C I T JAIPUR vs. CHIEF ENGINEER BISALPUR PROJECT

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 91 / 2011 COMMISSIONER OF INCOME TAX, (TDS), JAIPUR ----Appellant Versus THE CHIEF ENGINEER, BISALPUR PROJECT, RAJ. URBAN INFRASTRUCTURE, 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 are involved therefore, they are decided by the common judgment. 2. By way of these appeals, the appellant has challenged the judgment and order of the tribunal whereby the tribunal has dismissed the appeal preferred by the department. 2. This court while admitting the appeal has framed following

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substantial questions of law:- D.B. Income Tax Appeal No.91/2011 admitted on 12.04.2012 “Whether in the facts and circumstances of the case the ITAT was justified in law in deleting the demand raised u/s. 201(1) and 201(1A) holding the respondent assessee liable for deduction of TDS u/s. 194C of the Act.” D.B. Income Tax Appeal No.550/2011 admitted on 10.10.2011 “Whether the Tribunal was justified in deleting the demand raised u/s.201(1) and 201(A) holding the respondent(assessee) to be liable for deduction of tax deducted at source u/s. 194C of the Act.” 3. Counsel for the appellant contended that the A.O. while considering the matter has taken into consideration the payment which was made to the company with whom they entered into contract. He has relied upon para 5 of the A.O. which reads as under:- “In the para 1 of the reply, the deductor has taken plea that payment of service tax is reimbursement of the payment of service tax so it is not liable to TDS and has relied on circular no.4/2008 dated 28.4.2008 of CBDT wherein it is mentioned that no TDS is required on service tax part of rent. The plea of the deductor is not tenable. Circular regarding payment of rent u/s. 1941 cannot be applied on payments made u/s.194J. In this connection the CBDT has given clarification vide no. F.No.275/73/2007-IT (B) dated 30.06.2008 that since 194J covers any sum paid therefore the scope of circular no 4/2008 can not be extended to payment made u/s.194J. This means that service tax portion of total payment can not be excluded from deduction of TDS and TDS should be made

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on gross payment including service tax pat. The relevant portion of above clarification is reproduced below for ready reference:- “The payment made under Section 194-I differ significantly from payment made under section 194J in the way that in the case of 194I TDS has to be deducted or any income paid as rent. However, in the case of section 194J TDS has to be deducted on any sum paid as professional and technical fees. The board had decided to exclude TDS on service tax component on rental payment because it was construed that service tax payment cannot be regarded as income of the landlord. Since section 194J covers any sum paid therefore the board has decided not to extend the copy of circular no.4/2008 dated 28.04.2008 to such payment under section 194J. As discussed above, it is clear that as per the provisions of section 194J, any payment is covered for TDS and the deductor should have made TDS on the service tax component of total payment also. The deductor is therefore held liable u/s.201(1) for non deduction of TDS u/s. 194J on service tax portion of payments u/s.194J and also liable for interest u/s. 201(1A) as per the calculation given in annexure of this order. The deductor has submitted that all the consultants are regularly filing their return and have paid their due taxes. The submission of the assessee deductor has been considered. The onus is on the assessee deductor to prove that taxes due have been paid by the deductees. This is clear from 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 several representations seeking clarifications about the default under sec. 201(1) and consequent interest u/s 201(1A) of the I.T. Act. I am directed to state that the Board is of the view that no demand visualized u/s.201(1) of the I.T. Act should be enforced after the tax deductor has satisfied the officer in charge of TDS that taxes due have ben paid by the deductee assessee. However, this will not alter the liability to charge interest u/s 201(1A) of the Act till the date of payment of taxes by the deductee

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assessee or the liability for penalty u/s. 271C of the I.T. Act.” Simply by saying that the consultants are regularly filing their returns of income and have paid their due taxes and without giving any evidence in this regard, it can not be said that the deductor assessee has satisfied the TDS officer that the deductees have included the receipts from the deductor assessee in their income of the relevant year and have paid taxes on the income portion of such receipts. The assessee has failed to discharge its onus within the meaning of CBDSs clarification as reproduced above. Thus the assessee has failed to prove its case and therefore demand of TDS under Section 201(1) can not be waived.” 4. The A.O. while taking into consideration has observed as under:- “On perusal of para-6 of this letter, it is observed that since the work has not been completed,j RRVPNL has not takien the payment of Rs.36 crores received from RUIDP in the income & expenditure account and the same is lying in the balance sheet in liability side. Thus, when RRVPNL has not included the receipts of Rs.36 crores in its income, it cannot be said that due taxes has been paid in terms of the CBDTs clarification F. No.376/201/96-IT(B) dated 29.01.1997 given above. The assessee has failed to discharge its onus within the meaning of CBDTs clarification. Thus the assessee has failed to prove its case and therefore demand of TDS under Section 201(1) cannot be 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:- “2.3 I have carefully considered the facts of the case and submissions of Ld.AR. On perusal of the relevant records, I find that there is no dispute

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regarding the fact that the appellant, during this year, made a payment of Rs.30 crores to RRVPNL, towards meeting the cost of construction of the power sub-station and allied installations, which were required for providing the power supply needed for the appellant’s Bilaspur Jaipur Water Supply Project. However, I find merit in the contention of Ld.AR that the said payment was in the nature of consumer was to be done by RRVPNL and for that purpose RRVPNL constructed power sub stations, etc. and / or other infrastructure needed, which remained the property/assets of RRVPNL has also confirmed, vide its letter dated 4.2.2009, sent in response to the summons issued u/s 131 of the Act to it by the AO, that the said amount of Rs.30 crores (forming the part of Rs.36 crores received by RRVPNL from RUDIP in F.Ys. 2006-07 and 2007-08), was received under the head “deposit for specific jobs” and that the assets created by incurring the expenditure out of the said amount remained the assets of RRVPNL and not a RUIDP. RRVPNL has further informed , vide the aforesaid letter, that after completion of the construction work, it debited the concerned asset to its fixed assets and credited the deposit (aforesaid payment by the appellant) to “Consumers Contribution” account, which was shown under the head “Reserves and Surplus”. Therefore, in view of the aforesaid reply, given by the RRVPNL, it is evident that the payment of Rs.30 crores, in question made by the appellant to RRVPNL during this year, was in the nature of a consumer’s contribution towards creation of an asset, which belonged to RRVPNL, though the same was to be used for the supply of electricity to the appellant/any other consumer. Further, it is also noticed that the asset (sub-station), in question, was constructed by the RRVPNL through some their contractor and the contract for the construction of the same was between RRVPNL and the other contractor and not between the appellant and that contractor. Hence, on these facts, it cannot be said that there was a relationship of contractor and contractee between RRVPNL and the appellant. In accordance wit the above discussion, it is held that the payment of Rs.30 crores made by the appellant to RRVPNL was not for any contrct, in terms of the provisions of S.194C of the I.T. Act. Therefore, consequently, it is held that the appellant was not liable for making TDS from the

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said payment of Rs.30 crores (made as consumer’s contribution to RRVPNL), U/s 194C of the I.T. Act and the demand created u/s 201(1)/201(1A) of the I.T. Act against the appellant. Consequently, this ground of appeal is allowed.” 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 Revenue is to similar to the grievance raised in assessment year 2007-08. Following our findings for the assessment year 2007-058, we hold that the TDS was not required to be deducted on the sum paid by the asessee as consumer contribution 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 circular No.4/2008 in the order. The ld. CIT(A) has deleted the liability of Rs.1,62,266/- in respect of non-deducting of tax at source from service tax paid to Shah Technical Consultant (P) Ltd. on services rendered as per bill including such tax. This liability was deleted on the basis of the decision of the Tribunal in the case of the assessee. It will be reproduce para 3.3 of the ld. CIT(A)’s order. 3.3 I have carefully considered the facts of the case and submissions of the ld. AR. I have also carefully one through the aforementioned order of the Hon’ble ITAT Jaipur bench dated 30.10.2009 in the appellant’s case. On perusal of the same, I find that the issue as to whether the appellant was liable to make TDS u/s 194K from the service tax paid to M/s. Shah Technical Consultant (P) Ltd, was directly covered in favour of the appellant by the aforesaid order of Hon’ble Tribunal. Therefore, respectfully, following the same, the AO is directed to delete the liability of Rs.1,62,266/- created u/s 201(1) /201(1A) against the appellant in respect of the payments made to M/s. Shah Technical Consultant (P) Ltd. However, as the appellant has admitted to its mistake and has not disputed liability of Rs.25,474/- created u/s

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101(1)/201(1A) against the appellant in respect of the payments made to CECODECON, the same is confirmed. Consequently, this ground of appeal is partly 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 recorded by the authorities and apart from that the agreement was entered between the parties and both the authorities have rightly appreciated the same. 11. In that view of the matter, the issue is answered in favour of the assessee and against the department. 12. All the appeals stand dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Jyoti item No.83-84