TaxTMI 
TaxTMI 
2015 (2) TMI 677
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...., "the Act") in respect of the payments made by the respondent-assessee towards the transmission charges and whether it is in the nature of sale or contract in between the respondent-assessee and the Gas Authority of India Ltd (for short "GAIL"). 3. Brief facts, as emerging on the face of record, are that the respondent- assessee is a private limited company and a survey was carried out at the business premises of the respondent-assessee on December 16, 2008, which was basically with reference to the provisions relating to tax deduction at source (for short, "the TDS"). The authorised officer noticed that the respondent-assessee had made huge payments towards transmission transaction charges to GAIL for supply of gas pursuant to an agreement/ contract entered into by both the parties. It was further noticed that though the respondent-assessee was deducting TDS on other payments made but did not deduct TDS on the payments made towards the transmission charges to GAIL. The Assessing Officer (for short, "the AO") issued a show-cause notice to the respondent-assessee requiring, inter alia, the respondent-assessee to prove as to why huge payments have been made towards the transmissi....
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.... of the GAS only. The assessee also quoted article 2 which specifically stated about purchase and sale between the parties. It was further mentioned that after revising the clauses in the agreements that the facilities (pipelines, metering equipment and other gas accessories are facilities of the seller only, the seller is maintaining these equipment for facilitating effective delivery of the gas, the seller is providing technical or whatsoever services to themselves while maintaining their own facilities and not the buyer's facilities as such the provisions of section 194C or section 194J of the Income-tax Act are not applicable. Along with the reply, the assessee also enclosed a copy of purchase invoice issued by the GAIL to the assessee bearing No. RJ00030229, dated November 30, 2008, where it was pointed out that the seller charged VAT on all elements of the price of the gas. It was reiterated that the price paid by the company to GAIL is price for gas and not availing of any type of services from GAIL. It was also contended that even GAIL, the seller, has also treated the entire transaction as transaction of sale and by producing the profit and loss account of the said com....
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.... cited before it, was of the view that the gas sale agreement (GSA) with GAIL was essentially an agreement for purchase/sale of goods and that the Assessing Officer did not give good justification for isolating transmission charges as fees for technical services or payment for works contract and, thus, came to the conclusion that neither section 194J nor section 194C was applicable to the payments made to GAIL under GSA. The Commissioner of Income-tax (Appeals) alternatively also came to the conclusion that since GAIL had paid tax on all payments under the GSA for both the assessment years and such receipts were included in its relevant return of income, even otherwise, there was no scope for invoking section 201 of the Income-tax Act and accordingly deleted the entire levy of TDS as well as interest. 6. Aggrieved with the order of the Commissioner of Income-tax (Appeals), the Revenue preferred two appeals before the Income-tax Appellate Tribunal and the Income-tax Appellate Tribunal also concurred with the findings of the Commissioner of Income-tax (Appeals) and after referring to clauses of the agreement as also other factors upheld the order passed by the Commissioner of Inco....
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.... portion of this article is also reproduced here under for convenience. 5.1. Delivery.- Subject to the provision of article 8.1.1 gas sold to the buyer pursuant to this agreement shall be delivered by the seller at the delivery point. 5.2. Title and risk.- The facilities as defined in article 8 up to the delivery point shall be constructed, operated and maintained by the seller at its own risk and cost. 5.3. Delivery pressure.- The seller shall maintain the ability to supply gas to the buyer at the delivery point at the pressure of 12 kg./ cm2 (g)+ 1 kg/cm2." "8.1.1. The seller and the buyer shall provide the seller's facilities and the buyer's facilities respectively, as may from time to time be necessary to enable party to perform its obligations under this agree ment and the seller and the buyer shall operate, repair and maintain, the seller's facilities and the buyer's facilities, respectively, and all replacements in good working order and condition throughout the duration of the agreement and operate the same in accordance with reasonable and prudent operator." ....
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....n and includes- (i) a transfer, otherwise than in pursuance of a contract, of pro perty in goods for cash, deferred payment or other valuable consi deration ; (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract ; (iii) any delivery of goods on hire-purchase or other system of payment by instalments ; (iv) a transfer of the right to use goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration ; (v) a supply of goods by an unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration ; and (vi) a supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply shall be deemed to be a sale and the word 'purchase' or 'buy' shall be construed accordingly ; Explanation.- Notwithstanding anything contained in this Act....
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....ties that the seller agrees to deliver and sale to the buyer the gas at the delivery point and the buyer agrees to purchase and take delivery of such gas and pay in accordance with the terms and conditions in this agreement. Thus, the very nature of the agreement clearly shows that it was not in the nature of works contract or technical services. Delivery at the place of buyer does not mean that it would convert transaction as in the nature of contract or technical services. 14. On a perusal of above and on a plain reading, it provides that under section 194C there should be a contract in between two parties and work includes (a) advertising, (b) broadcasting, (c) carriage of goods or passengers by any mode of transport other than railways, (d) catering, (e) manufacturing or supplying a product . . . Thus, on reading the clauses as entered into by and between the parties, in our view, the agreement is not in the nature of a contract as the assessee and GAIL have not entered into any of the work, referred to hereinabove. On a perusal of a reading of section 194J read with Explanation 2 of section 9(1)(vii) (supra), it provides that the predominant purpose to fall in "technical se....
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.... to whether freight was part of the sale price or excluded out of the purview of sale price, after considering the issue at length, was of the view that "any sum charged for anything contained by the dealer in respect of the goods at the time of/or before the delivery thereof, is to be regarded as part of the 'sale price', even if it does not fall within the first part of the definition". 19. We are also of the view that the judgment rendered by the hon'ble apex court in the case of Hindustan Coca Cola Beverage P. Ltd. (supra) is squarely applicable in the instant case as the recipient (GAIL) had duly disclosed the turnover as sale in their books of account and as per the profit and loss account already placed before the Assessing Officer. It is already admitted by the Assessing Officer that such profit and loss account and other necessary information was placed by the assessee of GAIL in the present case so as to prove that the recipient has not only disclosed the turnover but also paid due taxes, if any, and, therefore, the judgment of the hon'ble apex court is applicable. We fail to understand on the face it as to how the Assessing Officer could distinguish th....