Areva T& D, Sa v. The Assistant Director of Income Tax and Ors

SANJIV KHANNA, J. APRIL 25, 2011 pk, kapil, dk

* HIGH COURT OF DELHI AT NEW DELHI Judgment Reserved on: 14th February, 2011 % Judgment Pronounced on: 25th April, 2011 + WP(C) No.12859, 12860, 12863, 12864, 12865, 12866 of 2009 AREVA T&D, SA ..... Petitioner Through: Mr. Ajay Vohra, Ms.Kavita Jha, Mr.Sachit Jolly, Mr.Somnath Shukla, Advocates Versus THE ASST. DIRECTOR OF INCOME TAX & ORS. ....Respondents Through: Mr. N.P. Sahni, Standing Counsel for Revenue with Mr.Ruchesh Sinha, Advocate CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE SANJIV KHANNA 1. Whether reporters of the local papers be allowed to see the judgment? YES 2. To be referred to the Reporter or not? YES Whether the judgment should be reported in the Digest? YES DIPAK MISRA, CJ Keeping in view the similitude of the question involved in this batch of writ petitions, they were heard together and are disposed of by a common order. For the sake of clarity and convenience, the facts of WP(C) 12859/2009 are enumerated herein. 2. The petitioner company was awarded four contracts encompassing Onshore supply, Onshore services and Offshore supply, one each for Northern and North Eastern regions and two for Eastern region by Power Grid Corporation of India Ltd. (PGCIL). The contracts were awarded on 29.1.1998, 15.5.2000, 16.1.2001 and 20.1.2002. The contracts for Onshore supply and Onshore services were given on sub contract to Areva T&D Systems India Ltd. at the same price at which the said contracts were awarded to the petitioner by PGCIL. 3. The PGCIL had moved an application under Section 195(2) of the Income Tax Act, 1961 (for brevity ‗the Act') with regard to the payments to be made to the petitioners. The revenue, vide orders dated 6.6.2000, 23.5.2001 and 28.12.2001, passed orders for tax deduction only in respect of the payments made to the petitioner on Offshore contract and Onshore services contract at 10% on gross basis in respect of the payment made for training charges and 10% on gross basis in respect of the payments made for maintenance and service charges respectively and on other payments, deduction was to be made at Nil rate. It is averred that the determination was preceded by an enquiry which included scrutiny of the relevant agreements whereunder payments were made to the petitioner, the relevant law including the past period, the provisions of the DTAA between India and France and the submissions of the petitioner. The other payments on which the tax deduction was to be made at Nil rate included payments made on supply of software consisting of scada software and information storage and retrieval, hardware consisting of processors, servers, hard discs, etc., mandatory spares and test equipments like digital multimeter, varmeter, etc. 4. As set forth, the petitioner had been regularly filing applications under Section 197(1) of the Act with regard to the payments to be made by PGCIL to the petitioner under the various contracts. The revenue had been issuing certificates under Section 197(1) for tax deduction at source. The revenue had posed an enquiry that the facts and circumstances of the case remained similar to those of the earlier years. It is pleaded that orders under Section 197(1) were also passed on 6.8.2002, 12.5.2003 and 21.4.2005. The orders passed under Sections 195(2) and 197(1) have been brought on record as Annexures B and C collectively. 5. Pursuant to the aforesaid orders, payments were made to the petitioner by PGCIL during the period for which the earlier certificates under Section 197 were valid by applying the rates of deduction prescribed by the revenue. For the period, as stated, covered by the contracts upto financial year 2006- 07, that is, upto 31.3.2007, remittances were made by deducting tax at source at the directed rates. On 5.10.2007, for the financial year 2007-08, another application for issue of certificate under Section 197 of the Act was preferred and request was made for issue of a certificate on similar lines issued in the past for payments under the very