M/s Karnataka Power Transmission Corporation Ltd.,, Mangalore v. ITO, Bangalore

ITA 1041/BANG/2010 | 2003-2004
Pronouncement Date: 22-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 104121114 RSA 2010
Bench Bangalore
Appeal Number ITA 1041/BANG/2010
Duration Of Justice 6 month(s) 21 day(s)
Appellant M/s Karnataka Power Transmission Corporation Ltd.,, Mangalore
Respondent ITO, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 22-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted Not Allotted
Tribunal Order Date 22-03-2011
Date Of Final Hearing 14-03-2011
Next Hearing Date 14-03-2011
Assessment Year 2003-2004
Appeal Filed On 01-09-2010
Judgment Text
PAGE 1 OF 12 ITA NOS.1041 TO 1052/BANG/2010 1 THE INCOME TAX APPELLATE TR IBUNAL BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K J.M. AND SHRI A MOHAN ALANKAMONY A.M. ITA NOS.1041 TO 1052/BANG/2010 (ASST. YEARS 2003-04 TO 2008-09) KARNATAKA POWER TRANSMISSION CORPORATION LTD. BANGALORE MAJOR WORKS DIVISION AIRPORT ROAD KAVOOR MANGALORE. - APPELLANT VS THE INCOME-TAX OFFICER TDS WARD (LTU) BANGALORE. - 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 TWELVE APPEALS INSTITUTED BY KPTCL MANGALORE DIVISION A STATE GOVERNMENT PUBLIC SECTOR COMPANY ARE D IRECTED AGAINST THE CONSOLIDATED ORDER OF THE LD. CIT (A)-L TU BANGALORE IN ITA NOS: 51 52 53 54 55 & 56/CIT(A)LTU /09-10 DATED: 14.7.2010 FOR THE ASSESSMENT YEARS 2003-04 2004-05 2005-06 2006-07 2007-08 AND 2008-09 RESPECTIVELY. I. ITA NOS: 1041 1043 1045 1047 1049 & 1051/10 AY S: 2003- 04 TO 2008 -09 U/S. 201 (1) OF THE ACT : 2. THE ASSESSEE HAD RAISED AS MANY AS TWENTY FIVE IDENTICAL GROUNDS FOR THE AYS UNDER DISPUTE IN AN ILLUSTRATIV E AND NARRATIVE MANNER. PAGE 2 OF 12 ITA NOS.1041 TO 1052/BANG/2010 2 ON A CLOSE SCRUTINY OF THE SAME THE SUBSTANCES OF THE ISSUES EMERGED ARE LISTED OUT AS UNDER: 1. THE CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE A CTION OF THE AO IN INITIATING THE PROCEEDINGS U/S 201 AFTER THE LAPSE OF SEVEN YEARS AND THAT THE ACTION OF THE AO U/S 201 WAS BAR RED BY LIMITATION; - THAT THE CIT (A) WAS NOT JUSTIFIED IN REJECTING T HE ASSESSEES CONTENTIONS ON THE BASIS OF NEWLY INSERTED SUB-SECT ION (3) TO S.201 INSERTED BY THE FINANCE (NO.2) ACT 2009 W.E. F 1.4.2010; 2. THAT THE CIT (A) WAS NOT JUSTIFIED IN SUSTAINING THE ACTION OF THE AO (TDS) IN TREATING THE ASSESSEE AS ASSESSEE IN DEFAULT AND DEMANDING THE TAX ON THE BASIS THAT THE ASSESS EE OUGHT TO HAVE DEDUCTED THE TDS IN RESPECT OF PAYMENTS MADE T O THE CONTRACTORS TOWARDS SUPPLY OF MATERIALS 3. THAT THE CIT(A0 HAD FAILED TO APPRECIATE THAT T HE ASSESSEE CANNOT BE REGARDED AS AN ASSESSEE IN DEFAULT U/S 201(1) AS THERE WAS NO OBLIGATION ON THE ASSESSEE TO DEDUCT T DS UNDER ANY OF THE PROVISIONS OF THE ACT; & 4. WITHOUT PREJUDICE THE CIT(A)-LTU OUGHT TO HAVE APPRECIATED THAT THE RECIPIENTS HAVING PAID THE TAXES ON THE AM OUNTS RECEIVED FROM THE ASSESSEE THE ASSESSEE WAS UNDER NO OBLIGA TION TO PAY THE TAX UNDER SECTION 201(1) OF THE ACT. II. ITA NOS: 1042 1044 1046 1048 1050 & 1052/10 AYS:2003-04 TO 2008-09 U/S.201 (1A)OF THE AC T: 2.1. LIKEWISE THE ASSESSEE HAD RAISED THREE IDENTICAL GROUNDS FOR THE AYS UNDER CHALLENGE OUT OF WHICH GROUND NO.1 BEING GENERAL AND NO SPECIFIC ISSUE INVOLVED IT HAS BECOME NON-CONSEQUE NTIAL. IN THE REMAINING GROUNDS THE ISSUES RAISED ARE REFORMULATED AS UNDE R: 1. THE CIT (A) WAS NOT JUSTIFIED IN SUSTAINING THE ACT ION OF THE AO (TDS) IN TREATING THE ASSESSEE AS AN ASSESSEE IN D EFAULT AND DEMANDING THE INTEREST ON TAX; & PAGE 3 OF 12 ITA NOS.1041 TO 1052/BANG/2010 3 - THAT SHE WAS NOT JUSTIFIED IN UPHOLDING THE STAND O F THE AO IN LEVYING INTEREST U/S 201 (1A) OF THE ACT WHEN THE ASSESSEE S CASE DOESNT FALL WITHIN THE SPHERE OF S.201(1) OF THE ACT. 3. AS THE ISSUES RAISED BEING IDENTICAL PERTAINING TO THE SAME ASSESSEE THEY WERE HEARD CONSIDERED TOGETHER AND DISPOSED OFF IN THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND CLARIT Y. 4. BRIEFLY STATED THE ASSESSEE WAS A S TATE GOVERNMENT PUBLIC SECTOR COMPANY CARRYING ON THE BUSINESS OF TRANSMIS SION OF ELECTRICITY FROM ELECTRICITY GENERATING POINTS TO VARIOUS ELECT RICAL SUB-STATIONS IN THE STATE THROUGH THE NETWORK OF TRANSMISSION LINES AND SUB-STATIONS. THE ASSESSEES PREMISES WERE SUBJECTED TO AN OPERATION U/S 133A OF THE ACT ON 30.1.2009 TO VERIFY THE COMPLIANCE WITH TDS PROVISIONS. DUR ING THE COURSE OF SURVEY IT WAS NOTICED THAT THE ASSESSEE HAD ENTERED INTO AGREEMENTS WITH VARIOUS CONTRACTORS FOR SETTING UP OF ELECTRICAL SUB- STATIONS. THE SUB-STATIONS WERE ESTABLISHED IN ORD ER TO SEGREGATE THE LOAD OF ONE STATION OR TO IMPROVE THE RELIABILITY O F POWER SUPPLY AND TO MEET THE INCREASING DEMAND FOR POWER SUPPLY. IT WA S NOTICED BY THE REVENUE DURING THE VERIFICATION OF THE AGREEMENTS T HAT THE ASSESSEE HAD ENTERED INTO SEPARATE AGREEMENTS FOR SUPPLY OF MATE RIALS ERECTION WORK AND FOR CIVIL WORK PORTION ETC. IT WAS FURTHER N OTICED THAT WHEN THE ASSESSEE WAS DEDUCTING TAX AT SOURCE WHILE MAKING P AYMENTS ON CIVIL WORK AND ERECTION PORTION HOWEVER NO TDS WAS EFFECTED ON PAYMENTS TOWARDS SUPPLY OF MATERIAL PORTION. DURING THE COURSE OF P ROCEEDINGS U/S 201(1) AND 201(1A) OF THE ACT AS THE AO WAS OF THE VIEW T HAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE ON THE SUPPLY OF MATERIAL PORTION ALSO IT WAS REQUIRED TO EXPLAIN SUCH INACTION ON T HE PART OF THE ASSESSEE. PAGE 4 OF 12 ITA NOS.1041 TO 1052/BANG/2010 4 4.1. BRUSHING ASIDE THE ASSESS EES EXPLANATION THE AO WENT AHEAD IN CONCLUDING AFTER DETAILED REASONS RECORDE D IN THE IMPUGNED ORDERS UNDER CHALLENGE THAT THE ASSESSEE SHOULD HA VE DEDUCTED TAX AT SOURCE ON THE SUPPLY PORTION ALSO WHICH IT HAD FAIL ED TO DO SO THE ASSESSEE WAS TREATED AS AN ASSESSEE IN DEFAULT AN D ACCORDINGLY COMPUTED THE TAXES AS WELL AS INTEREST THEREON U/S 201 AND U/S 201(1A) OF THE ACT RESPECTIVELY FOR THE ASSESSMENT YEARS UN DER DISPUTE. 5. AGGRIEVED THE ASSESSEE TOOK UP THE ISSUES WITH THE LD. CIT (A)-LTU FOR RELIEF. AFTER DUE CONSIDERATION OF THE LENGTHY CONTENTIONS PUT-FORTH BY THE ASSESSEES A.R. PERUS ING THE OBSERVATIONS MADE BY THE AO IN HER IMPUGNED ORDER UNDER CHALLENG E ANALYZING THE PROVISIONS OF S.194C OF THE ACT EXTENSIVELY ANALYZ ING VARIOUS RULINGS DUE PERUSAL OF TENDER NOTIFICATION FLOATED BY THE ASSES SEE AND ALSO CONSIDERING THE CASE LAWS ON WHICH THE ASSESSEE HAD PLACED STRONG RELIANCE THE LD. CIT (A) HAD OBSERVED: (I) WITH REGARD TO THE TIME LIMIT FOR INITIATION OF PROCEEDINGS U/S 201 FOR THE AYS 2003-04 TO 2006-07 : AFTER ANALYZING THE ASSESSEES CONTEN TION AS WELL AS SHELTERING HERSELF ON VARIOUS JUDICIAL PRONOUNCEMENTS ON THE I SSUE THE LD. CIT (A) HAD REASONED THAT THERE IS NO TIME LIMIT IN THE STATUTE FOR PASSING A N ORDER U/S 201 OF THE ACT. IN FURTHERANCE SHE HAD OBSERVED THAT - - THE NEWLY INSERTED SUB-SECTION (3) BY THE FINANCE ( NO.2) ACT 2009 W.E.F. 1.4.2010 ON THE OTHER HAND NOW LAYS DOW N THAT THE TIME LIMIT FOR AN ORDER U/S 201(1) IS TWO YEARS FRO M THE END OF THE FY IN WHICH THE STATEMENT IS FILED OR FOUR YEAR S FROM THE END OF THE FY IN WHICH THE PAYMENT IS MADE OR CREDI T IS GIVEN; PAGE 5 OF 12 ITA NOS.1041 TO 1052/BANG/2010 5 - THAT THE PROVISO TO SUB-SECTION (3) MAKES IT CLEAR THAT SUCH ORDER FOR A FY COMMENCING ON OR BEFORE THE 1 ST DAY OF APRIL 2007 MAY BE PASSED AT ANY TIME ON OR BEFORE THE 31 ST DAY OF MARCH 2011 AND THE ORDER U/S 201(1) OF THE ACT PAS SED ON 1.3.2010 IN THE PRESENT ASSESSEE WAS BEFORE 31.3.20 11 AND THUS WELL WITHIN THE STATUTORY TIME LIMIT; & - SINCE THE STATUTE ITSELF HAD PROVIDED FOR A TIME F RAME IN RESPECT OF PASSING OF ORDERS FOR THE FYS INCLUDING AND PRIOR TO FY 2007-08 HE ASSESSEE CANNOT RESTRICT THIS TIME-F RAME ON THE GROUND THAT THE INITIATION OF PROCEEDINGS HAPPE NED BEYOND A PERIOD OF FOUR YEARS ETC. (II) WITH REGARD TO THE AOS STAND IN TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT AND IN LEVYING INTEREST U/S 201(1) FOR THE AYS UNDER CHALLENGE THE CIT (A)-LTU HAD UPHELD THE AO S ACTION ON THIS COUNT FOR THE FOLLOWING REASONS: - NOTWITHSTANDING THE VARIOUS JUDICIAL PRONOUNCEMENT S CITED TO ARGUE THAT AGREEMENTS FOR SUPPLY OF MATERIALS WER E OUTSIDE THE PURVIEW OF S.194C A HOLISTIC LOOK AT THE TRANS ACTIONS CARRIED OUT IN PURSUANCE OF THE TURNKEY CONTRACTS C LEARLY BRINGS OUT NO INDIVIDUAL PORTION OF THE CONTRACT CO ULD BE SINGLED OUT FOR SEPARATE TREATMENT IN THE MATTER OF DEDUCTI ON OF TAX AT SOURCE; - THAT THE CONTRACTS AWARDED BY THE ASSESSEE WERE NOT FOR PROCESSING OF GOODS OR FOR FABRICATION OF ARTICLES OR THINGS FROM MATERIALS SUPPLIED BY IT WITHIN THE MEANING O R SCOPE OF THE EXCLUSIONS PROVIDED IN CIRCULAR NO.681; THAT TH E ASSESSEE WAS NOT IN THE BUSINESS OF TRADING OR MANUFACTURING BUT IN THE DISTRIBUTION OF ELECTRIC POWER AND THE CONTRACTS AW ARDED BY IT WERE FOR ESTABLISHING 66/11 KV SUB-STATIONS AND CON STRUCTION OF 66 KV LINES; - THAT THE TURNKEY CONTRACTS AWARDED BY THE ASSESSEE WERE COMPOSITE CONTRACTS AND DIVIDING THE CONTRACT INTO THREE SEPARATE PORTIONS CANNOT CHANGE THE TRUE NATURE OF THE CONTRACTS; THAT THE ARRANGEMENT MADE BY THE ASSESSE E PAGE 6 OF 12 ITA NOS.1041 TO 1052/BANG/2010 6 WHEREBY IT FIRST BOUGHT THE MATERIALS AND THEN HAND ED OVER SUCH MATERIALS TO THE CONTRACTORS FOR ERECTION AND CIVIL WORKS COULD SERVE LITTLE PURPOSE EXCEPT MAKING THE SUPPLY TRANSACTIONS APPEAR AS IF THEY WERE SEPARATE BUT IN ESSENCE THE CONTRACTS WERE SINGLE AND COMPOSITE CONTRACTS W ITH THE ENTIRE RESPONSIBILITY FOR THE QUALITY AND STANDARD OF THE SUPPLIES AND WORKS REMAINING WITH THE CONTRACTORS; - THAT A PROPER CONSTRUCTION AND ANALYSIS OF THE TERM S AND CONDITIONS OF THE CONTRACT BETWEEN THE ASSESSEE AND THE CONTRACTORS CLEARLY INDICATE THAT THERE WAS NO CONT RACT IN SUBSTANCE FOR SALE OF GOODS OR FOR FABRICATION OF ARTICLES OR THINGS AS PER THE ASSESSEES SPECIFICATIONS; THAT T HE ASSESSEE ON THE CONTRARY HAD PLACED EMPHASIS ON THE FORM OF THE CONTRACT WHICH WAS NOT MATERIAL IN DETERMINING THE TRUE NATURE OF THE TRANSACTION RATHER THAN THE SUBSTANCE; - THAT THERE WAS NO MERIT IN THE ASSESSEES ARGUMENT THAT THE ENTIRE ARRANGEMENT ENCOMPASSING SUPPLY ERECTION AN D CIVIL PORTION WAS TO BE REGARDED AS A CONTRACT FOR SUPPLY OF EQUIPMENT ON THE BASIS THAT ERECTION AND CIVIL PORT ION WAS ONLY ANCILLARY AND SUBSERVIENT TO THE SUPPLY PORTION. O N THE CONTRARY THE PRIMARY BUSINESS OF THE ASSESSEE BEIN G DISTRIBUTION OF POWER IT IS ONLY LOGICAL THAT EREC TION OF ELECTRICAL SUB-STATIONS AND TRANSFORMERS FOR TRANSM ISSION OF POWER WAS UNDENIABLY THE DOMINANT ACTIVITY AND CONS EQUENTLY PURCHASE OF MATERIALS FOR ERECTION AND ASSOCIATED C IVIL WORKS WAS THE ANCILLARY AND SUBSERVIENT ACTIVITY; - THAT IF THE DOMINANT TEST THEORY PROPOUNDED IN THE RULING OF THE HONBLE APEX COURT IN THE CASE OF P.S.COMPANY V . STATE OF AP WERE APPLIED TO THE ASSESSEES CASE THE CASE WO ULD FALL IN THE SECOND CATEGORY OF CONTRACTS WHERE USE OF THE M ATERIALS SUPPLIED IN TERMS OF THE AGREEMENT TO SUPPLY WAS AN CILLARY OR INCIDENTAL TO THE EXECUTION OF WORK OF ERECTION AND CIVIL WORKS. THE CONTRACTS WERE CLEARLY CONTRACTS FOR WORK AND L ABOUR NOT INVOLVING SALE OF GOODS; - THAT THE ARGUMENT THAT THE VALUE OF MATERIALS SUPPL IED TO THE CONTRACTORS BELONGED TO THE ASSESSEE BECAUSE THE AS SESSEE PURCHASED MATERIALS DIRECTLY FROM THE SUPPLIERS AND GAVE THEM PAGE 7 OF 12 ITA NOS.1041 TO 1052/BANG/2010 7 TO THE CONTRACTORS CANNOT DETRACT FROM THE COMPOSIT E CHARACTER OF THE CONTRACTS; - THAT THOUGH THE CONTRACTORS SUPPLIED MATERIALS TO T HE ASSESSEE AS A PART OF THE CONTRACTS OWNERSHIP OF SUCH MATER IALS REMAINED WITH THE CONTRACTORS TILL THE TIME OF DELI VERY/USE OF THE MATERIALS; THAT CIRCULAR NO.681 HAS CLARIFIED T HAT PAYMENTS MADE FOR SUCH MATERIALS CONTRACTS WERE LIABLE FOR DEDUCTION OF TAX AT SOURCE AND HENCE THE MERE FACT THAT THE COST OF MATERIALS WAS PAID TO THE CONTRACTORS AND THAT THE MATERIALS USED FOR CARRYING OUT THE CIVIL WORKS AND ERECTION WERE EVENTUALLY OWNED BY THE ASSESSEE CANNOT ABSOLVE THE ASSESSEE OF ITS OBLIGATION TO DEDUCT TAX AT SOURCE U/S 194C; - THAT A STATUTORY DUTY TO DEDUCT TAX ON PAYMENTS MAD E TO CONTRACTORS CANNOT BE SHRUGGED OFF BY TERMS AND CON DITIONS OF PRIVATE CONTRACTS; THAT THE ASSESSEES ARGUMENT FAI LS TO RECOGNIZE THAT SEGMENTATION OF CONTRACTS INTO THREE PORTIONS TO SUIT THE ASSESSEES OWN CONVENIENCE CANNOT CONCE AL THE REAL PURPOSE OF AWARDING THE CONTRACTS; THAT THE ASSESSE ES ADMISSION THAT THE SUPPLY PORTION CONSTITUTED MORE THAN 80% OF THE TOTAL VALUE THE ENTIRE ARRANGEMENT APPEARS TO HAVE BEEN SO WORKED OUT AS TO GIVE AN IMPRESSION THAT ER ECTION AND CIVIL WORKS WERE ONLY INCIDENTAL AND ANCILLARY TO T HE SUPPLY CONTRACTS AND THEREFORE S.194C WOULD NOT APPLY T O ALL THE THREE CONTRACTS; - THAT THE CASE OF SR. ACCOUNTS OFFICER (O&M) HARYAN A POWER GENERATION CORPORATION LTD. V. ITO RELIED ON BY THE ASSESSEE IS ACCEPTABLE IN SO FAR AS IT WAS HELD THAT IT WAS ESS ENTIAL IN EACH CASE TO ANALYZE THE TERMS OF THE CONTRACT BEFORE CO MING TO THE CONCLUSION WHETHER A CONTRACT WAS A COMPOSITE C ONTRACT OR NOT WHICH IS PRECISELY WHAT THE AO HAD DONE IN LEVY ING TAX U/S 201(1) AND INTEREST U/S 201(1A) OF THE ACT. 5.1. ACCORDINGLY THE LD. CIT (A) UPHELD THE AOS ACTION IN TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT U/S 201 (1 ) AND LEVYING INTEREST U/S 201 (1A) FOR THE AYS UNDER CHALLENGE. PAGE 8 OF 12 ITA NOS.1041 TO 1052/BANG/2010 8 6. AGITATED OVER THE FINDINGS OF THE LD. CIT (A) THE ASSESSEE HAS COME UP WITH THE PRESENT APPEALS. 7. AS FAR AS THE ASSESSEES CONTENTIONS WITH REG ARD TO THE LD. CIT (A)S STAND IN UPHOLDING THE ACTION OF THE AO I N INITIATING PROCEEDINGS U/S 201 AFTER A CONSIDERABLE DELAY ETC. WE HAVE CA REFULLY CONSIDERED THE ASSESSEES FORCEFUL ARGUMENTS AND ALSO REASONING OF THE LD. CIT (A) IN REJECTING THE ASSESSEES TECHNICAL ASPECT. AS RI GHTLY HIGH-LIGHTED BY THE LD. CIT (A) THE NEWLY INSERTED SUB-SECTION (3) BY THE FINANCE ( NO.2) ACT 2009 W.E.F. 1.4.2010 ON THE OTHER HAND NOW LAY S DOWN THAT THE TIME LIMIT FOR AN ORDER U/S 201(1) IS TWO YEARS FROM THE END OF THE FY IN WHICH THE STATEMENT IS FILED OR FOUR YEARS FROM THE END O F THE FY IN WHICH THE PAYMENT IS MADE OR CREDIT IS GIVEN; AND THE PROVISO TO SUB-SECTION (3) MAKES IT CLEAR THAT SUCH ORDER FOR A FY COMMENCING ON OR BEFORE THE 1 ST DAY OF APRIL 2007 MAY BE PASSED AT ANY TIME ON OR BEFORE THE 31 ST DAY OF MARCH 2011 AND IN THE PRESENT CASE THE IMPUGNED O RDER OF THE AO U/S 201(1) WAS DATED 1.3.2010 WHICH WAS WELL BEFORE 31 .3.2011 AND THUS WELL WITHIN THE STATUTORY TIME LIMIT. MOREOVER THE ST ATUTE ITSELF HAD PROVIDED A TIME FRAME IN RESPECT OF PASSING OF ORDE RS FOR THE FYS INCLUDING AND PRIOR TO FY 2007-08 AND THUS THE A SSESSEE IN OUR CONSIDERED VIEW SHOULD HAVE NO GROUND TO AIR ITS G RIEVANCE WHEN THE IMPUGNED ORDER OF THE AO WAS NOT HIT BY TIME LIMIT AS APPREHENDED BY IT. 7.1. IN VIEW OF THE ABOVE WE ARE IN TOT AL AGREEMENT WITH THE STAND OF THE LD. CIT (A) ON THIS COUNT. 8. BEFORE VENTURE TO ADDRESS TO THE OTHER MAIN ISSUES REFERRED SUPRA WE WOULD LIKE TO POINT OUT THAT IDENTICAL ISSUES WERE RAISED BY THE PAGE 9 OF 12 ITA NOS.1041 TO 1052/BANG/2010 9 ASSESSEES COUNTER-PART KPTCL BANGALORE DIVISION IN ITS APPEALS IN ITA NOS. 112 TO 115 & 162 TO 165 DATED 10 TH MARCH 2011. 9. THE SIMILAR FACTS WERE ELABORATELY DISCUSSED AN D SUBMISSIONS OF BOTH THE LD. A.R AS WELL AS THE LD. D.R. WERE CO NSIDERED AT LENGTH IN THE SAID APPEALS. AFTER CONSIDERING THE DETAILED R IVAL SUBMISSIONS AND ALSO ON A PERUSAL OF MATERIALS ON RECORD THIS BENC H HAD DECIDED THE ISSUE 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 SUPP LY 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 CONTRACT OR(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 MATE RIALS COMPONENT PARTS WERE FABRICATED AND INSTALLED AT WO RK SITE PREMISES; PAGE 10 OF 12 ITA NOS.1041 TO 1052/BANG/2010 10 - 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 OF MATERIALS; (II) FOR ERECTION & (III) FOR CIVIL WORK 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 DIVIS IBLE CONTRACT COVERING THE ENTIRE SCOPE OF THE PARTIAL/T OTAL TURNKEY PACKAGE WILL BE ENTERED INTO WITH THE SUCCE SSFUL BIDDER THERE SHALL BE THREE SEPARATE 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 29 199 7 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES DECLARI NG 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 AC T; - WE HAVE ALSO DULY PERUSED THE CASE LAWS ON WHICH TH E LD. CIT (A) HAD PLACED STRONG RELIANCE. HOWEVER W E ARE OF THE CONSIDERED VIEW THAT THOSE DECISIONS WER E PAGE 11 OF 12 ITA NOS.1041 TO 1052/BANG/2010 11 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 PROVISION S 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). 9.1. AS THE ISSUES BEFORE US IN THESE APPEALS ARE SIMILAR TO THAT OF THE ISSUES REFERRED SUPRA AND ALSO IN CONFORMITY WITH THE SAID FINDINGS 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. 10. IN THE RESULT THE ASSESSEES APPEALS FOR THE ASSESSMENT YEARS 2003-04 2004-05 2005-06 2006-07 2007-08 AND 200 8-09 [U/S 201 (1) AND U/S 201(1A) OF THE ACT] ARE PARTLY ALLO WED. PAGE 12 OF 12 ITA NOS.1041 TO 1052/BANG/2010 12 THE ORDER PRONOUNCED ON 22 ND DAY OF MARCH 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMB ER COPY TO :- 1.THE ASSESSEE 2. THE REVENUE 3. THE CI T(A) CONCERNED. 4. THE CIT CONCERNED. 5. THE DR 6. GF BY ORDER MSP/21.3. ASSISTANT REGISTRAR ITAT BANGALORE.