Commissioner Of Income Tax, (Tds), Jaipur v. The Chief Engineer, Bisalpur Project, Raj. Urbaninfrastructure, Development Project, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 91 / 2011 COMMISSIONER OF INCOME TAX, (TDS), JAIPUR ----Appellant Versus THE CHIEF ENGINEER, BISALPUR PROJECT, RAJ. URBANINFRASTRUCTURE, DEVELOPMENT PROJECT, JAIPUR ----Respondent Connected With D.B. Income Tax Appeal No. 550 / 2011 COMMISSIONER OF INCOME TAX (TDS), JAIPUR ----Appellant Versus THE CHIEF ENGINEER, BISALPUR PROJECT, RAJ. URBAN INFRASTRUCTURE, DEVELOPMENT PROJECT, JAIPUR ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.D. Mathur, Mr. Prateek Kedawat for Mr. R.B. Mathur For Respondent(s) : Mr. Krishna Verma _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 22/08/2017 1.In both these appeals, common question of law and facts areinvolved therefore, they are decided by the common judgment. 2.By way of these appeals, the appellant has challenged thejudgment and order of the tribunal whereby the tribunal hasdismissed the appeal preferred by the department. 2.This court while admitting the appeal has framed following substantial questions of law:- D.B. Income Tax Appeal No.91/2011admitted on 12.04.2012 “Whether in the facts and circumstances of thecase the ITAT was justified in law in deleting thedemand raised u/s. 201(1) and 201(1A) holdingthe respondent assessee liable for deduction ofTDS u/s. 194C of the Act.” D.B. Income Tax Appeal No.550/2011admitted on 10.10.2011 “Whether the Tribunal was justified in deletingthe demand raised u/s.201(1) and 201(A)holding the respondent(assessee) to be liable fordeduction of tax deducted at source u/s. 194C ofthe Act.” 3.Counsel for the appellant contended that the A.O. whileconsidering the matter has taken into consideration the paymentwhich was made to the company with whom they entered intocontract. He has relied upon para 5 of the A.O. which reads asunder:- “In the para 1 of the reply, the deductor hastaken plea that payment of service tax isreimbursement of the payment of service tax soit is not liable to TDS and has relied on circularno.4/2008 dated 28.4.2008 of CBDT wherein itis mentioned that no TDS is required on servicetax part of rent. The plea of the deductor is nottenable. Circular regarding payment of rent u/s.1941 cannot be applied on payments madeu/s.194J. In this connection the CBDT has givenclarification vide no. F.No.275/73/2007-IT (B)dated 30.06.2008 that since 194J covers anysum paid therefore the scope of circular no4/2008 can not be extended to paymentmade u/s.194J. This means that service taxportion of total payment can not be excludedfrom deduction of TDS and TDS should be made on gross payment including service tax pat. Therelevant portion of above clarification isreproduced below for ready reference:- “The payment made under Section 194-Idiffer significantly from payment made undersection 194J in the way that in the case of 194ITDS has to be deducted or any income paid asrent. However, in the case of section 194J TDShas to be deducted on any sum paid asprofessional and technical fees. The board haddecided to exclude TDS on service taxcomponent on rental payment because it wasconstrued that service tax payment cannot beregarded as income of the landlord. Sincesection 194J covers any sum paid therefore theboard has decided not to extend the copy ofcircular no.4/2008 dated 28.04.2008 to suchpayment under section 194J. on gross payment including service tax pat. Therelevant portion of above clarification isreproduced below for ready reference:- “The payment made under Section 194-Idiffer significantly from payment made undersection 194J in the way that in the case of 194ITDS has to be deducted or any income paid asrent. However, in the case of section 194J TDShas to be deducted on any sum paid asprofessional and technical fees. The board haddecided to exclude TDS on service taxcomponent on rental payment because it wasconstrued that service tax payment cannot beregarded as income of the landlord. Sincesection 194J covers any sum paid therefore theboard has decided not to extend the copy ofcircular no.4/2008 dated 28.04.2008 to suchpayment under section 194J. As discussed above, it is clear that as perthe provisions of section 194J, any payment iscovered for TDS and the deductor should havemade TDS on the service tax component of totalpayment also. The deductor is therefore heldliable u/s.201(1) for non deduction of TDSu/s. 194J on service tax portion ofpayments u/s.194J and also liable forinterest u/s. 201(1A) as per the calculationgiven in annexure of this order. Thedeductor has submitted that all the consultantsare regularly filing their return and have paidtheir due taxes. The submission of the assesseedeductor has been considered. The onus is onthe assessee deductor to prove that taxes duehave been paid by the deductees. This is clearfrom the CBDTs clarification F. No.276/201/96-IT(B) dated 29.01.1997, which is given below:- “Subject: Tax deducted at source- consequences of failure to deduct on payment. The Board has received severalrepresentations seeking clarifications about thedefault under sec. 201(1) and consequentinterest u/s 201(1A) of the I.T. Act. I amdirected to state that the Board is of the viewthat no demand visualized u/s.201(1) of the I.T.Act should be enforced after the tax deductorhas satisfied the officer in charge of TDS thattaxes due have ben paid by the deducteeassessee. However, this will not alter the liabilityto charge interest u/s 201(1A) of the Act till thedate of payment of taxes by the deductee assessee or the liability for penalty u/s. 271C ofthe I.T. Act.” Simply by saying that the consultants areregularly filing their returns of income and havepaid their due taxes and without giving anyevidence in this regard, it can not be said thatthe deductor assessee has satisfied the TDSofficer that the deductees have included thereceipts from the deductor assessee in theirincome of the relevant year and have paid taxeson the income portion of such receipts. Theassessee has failed to discharge its onus withinthe meaning of CBDSs clarification asreproduced above. Thus the assessee hasfailed to prove its case and thereforedemand of TDS under Section 201(1) cannot be waived.” 4.The A.O. while taking into consideration has observed as under:- “On perusal of para-6 of this letter, it is observedthat since the work has not been completed,jRRVPNL has not takien the payment of Rs.36crores received from RUIDP in the income &expenditure account and the same is lying in thebalance sheet in liability side. Thus, whenRRVPNL has not included the receipts of Rs.36crores in its income, it cannot be said that duetaxes has been paid in terms of the CBDTsclarification F. No.376/201/96-IT(B) dated29.01.1997 given above. The assessee has failedto discharge its onus within the meaning ofCBDTs clarification. Thus the assessee hasfailed to prove its case and thereforedemand of TDS under Section 201(1) cannotbe waived.” 5.He contended that the view taken by the A.O. is required to be approved. 6.Counsel for the respondent has taken us to the order of the CIT(A) in para 2.3 which reads as under:- 5.He contended that the view taken by the A.O. is required to be approved. 6.Counsel for the respondent has taken us to the order of the CIT(A) in para 2.3 which reads as under:- “2.3 I have carefully considered the facts of thecase and submissions of Ld.AR. On perusal of therelevant records, I find that there is no dispute regarding the fact that the appellant, during thisyear, made a payment of Rs.30 crores toRRVPNL, towards meeting the cost ofconstruction of the power sub-station and alliedinstallations, which were required for providingthe power supply needed for the appellant’sBilaspur Jaipur Water Supply Project. However, Ifind merit in the contention of Ld.AR that the saidpayment was in the nature of consumer was tobe done by RRVPNL and for that purposeRRVPNL constructed power sub stations, etc. and/ or other infrastructure needed, which remainedthe property/assets of RRVPNL has alsoconfirmed, vide its letter dated 4.2.2009, sent inresponse to the summons issued u/s 131 of theAct to it by the AO, that the said amount of Rs.30crores (forming the part of Rs.36 crores receivedby RRVPNL from RUDIP in F.Ys. 2006-07 and2007-08), was received under the head “depositfor specific jobs” and that the assets created byincurring the expenditure out of the said amountremained the assets of RRVPNL and not a RUIDP.RRVPNL has further informed , vide the aforesaidletter, that after completion of the constructionwork, it debited the concerned asset to its fixedassets and credited the deposit (aforesaidpayment by the appellant) to “ConsumersContribution” account, which was shown underthe head “Reserves and Surplus”. Therefore, inview of the aforesaid reply, given by the RRVPNL,it is evident that the payment of Rs.30 crores, inquestion made by the appellant to RRVPNLduring this year, was in the nature of aconsumer’s contribution towards creation of anasset, which belonged to RRVPNL, though thesame was to be used for the supply of electricityto the appellant/any other consumer. Further, it isalso noticed that the asset (sub-station), inquestion, was constructed by the RRVPNLthrough some their contractor and the contractfor the construction of the same was betweenRRVPNL and the other contractor and notbetween the appellant and that contractor.Hence, on these facts, it cannot be said thatthere was a relationship of contractor andcontractee between RRVPNL and the appellant. Inaccordance wit the above discussion, it is heldthat the payment of Rs.30 crores made by theappellant to RRVPNL was not for any contrct, interms of the provisions of S.194C of the I.T. Act.Therefore, consequently, it is held that theappellant was not liable for making TDS from the said payment of Rs.30 crores (made asconsumer’s contribution to RRVPNL), U/s 194C ofthe I.T. Act and the demand created u/s201(1)/201(1A) of the I.T. Act against theappellant. Consequently, this ground of appeal isallowed.” 7.The same has been confirmed by the tribunal in paragraph 3.2 and 4.2 which reads as under:- 3.2 The first grievance and third of the Revenueis to similar to the grievance raised inassessment year 2007-08. Following our findingsfor the assessment year 2007-058, we hold thatthe TDS was not required to be deducted on thesum paid by the asessee as consumercontribution for laying the transmission lines. 4.2 We have gone through the order of the ld.CIT(A). The ld. CIT(A) has not referred to circularNo.4/2008 in the order. The ld. CIT(A) hasdeleted the liability of Rs.1,62,266/- in respect ofnon-deducting of tax at source from service taxpaid to Shah Technical Consultant (P) Ltd. onservices rendered as per bill including such tax.This liability was deleted on the basis of thedecision of the Tribunal in the case of theassessee. It will be reproduce para 3.3 of the ld.CIT(A)’s order. 4.2 We have gone through the order of the ld.CIT(A). The ld. CIT(A) has not referred to circularNo.4/2008 in the order. The ld. CIT(A) hasdeleted the liability of Rs.1,62,266/- in respect ofnon-deducting of tax at source from service taxpaid to Shah Technical Consultant (P) Ltd. onservices rendered as per bill including such tax.This liability was deleted on the basis of thedecision of the Tribunal in the case of theassessee. It will be reproduce para 3.3 of the ld.CIT(A)’s order. 3.3 I have carefully considered the factsof the case and submissions of the ld.AR. I have also carefully one throughthe aforementioned order of theHon’ble ITAT Jaipur bench dated30.10.2009 in the appellant’s case. Onperusal of the same, I find that theissue as to whether the appellant wasliable to make TDS u/s 194K from theservice tax paid to M/s. Shah TechnicalConsultant (P) Ltd, was directly coveredin favour of the appellant by theaforesaid order of Hon’ble Tribunal.Therefore, respectfully, following thesame, the AO is directed to delete theliability of Rs.1,62,266/- created u/s201(1) /201(1A) against the appellantin respect of the payments made toM/s. Shah Technical Consultant (P) Ltd.However, as the appellant has admittedto its mistake and has not disputedliability of Rs.25,474/- created u/s 101(1)/201(1A) against the appellant inrespect of the payments made toCECODECON, the same is confirmed.Consequently, this ground of appeal ispartly allowed.” 8.He contended that the view taken by the CIT(A) and Tribunal are required to be accepted. 9.We have heard the counsel for the parties. 10.Taking into consideration, the concurrent findings recordedby the authorities and apart from that the agreement was enteredbetween the parties and both the authorities have rightlyappreciated the same. 11.In that view of the matter, the issue is answered in favour ofthe assessee and against the department. 12.All the appeals stand dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Jyoti item No.83-84