No TDS u/s 194C for Terminaling Charges to Avail Infrastructure Facilities

Payment made by assessee for terminalling charges were actually for availing infrastructure facilities and as such, there was no work contract involved, hence, provisions of section 194C were not attracted

Facts

• Assessee company engaged in oil business made payment of terminalling charges to BRPL without deducting TDS.

• Assessing officer held that assessee's transactions were very much attracted towards provisions of section 194C and non-deduction of TDS had made assessee in default under 201(1) and accordingly charged interest under section 201(1A).

• The commissioner(Appeals) confirmed the action of the Assessing Officer.

• On appeal to the Tribunal:
No TDS u/s 194C for Terminaling Charges to Avail Infrastructure Facilities

Held

• From the copy of Agreement between assessee and BRPL it is evident that payment was made for availing the infrastructure facilities and as such, there was no work contract of the nature as specified under section 194C. It is also pertinent to note that Legislative has brought amendment to section 194-I for making such transactions subject to TDS but which came into force with effect from 1-6-2007 only. However, the dispute in the instant case relate to the period prior to the amendment under section 194-I.

• For making a transaction subject to TDS under section 194-C there has to be written or unwritten works contract. From the facts it is found that in the instant case the assessee was buying the petroleum products from BRPL. Besides the above the loading services were also provided by BRPL in connection with the purchase of the petroleum product. For the loading services the assessee was making the payment separately to BRPL. The petroleum products were purchased by the assessee in bulk and regular basis for which loading facility was provided by BRPL. The assessee for availing the loading facility was making the payment to the same party from which he was buying the products i.e. BRPL. Thus the loading facility was intricately linked with every purchase of the products. It was not possible for the assessee to purchase the products without availing the infrastructure facility of BRPL. Thus it shall not be inappropriate to treat the expenses on infrastructure facility at par with the purchase. The method for the payment of infrastructure facility and entering into a separate agreement cannot be the sole basis to treat the transaction independent of the purchase. The rate lump sum consideration was fixed for the infrastructure facility. No direct labour was involved. Therefore, the provisions of section 194C are not applicable to the assessee.
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