By K. B. Bhujle, Advocate
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[CIT Vs. Krishak Bharati Co-operative Ltd.; 349 ITR 68 (Guj): 253 CTR 402 (Guj):]
Assessee was engaged in the manufacture of fertilisers. It consumed natural gas which was supplied by different agencies through pipelines. The Department took the view that the agreement involved works contract for transport of the gas and the assessee was required to deduct tax at source at the appropriate rate u/s. 194C on the transportation charges. The Tribunal held that the assessee did not hire any service of carriage of goods and that, therefore, the case would not fall in clause (c) of Explanation III to section 194C of the Act.
On appeal by the Revenue, the Gujarat High Court upheld the decision of the Tribunal and held as under:
“i) The contract of sale of gas itself envisaged that gas would be supplied by the seller to the assessee at the receiving point of the assessee’s factory. For such purpose, the seller would be laying down its pipelines and other equipment and would maintain such paraphernalia. The seller would also have the right to use such pipelines and equipment for the purpose of distributing gas to other gas consumers. The ownership of the gas was passed on from the seller to the assessee only at the point of delivery and not before.
ii) The agreement essentially was for purchase and sale of gas. Transportation of gas was only a part of the entire sale transaction. The clear understanding of the parties that the ownership of gas would pass on to the buyer at the delivery point, showed that the transport of gas by the seller was a step towards execution of contract for sale of gas and there was no contract for carriage of goods.
iii) Thus the case was not covered u/s. 194C. The transportation charges did not depend on the consumption of quantity of gas but were a fixed monthly charges to be borne by the assessee as part of the agreement between the parties. Therefore, the application of section 194C did not arise.”
