TaxTMI 
TaxTMI 
2013 (11) TMI 926
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....uge payments towards transmission charges to Gas Authority of India Ltd. [GAIL] and Indian Oil Corporation Ltd. [IOCL] for the supply of gas pursuant to an agreement entered into between the assessee and the above named parties. It was also noticed that the assessee company was deducting tax at source under the provisions of section 194C on these payments. When the concerned agreements were examined and analyzed, regarding gas sale with GAIL, it was noticed that the assessee was required to make payments towards transmission charges in addition to gas price for certain services provided by the seller. The terms and conditions as per this agreement also revealed that the services provided by GAIL to the assessee to facilitate uninterrupted supply of gas were technical in nature. Therefore, as per the A.O, the assessee is required to deduct tax at source as per the provisions of section 194J of the Act. Instead, the assessee had deducted tax at source u/s 194C of the Act, so the A.O. has treated the assessee company as the assessee in default. Accordingly, a detailed show cause notice dated 13.1.2009, was issued requiring it to explain why the provisions of section 194J are not appli....
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....s at the specified rate. The said price is for the supply of gas to the assessee company at the delivery point. In performance of such sale contract. GAIL has laid down pipeline to the factory premises of the "buyer" i.e. the assessee company. The said pipeline has been installed by the seller, is maintained by the seller and the assessee company is not in anyway responsible for its installation or maintenance or its management. The delivery point in the factory of the assessee company is looked after by the employees of the seller company and no managerial, technical or consultancy services are provided by the seller to the assessee company. 4. That as per Article 4.1 duly reproduced by you in the impugned notice-gas sold and transported to the buyer is to be delivered by the seller at the delivery point of the buyer's premises at Gadepan, Dist. Kota. A Gas metering station is also provided and managed by the Seller and all the facilities upto the "delivery point" are maintained, constructed and operated by the seller at their own risk and cost. The facilities downstream from the delivery point onwards are maintained/constructed an....
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....wn and manufactures a product as per the requirement of a specific customer, it is a case of sale and not a contract for carrying out any work. The fact that the goods manufactured were, according to the requirement of the customer, does not mean or imply that any work was carried out on behalf of that customer ". 6. That the GAIL i.e. the seller issues invoice fortnightly on the basis of quantity actually supplied. The invoice contains the price, transmission charges, VAT, etc. The VAT which is charged by the seller is on the composite price and not only in respect of price of the gas. Only on account of the order of the Government which regulates the price of gas as well as transmission charges, both have to be disclosed separately in the invoice for your reference and record. 6.1 That as submitted hereinabove and as is apparent and patent on the face of the record that composite price of Gas and other charges have been considered by the GAIL as sale-price and VAT has been charged on the total price. Charging of VAT on the entire sale price clearly brings out the intention of....
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.... available in sale price. Further, in the case of Greaves Chitram v. State of Tamilnadu reported in 100 STC 411. The Madras High court has held the contract for supply of crane - which stipulated the price including delivery at site and insurance up to the delivery, the transport and insurance charges are part of sale price. In another reported case, in Commissioner of Income-tax v. B.M. Kharwar72 ITR 603, the Supreme Court quoted with approval a passage from the judgment of the Privy Council in the case of bank of Chettand Ltd. v. CIT & ITR 522 in - which the Supreme court has stated. The taxing authority is entitled and indeed bound to determine the true legal relation resulting from the transaction. If the parties has chosen to conceal by a device the legal relation it is open to the taxing authorities to unravel and to determine the true character of the relationship. But the legal effect of a transaction cannot be displayed by probing into the substance of the transaction. Thus, a contract which is intended to b....
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....d industrial science". In the modern day world almost every facet of one's life is linked to science and technology inasmuch as numerous things used or relied upon in ever day life is the result of scientific and technological development. Every instrument or gadget that is used to make life easier is the result of scientific invention or development and involves the use of technology. On that score, every provider of every instrument or facility used by a person cannot be regarded as providing technical service, (Emphasis supplied). When a person hires a taxi to move from one place to another, he uses a product of science and technology, viz., an automobile. It cannot on that ground be said that the taxi driver who controls the vehicle, and monitors its movement is rendering a technical service to the person who uses the automobile. Similarly, when a person travels by train or in an aeroplane, it cannot be said that the railways or airlines is rendering a technical service to the passenger and, therefore, the passenger is under an obligation to deduct tax at source on the payments made to the railway or the airline for having....
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.... the assessee Company is similar to that of Sky cell Communications Ltd. (supra). Whatever equipment has been put or used by the GAIL for supply and measurement of gas is incidental, ancillary and essential for a 'contract of sale'. It is not providing of 'technical services' as envisaged in Section 194J. We submit the said Section is unattracted in respect of amount of transmission charges paid to GAIL of Rs. 640,771,476 and Rs. 510,271,499 for the A.Y. 2007-08 and from 1.4.2008 to 30.11.2008 respectively. It deserves to be excluded and is objected. That as discussed hereinabove the "delivery point" installed by GAIL in the factory premises of the assessee Company is like putting up a petrol pump. It is transportation by GAIL of its own gas by pipelines. Pipelines are more suitable for transportation of gases. The sale is by GAIL at their delivery point. 8.1 That in ultimate analysis as discussed herein before, we submit there is no liability for tax deduction at source u/s. 194C or 194J of the Act. That there exists a Gas Sale Agreement between the assessee Company (As Buyer) and India Oil Corporation Ltd. a Public Sector Co....
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....that if any person referred to in section 200 and in the cases referred to in section 194, the principal officer and the company of which he is the principal officer does not deduct the whole or any part of the tax and such tax gas not been paid by the assessee direct, then such person the principal officer and the company shall without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default as referred to in sub-section (1) of section 201 in respect of such tax. Thus, the explanation clarifies that the principal officer shall be deemed to be an assessee is default U/s 201 (IA) only when he does not deduct the whole or any part of the tax and such tax has not been paid the tax direct, the principal officer shall not be held to be an assessee in default for non-deduction of tax at source. This issue has also made clear from the Circular No. 275/201/95-IT9Bo dated 29.01.1997 issued by the CBDT. This circular declares that no demand visualized under section 201(1) of the officer in charge TDS, that taxes due have been paid by the ....
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....en in the case of ITO v. Samtel Glass Ltd., Kota in ITA No. 150 & 151/JU/2010 for A.Ys. 2008-09 and 2009-10 dated 27.7.2012. According to the ld. A.R., the facts of this case are exactly identical to the facts of his assessee and therefore, it was pleaded that the issue being squarely covered in favour of the assessee, these appeals of the revenue may kindly be dismissed. 5. Per contra, the ld. D.R. has relied on the order of the A.O. and has further submitted that the arguments of the ld. A.R. that no TDS is to be deducted in this case is contradictory to the assessee's stand because it has itself deducted tax at source qua these payments but under a different provision of the Act namely, u/s 194C of the Act instead of 194J of the Act. With the above submissions, he has stated that the facts of the case in hand are different from the cases of Samtel Glass Ltd. (supra) on which reliance has been placed by the ld. A.R. 6. We have cogitated the entire records. We have carefully perused the Tribunal orders relied before us, conjointly with the oral submissions and reasonings given by the A.O. for treating the assessee in default u/s 201(1) and for charging interest 201(1A) of the Ac....
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.... to the buyer is to be delivered by the seller at the delivery point of the buyer's premises at Gadepan, Dist kota. A gas metering station is also provided and managed by the seller and all the facilities upto the delivery point are maintained, constructed and operated by the seller at their own risk and cost. Thus it becomes crystal-clear that it is 'a contract for sale' and not 'a contract for technical services' as has been construed by the A.O. In this regard reliance was placed on the CBDT Circular No. 86 dated may 29, 1972 reported in [1972] 84 ITR [St.] 99. Its sub-clause (ii) of clause (1) reads as under: "The deduction of the income-tax will be made from sums paid for carrying out any work or for supplying labour for carrying out any work. In other words, the new provision will apply only in relation to 'works contract' and 'labour contracts' and will not cover 'contracts for sale of goods." We have also found that our above finding is supported by the decisions of the Hon'ble Delhi High Court in the case of CIT v. Dabur India Ltd. [2006] 283 ITR 197; and Mumbai High Court in the case of BDA Ltd. v. ITO [TDS] [2006] 281 ITR 99 [Mum]and by the Hon....