Ivory Consultants Pvt. Ltd., Kolkata v. CIT, KOLKATA-3, KOLKATA, Kolkata

ITA 35/KOL/2016 | 2011-2012
Pronouncement Date: 30-11-2017 | Result: Dismissed

Appeal Details

RSA Number 3523514 RSA 2016
Bench Kolkata
Appeal Number ITA 35/KOL/2016
Duration Of Justice 1 year(s) 10 month(s) 23 day(s)
Appellant Ivory Consultants Pvt. Ltd., Kolkata
Respondent CIT, KOLKATA-3, KOLKATA, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 30-11-2017
Date Of Final Hearing 20-10-2016
Next Hearing Date 20-10-2016
First Hearing Date 20-10-2016
Assessment Year 2011-2012
Appeal Filed On 06-01-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH KOLKATA [BEFORE SRI J. SUDHAKAR REDDY HONBLE AM & SRI S .S. VISWANETHRA RAVI HONBLE JM] I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 201 0-11 C.O. NO. 33/KOL/2016 A/O. I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 2010-11 I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 201 1-12 C.O. NO. 34/KOL/2016 A/O. I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012 -13 C.O. NO. 35/KOL/2016 A/O. I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012-13 A.C.I.T. CIRCLE-3(TDS) KOLKATA. ..APPELLANT COMMISSIONER OF INCOME TAX TDS KOLKATA 10-B MIDDLETON ROW 7 TH FLOOR KOLKATA- 700 071 HALDIA DEVELOPMENT AUTHORITY ...RESPONDENT HAKDIA UNNAYAN BHAWAN CITY CENTRE P.O.-DEBHOG PURBA MEDNIPUR PIN- 721 657 [PAN : CALH 02596 G] APPEARANCES BY: SHRI ANIL KOCCHAR ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE. SHRI SOUMYAJIT DASGUPTA ADDITIONAL CIT DR. APPEA RING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : NOVEMBER 29 2017 DATE OF PRONOUNCING THE ORDER : NOVEMBER 30 TH 2017 O R D E R PER J. SUDHAKAR REDDY AM :- THESE THREE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST A COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-24 KOLKAT A FOR THE ASSESSMENT YEARS 2010- 11 2011-12 & 2012-13 PASSED U/S 250 OF THE INCOME -TAX ACT 1961 (HEREINAFTER THE ACT) DT. 19/01/2016. CROSS-OBJECTIONS HAVE BEEN FILED BY THE ASSESSEE. 2 I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 201 0-11 C.O. NO. 33/KOL/2016 A/O. I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 2010-11 I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 201 1-12 C.O. NO. 34/KOL/2016 A/O. I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012 -13 C.O. NO. 35/KOL/2016 A/O. I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012-13 HALDIA DEVELOPMENT AUTHORITY 2. AS THE ISSUES ARISING IN ALL THESE APPEALS ARE C OMMON FOR THE SAKE OF CONVENIENCE THEY ARE HEARD TOGETHER AND DISPOSED OFF BY WAY OF THIS COMMON ORDER. 3. THE ASSESSING OFFICER PASSED AN ORDER U/S 201(1) AND SECTION 201(1A) OF THE ACT RAISING A DEMAND ON THE ASSESSEE FOR NON-DEDUCTION OF TAX ON PAYMENTS MADE TO HALDIA WATER MANAGEMENT LTD. FOR OPERATION MAINTENANCE AN D COLLECTION OF WATER BILLS. THE LD. CIT(A) DELETED THE SAME. 3.1. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS :- FOR ASSESSMENT YEAR 2010-11 (FINANCIAL YEAR 2009-10 ) 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN HOLDING THAT THE TECHNICAL FEES PAID BY HALDIA DEVE LOPMENT AUTHORITY TO HALDIA WATER MANAGEMENT LTD. (HWML) FOR HAVING THE WATER S UPPLY IN THE HALDIA TOWNSHIP IS NOT SUBJECT TO TDS. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE T HE CIT(A) HAS ERRED IN NOT GIVING ANY FINDING ON THE ISSUE WHEN THE ASSESSEE DEDUCTOR TOOK SECOND ALTERNATIVE LEA BEFORE HIM THAT IN CASE THE PAYMENT IS LIABLE F OR DEDUCTION OF TAX AT SOURCE APPLYING THE RATIO OF HINDUSTAN COCA COLA LTD. CASE THERE WOULD HAVE BEEN NO DEFAULT AS THE PAYEE HWML HAS PAID THE DUE TAX ON T HE RECEIPT THEREBY DENYING THE DEPARTMENT OF CHARGING INTEREST U/S 201(1A) EVEN IF THE PAYEE HAS PAID THE TAX BY THEMSELVES. 3. THE APPELLANT CRAVES LEAVE TO ADD ALTER/MODIFY THE GROUND OF APPEAL DURING THE COURSE OF HEARING. AS THE GROUNDS OF APPEAL OF THE REVENUE FOR ALL T HE ASSESSMENT YEARS ARE IDENTICAL THEY ARE NOT RE-ITERATED. 3 I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 201 0-11 C.O. NO. 33/KOL/2016 A/O. I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 2010-11 I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 201 1-12 C.O. NO. 34/KOL/2016 A/O. I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012 -13 C.O. NO. 35/KOL/2016 A/O. I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012-13 HALDIA DEVELOPMENT AUTHORITY 4. THE ASSESSEE HAS FILED CROSS-OBJECTIONS ON THE F OLLOWING GROUNDS:- 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE PROVISIONS OF SEC. 194J OF THE INCOME TAX ACT 1961 WERE NOT APPLICABL E AT ALL AND AS SUCH THERE WAS NO LIABILITY ON THE RESPONDENT-ASSESSEE TO DEDU CT TAX. 2. FOR THAT THERE BEING NO PAYMENT OF ANY AMOUNT MA DE BY THE RESPONDENT-ASSESSEE TO HALDIA WATER MANAGEMENT LTD. THAT WOULD ENTAIL ANY LIABILITY TO DEDUCT TAX PROVISIONS OF SEC. 194J HA D BEEN WRONGLY APPLIED BY THE ASSESSING OFFICER. 3. FOR THAT FURTHER GROUND OF APPEAL MAY KINDLY BE ALLOWED TO BE TAKEN AT THE TIME OF HEARING OF THE APPEAL. AS THE GROUNDS OF CROSS-OBJECTION OF THE ASSESSEE FOR ALL THE ASSESSMENT YEARS ARE IDENTICAL THEY ARE NOT RE-ITERATED. 5. THE BRIEF FACTS OF THE CASE ARE BROUGHT OUT FROM PARA 1 TO PARA 2.4. OF THE ORDER OF THE ASSESSING OFFICER FOR THE FINANCIAL YEAR 2009-1 0 WHICH IS EXTRACTED FOR READY REFERENCE:- 1.0. A SURVEY U/S. 133A OF THE LT. ACT 1961 WAS C ONDUCTED AT THE OFFICE PREMISES OF HALDIA DEVELOPMENT AUTHORITY HALDIA UNNAYAN BHAWAN CITY CENTRE P.O. -DEBHOG PURBA MIDNAPORE WEST BENGAL-721 657 ON 22.01.2013. DURIN G THE COURSE OF SURVEY IT WAS FOUND THAT THE ASSESSEE-DEDUCTOR WAS THE AUTHORITY DEALI NG MAINLY WITH THE PLANS AND EXECUTING WORKS RELATING TO BASIC INFRASTRUCTURE DEVELOPMENT. THE NATURE OR WORK INCLUDES CONSTRUCTION OF ROADS PROVIDING WATER SUPPLY DRAI NAGE FACILITIES STREET LIGHTING. INSTALLATION OF TUBEWELLS AND OTHER DEVELOPMENT WORKS WITHIN THE PLANNING AREA OF HALDIA DEVELOPMENT AUTHORITY (H.D.A). 1.1. IN COURSE OF SURVEY PROCEEDINGS IT WAS OBSERV ED THAT THE H.D.A. WHILE MAKING CERTAIN PAYMENTS DID NOT DEDUCT TOS AS PER PROVISIONS OF TH E LT. ACT 1961. THE ISSUE IS DISCUSSED BELOW : 4 I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 201 0-11 C.O. NO. 33/KOL/2016 A/O. I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 2010-11 I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 201 1-12 C.O. NO. 34/KOL/2016 A/O. I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012 -13 C.O. NO. 35/KOL/2016 A/O. I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012-13 HALDIA DEVELOPMENT AUTHORITY SERVICE CHARGES PAID TO HALDIA WATER MANAGEMENT LTD . FOR OPERATION MAINTENANCE AND COLLECTION OF WATER BILLS: 2.1 A CONCESSION AGREEMENT WAS SIGNED ON 18.07.2008 BETWEEN HDA (HALDIA DEVELOPMENT AUTHORITY) AND HALDIA WATER MANAGEMENT LIMITED(HWML ) FOR OPERATION AND MAINTENANCE OF WATER TREATMENT PLANT. FROM NOVEMBER 2008 HWML STARTED ITS OPERATION AND MAINTENANCE AND RAISED WATER BILLS TO THE WATER CON SUMERS IN FAVOUR OF H.D.A. THE WATER RENT WAS DEPOSITED INTO REVENUE COLLECTION ACCOUNT MAINTAINED AT PNB DURGACHOWK BRANCH HALDIA AND THE REVENUE WAS SHARED BETWEEN H D.A. AN D HWML AS PER THE SAID AGREEMENT. 2.2 REGARDING SALIENT FEATURES OF THE SAID CONCESSI ON AGREEMENT THE A.R. OF THE ASSESSEE FILED A SUBMISSION ON 25.02.2013 AND AS PER THE SAID COMM UNICATION THE H.W.M.L. IS RESPONSIBLE FOR THE FOLLOWING: 1 . TO EXTRACT RAW WATER FROM THE HOOGHLY/ROOPNARAY AN RIVER AND THE 15 TUBE WELLS CONSTRUCTED FROM MAHISHADAL TO CHITYANAPUR AND SUCH OTHER SOURCES OF RAW WATER AS PERMITTED BY LAW 2. TO MONITOR MANAGE OCCUPY REPAIR OPERATE AND MAINTAIN THE EXISTING FACILITIES; 3. TO DEVELOP DESIGN ENGINEER FINANCE PROCURE CONSTRUCT OPERATE AND MAINTAIN THE NEW FACILITIES; 4. TO RESPONSIBLE FOR THE SMOOTH AND REGULAR SUPPLY OF PURIFIED WATER TO HALDIA TOWNSHIP (BOTH FOR RESIDENTIAL AS WELL AS INDUSTRIAL PURPOSE ); 5. TO LEVY BILL AND COLLECT RETAIN AND APPROPRIAT E WATER CHARGES AND PAYMENTS FROM THE CUSTOMERS ON BEHALF OF H.D.A. 6. TO IMPLEMENT THE CUSTOMER SERVICE RULES; 7. TO BEAR AND PAY ALL EXPENSES COSTS AND CHARGES INCURRED IN THE FULFILLMENT OF THE AGREEMENT. THE SAID COMMUNICATION ALSO SPEAKS ABOUT THE METHOD OLOGY OF SHARING THE REVENUE SO COLLECTED FROM THE CONSUMERS. AFTER THE REALIZATION OF BILLS FROM THE CUSTOMERS THE PROCEEDS IS DEPOSITED IN AN ACCOUNT MAINTAINED (NAMED AS REV ENUE COLLECTION ACCOUNT) WITH PNB DURGACHAK HALDIA. AFTER EVERY MONTH OR SO H.D.A. USED TO INSTRUCT THE BANKER TO TRANSFER LICENCE FEES TO THE ACCOUNT OF H.D.A. WITH PNB HAL DIA AND TO TRANSFER THE RESIDUAL AMOUNT OF REVENUE AS OPERATION & MAINTENANCE EXPENSES (0 & M) TO THE ESCROW A/C OF HWML. 5 I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 201 0-11 C.O. NO. 33/KOL/2016 A/O. I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 2010-11 I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 201 1-12 C.O. NO. 34/KOL/2016 A/O. I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012 -13 C.O. NO. 35/KOL/2016 A/O. I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012-13 HALDIA DEVELOPMENT AUTHORITY 2.3 ON GOING THROUGH THE PARA 10.6 OF THE AGREEMENT IT IS APPARENT THAT THE SOLE RESPONSIBILITY OF OPERATION AND MAINTENANCE OF THE WATER TREATMENT PLAN IS ENTRUSTED WITH HWML. THE AGREEMENT STATES THAT 'THE CONCESSIONAIRE SHALL OPERATE AND MAINTAIN THE'- PROJECT BY ITSELF OR THROUGH 0 & M CONTRACTORS AND IF REQUIRED MODIFY REPAIR OR OTHERWISE MAKE IMPROVEMENTS TO THE PROJECT TO COMPLY 'WITH OT HER REQUIREMENTS SET FORTH IN THE AGREEMENT GOOD INDUSTRY PRACTICE APPLICABLE LAWS AND APPLICABLE PERMITS AND MANUFACTURERS GUIDELINES AND INSTRUCTIONS ... '. HE NCE IT IS APPARENT THAT HWML IS- RENDERING TECHNICAL SERVICES FOR THE ENTIRE WATER TREATMENT P LANT AND FOR OTHER AUXILIARY FUNCTIONS IN TERMS OF GENERATION AND DISTRIBUTION OF WATER IN TH E CITY OF HALDIA. 24. FROM THE DETAILS OF THE AGREEMENT AND THE FUNCT IONING OF HWML IT IS EVIDENT THAT TRANSFERRING OF OPERATION AND MAINTENANCE EXPENSES TO THE ESCROW ALE OF HWML FROM THE REVENUE COLLECTION ACCOUNT MAINTAINED BY BOA WITH P NB DURGACHAK HALDIA IS NOTHING BUT CONSIDERATION MADE FOR RENDERING TECHNICAL SERVICES BY H.W.M.L. HENCE THE NATURE OF PAYMENT IS SQUARELY COVERED FOR DEDUCTION OF TAX U/ S. 194J OF THE ACT. 6. THE ASSESSING OFFICER RECORDS THAT THE ASSESSEE I.E. HAD IS ONLY SHOWING LICENSE FEE AS ITS INCOME AND OPERATIONAL MAINTENANCE EXPEN SES ARE TRANSFERRED TO ESCROW A/C AND THAT IN THE ACCOUNTING PROCEDURE FOLLOWED BY TH E ASSESSEE AND THE SCHEME OF SHARING OF AMOUNT DEPOSITED IN THE REVENUE COLLECTI ON ACCOUNT THE ASSESSEE IS TAKING AND ACCOUNTING ONLY LICENSE FEE AS INCOME IN ITS BO OKS OF ACCOUNT. THE ASSESSING OFFICER CONCLUDED THAT THE GROSS RECEIPT OF BILLS COLLECTED BY HWML CONSTITUTES INCOME OF THE ASSESSEE AND THE AMOUNT TRANSFERRED TO ESCROW A/C I S A PAYMENT MADE BY THE ASSESSEE AND JUST BECAUSE THERE WERE NO DEBIT ENTRIES IN RES PECT OF HWML IN THE BOOKS OF ACCOUNT OF THE ASSESSEE THE TRUE NATURE OF TRANSAC TION CANNOT BE IGNORED. HE CONCLUDED THAT SECTION 194J OF THE ACT APPLIES. 7. THE LD. FIRST APPELLATE AUTHORITY CONSIDERED TH E MATERIAL FACTS SUBMITTED BY THE ASSESSEE AND AT PARA 3.1. AND 3.2. CONCLUDED AS FO LLOWS:- 3.1 FROM THE A.O.'S ORDER AND THE SUBMISSION IT AP PEARS THAT HWML SET UP THE WATER SUPPLY FACILITY AND IS OPERATING IN TERMS OF THE CONCESSION AGREEMENT ON ITS 6 I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 201 0-11 C.O. NO. 33/KOL/2016 A/O. I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 2010-11 I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 201 1-12 C.O. NO. 34/KOL/2016 A/O. I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012 -13 C.O. NO. 35/KOL/2016 A/O. I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012-13 HALDIA DEVELOPMENT AUTHORITY OWN. FOR THE INITIAL 25 YEARS THE FACILITY IS COMPL ETELY UNDER THE CONTROL OF HWML WHICH IS REQUIRED TO INCUR ALL EXPENSES FOR MAINTAI NING AND OPERATING THE WATER FACILITY. THE REVENUE IS BEING COLLECTED BY HWML WH ICH IS BEING DEPOSITED IN THE REVENUE COLLECTION ACCOUNT FROM WHICH HDA THE APPE LLANT DEDUCTOR IS TRANSFERRED LICENCE FEE. THERE IS PROVISION FOR ADDITIONAL PAYM ENTS FROM THE SAID REVENUE COLLECTION ACCOUNT TO THE APPELLANT BUT THAT SITUAT ION DID NOT ARISE AS THE VOLUME OF WATER SUPPLIED DID NOT EXCEED THE STIPULATED VOLUME LIMIT. HWML GOT THE SHARE IN THE REVENUE COLLECTION ACCOUNT AFTER PAYMENT OF LIC ENCE FEE TO HDA. THERE IS NOTHING ON RECORD TO EVEN SUGGEST THAT ANY MONEY WAS PAID B Y HDA THE APPELLANT TO HWML. THE TECHNICAL OR OTHER SERVICES BEING RENDERED BY HWML IS ON ITS OWN ACCOUNT. IN OTHER WORDS NO SUCH SERVICES CAN BE SAID TO HAVE B EEN GIVEN TO HDA WHICH RECEIVES THE LICENCE FEE OR SOME ADDITIONAL REVENUE FOR THE 25 YEARS OF THE CONCESSION PERIOD AFTER WHICH THE WATER FACILITY HAS TO BE HANDED OVE R TO THE APPELLANT HDA WI1HOUT PAYMENT OF ANY COST TO HWML. THUS THE A.O.'S OBSERV ATION THAT HDA RECEIVED TECHNICAL SERVICES AND PAID FEES FOR IT IS NOT BASE D ON ANY MATERIAL. 3.2 ON THE QUESTION WHETHER HDA IS LIABLE TO DEDUCT ION U/ S.194J ALTERNATIVES SUBMISSION AS GIVEN IN PARA 6 OF THE APPELLANT'S S UBMISSION DATED 08.12.2015 IS ALSO RELEVANT. THERE IS MATERIAL TO SUGGEST THAT TH E APPELLANT DID NOT PAY ANY AMOUNT TO HWML AS FEES FOR TECHNICAL SERVICES OR OT HER SUMS. 8. WE FIND NO INFIRMITY IN THIS ORDER OF THE LD. CI T(A). THE FACTS AND CLAUSES OF CONCESSION AGREEMENT HAVE BEEN BROUGHT OUT FROM PARA 4.1. TO 4 .15 OF THE LD. CIT(A)S ORDER FROM PAGE 5 TO 8 WHICH IS EXTRACTED FOR READY REFERENCE :- 4.1 THE MATERIAL FACTS ARE THAT ON JULY 18 2008 A CONCESSION AGREEMENT WAS MADE BETWEEN THE ASSESSEE AND THE SAID COMPANY IN RESPEC T OF HALDIA WATER SUPPLY PROJECT. IN THE SAID AGREEMENT THE WORD 'PROJECT' WAS DEFINED IN CLAUSE (AAG) ARTICLE 1. 1 AS FOLLOWS: - '(AAG) 'PROJECT' MEANS SUBJECT TO THE PROVISIONS O F THIS AGREEMENT THE DEVELOPMENT FINANCING DESIGN CONSTRUCTION OF THE NEW FACILITI ES REHABILITATION/ REPLACEMENT WORK OF THE EXISTING FACILITIES (III) OPERATION A MAINTENA NCE (O&M) OF THE PROJECT FACILITIES AND ALL ACTIVITIES INCIDENTAL THERETO INCLUDING BUT WITHOUT LIMITATION ENGINEERING TESTING 7 I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 201 0-11 C.O. NO. 33/KOL/2016 A/O. I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 2010-11 I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 201 1-12 C.O. NO. 34/KOL/2016 A/O. I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012 -13 C.O. NO. 35/KOL/2016 A/O. I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012-13 HALDIA DEVELOPMENT AUTHORITY COMMISSIONING AND INSURANCE (IV) BILLING AND COLLEC TION OF WATER CHARGES; V) TRANSFER OF THE PROJECT FACILITIES TO THE H.D.A. ON THE TRANSFE R DATE; (VI) THE PAYMENT OF LICENCE FEES BY THE CONCESSIONAIRE TO THE H.D.A. IN LIEU OF THE GRA NT OF THE CONCESSION; AND (VII) PROVIDING SERVICES IN THE SERVICE AREA. 4.2 IN TERMS OF ARTICLE 4.1 THE ASSESSEE GRANTED T O THE SAID COMPANY THE CONCESSION FORTH IN THE AGREEMENT INCLUDING THE EXCLUSIVE RIGHT LICENC E AND AUTHORITY DURING SUBSISTENCE OF THE AGREEMENT TO IMPLEMENT THE PROJECT ('THE CONCESSION '] AND THE SAID COMPANY ACCEPTED THE CONCESSION AND AGREED TO IMPLEMENT THE PROJECT SUBJ ECT TO THE TERMS AND CONDITIONS SET FORTH IN THE AGREEMENT. THE CONCESSION GRANTED OBL IGED OR ENTITLED (AS THE CASE MAY BE) THE SAID COMPANY TO INTER ALIA THE FOLLOWING : - (I) RIGHT OF WAY ACCESS AND LICENCE TO THE SITE AN D THE EXISTING FACILITIES; (II) RIGHT TO EXTRACT RAW WATER FREE OF CHARGE; (III) MONITOR MANAGE OCCUPY REPAIR OPERATE AND MAINTAIN THE EXISTING FACILITIES; (IV) DEVELOP DESIGN ENGINEER FINANCE PROCURE C ONSTRUCT OPERATE AND MAINTAIN THE NEW FACILITIES DURING THE CONCESSION PERIOD; (V) MANAGE OPERATE AND MAINTAIN THE PROJECT FACILI TIES AND TO OPERATE AND MAINTAIN THE WATER SUPPLY; (VI) BE RESPONSIBLE FOR THE SMOOTH AND REGULAR SUPP LY OF WATER; (VII) LEVY BILL AND COLLECT RETAIN AND APPROPRIAT E WATER CHARGES AND PAYMENT FROM CUSTOMERS ON BEHALF OF THE ASSESSEE FOR ALL SERVICE S; (VIII) IMPLEMENT THE CUSTOMER SERVICE RULES; (IX) HANDOVER THE PROJECT FACILITIES TO THE ASSESSE E UPTO THE CONCESSION PERIOD COMING TO AN END; AND (X) BEAR AND PAY ALL EXPENSES COSTS AND CHARGES IN CURRED IN THE FULFILLMENT OF ITS OBLIGATIONS UNDER THE AGREEMENT; 4.3 THE WORDS/ EXPRESSIONS 'REVENUE' 'WATER CHARGE S' AND 'WATER TARIFF' WERE DEFINED VIDE CLAUSES (AAR} (AAAG) AND (AAAI) OF ARTICLE 1. 1 AS FOLLOWS - '(AAR) 'REVENUE' MEANS THE PRE-TAX GROSS REVENUES O F THE CONCESSIONAIRE FOR ANY PERIOD INCLUDING ALL AMOUNTS RECEIVED (OR WHICH WOULD HAVE BEEN RECEIVED) FROM CUSTOMERS FOR THE SERVICES AND ALL OTHER NET AMOUNTS WHICH FALLS (OR WOULD FALL) TO BE CREDITED TO THE 8 I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 201 0-11 C.O. NO. 33/KOL/2016 A/O. I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 2010-11 I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 201 1-12 C.O. NO. 34/KOL/2016 A/O. I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012 -13 C.O. NO. 35/KOL/2016 A/O. I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012-13 HALDIA DEVELOPMENT AUTHORITY PROFIT' & LOSS ACCOUNT OF THE CONCESSIONAIRE FOR TH E ACCOUNTING YEAR IN WHICH THE RELEVANT PERIOD FALLS BUT SHALL EXCLUDE FOR THE AVOIDANCE OF DOUBT ALL AMOUNTS RECEIVED (OR WHICH WOULD HAVE BEEN RECEIVED) BY THE CONCESSIONAIRE WHI CH ARE PAYMENTS IN SATISFACTION (DIRECTLY OR INDIRECTLY) OF ANY OBLIGATION OF ANY S HAREHOLDER IN THE CONCESSIONAIRE TO CONTRIBUTE FUNDS TO THE CONCESSIONAIRE;' '(AAAG) 'WATER CHARGES' MEANS THE AMOUNT DETERMINED LEVIED DEMANDED COLLECTED RETAINED AND APPROPRIATED BY THE CONCESSIONAIRE AS PER WATER TARIFF FROM CUSTOMERS FOR SERVICES INCLUDING ANY DUTIES LEVIES TAXES CESS OR OTHER CHARGES THAT] LAY BE IMPOSED IN RELATION TO THE SERVICES AND WHICH ARE PASSED ON/TH ROUGH TO THE CUSTOMERS; '(AAAI) 'WATER TARIFF' MEANS THE AMOUNT TO BE CHARG ED BY THE CONCESSIONAIRE IN ACCORDANCE WITH THE WATER TARIFF NOTIFICATION ISSUE D BY THE H.D.A FROM TIME TO TIME IN THIS REGARD;' ARTICLE 13 CONTAINED DETAILED PROVISIONS REGARDING INVOICING AND COLLECTION. 4.4 AS PER ARTICLE 4.2 THE CONCESSION PERIOD WAS 25 YEARS. 4.5 ARTICLE 2.2 CONTAINED PROVISIONS FOR HANDING OV ER BY THE ASEESEE TO THE SAID COMPANY ALL THE EXISTING FACILITIES AND VACANT POSSESSION OF TH E SITE FOR THE NEW FACILITIES AND FOR ISSUE OF WRITTEN NOTICE TO THE EXISTING CUSTOMERS THAT SERVI CE WOULD BE PROVIDED BY THE SAID COMPANY IN THE NAME AND ON BEHALF OF THE ASSESSEE I NCLUDING BILLING AND COLLECTION. 4.6 ARTICLE 7.1 CONTAINED THE OBLIGATIONS OF THE SA ID COMPANY. THE SAID COMPANY AT ITS OWN COST AND EXPENSE WAS TO INTER ALIA PROVIDE AND MA NAGE THE SUPPLY OF WATER TO CUSTOMERS MONITOR MANAGE OPERATE AND REPAIR THE PROJECT FAC ILITIES PAY IN TIMELY MANNER TO THE ASSESSEE THE LICENCE FEE AS PER THE AGREEMENT COLL ECT IN THE NAME AND ON BEHALF OF THE ASSESSEE WATER CHARGES FROM THE ASSESSEE UNDERTAKE THE REHABILITATION/ REPLACEMENT WORK OF THE EXISTING FACILITIES ACHIEVE COMMERCIAL OPER ATION DATE OF THE NEW FACILITIES UNDERTAKE THE DESIGN ENGINEERING PROCUREMENT AND CONSTRUCTI ON AND FINANCING OF THE PROJECT OPERATE AND MAINTAIN THE PROJECT FACILITIES HAND O VER THE PROJECT TO THE ASSESSEE UPON TERMINATION OF THE AGREEMENT ETC. ETC. THE SAID COM PANY WAS TO BE SOLELY RESPONSIBLE FOR ALL COSTS WAGES OF THE EXISTING PERSONNEL AND EXPENSES RELATABLE TO SERVICES RENDERED FROM THE DATE OF HANDING OVER OF THE EXISTING FACILITIES BY THE ASSESSEE TO THE SAID COMPANY. 9 I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 201 0-11 C.O. NO. 33/KOL/2016 A/O. I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 2010-11 I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 201 1-12 C.O. NO. 34/KOL/2016 A/O. I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012 -13 C.O. NO. 35/KOL/2016 A/O. I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012-13 HALDIA DEVELOPMENT AUTHORITY 4.7. AS PER ARTICLE 8.3.8 THE COST OF CARRYING OUT THE REHABILITATION/ REPLACEMENT WORK OF THE EXISTING FACILITIES WAS TO BE BORNE BY THE ASSE SSEE AND THE SAID COMPANY EQUALLY SUBJECT TO THE CONDITION THAT THE TOTAL COST OF THE REHABIL ITATION/REPLACEMENT OVER THE PERIOD OF FIVE YEARS DID NOT EXCEED RS.10 CRORES. ANY EXCESS OVER RS. 10 CRORES WAS TO BE BORNE BY THE SAID COMPANY. AS PER ARTICLE 8.4.1 THE ASSESSEE WAS TO REIMBURSE ITS SHARE OF SUCH COST ON THE BASIS OF COMPLETION OF SUCH WORK AS MAY BE INVOICED BY THE SAID COMPANY. 4.8. ARTICLE 9 CONTAINED DETAILED PROVISIONS REQUIR ING THE SAID COMPANY TO COMPLETE THE NEW FACILITIES AT ITS OWN COST WITHIN A PERIOD OF T WO YEARS. 4.9. ARTICLE 10.6 PROVIDED FOR OPERATION AND MAINTE NANCE OF THE PROJECT BY THE SAID COMPANY. 4.10. ARTICLE 12 CONTAINED PROVISIONS RELATING TO W ATER TARIFF LICENCE FEES SHARING OF ADDITIONAL REVENUE AND POWER COST. THE SAID COMPANY WAS ENTITLED TO DEMAND' AND COLLECT WATER CHARGES FROM THE CUSTOMERS ON BEHALF OF THE A SSESSEE. IN CONSIDERATION FOR THE GRANT OF THE CONCESSION THE SAID COMPANY WAS TO PAY AN A NNUAL LICENCE FEE AS PER APPENDIX VII ON MONTHLY BASIS AND ALSO SHARE ANY ADDITIONAL REVE NUE REALISED FROM CUSTOMERS ON ACCOUNT OF EITHER THE SALE OF WATER BEYOND THE TRIG GER VOLUME (TO BE SHARED IN THE RATIO 50:50) AND/ OR INCREASE IN THE WATER TARIFF/ABOVE T HE MINIMUM TARIFF INCREASE (TO BE SHARED IN THE RATIO OF 70:30). ANY INCREASE IN THE POWER COST DUE TO INCREASE IN THE POWER TARIFF BEYOND THE BASE POWER TARIFF WAS TO BE SHARE D BETWEEN THE ASSESSEE AND THE SAID COMPANY ON EQUAL BASIS. 4.11. AS PER ARTICLE 19.5.2 ON EXPIRY OF THE AGREE MENT THE SAID COMPANY WAS TO HAND OVER THE PROJECT TO THE ASSESSEE FREE OF COST. 4.12. ARTICLE 11.5 PROVIDED FOR OPENING A REVENUE C OLLECTION ACCOUNT WITH THE REVENUE COLLECTION BANK BY THE ASSESSEE IN WHICH THE CUSTOM ERS WERE TO DEPOSIT THE WATER CHARGES BILLED BY THE SAID COMPANY. DETAILED PROVISIONS WER E MADE REGARDING THE PRIORITY OF PAYMENT FROM THE SAID ACCOUNT TOWARDS TAXES OPERAT ION AND MAINTENANCE EXPENSES OF THE SAID COMPANY LICENCE FEE TO WHICH THE ASSESSEE WAS ENTITLED SHARING OF ADDITIONAL REVENUE ADMITTED CLAIMS OF EITHER PARTY AND TRANSFER OF THE BALANCE AMOUNT TO THE SAID COMPANY. FOR PAYMENT OF OPERATION AND MAINTENANCE EXPENSES THE REVENUE COLLECTION BANK WAS TO ACT ON THE CLAIM OF THE SAID COMPANY DULY SUPPORTED BY PROOF OF APPROVAL OF OPERATION AND MAINTENANCE BUDGET FOR THE PURPOSE OF PAYMENT OF LI CENCE FEE TO THE ASSESSEE THE REVENUE 10 I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 201 0-11 C.O. NO. 33/KOL/2016 A/O. I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 2010-11 I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 201 1-12 C.O. NO. 34/KOL/2016 A/O. I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012 -13 C.O. NO. 35/KOL/2016 A/O. I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012-13 HALDIA DEVELOPMENT AUTHORITY COLLECTION BANK WAS TO ACT ON THE BASIS OF APPENDIX XVI DETAILING THE LICENCE FEES. IT WAS PROVIDED THAT THE ARRANGEMENT WOULD BE OPERATIONA LISED THROUGH A SUITABLE REVENUE COLLECTION AGREEMENT ENTERED INTO BY THE PARTIES AN D THE REVENUE COLLECTION BANK HAVING AN IRREVOCABLE INSTRUCTION MANDATE THAT THERE SHALL BE NO INTERFERENCE OR CLAIM OF LIEN BY EITHER PARTY. 4.13. ARTICLE 11.6 PROVIDED THAT THE SAID COMPANY S HALL OPEN AN ESCROW ACCOUNT INTO WHICH ALL ITS ENTITLEMENTS WILL BE TRANSFERRED. 4.14. THE REVENUE COLLECTION AGREEMENT BETWEEN THE SAID COMPANY THE REVENUE COLLECTION BANK NAMELY PUNJAB NATIONAL BANK AND THE ASSESSEE WAS MADE ON JANUARY 12 2009. IT WOULD APPEAR FROM THE SAID AGREEMENT THAT THE REVEN UE COLLECTION ACCOUNT WAS A TRUST ACCOUNT AND THE REVENUE COLLECTION BANK WAS THE TRU STEE AND HELD THE MONEY FOR AND ON ACCOUNT OF THE SAID COMPANY AND THE ASSESSEE IN ACC ORDANCE WITH THEIR RESPECTIVE ENTITLEMENTS. THE SAID COMPANY AND THE ASSESSEE WER E TO PROVIDE THE REVENUE COLLECTION BANK A LIST OF THEIR RESPECTIVE AUTHORISED OFFICERS ALONGWITH THEIR SPECIMEN SIGNATURE WHO WOULD BE AUTHORISED TO COMMUNICATE THE RELEVANT DEC ISIONS NOTICES LETTERS ETC. THE RIGHTS OF THE SAID COMPANY AND THE ASSESSEE IN THE MONEYS HELD IN THE REVENUE COLLECTION ACCOUNT WERE SET FORTH IN THE SAID AGREEMENT IN THEIR ENTIR ETY AND NEITHER PARTY HAD ANY OTHER RIGHT IN RESPECT OF SUCH MONEY. THE SAID COMPANY WAS ENTI TLED TO RECEIVE ITS OPERATION AND MAINTENANCE EXPENSES FROM THE REVENUE COLLECTION BA NK BY MAKING A CLAIM DULY SUPPORTED BY APPROPRIATE DOCUMENTARY PROOF OF APPRO VAL OF THE OPERATION AND I MAINTENANCE BUDGET. THE PROVISIONS REGARDING PRIORI TY OF PAYMENT FROM THE REVENUE; COLLECTION ACCOUNT WERE THE SAME AS IN ARTICLE 11.5 OF THE CONCESSION AGREEMENT DATED JULY 18 2008. ARTICLE 6.3 PROVIDED THAT UPON CLOSURE OF THE REVENUE COLLECTION ACCD.MT .THE BALANCE WAS TO BE PAID TO THE SAID COMPANY. BECAUSE THE REVENUE COLLECTION ACCOUNT WAS A TRUST ACCOUNT THE SAID AGREEMENT DATED JANUARY 12 2009 PROVIDED THAT MONEYS OR OTHER PROPERTY RECEIVED BY THE REVENUE COLLECTION BANK UN DER THE AGREEMENT SHALL BE HELD BY THE REVENUE COLLECTION BANK IN TRUST FOR THE PURPOSE FO R WHICH THEY WERE RECEIVED AND SHALL BE SEGREGATED FROM OTHER FUNDS AND PROPERTY OF THE REV ENUE COLLECTION BANK. 4.15. THE SAID BANK ACCOUNT WAS TITLED 'REVENUE COL LECTION ACCOUNT HDA HWML' WHERE 'HDA' STOOD FOR THE ASSESSEE AND 'HWML' STOOD FOR T E SAID COMPANY. THE SAID BANK ACCOUNT WAS REFLECTED BY THE SAID COMPANY IN ITS BO OKS OF ACCOUNT. THE SAID COMPANY 11 I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 201 0-11 C.O. NO. 33/KOL/2016 A/O. I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 2010-11 I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 201 1-12 C.O. NO. 34/KOL/2016 A/O. I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012 -13 C.O. NO. 35/KOL/2016 A/O. I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012-13 HALDIA DEVELOPMENT AUTHORITY ACCOUNTED FOR ALL THE EXPENSES INCURRED BY IT FOR S UPPLY OF WATER TO THE CONSUMERS INCLUDING IN RESPECT OF OPERATION AND MAINTENANCE OF THE WATE R SUPPLY PROJECT AND FOR THE WATER CHARGES BILLED TO THE CONSUMERS. THE LICENCE FEE PA ID/PAYABLE TO THE ASSESSEE WAS SHOWN BY THE SAID COMPANY AS AN ITEM OF EXPENSE. DURING THE MATERIAL PERIOD NO ADDITIONAL REVENUE AROSE IN TERMS OF THE AGREEMENT AND THERE WAS NO RE VENUE SHARING. 9. FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE DID NOT ENGAGE HWML TO RENDER ANY SERVICE. UNDER THE SAID AGREEMENT DT. 18 TH JULY 2008 THE ASSESSEE TRANSFERRED TO HWML FOR AN AGREED CONSIDERATION AND FOR A SPECIFI ED PERIOD ITS RIGHT TO SUPPLY WATER TO CONSUMERS IN HALDIA AND CONFERRED THE RIGHT TO H WML TO CHARGE AND COLLECT THE CHARGE THERETO DIRECTLY FROM THE CONSUMERS. THE TER MS & CONDITIONS OF SUCH TRANSFER IS THAT HWML SHALL OPERATE AND MAINTAIN THE EXISTING F ACILITIES AND ESTABLISH OPERATE AND MAINTAIN THE NEW FACILITIES AT ITS COST. THE ASSESS EE WAS TO SHARE 50 PER CENT OF THE COST OF REHABILITATION/REPLACEMENT OF THE EXISTING FACIL ITY SUBJECT TO AN UPPER LIMIT OF RS.5 CRORES. THE ASSESSEE WAS ALSO TO SHARE THE INCREASE IN THE POWER COST OVER THE BASE POWER TARIFF EQUALLY WITH HWML. DURING THE CURRENC Y OF THE AGREEMENT THE ASSESSEE WAS TO RECEIVE ONLY LICENSE FEE AND AN AGREED SHARE IN ADDITIONAL REVENUE FROM HWML. THE REVENUE FROM WATER BILLS RAISED BELONGED TO HWM L. THUS THERE IS NO PAYMENT OF ANY AMOUNT OF ANY KIND FOR ANY SERVICE BY THE ASSES SEE TO HWML. 10. UNDER THESE CIRCUMSTANCES THE CONCLUSION OF TH E ASSESSING OFFICER THAT SECTION 194J OF THE ACT APPLIES IS BAD IN LAW. 10.1. IN VIEW OF THE ABOVE DISCUSSION WE UPHOLD TH E ORDER OF THE LD. FIRST APPELLATE AUTHORITY AND DISMISS ALL THE THREE APPEALS OF THE REVENUE. THE CROSS-OBJECTIONS ARE ONLY IN SUPPORT OF THE REVENUE APPEALS AND HENCE DI SPOSED OFF AS SUCH. 11. IN THE RESULT ALL THE APPEALS OF THE REVENUE & THE CROSS-OBJECTIONS OF THE ASSESSEE ARE DISMISSED AS INFRUCTUOUS. KOLKATA THE 30 TH DAY OF NOVEMBER 2017. 12 I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 201 0-11 C.O. NO. 33/KOL/2016 A/O. I.T.A. NO. 709/KOL/2016 ASSESSMENT YEAR: 2010-11 I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 201 1-12 C.O. NO. 34/KOL/2016 A/O. I.T.A. NO. 710/KOL/2016 ASSESSMENT YEAR: 2011-12 I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012 -13 C.O. NO. 35/KOL/2016 A/O. I.T.A. NO. 711/KOL/2016 ASSESSMENT YEAR: 2012-13 HALDIA DEVELOPMENT AUTHORITY SD/- SD/- [ S.S. VISWANETHRA RAVI ] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT ME MBER DATED : 30.11.2017 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. A.C.I.T. CIRCLE-3(TDS) KOLKATA COMMISSIONER OF INCOME TAX TDS KOLKATA 10-B MIDDLETON ROW 7 TH FLOOR KOLKATA- 700 071 2. HALDIA DEVELOPMENT AUTHORITY HAKDIA UNNAYAN BHAWAN CITY CENTRE P.O.-DEBHOG PURBA MEDNIPUR PIN- 721 657 3. CIT(A)- 4. CIT- 5. CIT(DR) KOLKATA BENCHES KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT KOLKATA BENCHES