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

ITA 375/BANG/2010 | 2009-2010
Pronouncement Date: 22-03-2011 | Result: Allowed

Appeal Details

RSA Number 37521114 RSA 2010
Bench Bangalore
Appeal Number ITA 375/BANG/2010
Duration Of Justice 1 year(s) 7 day(s)
Appellant M/s Karnataka Power Transmission Corporation Ltd.,, Mangalore
Respondent ITO, Mangalore
Appeal Type Income Tax Appeal
Pronouncement Date 22-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 22-03-2011
Date Of Final Hearing 07-01-2011
Next Hearing Date 07-01-2011
Assessment Year 2009-2010
Appeal Filed On 15-03-2010
Judgment Text
PAGE 1 OF 10 ITA NOS.374 & 375/BANG/2010 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.374 AND 375/BANG/2010 (ASST. YEAR 2009-10) KARNATAKA POWER TRANSMISSION CORPORATION LTD. BANGALORE MAJOR WORKS DIVISION AIRPORT ROAD KAVOOR MANGALORE. - APPELLANT VS THE INCOME-TAX OFFICER TDS WARD CENTRAL REVENUE BUILDING ANNEXE ATTAVAR MANGALORE. - 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 TWO APPEALS INSTITUTED BY KPTCL MANGALORE DIVISION A STATE GOVERNMENT PUBLIC SECTOR COMPANY ARE DIRE CTED AGAINST THE ORDER OF THE LD. CIT (A) MANGALORE IN ITA NO: 07/MNG/CIT(A)MNG/09-10 DATED: 18.1.2010 FOR THE ASS ESSMENT YEARS 2009-10 . I. ITA NO: 374/10 AY: 2009-10 U/S.201 (1) OF THE ACT : 2. THE ASSESSEE HAD RAISED AS MANY AS NINETEEN GROUNDS IN AN ILLUSTRATIVE AND NARRATIVE MANNER. ON A CLOSE SCRU TINY OF THE SAME THE CRUXES OF THE ISSUES EMERGED ARE THAT PAGE 2 OF 10 ITA NOS.374 & 375/BANG/2010 2 1. THE CIT (A) WAS NOT JUSTIFIED IN SUSTAINING THE ACTION OF THE AO (TDS) IN TREATING THE ASSESSEE AS ASSESS EE IN DEFAULT AND DEMANDING THE TAX ON THE BASIS THAT T HE ASSESSEE OUGHT TO HAVE DEDUCTED THE TDS IN RESPECT OF PAYMENTS MADE TO THE CONTRACTORS TOWARDS SUPPLY OF MATERIALS 2. THAT THE CIT(A) HAD FAILED TO APPRECIATE THAT T HE ASSESSEE CANNOT BE REGARDED AS AN ASSESSEE IN DEFA ULT U/S 201(1) AS THERE WAS NO OBLIGATION ON THE ASSESS EE TO DEDUCT TDS UNDER ANY OF THE PROVISIONS OF THE ACT; & 3. WITHOUT PREJUDICE THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE RECIPIENTS HAVING PAID THE TAX ES ON THE AMOUNTS RECEIVED FROM THE ASSESSEE THE ASSESSE E WAS UNDER NO OBLIGATION TO PAY THE TAX UNDER SECTIO N 201(1) OF THE ACT. II. ITA NO: 375/10 AY: 2009-10 U/S.201 (1A)OF THE A CT: 3. LIKEWISE THE ASSESSEE HAD RAISED T HREE GROUNDS OUT OF WHICH GROUND NO.1 BEING GENERAL AND NO SPECIFIC ISSUE INV OLVED IT HAS BECOME NON-CONSEQUENTIAL. IN THE REMAINING GROUNDS THE I SSUES RAISED ARE REFORMULATED AS UNDER: 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; & - THAT HE WAS NOT JUSTIFIED IN UPHOLDING THE STAND OF THE AO IN LEVYING INTEREST U/S 201 (1A) OF THE ACT WHEN THE ASSESSEES CASE DOESNT FALL WITHIN THE SPHERE OF S.201(1) OF THE ACT. 4. AS THE ISSUES RAISED WERE IDENTICAL PERT AINING TO THE SAME ASSESSEE THEY WERE HEARD CONSIDERED TOGETHER AND DISPOSED OFF IN THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND CLARIT Y. PAGE 3 OF 10 ITA NOS.374 & 375/BANG/2010 3 5. BRIEFLY STATED THE ASSESSEE WAS A STATE 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 PROV ISIONS. DURING 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. 5.1. BRUSHING ASIDE THE ASSESSEES DETA ILED EXPLANATION THE AO WENT AHEAD IN CONCLUDING AFTER DETAILED REASONS RE CORDED IN THE IMPUGNED ORDERS UNDER CHALLENGE THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE ON THE SUPPLY PORTION ALSO WHICH IT H AD FAILED 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 FOR THE ASSESSMENT YEAR UNDER DISPUTE. PAGE 4 OF 10 ITA NOS.374 & 375/BANG/2010 4 6. AGGRIEVED THE ASSESSEE TOOK UP THE ISSUES WITH THE LD. CIT (A) FOR SOLACE. AFTER DUE CONSIDERATION OF THE LENGTHY CONTENTIONS PUT-FORTH BY THE ASSESSEES A.R. PERUSING THE OBSERVATIONS M ADE BY THE AO IN HIS IMPUGNED ORDER UNDER CHALLENGE ANALYZING THE PROVI SIONS OF S.194C OF THE ACT EXTENSIVELY ANALYZING VARIOUS RULINGS DUE PER USAL OF TENDER NOTIFICATION FLOATED BY THE ASSESSEE AND ALSO CONSI DERING THE CASE LAWS ON WHICH THE ASSESSEE HAD PLACED STRONG RELIANCE THE LD. CIT (A) HAD OBSERVED THUS: 49. AFTER A DETAILED EXAMINATION OF THE TENDER N OTIFICATION AND THE TERMS AND CONDITIONS OF THE CONTRACT I AM IN COMPLETE AGREEMENT WITH THE AO THAT THE TURNKEY CONTRACTS AW ARDED BY THE APPELLANT WERE COMPOSITE CONTRACTS AND THAT DIVIDING THE CONTRACT INTO THREE SEPARATE PORTIONS COULD NOT CHANGE SUCH NATURE OF THE CONTRACTS. THE ARRANGEMENT MADE BY THE APPELLANT WHEREBY IT FIRST BOUGHT THE MATERIALS (E .G. TRANSFORMERS) AND THEN HANDED OVER SUCH MATERIALS T O THE CONTRACTORS FOR ERECTION AND CIVIL WORKS COULD SERV E LITTLE PURPOSE EXCEPT MAKING THE SUPPLY TRANSACTIONS APPE AR AS IF THEY WERE SEPARATE. IN ESSENCE THE CONTRACTS WERE SINGLE AND COMPOSITE CONTRACTS WITH THE ENTIRE RESPONSIBILITY FOR THE QUALITY AND STANDARD OF THE SUPPLIES AND WORKS REMA INING WITH THE CONTRACTORS. 50. THE AO HAS FOLLOWED IN TRUE SPIRIT THE DECISIO NS OF THE HONBLE SUPREME COURT IN THE CASES OF STATE OF ANDH RA PRADESH V. KONE ELEVATORS (INDIA) LTD. AND HINDUSTAN SHIPYARD LTD. V. STATE OF ANDHRA PRADESH. IN JUDGING WHETHE R THE CONTRACTS WERE FOR SALE OR FOR WORK AND LABOUR HE HAS CONSIDERED THE ESSENCE OF THE CONTRACTS AND THE REA LITY OF THE TRANSACTIONS AS A WHOLE AND FOUND THAT THE PREDOMI NANT OBJECT OF THE CONTRACTS WAS NOT IN SUBSTANCE THE SALE OF GOODS. HE HAS GONE THOROUGHLY INTO THE FACTS OF TH E CASE AND MADE A PROPER CONSTRUCTION OF THE TERMS AND CONDITI ONS OF THE CONTRACT BETWEEN THE APPELLANT AND THE CONTRACTORS TO SHOW THAT THERE WAS NO CONTRACT IN SUBSTANCE FOR SALE OF GOODS OR FOR FABRICATION OR ARTICLES OR THINGS AS PER THE AP PELLANTS SPECIFICATIONS. ON THE CONTRARY THE APPELLANTS S UBMISSIONS HAVE PLACED UNDUE EMPHASIS ON THE FORM OF THE CONTR ACT WHICH WAS NOT MATERIAL IN DETERMINING THE NATURE OF THE T RANSACTIONS. PAGE 5 OF 10 ITA NOS.374 & 375/BANG/2010 5 51. I FIND NO MERIT IN THE APPELLANTS CONTENTION 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 SAND CIVIL POR TION WAS ONLY ANCILLARY AND SUBSERVIENT TO THE SUPPLY PORTION. ON THE CONTRARY THE PRIMARY BUSINESS OF THE APPELLANT BEI NG DISTRIBUTION OF POWER ERECTION OR ELECTRICAL SUB-S TATIONS AND TRANSFORMERS FOR TRANSMISSION OF POWER WAS THE DOMI NANT ACTIVITY AND PURCHASE OF MATERIALS FOR ERECTION AN D ASSOCIATED CIVIL WORKS WERE THE ANCILLARY AND SUBSERVIENT ACTI VITIES. 52. I AM UNABLE TO AGREE WITH THE APPELLANT THAT ITS CASE FELL IN THE THIRD CATEGORY OF CASES DISCUSSED BY THE HON BLE APEX COURT IN THE CASE OF P.S. COMPANY V. STATE OF ANDHR A PRADESH. IF THE DOMINANT TEST THEORY PROPOUNDED IN THE ABOVE DECISION WERE APPLIED TO THE APPELLANTS CASE THE CASE WOUL D RATHER FALL IN THE SECOND CATEGORY OF CONTRACTS WHERE USE OF T HE MATERIALS SUPPLIED IN TERMS OF THE AGREEMENT TO SUP PLY WAS ACCESSORY OR INCIDENTAL TO THE EXECUTION AND CIVIL WORKS. THE CONTRACTS WERE CLEARLY CONTRACTS FOR WORK AND LABOU R NOT INVOLVING SALE OF GOODS. 53. THE ARGUMENT THAT THE VALUE OF MATERIALS SUPP LIED TO THE CONTRACTOR BELONGED TO THE APPELLANT BECAUSE THE AP PELLANT COMPANY PURCHASED MATERIALS DIRECTLY FROM SUPPLIERS AND GAVE THEM TO CONTRACTORS CANNOT DETRACT FROM THE COMPOSI TE CHARACTER OF THE CONTRACTS. AS THE ITO HAS CORRECT LY POINTED OUT THOUGH THE CONTRACTORS SUPPLIED MATERIALS TO T HE APPELLANT AS A PART OF THE CONTRACTS OWNERSHIP OF SUCH MATER IALS REMAINED WITH THE CONTRACTORS THEMSELVES TILL THE T IME OF DELIVERY/USE OF THE MATERIALS. CIRCULAR NO.681 CLA RIFIED THAT PAYMENTS MADE FOR SUCH MATERIALS CONTRACTS WERE L IABLE FOR DEDUCTION OF TAX AT SOURCE. HENCE THE MERE FACT T HAT 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 APPELLANT COULD NOT A BSOLVE THE APPELLANT OF THE OBLIGATION TO DEDUCT TAX AT SOURC E UNDER SECTION 194C. 54. THERE IS NO FORCE IN THE CONTENTION THAT THE A PPELLANT HAD NO OBLIGATION TO DEDUCT TAX U/S 194C ON THE SUPPLY PORTION OF THE CONTRACTS AS IT HAD AWARDED WORK ORDERS TO CONT RACTORS UNDER THREE DIFFERENT SEGMENTS AND THE TERMS OF EAC H OF THE THREE PORTIONS WERE CLEAR AND THE CONSIDERATION FOR EACH PAGE 6 OF 10 ITA NOS.374 & 375/BANG/2010 6 PORTION WAS SEPARATE. A STATUTORY DUTY TO DEDUCT TA X ON PAYMENTS MADE TO CONTRACTORS COULD NOT BE SHRUGGED OFF BY THE TERMS AND CONDITIONS OF PRIVATE CONTRACTS. IT IS ALSO THE ARGUMENT OF THE APPELLANT THAT THE THREE PORTIONS O F THE WORK ORDER WERE INDEPENDENT OF EACH OTHER BECAUSE THE P ARTIES TO THE SUPPLY CONTRACTORS WERE CLEAR ABOUT THE QUANTIT Y AND RATE OF THE MATERIALS TO BE SUPPLIED WHILE THE PARTIES TO THE ERECTION AND CIVIL WORKS CONTRACTS WERE CLEAR ABOUT THE WORKS TO BE PERFORMED BY THEM. 55. THIS ARGUMENT FAILS TO RECOGNIZE THAT SEGMENT ATION OF CONTRACTS INTO THREE PORTIONS TO SUIT THE APPELLANT S OWN CONVENIENCE COULD NOT CONCEAL THE REAL PURPOSE OF A WARDING THE CONTRACTS NAMELY ESTABLISHING 66/11KV SUB-STATION S AND CONSTRUCTION OF 66 KV LINES. GIVEN THAT BY THE AP PELLANTS OWN ADMISSION 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 ERECTIO N AND CIVIL WORKS WERE ONLY INCIDENTAL AND ANCILLARY TO THE SUP PLY CONTRACT AND THEREFORE SECTION 194C WOULD NOT APPLY TO ALL THE THREE CONTRACTS. BUT THE FACT OF THE MATTER WAS THAT THI S WAS JUST AN ARRANGEMENT OF AFFAIRS. ERECTION AND CIVIL WORK S WERE THE RAISON DE ETRE FOR THE APPELLANTS EXISTENCE AND CO ULD NOT BE SUBORDINATED TO INCIDENTAL ACTIVITIES LIKE SUPPLY O F MATERIALS NEEDED FOR THE MAIN PURPOSE. 56. I AM IN AGREEMENT WITH THE APPELLANTS CITATIO N OF THE CASE OF SENIOR ACCOUNTS OFFICER (O&M) HARYANA POWER GEN ERATION CORPORATION LIMITED V. ITO INSOFAR AS IT WAS HELD THAT CASE THAT IN EACH CASE THE TERMS OF THE CONTRACTS WERE REQUIRED TO BE ANALYZED BEFORE COMING TO THE CONCLUSION WHETHER THE CONTRACTS WERE COMPOSITE CONTRACTS OR NOT. THIS IS PRECISELY WHAT THE AO HAS DONE BEFORE LEVYING TAX U/S 201(1) AND INTEREST U/S 201(1A). THE FACTS AND CIRCUMSTANCES OF THE OTHER DECISIONS CITED BY THE APPELLANT ARE MUCH DIF FERENT FROM THOSE OF THIS CASE AND ARE NOT THEREFORE APP LICABLE. THE ITO HELD THAT PAYMENTS MADE ON THE SUPPLY PORTI ON OF THE CONTRACTS WERE ALSO SUBJECT TO TDS NOT BECAUSE THE COMPOSITE CONTRACTS COULD NOT BE IMPLEMENTED THROUG H SEPARATE AGREEMENTS IF IT SUITED THE PARTIES CONVE NIENCE AND PURPOSES BUT BECAUSE THE NATURE OF THE WHOLE TRANS ACTION VIEWED HOLISTICALLY WAS ONE OF ERECTION AND CIVIL WORKS RATHER THAN BEING ONE OF SALE OF GOODS AND AS SUCH THE S UPPLY PORTION ALONE COULD NOT BE SEPARATED WHEN IT CAME TO MAKIN G TDS. PAGE 7 OF 10 ITA NOS.374 & 375/BANG/2010 7 ACCORDINGLY I HOLD THAT THE ITO WAS JUSTIFIED IN T REATING THE APPELLANT AS AN ASSESSEE IN DEFAULT AND UPHOLD HI S ORDER. 7. AGITATED OVER THE FINDING OF THE LD. CIT (A) THE ASSESSEE HAS COME UP WITH THE PRESENT APPEALS. 8. BEFORE VENTURE TO ADDRESS TO THE ISSUES REFERRED SUPRA WE WOULD LIKE TO POINT OUT THAT IDENTICAL ISSUES WE RE RAISED 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. 9. THE FACTS WERE ELABORATELY DISCUSSED AND SUBMIS SIONS OF BOTH THE LD. A.R AS WELL AS THE LD. D.R. WERE CONSI DERED AT LENGTH IN THOSE APPEALS. AFTER CONSIDERING THE DETAILED RIVAL SUBM ISSIONS AND ON A PERUSAL OF MATERIALS ON RECORD THIS BENCH 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 METICUL OUSLY ANALYZED AND ALSO EXTENSIVELY QUOTING THE VARIOUS J UDICIAL PRONOUNCEMENTS ON THE ISSUES IN THE FORE-GOING PARAGRAPHS WE ARE OF THE CONSIDERED VIEW THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATING TH E ASSESSEE KPTCL AS AN ASSESSEE IN DEFAULT U/S 201(1) AND ALSO CHARGING INTEREST U/S 201(1A) OF THE ACT F OR 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); PAGE 8 OF 10 ITA NOS.374 & 375/BANG/2010 8 - 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; - IT WAS WRONGLY PRESUMED THAT THE CONTRACTS ENTERED INTO BETWEEN THE ASSESSEE AND THE CONTRACTOR WERE COMPOS ITE CONTRACT AND AN INDIVISIBLE CONTRACT WHEREAS THERE WERE THREE SEPARATE CONTRACTS VIZ. (I) SUPPLY OF MATER IALS; (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 DIVISIBLE CONTRACT COVERING THE ENTIRE SCOPE OF THE PARTIAL/TOTAL TURN KEY PACKAGE WILL BE ENTERED INTO WITH THE SUCCESSFUL BI DDER 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 AG REEMENTS 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 PAGE 9 OF 10 ITA NOS.374 & 375/BANG/2010 9 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 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 DEDUC T TAX U/S 194C OF THE ACT TOWARDS THE PAYMENTS MADE ON SUPPLY PORTION THE ASSESSEES CASE DOESNT FALL WI THIN 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 T AX 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 WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS RECORDED THERETO HOLD GOOD FOR THE PRESENT APPEALS TOO. IT IS ORDERED ACCORDINGLY. PAGE 10 OF 10 ITA NOS.374 & 375/BANG/2010 10 10. IN THE RESULT THE ASSESSEES APPEALS FOR THE ASSESSMENT YEAR 2009-2010 [U/S 201 (1) AND U/S 201(1A) OF THE ACT] ARE ALLOWED. 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.