Karnataka Power Transmission Corporation Ltd.,, Hassan v. ITO, Mysore

ITA 1012/BANG/2009 | 2005-2006
Pronouncement Date: 23-03-2011 | Result: Allowed

Appeal Details

RSA Number 101221114 RSA 2009
Bench Bangalore
Appeal Number ITA 1012/BANG/2009
Duration Of Justice 1 year(s) 4 month(s) 19 day(s)
Appellant Karnataka Power Transmission Corporation Ltd.,, Hassan
Respondent ITO, Mysore
Appeal Type Income Tax Appeal
Pronouncement Date 23-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 23-03-2011
Date Of Final Hearing 07-01-2011
Next Hearing Date 07-01-2011
Assessment Year 2005-2006
Appeal Filed On 03-11-2009
Judgment Text
PAGE 1 OF 12 ITA NOS.1012 1014 101 6 1018 & 1020/BANG/2009 1 THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K J.M. AND SHRI A MOHAN ALANKAMONY A.M. ITA NOS. 1012 1014 1016 1018 & 1020-2009) (ASST. YEARS 2005-06 TO 2009-2010) M/S KARNATAKA POWER TRANSMISSION CORPORATION LTD. MAJOR WORKS (S) DIVISION HASSAN. - APPELL ANT VS THE INCOME-TAX OFFICER TDS WARD MYSORE. - RESPONDENT APPELLANT BY : SHRI S PARTHASARATHY & SHRI CHYTHANYA K. K ADVOCATE RESPONDENT BY : SHRI G V GOPALA RAO CIT-I O R D E R PER BENCH : THESE FIVE APPEALS INSTITUTED BY KPTCL HASSAN DIVISION A STATE GOVERNMENT PUBLIC SECTOR COMPANY ARE DIRECTE D AGAINST THE CONSOLIDATED ORDER OF THE LD. CIT (A) MYSORE IN IT A NOS: 22 TO 26/CIT(A)/MYS/09-10 DATED: 31.8.2009 FOR THE ASSESS MENT YEARS 2005-06 TO 2009-2010 . 2. THE KPTCL [THE ASSESSEE IN SHORT] H AD RAISED TEN IDENTICAL GROUNDS FOR THE AYS UNDER DISPUTE OUT OF WHICH GR OUND NOS: 1 AND 10 BEING GENERAL AND NO SPECIFIC ISSUES INVOLVED THEY HAVE B ECOME NON-CONSEQUENTIAL. PAGE 2 OF 12 ITA NOS.1012 1014 101 6 1018 & 1020/BANG/2009 2 IN THE REMAINING GROUNDS THE SUBSTANCES OF ISSUES RAISED ARE REFORMULATED AS UNDER: (I) THE LD. CIT (A) OUGHT TO HAVE ACCEPTED THE EXPLANAT ION OFFERED AND REFRAINED FROM CONFIRMING THE LEVY OF TAX AND IN TEREST U/S 201 (1) AND 201(1A) OF THE ACT: THAT THE ASSESSEE WAS NOT A DEFAULTER AND THE PROVISIONS OF S.201(1) AND 201(1A) OF THE A CT WERE NOT APPLICABLE; (II) THE CIT (A) OUGHT TO HAVE APPRECIATED THAT THE WIT H REGARD TO THE VALUE OF MATERIALS SUPPLIED TO THE CONTRACTORS THE Y BELONG TO THE ASSESSEE AND THUS THE QUESTION OF DEDUCTION OF T AX AT SOURCE BY APPLYING THE PROVISIONS OF S. 194C OF THE ACT WOULD NOT ARISE; & (III) WITHOUT PREJUDICE THE CIT(A) OUGHT TO HAVE APPRECI ATED THAT THE RECIPIENT HAVING PAID THE TAX ON THE AMOUNT RECEIVE D FROM THE ASSESSEE THERE WAS NO OBLIGATION ON THE PART OF TH E ASSESSEE TO PAY TAX U/S 201(1) OF THE ACT AS RULED BY THE HONBLE SUPREME COURT AND THUS LEVY OF TAX AS WELL AS INTEREST U/ S 201(1A) ARE LIABLE TO BE CANCELLED. 3. AS THE ISSUES RAISED BEING IDENTICAL PE RTAINING TO THE SAME ASSESSEE THEY WERE HEARD CONSIDERED TOGETHER FOR THE SAKE O F CONVENIENCE AND CLARITY AND DISPOSED OFF IN THIS COMMON ORDER. 4. BRIEFLY STATED THE ASSESSEE WAS A STATE GO VERNMENT PUBLIC SECTOR COMPANY CARRYING ON THE BUSINESS OF TRANSMISSION OF ELECTRICITY FROM ELECTRICITY GENERATING POINTS TO VARIOUS ELECTRICAL SUB-STATIONS IN THE STATE THROUGH THE NETWORK OF TRANSMISSION LINES AND SUB-S TATIONS. THE ASSESSEES PREMISES WERE SUBJECTED TO AN OPERATION U/S 133A OF THE ACT ON 2.2.2009 TO VERIFY THE COMPLIANCE WITH TDS PROVISIONS. DURING T HE COURSE OF SURVEY IT WAS NOTICED THAT THE ASSESSEE HAD ENTERED INTO AGRE EMENTS WITH VARIOUS CONTRACTORS FOR SETTING UP OF ELECTRICAL SUB-STATIO NS. THE SUB-STATIONS WERE PAGE 3 OF 12 ITA NOS.1012 1014 101 6 1018 & 1020/BANG/2009 3 ESTABLISHED IN ORDER TO SEGREGATE THE LOAD OF ONE S TATION OR TO IMPROVE THE RELIABILITY OF POWER SUPPLY AND TO MEET THE INCREASIN G DEMAND FOR POWER SUPPLY. IT WAS NOTICED BY THE REVENUE DURING THE VER IFICATION OF THE AGREEMENTS THAT THE ASSESSEE HAD ENTERED INTO SEPAR ATE AGREEMENTS FOR SUPPLY OF MATERIALS ERECTION WORK AND FOR CIVIL WOR K PORTION ETC. IT WAS FURTHER NOTICED THAT WHEN THE ASSESSEE WAS DEDUCTI NG TAX AT SOURCE WHILE MAKING PAYMENTS ON CIVIL WORK AND ERECTION PORTION HOWEVER NO TDS WAS EFFECTED ON PAYMENTS TOWARDS SUPPLY OF MATERIAL PORT ION. DURING THE COURSE OF PROCEEDINGS U/S 201(1) AND 201(1A) OF THE ACT A S THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE ON THE SUPPLY OF MATERIA L PORTION ALSO IT WAS REQUIRED TO EXPLAIN SUCH INACTION ON THE PART OF TH E ASSESSEE. 4.1. BRUSHING ASIDE THE ASSESSEES EXPLANATION THE AO WENT AHEAD IN CONCLUDING AFTER DETAILED REASONS RECORDED IN THE IMPUGNED ORDER UNDER CHALLENGE THAT THE ASSESSEE SHOULD HAVE DEDUCTED T AX AT SOURCE ON THE SUPPLY PORTION ALSO WHICH IT HAD FAILED TO DO SO T HE ASSESSEE WAS TREATED AS AN ASSESSEE IN DEFAULT AND ACCORDINGLY COMPUTED T HE TAXES AS WELL AS INTEREST THEREON U/S 201 AND U/S 201(1A) OF THE ACT FOR THE ASSESSMENT YEARS UNDER DISPUTE. 5. AGGRIEVED THE ASSESSEE TOOK UP THE ISSUE S WITH THE LD. CIT (A) MYSORE FOR SUCCOR. AFTER DUE CONSIDERATION OF THE L ENGTHY CONTENTIONS PUT- FORTH BY THE ASSESSEES A.R. PERUSING THE OBSERVATI ONS MADE BY THE AO IN HER IMPUGNED ORDER CITED SUPRA ANALYZING THE PROVIS IONS OF S.194C OF THE ACT EXTENSIVELY QUOTING THE RULINGS IN THE CASES ON WHICH THE ASSESSEE HAD PLACED STRONG RELIANCE THE LD. CIT (A) HAD OBSERVE D THUS: PAGE 4 OF 12 ITA NOS.1012 1014 101 6 1018 & 1020/BANG/2009 4 (ON PAGE 12) 6..IN VIEW OF THE FORE-GOING IT IS HELD THAT CONSIDERING THE NATURE OF THE CONTRACT WHICH IS FOUND TO BE COMPOSITE THE APPELLANT WAS LIABLE TO DEDUCT TAX ON SUPPLY PORTION OF THE CONTRACT ALSO. THE AOS ACTION IN DEMANDING TAX AND MANDATORY INTEREST U/S 201 (1A) IS THEREFORE UPHELD. GROUND NOS.1 TO 4 ARE DISMISSED IN VIEW OF THE DISCUSSION MADE ABOVE. IN GROUND NO.5 THE APPELLANT HAS RAISED THE CONTEN TION THAT THE RECIPIENT HAS PAID THE TAX ON THE AMOUNT RECEIVED FROM THE APPELLANT. IN THE WRITTEN SUBMIS SIONS THE APPELLANT HAS REFERRED TO THE DECISION OF SUPRE ME COURT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGE P . LTD. V. CIT 293 ITR 226 IN THIS CONNECTION. NO DETAILS OR EVIDENCE WAS HOWEVER GIVEN AT THE TIME OF APPEAL HEARING. AT THE TIME OF LAST HEARING THE APPELLAN T ASKED FOR MORE TIME FOR PRODUCING CONFIRMATION FROM CONTRACTORS REGARDING TAX PAYMENT. HOWEVER SINCE SUFFICIENT OPPORTUNITY HAS BEEN PROVIDED TO THE APPE LLANT NO FURTHER TIME WAS GIVEN. IN THE ABSENCE OF ANY SUPPORTING DETAILS AND EVIDENCE ON THE ABOVE GROUND APPEAL FAILS. 6. AGITATED THE ASSESSEE HAS C OME UP WITH THE PRESENT APPEALS. DURING THE COURSE OF HEARING THE FORCEFUL SUBMISSI ONS MADE BY THE LD. A R ARE SUMMARIZED AS UNDER: (I) S. 201(1) WAS NOT AT ALL APPLICABLE IN THE CASE OF THE APPELLANT AS THERE WAS NO REQUIREMENT TO DEDUCT TAX AT SOURCE. S. 201 REQUIRE A PERSON WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORD ANCE WITH THE PROVISIONS OF THE ACT. HERE AS THERE WAS NO REQUI REMENT TO DEDUCT ANY SUM S.201(1) IS NOT APPLICABLE; (II) THE APPELLANT FLOATS TENDERS FOR SUPPLY OF GOODS ER ECTION AND CIVIL ENGINEERING WORKS. FOR SUPPLY OF GOODS AN AGREEMEN T WAS EXECUTED. SOME OF THE SIGNIFICANT CLAUSES CONTAIN ED IN THE TENDER WERE THAT - PAGE 5 OF 12 ITA NOS.1012 1014 101 6 1018 & 1020/BANG/2009 5 35.2. IN CASE OF AWARD OF CONTRACT A DIVISIBLE C ONTRACT COVERING THE ENTIRE SCOPE OF THE PARTIAL/TOTAL TURNKEY PACKA GE WILL BE ENTERED INTO WITH THE SUCCESSFUL BIDDER. THERE SHA LL BE THREE SEPARATE CONTRACTS AS UNDER: (A) FOR SUPPLY OF GOODS; (B) FOR ERECTION WORKS; & (C) F OR CIVIL ENGINEERING WORKS. 37.3. FOR CONTRACTOR SUPPLIED EQUIPMENTS/MATERIAL S: 37.3.1. TRANSFER OF THE TITLE IN RESPECT OF EQUIPM ENT AND MATERIALS SUPPLIED BY THE CONTRACTOR TO THE KPTCL PURSUANT TO THE TERMS OF THE CONTRACT SHALL PASS ON TO THE KPTCL WITH NEGOTI ATION OF DISPATCH DOCUMENTS. 37.3.2. THIS TRANSFER OF TITLE SHALL NOT BE CONST RUED TO MEAN THE ACCEPTANCE AND THE CONSEQUENT TAKING OVER OF EQUI PMENT AND MATERIALS. THE CONTRACTOR SHALL CONTINUE TO BE RES PONSIBLE FOR THE QUALITY AND PERFORMANCE OF SUCH EQUIPMENT AND MATERI ALS AND FOR THEIR COMPLIANCE WITH THE SPECIFICATIONS UNTIL TAK ING OVER AND THE FULFILLMENT OF GUARANTEE PROVISIONS OF THIS CONTRAC T. 3.2. THE SCOPE OF WORK SHALL ALSO INCLUDE SUPPLY/E RECTION/CIVIL WORKS* PORTION OF ALL SUCH ITEMS WHICH ARE NOT SP ECIFICALLY MENTIONED IN THE CONTRACT DOCUMENTS BUT WHICH ARE NEEDED FOR SUCCESSFUL EFFICIENT SAFE AND RELIABLE OPERATION OF THE EQUIPMENT UNLESS OTHERWISE SPECIFICALLY EXCLUDED IN THE SPECIF ICATIONS UNDER EXCLUSIONS OR LETTER OF AWARD. (III) 3.5. IT IS EXPRESSLY AGREED TO BY THE CONTRACTOR T HAT NOTWITHSTANDING THE FACT THAT THE CONTRACT IS TERME D AS SUPPLY FOR CONVENIENCE OF OPERATION OF THE OTHER CONTRACTS NAMELY ERECTION CONTRACTS AND CIVIL CONTRACTS* ARE ALSO TH E INTEGRAL PARTS OF THE COMPOSITE CONTRACT ON SINGLE SOURCE RESPONSI BILITY BASIS SAND THE CONTRACTOR IS BOUND TO PERFORM THE TOTAL C ONTRACT IN ITS ENTIRETY AND NON-PERFORMANCE OF ANY PART OR PORTION O F THE CONTRACT SHALL BE DEEMED TO BE A BREACH OF THE ENTI RE CONTRACT. [ *THE CLAUSE SHALL BE SUITABLY MODIFIED IN THE AGRE EMENT OF SUPPLY/ERECTION/CIVIL WORKS PORTION] PAGE 6 OF 12 ITA NOS.1012 1014 101 6 1018 & 1020/BANG/2009 6 (IV) THE DISPUTE BETWEEN THE APPELLANT AND THE AO WAS MA INLY WITH REGARD TO THE AGREEMENT FOR SUPPLY AND THE AO HAD TR EATED THE AGREEMENT FOR SUPPLY OF GOODS AS PART OF THE COMPOSI TE CONTRACT WHICH ACCORDING TO THE APPELLANT WAS A WRONG INTE RPRETATION ARRIVED AT BY THE AO CONSIDERING ONLY SOME PORTION O F THE DOCUMENTS REFERRED TO IN HER ORDER; (V) THOUGH THE COMPLETE CONTRACT WORK WAS AWARDED TO A SINGLE CONTRACTOR STILL SUCH CONTRACT WAS REQUIRED TO EXE CUTE SEPARATE AGREEMENTS FOR EACH OF THE WORK WHICH MEANS THREE C ONTRACTS WERE DOCUMENTED SEPARATELY AND WERE CONSIDERED AS TH REE CONTRACTS FOR ALL PRACTICAL PURPOSES; - THE MATERIALS/EQUIPMENTS PURCHASED WERE IN THE ABSO LUTE OWNERSHIP OF THE APPELLANT AND IT WAS THE APPELLANT WHO SUPPL IED THESE MATERIALS FOR PERFORMING THE OTHER TWO CONTRACTS BY THE CONTRA CTOR. WITH REGARD TO THE SUPPLY IT WAS ONLY A CONTRACT OF SALE FOR PURCHASE OF SUCH MATERIALS/EQUIPMENTS WHICH WERE PURCHASED FOR CONSIDERATION WITH A SPECIFIC REQUIREMENT; - THE INTENTION WAS QUITE CLEAR THAT RIGHT FROM STEP ONE BOTH THE PARTIES KNEW THAT THERE WOULD BE THREE CONTRACT AGR EEMENTS THAT WERE TO BE EXECUTED AND HONOURED SEPARATELY; - THUS THE TRANSACTION BETWEEN THE APPELLANT AND THE CONTRACTOR WHILE EXECUTING THE AGREEMENT FOR SUPPLY OF GOODS WAS ESSE NTIALLY ONE OF SALE OF GOODS AND CERTAINLY NOT IN THE NATURE OF WOR KS CONTRACT; - RELIES ON THE CASE LAWS: CIT V. MUNNI LAL AND COMPANY (2008) 298 ITR 250 (RAJ ) CIT V. DY. CHIEF ACCOUNTS OFFICER MARKFED KHANNA ( 2008) 304 ITR 17 ( P& H) CIT V. REEBOK INDIA CO. (2008) 306 ITR 124 (DEL); SR. ACCTS. OFFICER (O&M) HARYANA POWER GENERATION C ORPN. LTD. V. ITO (2006) 103 TTJ(DEL)584 CIT V. GIRNAR FOOD AND BEVERAGE P. LTD. (2008) 306 ITR 23 (GUJ) CIT V. HINDUSTAN LEVER LTD. (2008) 306 ITR 25 (GUJ) - THUS THE TRANSACTION WITH REFERENCE TO THE CONTRAC T AGREEMENT FOR SUPPLY OF MATERIALS WILL NOT FALL WITHIN THE MEANING OF S.194C OF THE PAGE 7 OF 12 ITA NOS.1012 1014 101 6 1018 & 1020/BANG/2009 7 ACT AND CONSEQUENTLY THE APPELLANT CANNOT BE HELD TO BE AN ASSESSEE IN DEFAULT AND THEREFORE S.201(1)AND 201 (1A) HAVE NO APPLICATION TO THE CASE OF THE APPELLANT; (VI) THE APPELLANT HAD ENTERED INTO THREE SEPARATE AGREE MENTS MAY BE WITH THE SAME CONTRACTOR FOR (1) SUPPLY OF GOODS OR MATERIALS/EQUIPMENTS (2) FOR ERECTION WORKS AND (3) CIVIL ENGINEERING WORKS. IT WAS ONLY FOR SAKE OF CONVENIE NCE THAT A CONTRACTOR WAS ALLOWED TO SUPPLY MATERIALS OR EQUIP MENTS SINCE HE WAS WELL INFORMED ABOUT THE QUALITY OF GOODS OR MATE RIALS WHICH WERE REQUIRED FOR THE CONSTRUCTION WORK. ONCE THE CONTRACTOR SUPPLIES THE GOODS/MATERIALS/EQUIPMENTS THE APPELL ANT BECOMES THE OWNER FOR ALL PRACTICAL PURPOSES AND THE CONTRA CTOR WILL HAVE NO CONTROL OVER SUCH GOODS; - AS HELD BY THE SUPREME COURT IN THE CASE OF STATE OF A.P V. KONE ELEVATORS (I) LTD. (2005) 140 STC 22 THE MATERIAL S PURCHASED FROM THE CONTRACTOR WERE SUPPLIED FOR COMMISSIONING OF T HE SUB-STATIONS. THE PURCHASES HAVE DULY BEEN REFLECTED IN THE ACCOUN TS OF THE APPELLANT AND THE OWNERSHIP OF GOODS VESTED WITH TH E APPELLANT AND AT NO GIVEN POINT OF TIME IT WAS OWNED BY THE CONTRACT OR TO SUGGEST THAT THESE MATERIALS WERE PART OF THE MATERIALS SUPPLIED BY THE CONTRACTOR IN THE COURSE OF WORKS CONTRACT; (VII) IT WAS NOT THE CASE OF THE REVENUE THAT THE CONTRAC TOR HAD FAILED TO FULFILL THE TAX OBLIGATION AND THAT THE GOVERNME NT WAS DEPRIVED OF THE TAXES DUE. AS HELD BY THE S.C. IN THE CASE OF HINDUSTAN COCO COLA BEVERAGE P.LTD. V. CIT (2007) 293 ITR 22 6 (SC) WHERE THE PAYEE HAS ALREADY PAID THE TAX ON THE INCOME ON W HICH THERE WAS A SHORT DEDUCTION OF TAX AT SOURCE RECOVERY OF AX CANNOT BE MADE ONCE AGAIN FROM THE TAX DEDUCTOR. - THE APPELLANT WAS NOT OBLIGED TO DEDUCT TAX AT SOU RCE FROM THE PAYMENT MADE FOR PURCHASE OF MATERIALS FROM THE CONT RACTORS WHO UNDERTOOK THE OTHER WORKS OF ERECTION AND CIVIL ENG INEERING AND IN LIEU OF VARIOUS JUDICIAL PRONOUNCEMENTS THE APPELLANT W AS NOT OBLIGED TO DEDUCT TAX AT SOURCE. PAGE 8 OF 12 ITA NOS.1012 1014 101 6 1018 & 1020/BANG/2009 8 - THAT THE APPELLANT WAS UNDER THE BONA FIDE BELIEF T HAT THERE WAS NO LIABILITY TO DEDUCT TAX WHEN PAYMENTS WERE MADE TOWAR DS SUPPLY OF MATERIALS/EQUIPMENTS. THE BONA FIDES OF THE APPELL ANT WAS FURTHER PROVED BY THE FACT THAT THE APPELLANT HAD DEDUCTED T AX AT SOURCE WHEN PAYMENTS WERE MADE TOWARDS THE OTHER TWO CONTRA CTS VIZ. ERECTION AND CIVIL ENGINEERING WORKS. THUS THERE WAS REASONABLE CAUSE FOR NON-DEDUCTION OF TAX IF ANY WHILE MAKING THE PAYMENT TOWARDS SUPPLY OF MATERIALS/EQUIPMENTS WHICH WAS IN ACCORDANCE WITH THE PROVISO TO S.201(1) AND THAT THE APPELLANT CANN OT BE HELD TO BE A DEFAULTER TO ENFORCE THE DEMAND US 201(1) OF THE AC T. - RELIES ON THE CASE LAW IN THE CASE OF ITO V. GUJARA T NARMADA VALLEY FERTILIZERS CO. LTD. (2001) 247 ITR 305 (GUJ) & IN THE CASE OF POWER GRID CORPORATION OF INDIA LTD. V. ACIT (2007) 108 ITD 340. (VIII) EVERY PURCHASE (SUPPLY) WAS RECORDED BY THE APPELLANT AS SUCH SAND WAS TAKEN INTO THE STOCK AND ISSUED THEREFORE. THI S ASPECT IS RELEVANT IN VIEW OF THE BUDGET PROPOSALS PRESENTED ON 6 TH JULY 2009 THAT CLAUSE 60 OF 2009-10 UNION BUDGET SEEKS TO SUBSTITUTE S.194C W.E.F. 1.10.2009 6.1. TO DRIVE HOME HIS WELL STRETCHED ARGUMENTS THE LD. AR CAME UP WITH A PAPER BOOK CONTAINING 1 68 PAGES WHICH CONSIST OF INTER ALIA COPIES OF (I) TENDER NOTIFICATION; (II) CIVIL WORK AWARD; (III) SUPPLY AWARD ETC. 7. BEFORE ADDRESS TO THE ISSUES RAISED BY THE ASSESSE E AS WELL AS THE ARGUMENTS PUT FORTH BY THE LD. A R REFERRED SUPRA W E WOULD LIKE TO POINT OUT THAT ALMOST IDENTICAL ISSUES WERE RAISED BEFO RE THIS BENCH BY THE ASSESSEES COUNTER-PART KPTCL BANGALORE DIVISION IN ITS APPEALS IN ITA NOS. 112 TO 115 & 162 TO 165/BANG/2010 DATED 10 TH MARCH 2011. 7.1. THE FACTS WERE ELABORATELY DISCUSSED AND SUBMI SSIONS OF BOTH THE LD. A.R AS WELL AS THE LD. D.R. WERE CONSIDERED AT LENGTH IN THOSE APPEALS. PAGE 9 OF 12 ITA NOS.1012 1014 101 6 1018 & 1020/BANG/2009 9 AFTER CONSIDERING THE DETAILED RIVAL SUBMISSIONS AN D ON A PERUSAL OF MATERIALS ON RECORD THIS BENCH HAD DECIDED THE ISS UE IN THE FOLLOWING MANNER (QUOTE ) 11.6. IN TAKING INTO ACCOUNT THE FACTS AND CIRCUMSTANCES OF THE ISSUES WHICH HAVE BEEN METICULOUSLY ANALYZED AND ALSO EXTENSIVELY QUOTING THE VARIOUS JUDICIAL PRONOUNCEMENTS ON THE ISSUES IN TH E FORE-GOING PARAGRAPHS WE ARE OF THE CONSIDERED VIE W THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATING THE ASSESSEE KPTCL AS AN ASSESSEE IN DEFAULT U/S 201(1) AND ALSO CHARGING INTEREST U/S 201(1A) OF THE ACT FOR THE FOLLOWING REASONS: - THE ASSESSEE CANNOT BE CATEGORIZED AS AN ASSESSEE IN DEFAULT WHEN THERE WAS NO OBLIGATION ON THE PART O F THE ASSESSEE TO DEDUCT TAX U/S 194C OF THE ACT FOR SUPPLY PORTION; - AMENDMENT OF S. 194C THROUGH FINANCE ACT(NO.2) OF 2009 CLARIFY DEDUCTION DOESNT EXTEND TO SUPPLY O F MATERIALS (PORTION); - THE MATERIALS IN QUESTION WERE PURCHASED FROM THE SUPPLIERS BY THE ASSESSEE AND GIVEN TO THE CONTRACTOR(S) FOR CARRYING OUT THE WORK OF CIVIL ERECTION ETC. - THE CONTRACT BETWEEN THE ASSESSEE AND THE CONTRACTO R WAS A CONTRACT FOR SUPPLY AND NOT FOR CONTRACT OF WORK AND THE REVENUE HAD CONSISTENTLY REFUSED TO S EE THE REASON AND TO RECOGNIZE THE DISTINCT MEANING - SUPPLY AND WORK; - IT WAS WRONGLY VISUALIZED THAT THE EQUIPMENTS MATERIALS COMPONENT PARTS WERE FABRICATED AND INSTALLED AT WORK SITE PREMISES; - IT WAS WRONGLY PRESUMED THAT THE CONTRACTS ENTERED INTO BETWEEN THE ASSESSEE AND THE CONTRACTOR WERE COMPOSITE CONTRACT AND AN INDIVISIBLE CONTRACT WHER EAS THERE WERE THREE SEPARATE CONTRACTS VIZ. (I) SUPP LY PAGE 10 OF 12 ITA NOS.1012 1014 10 16 1018 & 1020/BANG/2009 10 OF MATERIALS; (II) FOR ERECTION & (III) FOR CIVIL W ORK PORTION; - INSTRUCTION TO BIDDERS (SECTION II ITB) UNDER CLA USE 14. TAXES AND DUTIES [SOURCE P 123 OF PB AR] IT H AS BEEN MADE IMPLICITLY CLEAR THAT 14.1. AS INDICATED IN CLAUSE 35.2 OF SECTION ITB O F THE BID DOCUMENT IN CASE OF AWARD OF CONTRACT A DIVISIBLE CONTRACT COVERING THE ENTIRE SCOPE OF THE PARTIAL/TOTAL TURNKEY PACKAGE WILL BE ENTERED INTO WITH THE SUCCESSFUL BIDDER THERE SHALL BE THREE SEPARAT E CONTRACTS AS UNDER: (I) FOR SUPPLY OF GOODS (II) FOR ERECTION WORKS (III) FOR CIVIL ENGINEERING WORKS THUS TENDER CLEARLY GIVES BREAKS-UP OF SEPARATE AGREEMENTS REFLECTING SEPARATE CONSIDERATION; - THROUGH A SINGLE BIDDING PROCESS ALL THE CONTRACTS WERE AWARDED DISTINCTLY WHICH DO NOT MEAN THAT THEY WERE COMPOSITE CONTRACT; - THE HONBLE APEX COURT IN THE CASE OF HINDUSTAN COC A COLA BEVERAGES P. LTD. V. CIT REPORTED IN 293 ITR 226(SC) HAD RULED THAT IT IS NOT DISPUTED THAT THE CIRCULAR NO. 275/201/95-IT(B) DATED JANUARY 29 1997 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES DECLARING THAT 'NO DEMAND VISUALIZED UNDER SECTION 201(1) OF THE INCOME- TAX ACT SHOULD BE ENFORCED AFTER THE TAX DEDUCTOR HAS SATISFIED THE OFFICER-IN - CHARGE OF TDS THAT TAXES DUE HAVE BEEN PAID BY THE DEDUCTEE-ASSESSEE; - WHEN THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TAX ON SUPPLY PORTION THERE WAS NO QUESTION OF CHARGING INTEREST U/S 201(1A) OF THE ACT; - WE HAVE ALSO DULY PERUSED THE CASE LAWS ON WHICH TH E LD. CIT (A) HAD PLACED STRONG RELIANCE. HOWEVER W E PAGE 11 OF 12 ITA NOS.1012 1014 10 16 1018 & 1020/BANG/2009 11 ARE OF THE CONSIDERED VIEW THAT THOSE DECISIONS WER E CLEARLY DISTINGUISHABLE TO THE FACTS AND CIRCUMSTAN CES OF THE ISSUES UNDER CONSIDERATION. 11.7. IN A NUT-SHELL (I) WHEN THE ASSESSEE WAS UNDER NO OBLIGATION TO DEDUCT TAX U/S 194C OF THE ACT TOWARDS THE PAYMENTS MADE ON SUPPLY PORTION THE ASSESSEES CASE DOESNT FALL WITHIN THE AMBIT OF THE PROVISIONS OF S.201(1) OF THE ACT AND THUS THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT; AND (II) THAT WHEN THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX TOWARDS THE PAYMENT ON SUPPLY PORTION THERE WAS NO QUESTION WHATSOEVER IN CHARGING INTEREST U/S 201(1A) OF THE ACT. IT IS ORDERED ACCORDINGLY.(UN-QUOTE). 7.2. AS THE ISSUES BEFORE US IN THESE APPEALS ARE SIMILAR TO THAT OF THE ISSUES AND ALSO IN CONFORMITY WITH THE SAID FIND INGS IN THE CASE OF KPTCL BANGALORE DIVISION REFERRED SUPRA WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS RECORDED THERETO HOLD GOOD FOR THE PRESENT APPEALS TOO. IT IS ORDERED ACCORDINGLY. PAGE 12 OF 12 ITA NOS.1012 1014 10 16 1018 & 1020/BANG/2009 12 8. IN THE RESULT : THE ASSESSEES APPEALS FOR THE ASSESSME NT YEARS 2005-06 2006-07 2007-08 2008-09 AND 2009-10 U/S 201(1) AN D U/S 201(1A) OF THE ACT ARE ALLOWED. THE ORDER PRONOUNCED ON 23 RD DAY OF MARCH 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORG E GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMB ER COPY TO :- 1.THE ASSESSEE 2. THE REVENUE 3. THE CIT (A) CONCERNED. 4. THE CIT CONCERNED. 5. THE DR 6. GF BY ORDER MSP/23.3. ASSISTANT REGISTRAR ITAT BANGALORE.