ITO (TDS) 2(3), MUMBAI V. M. DHARAMDAS & CO, MUMBAI

ITA 1506/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0762 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-05-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 22-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KU MAR BEERLA
• Assessee Lawyers: DILIP S DAMLE
• Section: 194C; 201(1); 6

Judgement Text

M DHARAMDAS AND COMPANY ITA NO. 1505 /M/201 3 ITA NO. 1506/M/2013 ITA NO. 1507/M/20 13 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B , MUMBAI . . , , BEFORE SHRI G S PANNU , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIA L MEMBERITA ITA NO. : 1505 /MUM/20 1 3 ( ASSESSMENT YEAR: 20 08 - 0 9 ) ITA NO. : 1506 /MUM/20 13 (ASSESSMENT YEAR: 200 9 - 1 0) ITA NO. : 1507 /MUM/20 13 (ASSESSMENT YEAR: 20 10 - 11 ) IT O (TDS) - RANGE - 2(3) , R. NO. 708, 7 TH FLOOR, SMT. K.G. MITTAL AYURVEDIC HOSPITAL BUILDI NG, CHARNI ROAD, MUMBAI - 400 00 2 VS M DHARAMDAS AND COMPANY , 37, SHROFF BHAVAN, 3 RD FLOOR, 159, P. DMELLO ROAD, OPP CARNAC BUNDER, MUMBAI - 400 009 .: PAN : AA A FM 5898A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PAWAN KUMAR BEERLA RESPONDENT BY : SHRI DILIP S DAMLE /DATE OF HEARING : 05 - 05 - 2015 / DATE OF PRONOUNCEMENT : 10 - 07 - 2015 ORDER PER AMIT SHUKLA , J.M. : TH E AFORESAID APPEAL S HAVE BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 16.11.2012 PASSED BY CIT(A) - 1 4 , MUMBAI IN RELATION TO ORDER U/S 201(1)/201(1A). SI NCE THE GROUNDS RAISED BY THE REVENUE AND THE ISSUES INVOLVED ARE COMMON ARISING OUT OF IDENTICAL SET OF FACTS, THEREFORE, SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. FOR READY REFERENC E, GROUNDS OF APPEAL FOR THE ASSESSMENT YEAR 2008 - 09 ARE REPRODUCED HEREUNDER: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS UNDER NO LIABILITY TO DEDUCT TAX U/S 1941 OF INCOME TAX ACT 1 961 AND M DHARAMDAS AND COMPANY ITA NO. 1505 /M/201 3 ITA NO. 1506/M/2013 ITA NO. 1507/M/20 13 2 DELETING THE TERMINAL HIRING/HANDLING CHARGES DETERMINED BY THE AO U/S 201(1) OF THE ACT WITHOUT CONSIDERING IN THE ALTERNATIVE APPLICABILITY OF THE PROVISIONS OF SEC. 194C OF THE INCOME TAX ACT 1961. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS UNDER NO LIABILITY TO DEDUCT TAX U/S 194I OF INCOME TAX ACT 1961 AND DELETING THE NON/SHORT DEDUCTION UNDER THE HEAD CONTAINER FREIGHT STATION CHARGES DETERMINED BY THE AO U/S 201(1) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE DEFINITION OF RENT STANDS AMENDED WITH EFFECT FROM 13.07.2006. THE AO WAS CORRECT IN HOLDING THE ASSESSEE AS ASSESSEE IN DEFAULT WITHIN THE PROVISIONS OF SECTION 194I IN HIS ORDER U/S 201(1)/201(IA) OF THE INCOM E TAX ACT, 1961. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS UNDER NO LIABILITY TO DEDUCT TAX U/S 194 I OF INCOME TAX ACT 1961 AND DELETING THE NON/SHORT DEDUCTION UNDER THE HEAD BPT CHARGES I.E., WHARFAGE CHARGES DETERMINED BY THE AO U/S.201 OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE DEFINITION OF RENT STANDS AMENDED WITH EFFECT FROM 13.07.2006. WHARFAGE CHARGES REFERS TO ACCOMMODATION FOR PROVIDING UNLOADING, STORAGE OF GOO DS ETC., BY BOMBAY PORT TRUST, THE AO WAS CORRECT IN HOLDING THE ASSESSEE AS ASSESSEE IN DEFAULT WITHIN THE PROVISIONS OF SECTION 1941 IN HIS ORDER U/S 201(1)/201(1A) OF THE COME TAX ACT, 1961. IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C I T (A) HAS ERRED BY DELETING THE INTEREST LEVIED U/S. 201(1A) OF THE 1.T. ACT, 1961 BY HOLDING THAT THE PAYMENT OF TERMINAL HANDLING CHARGES, CONTAINER FREIGHT STATION CHARGES AND BPT CHARGES DOES NOT FALL WITHIN THE PURVIEW OF SECTION U/S. 1941 OF THE I.T. ACT 1961. M DHARAMDAS AND COMPANY ITA NO. 1505 /M/201 3 ITA NO. 1506/M/2013 ITA NO. 1507/M/20 13 3 V) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DEMAND ON ACCOUNT OF SHORT DEDUCTION OF TAX ON PAYMENTS OF TERMINAL HANDLING CHARGES, CONTAINER FREIGHT STATION CHARGES AND BP T CHARGES DOES NOT FALL WITHIN THE PURVIEW OF SECTION U/S. 1941 OF THE LT. ACT., WITHOUT APPRECIATING THE FACTUAL AND LEGAL MATRIX OF THE CASE, AS CLEARLY BROUGHT OUT BY THE A.O. IN HIS ORDER U/S. 201(1) / 201(1A) OF THE INCOME - TAX ACT, 1961. VI) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE INTEREST U/S 201(1A) OF THE IT ACT, 1961 ON THE SHORT DEDUCTION OF TAX DETERMINED BY THE AO AS THE TAX DETERMINED HAS ALREADY BEEN DELETED BY HIM AND INTEREST DE LETION IS CONSEQUENTIAL TO THE QUANTUM DELETION FOR WHICH FURTHER APPEAL HAS BEEN RECOMMENDED VIDE GROUND NO. I TO V. 2. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY AT THE TIME OF THE HEARING OF THE C ASE OR THEREAFTER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM , WHICH CARRIES ON THE BUSINESS OF CUSTOMS HOUSE AGENT (CHA) AND FUNCTIONS IN ACCORDANCE WITH THE LICENSING CONDITIONS CONTAINED IN THE CUSTOMS ACT, 1961. A SURVEY O PERATION U/S 13 3 A WAS CONDUCTED AGAINST SOME OF CHA S , WHICH INCLUDED ASSESSEES PREMISES ALSO ON 24.02.2011 , IN ORDER TO VERIFY THE COMPLIANCE WITH THE PROVISIONS OF CHAPTER XVII - B OF THE INCOME - TAX ACT. IN THE COURSE OF SURVEY, THE AO NOTED THAT ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE IN RESPECT OF EXPENSES INCURRED UNDER THE FOLLOWING HEADS: TERMINAL H ANDLING CHARGES; (A) CONTAINER F REIGHT S TATION C HARGES; (B) BOMBAY PORT TRUST C HARGES; AND (C) CRANE/FORKL I FT C HARGES M DHARAMDAS AND COMPANY ITA NO. 1505 /M/201 3 ITA NO. 1506/M/2013 ITA NO. 1507/M/20 13 4 3. IN RESPONSE TO THE SHOW CAUSE NOTICE AS TO W HY THE ASSESSEE SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT FOR NON - DEDUCTION OF TAX U NDER S ECTION 194I , T HE ASSES S EE FILED DETAILED SUBMISSIONS AS TO WHY THE SAID PROVISIONS ARE NOT APPLICABLE . R EGARDING TERMINAL HANDLING CHARGES (THC) PAID TO SHIPPI NG LINES IT WAS SUBMITTED THAT THE SAME WERE PAID BY THE ASSESSEE TO THE FOREIGN SHIPPING LINES OR THEIR AGENTS. THESE CHARGES PERTAIN TO HANDLING OF THE MATERIAL AT THE BE RTH S ITE WHILE OPERATING OF CARGO OF THE SHIPS OF F OREIGN SHIPPING LINES, FOR WHICH CLAIMS WERE RAISED BY THE SHIPPING COMPANIES, SPECIFICALLY IMPORTER/EXPORTER TO WHOM THE GOODS BELONGED. THE PAYMENT T O THESE SHIPPING COMPANIES OR AGENTS MADE BY THE ASSESSEE WERE ON BEHALF AND ON ACCOUNT OF T HEIR CLIENTS FOR WHICH REIMBURSEMENT WERE CLAI MED BY THE ASSESSEE . IT DOES NOT CONSTITUTE THE EXPENDITURE OF THE ASSESSEE. THEREFORE, THE DEFINITION OF RENT AS SET OUT IN EXPLANATION 1 TO SECTION 194I IS NOT APPLICABLE AT ALL . 4. REGARDING CONTAINER FREIGHT STATION CHARGES (CFS) , THE ASSESSEE SUBMI TTED THAT THESE ARE STATUTORY EXPENSES AND TDS IS NOT DEDUCTIBLE AS THE SAME ARE PAID TO STEAMER COMPANIES AND CFS TO PROMOTE THE REMOVAL OF THE MATERIAL FROM THE SHIP/STEAMER. THE CHARGES WERE PAID ON BEHALF OF IMPORTER, WHICH WERE REIMBURSED TO THE ASSES SEE ON ACTUAL /ACTUARIAL BASIS AGAINST THE RECEIPT ISSUED BY THE STEAMER COMPANIES AGAINST CFS. ON CRANE/FORKLI FT CHARGES, IT WAS SUBMITTED THAT THE ASSES S EE HAS DEDUCTED TDS U/S 194C , AS THE ASSESSEE IS NOT OPERATING OR USING THE CRANE OR FORKLIFT ON ITS O WN BUT HAS GIVEN CONTRACT TO PERFORM THE JOB. LASTLY, R EGARDING BOMBAY PORT TRUST CHARGES , (BPT) AGAIN THE ASSESSEE SUBMITTED THAT THE SAME IS ALSO STATUTORY IN NATURE AND NOT IN THE NATURE OF RENT ASSESSEE GETS REIMBURSEMENT OF THESE EXPENSES . HOWEVER, THE LD. AO HELD THAT THE ASSESSEE IS LIABLE TO DEDUCT TDS U/S 194I AND ACCORDINGLY TREATED THE ASSESSEE IN DEFAULT U/S 201 AND ALSO LEVIED THE INTEREST U/S 201(1) /201 (1A). M DHARAMDAS AND COMPANY ITA NO. 1505 /M/201 3 ITA NO. 1506/M/2013 ITA NO. 1507/M/20 13 5 5 . BEFORE THE CIT(A), DETAILED SUBMISSIONS WERE MADE BEFORE HIM, WHICH HAS BEEN INCORPORATED BY THE CIT(A) FROM PAGES 3 TO 27 OF THE APPELLATE ORDER AS TO WHY THE ASSESSEE WAS EITHER NOT LIABLE TO DEDUCT TAX AT SOURCE OR DEDUCTED TAX U/S 194C. THE LD. CIT(A) HAS DISCUSSED THE ISSUE IN DETAIL REGARDING EACH AND EVERY NATURE OF PAYMENT, WHICH HAS BEEN DEALT FROM PAGES 28 TO 44 OF THE APPELLATE ORDER AND ALLOWED ALL THE CONDITIONS RAISED BY THE ASSESSEE THAT SUCH PAYMENT DO NOT ENTAIL DEDUCTION OF TAX AT SOURCE U/S 194I . 6 . BEFORE US, THE LD. COUNSEL SUBMITTED THAT ALL THESE ISSUES ARE C OVERED BY THE DECISION OF THE TRIBUNAL IN SERIES OF CASES, WHEREIN, THE HONBLE TRIBUNAL AFTER DETAILED DISCUSSIONS HAVE HELD THAT ON SUCH CHARGES, ASSESSEE IS NOT LIABLE TO DEDUCT T DS AND WITH REGARD TO THE FORKLI FT C HARGES, IT HAS BEEN HELD THAT TDS DEDU CTIBLE IS UNDER SECTION 194C AND NOT U/S 194I . IN SUPPORT, HE STRONGLY RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF UNIVERSAL TRAFFIC CO. AND M/S EXPRESS TRANSPORT P VT . LTD. IN ITA NO. 1426 TO 1429/MUM/2013 AND 1473 TO 1475/MUM/2013 ORDER DATED 1 7.12.2014. 7 . ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE CIT(A). 8 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS. THE AO HAS TREATED ASSESSEE IN DEFAULT WITH REGARD TO NON - DEDUCTI ON OF TAX AT SOURCE IN CASE OF TERMINAL HANDLING CHARGES, CONTAINER FREIGHT STATION CHARGES, MUMBAI PORT TRUST CHARGES AND C RANE /FORKL I FT CHARGES. WE FIND THAT THE LD. CIT(A) HAS RECORDED A CATEGORICAL FINDING OF FACT THAT IN SO FAR AS TERMINAL HANDLING CH ARGES ARE CONCERNED, THE SAME HAS BEEN PAID BY THE ASSESSEE TO FOREIGN SHIPPING LINES OR THEIR AGENTS ON BEHALF AND ON ACCOUNT OF ITS CLIENTS FOR WHICH REIMBURSEMENTS WERE CLAIMED . SUCH A PAYMENT DOES NOT CONSTITUTE M DHARAMDAS AND COMPANY ITA NO. 1505 /M/201 3 ITA NO. 1506/M/2013 ITA NO. 1507/M/20 13 6 ASSESSEES OWN EXPENDITURE. THESE CHARGE S PERTAINS TO HANDLING OF MATERIAL AT THE TIME OF UNLOADING OF THE CARGO , T HUS, DOES NOT FALL WITHIN THE DEFINITION OF RENT, AS SET OUT IN EXPLANATION 1 TO SECTION 194I. THERE IS NO LIVE LINK AND RATIONAL NEXUS W I TH SUCH AN EXPENDITURE TO THE USE OF ANY LAND , BUILDING OR PLANT. SUCH CHARGES RECEIVED BY THE FOREIGN SHIPPING LINE ARE INTEGRAL PART OF THERE REVENUE GENERATION FROM THE OPERATIONS OF THE SHIPS AND ACCORDINGLY , THEY ARE CHARGEABLE TO TAX AS PROFITS OF THE SHIPPING BUSINESS. THE LD. CIT(A) HAS F URTHER NOTED THAT THE ASSESSEE HAS NOTED PARTICULARS OF PAYMENTS MADE TO SHIPPING LINES AND TO THEIR AGENTS AND HAS HELD THAT THEY ARE NOT IN THE NATURE OF R ENT. ACCORDINGLY, THE FINDING OF THE CIT(A) ON THIS SCORE IS UPHELD. 9 . REGARDING CONTAINER FREIGH T STATION CHARGES, BOMBAY PORT TRUST CHARGES, THE LD. CIT(A) HAS DISCUSSED THE RELEVANT PROVISIONS OF CUSTOMS ACT AND THEIR REGULATIONS MADE THEREIN IN CONNECTION WITH THE GRANT OF CUSTOMS CLEARANCE. THE PAYMENT MADE UNDER THESE HEADS ARE MORE OF A STATUT ORY NATURE UNDER THE REGULATION OF CUSTOMS ACT AND THE PAYMENT IS MADE BY THE ASSESSEE ONLY IN THE CAPACITY OF INTERMEDI A RY AS APPROVED BY THE CUSTOM DEPARTMENT. IT DOES NOT REPRESENT EXPENDITURE OF THE ASSESSEE BUT THE EXPENDITURE OF THE CLIENTS HANDLED BY THE ASSESSEE AND IT IS ONLY REIMBURSEMENT OF ACTUAL EXPENSE. FURTHER , THE GOODS, WHICH PASSED THROUGH CFS DO NOT BELONGED TO THE ASSESSEE AND THE SERVICES PROVIDED FOR HANDLING TILL THE CLEARANCE OF THE CUSTOM WAS NOT AVAILED OR UTILIZED BY THE ASSES S EE BUT BY THE OWNER OF THE GOODS. THE FINDING OF THE CIT(A) AS GIVEN IN PARA 3.17 TO 3.25 ARE UPHELD. REGARDING PAYMENTS FOR GRANT OF CRANE/FORKL I FT CHARGES, THE ASSES S EES CASE HAS BEEN THAT, IT IS NOT RENTED ANY CRANE/FORKLI FT ALBEIT IT ENGAGE S THE SERVICE S OF CRANE OPERATORS/CONTRACTORS FOR LOADING/UNLOADING OF GOODS. THE CONTRACTORS ENGAGED TO USE LOCAL LABOURS TO MOVE THE GOODS AND USE OF CRANE/FORKL I FT AND ALSO ENGAGED DRIVERS/OPERATORS TO DRIVE M DHARAMDAS AND COMPANY ITA NO. 1505 /M/201 3 ITA NO. 1506/M/2013 ITA NO. 1507/M/20 13 7 THESE VEHICLES. THE ASSES S EE DOES NOT HAVE ANY RIGHT OVER ANY FORKL I FT/CRANES. THUS, THE NATURE OF PAYMENT FALLS WITHIN THE AMBIT OF A CONTRACT WITHIN THE MEANING OF SECTION 194C FOR WHICH THE ASSESSEE HAS DEDUCTED TDS UNDER THE SAID SECTION AND THE PROVISIONS OF SECTION 194I WILL NOT APPLY. THE LD. CIT(A) AFTER DISCUSSING THIS ISSUE IN DETAIL HAS HELD THAT SUCH A PAYMENT DOES NOT ENTAIL DEDUCTION OF TDS U/S 194I BUT U/S 194C. FURTHER , ON SIMILAR MATTERS, THE TRIBUNAL HAS UPHELD THE SAME REASONING THAT ANY SUCH KIND OF CHARGES A TDS ARE NOT LIABLE TO BE DEDUCTED. THUS, THE ORDER OF THE CIT(A) IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 1 0 . SIMILARLY, APPEAL FILED BY THE REVENUE FOR A Y S 2009 - 10 & 2010 - 11, ARE ALSO ARISING FROM THE IDENTICAL SET OF FACTS AND ARE ALSO COVERED IN THE AFORESAID APPE AL AND ACCORDINGLY, THE APPEALS FOR THE ASSESSMENT YEAR S 2009 - 10 & 2010 - 11 ARE ALSO DISMISSED. 1 1 . IN THE RESULT, ALL THE THREE APPEALS FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JU LY , 2015. SD/ - SD/ - ( . . ) ( ) ( G S PANNU ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 10 TH JU LY , 2015 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A) - 1 4 , MUMBAI 4) THE CIT (TDS)/ CONCERNED ___ , MUMBAI . 5) , , / THE D.R. B BENCH, MUMBAI. 6) M DHARAMDAS AND COMPANY ITA NO. 1505 /M/201 3 ITA NO. 1506/M/2013 ITA NO. 1507/M/20 13 8 COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS