007. The learned CIT(A) pointed out that no other certificate could be furnished by the assessee for the year under consideration, he, therefore, confirmed the action of the Assessing Officer.
26. Now the assessee is in appeal. The learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee furnished the certificate dated 08/05/2008 for non deduction of tax issued by the Assessing Officer which was valid up to [54] 31/3/2009 and related to the society whose income was exempt u/s 80P of the Act, therefore, the action of the Assessing Officer in considering the assessee as "assessee in default" for the payment of the impugned amount was not justified and that the learned CIT(A) without considering the facts of the case in right perspective confirmed the action of the Assessing Officer. Reliance was placed on the following case laws:
- CIT Vs. Rishikesh Apts. Co-Operative Housing Society Ltd. (2002) 253 ITR 310 (Guj.)
- Mahindra & Mahindra Vs. DCIT (2009) 122 TTJ (Mum.) (S.B.) 577.
- CIT Vs. Adidas India Marketing P. Ltd. (2007) 288 ITR 379 (Del).
- CIT vs. Rajasthan Rajya Vidyut Prasaran Nigam Ltd. (2006) 287 ITR 354 (Raj.).
- ITO vs. Emrald Cost Co.P.Ltd. (2008)304 ITR (AT) 338 (Jd.) CIT Vs. Eli Lilly and Co. (India) P.Ltd. (2009) 312 ITR 225 (SC)
27. In his rival submissions the learned CIT, D.R. strongly supported the orders of the authorities below and further submitted that the assessee did not furnish certificate for non deduction of tax for the year under consideration and the assessee did not deduct tax on the payment made to M/s. Hindustan Purv Sainik Human Welfare Multi Purpose Co-Op. Society. Therefore, the Assessing Officer was justified in treating the assessee as assessee in default for the purpose of section 201(1) and 201(1A) of the Act and the learned CIT(A) rightly confirmed the action of the Assessing Officer.
28. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is an admitted fact that the A.O. made the enquiry from the concerned ITO i.e. [55] ITO, Ward-1(1), Udaipur who issued the certificates for non deduction of tax to the assessee. In the present case, the Assessing Officer did not dispute the correctness and validity of the non deduction certificate issued on 10/06/2003 and that the assessee was enjoying the exemption u/s 80P of the Act in all the years i.e. the tax liability of the assessee was nil. In the instant case, the assessee furnished the copy of certificate issued u/s 197(1)(A)/196C(4) of the Act dated 8th May, 2008 by the ITO, Ward-1(1), Udaipur( copy is placed on record at page 603 of the assessee's paper book), wherein it is stated that the total income of M/s. Hindustan Purv Sainik Human Welfare Multi Purpose Co-Op. Society is exempt u/s 80P(2)(vi) of the Act, therefore, the clients of the said society are not required to deduct tax at source at the time of payment to above cooperative society. The said certificate is valid upto 31/03/2009 and the present case relates to the Financial Year 2008-2009 i.e. assessment year 2009-2010. It appears that neither the Assessing Officer nor the learned CIT(A) had given any cognizance to the aforesaid certificate placed at page No. 603 of the assessee's compilation. We, therefore, set aside this issue back to the file of the Assessing Officer to be adjudicated afresh and on verification if it is found that the assessee was having the certificate issued by the competent authority for non deduction of the tax at source on the payment made to the said society then the assessee cannot be held as assessee in default on the payment made to the said society. Accordingly, this issue is remanded back to the Assessing Officer to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
[56]29. In the result, the appeal in I.T.A. No.24Jodh/2012 for the assessment year 2008-2009 is allowed and the appeal in I.T.A. No.25/Jodh/2012 for the assessment year 2009-2010 is partly allowed for statistical purposes.
(Order pronounced in the open court on 31/07/2013).
Sd/- Sd/- ( HARI OM MARATHA ) ( N. K. SAINI ) Judicial Member Accountant Member Dated: 31/07/2013 *CL Singh Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. D.R. Assistant Registrar