TaxTMI 
TaxTMI 
2015 (3) TMI 490
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....on transportation charges paid to GAIL by holding that liability for tax deduction at source was u/s 194C and not u/s 1941. 2. While doing so, the CIT (A) has further erred in holding that the transportation charges is a part of composite contract u/s 194C and not in the nature of rent u/s 1941, thereby overlooked the facts that pipelines were capital asset of GAIL and exclusively used for supply of gas to the deductor M/s Kribhco Shyam Fertilizers Ltd. 3. Further the Ld. CIT (A) has failed to discuss on the merit the order of the ITO(TDS) treating transportation charges as rent, while over emphasizing on the applicability of section 194C, which was not the main issue raised by the Assessing Officer. 4. That the order of the Ld. CIT (Appeal), Bareilly being erroneous in law and on facts be vacated and order of the Assessing Officer be restored. 3. These appeals are filed late by 14 days and the Revenue has moved applications for condonation of delay in filing of the appeal stating therein that the delay was caused on account of non-receipt of scrutiny reports forwarded by the office of the Assessing Officer to the ld. Commissioner of Income-tax. Therefore, the delay in filing o....
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....he issue raised in these appeals and the order of the Tribunal in assessee's own case for assessment years 2007-08 to 2009-10 and the orders of the lower authorities, we find that the Assessing Officer has held the assessee to be in default on non-deduction of TDS as per provisions of section 194I of the Act and also charged interest under section 201(1A) of the Act. When the matter reached to the ld. CIT(A), the ld. CIT(A) has held that TDS was required to be deducted under section 194C on the payment of transmission charges, following the Board Circular dated 17.10.2012. He accordingly partly allowed the appeal of the assessee, as on account of reduced rate of tax, deduction of tax was reduced. Against the order of the ld. CIT(A), assessee preferred an appeal before the Tribunal contending therein that transmission charges are embedded in the cost of gas though transportation charges or transmission charges are claimed separately along with cost of gas in the sale bill. Therefore, the nature of such contract remained to be contract for sale and not a work contract and the assessee was not required to deduct TDS even under section 194C of the Act. The Tribunal has examined this as....
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....essee took a stand that the contract for purchase of gas executed between the assessee and the GAIL is a composite contract for purchase of gas and its transportation to the assessee's working unit for which transmission charges were paid to GAIL. Therefore, the transmission charges are part and parcel of the sale consideration paid by the assessee to the GAIL for purchase of gas. Thus, the assessee was not required to deduct the TDS on payment of transmission charges. It was also contended that the pipelines provided for the transmission of the gas are not exclusively for the use of the assessee, therefore, the payment on transmission charges cannot be equated with the rent for the purpose of deduction of TDS u/s 194I of the Act. 7.1 The CIT(A) did not agree with the invocation of provision of section 194I of the Act for the purpose of deduction of TDS but he was of the view that the TDS is required to be deducted u/s 194C of the Act as the GAIL was required to transport the gas to the assessee for which transmission charges were paid. The CIT(A) accordingly approved the order of the Assessing Officer but invoked the provisions of section 194C of the Act for making deduction for ....
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....s for purchase and sale of gas. Transportation of gas was only a part of the entire sale transaction. Laying down the pipeline and supplying gas through such pipeline were the steps in furtherance of the terms of such a contract. Clear understanding of the parties that the ownership of gas would pass on to the buyer at the delivery point would clearly show that transport of gas by the seller was a step towards execution of contract for sale of gas and there was no contract for carriage of goods. We are not unmindful of the decision of the apex court in case of Associated Cement Co. Ltd. v. CIT reported in [1993] 201 ITR 435 (SC), wherein it was observed that section 194C(1) does not require that a contract to carry out a work or the contract to supply labour to carry out work should be confined to "works contract". However, in the present case, we are not faced with such a situation. We only find that there was no contract between GAIL and the assessee for carriage of goods. Transportation of gas by GAIL was only in furtherance of contract of sale of gas. 20. In view of the above discussion, we are of the opinion that the Tribunal committed no error in coming to the conclusion tha....
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.... dated 12-7-2011, has held that the question as to whether payment of Gas Transportation Charges by the purchasers of Natural gas to the Gas Distribution Companies is covered under the provision of Chapter XVII-B of Income-tax Act, 1961 (the Act) or not, can be ascertained only on the basis of the terms of agreement between the Gas Distributing Company and the purchaser of the Natural gas. In the operative part of the order, the Hon'ble Court says that in the facts of the abovementioned case, the agreement is for purchase and sale of gas. Transportation of gas is only a part of the entire sale transaction. Laying down the pipeline and supplying gas through such pipeline were the steps taken in furtherance of such a contract. There was a clear understanding of the parties that the ownership of gas would pass on to the buyer at the delivery point which clearly shows that transport of gas by the seller was a step towards execution of contract for sale of gas and there was no contract for carriage of goods. The Court added that Transportation of gas was only in furtherance of contract for sale of gas. The Hon'ble High Court then decided that in such a case the supply of gas is ....
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....Bharati Co-operative Limited whereas in the instant case the invoices for transmission charges were separately raised by GAIL. Therefore, in the instant case, the ratio laid down by the Apex Court and clarification made by the CBDT through Circular No. 9 of 2012, would not apply to the present case. 9. We have carefully examined the various clauses of the agreement executed between the assessee and the GAIL in both the cases and we find force in the contention of the Revenue but if we read the judgment of Hon'ble Gujarat High Court along with the Circular issued by the CBDT, we find that it has been made clear by the Revenue that wherever transportation charges are claimed by the seller of gas, the transportation charges would be embedded in the cost of gas and it makes no difference whether it may be shown in the consolidated sale bill or the invoices for transportation charges was raised separately. Undisputedly, invoices for transportation charges were raised separately in the instant case but in the light of judgment of Hon'ble Gujarat High Court and Circular of CBDT, it would not make much difference as it was raised by the seller of the gas and transportation charges....
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....ges to the GAIL and also deducted TDS on the payment but this aspect has not been clarified by any of the lower authorities as they have treated the entire payment of transmission charges as has been made u/s 194I or 194C of the Act. In the light of these facts, we are of the considered opinion that this aspect is required to be examined by the lower authorities as to how much transmission charges are paid by the assessee to GAIL for transportation of the gas purchased by it from GAIL and also the amount of transmission charges paid by the assessee to GAIL for transportation of gas purchased from other agencies. Accordingly, we set aside the order of CIT(A) and restore the matter to the file of the Assessing Officer with the direction to reexamine the issue afresh in the terms indicated above. If it is proved that the assessee has deducted the TDS on the transmission charges paid to GAIL for transmission of gas purchased from other agencies, no disallowance can be made, otherwise the Assessing Officer is required to act in accordance with law. Needless to mention here, while adjudicating the issue, the Assessing Officer shall afford adequate opportunity of being heard to the assess....
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....prays that the order of Ld. CIT (Appeal), Bareiily dated 04/03/2014 may be deleted and order of the A.O may be restored. 11. The facts borne out from the record are that the Assessing Officer has invoked the provisions of section 201(1) and 201(1A) of the Act and held the assessee to be in default on non-deduction of TDS on the payment of transmission charges under section 194C of the Act. Later on, the Assessing Officer passed an order under section 154 of the Act and substituted section 194C by section 194I of the Act, having noted that by typographical mistake in the order, section 194C of the Act was mentioned in place of section 194I of the Act. He accordingly held the assessee to be in default on account of non-deduction of TDS under section 194I of the Act and also charged interest under section 201(1A) of the Act. 12. An appeal was filed before the ld. CIT(A) and the ld. CIT(A) has disposed of the appeal in the light of the order of the Tribunal passed for assessment years 2007-08 to 2009-10 in the assessee's own case and the ld. CIT(A) has held that in the light of the decision of the Tribunal, this rectification application become infructuous and accordingly held that t....