The ACIT, TDS Circle, RAJKOT-GUJARAT V. M/s. Puspak Logistics Pvt. Ltd., JAMNAGAR

ITA 480/RJT/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2331 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 05-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S ANJARIA
• Assessee Lawyers: ANKIT GOKANI
• Section: 194C

Judgement Text

I.T.A. NO.: 479 AND 480/RJT/201 3 ASSESSMENT YEARS: 2008 - 09 AND 2009 - 10 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E COURT AT AHMEDABAD] [ CORAM: PRAMOD KUMAR AM AND S S GODARA JM ] I.T.A. NO.: 47 9 AND 480 /RJT/201 3 ASSESSMENT YEAR S : 2008 - 09 AND 2009 - 10 ASSISTANT COMMISSIONER OF INCOME TAX TDS CIRCLE, RAJKOT ..APPELLANT VS. PUSHPAK LOGISTICS PVT LTD RESPONDENT 1 ST FLOOR, STANDARD HOUSE INDIRA M ARG, JAMNAGAR 361001 [TAN: RKTP0 1448G] APPEARANCES BY: C S ANJARIA , FOR THE APPELLANT ANKIT GOKANI , FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : DECEMBER 11 ,201 5 DATE OF PRONOUNCING THE ORDER : JANUARY 29 ,2016 O R D E R PER PRAMOD KUMAR: 1. THESE TWO APPEALS PERTAIN TO THE SAME ASSESSEE, INVOLVE A COMMON ISSUE ARISING OUT OF THE SAME SET OF FACTS AND WERE HEARD TOGETHER. AS A MATTER OF CONVENIENCE, THEREFORE, BOTH THE APPEALS ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER. THE IMPUGNED ORDERS ARE TWO SEPARATE, BUT MAT ERIALLY SIMILAR, ORDERS DATED 10 TH SEPTEMBER 2013 PASSED BY THE CIT(A) IN THE MATTER OF TAX WITHHOLDING DEMANDS RAISED UNDER SECTION 201 R.W.S. 194I OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10. I.T.A. NO.: 479 AND 480/RJT/201 3 ASSESSMENT YEARS: 2008 - 09 AND 2009 - 10 PAGE 2 OF 5 2. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICATE IN THESE APPEALS IS WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN HOLDING THAT THE TAX WAS NOT REQUIRED TO BE DEDUCTED AT SOURCE UNDER SECTION 194I FROM PAYMENTS MADE BY THE ASSESSEE, AS THE ASSESSING OFFICER HIMSELF PUTS IT, FOR LOGIS TIC SERVICE FOR CARRYING GOODS BY SEA ROUTE IN CONTAINERS. WHEN WE PUT IT TO THE LEARNED REPRESENTATIVES THAT NOTWITHSTANDING SOMEWHAT ELABORATE, AND RATHER ARGUMENTATIVE, GROUNDS OF APPEAL SET OUT IN THE BOTH THE MEMORANDUMS OF APPEALS, IT IS THIS SHOR T QUESTION WHICH NEEDS TO BE DEALT WITH BY US, LEARNED REPRESENTATIVES FAIRLY ACCEPT THIS POSITION. 3. THE ISSUE IN APPEAL LIES IN A VERY NARROW COMPASS OF MATERIAL FACTS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CARGO HANDLING FOR SHIPMENTS. IN THE COU RSE OF THIS WORK, THE ASSESSEE ENGAGED THE SERVICES OF ONE SHREY AS RELAY SYSTEMS LIMITED. THE NATURE OF ARRANGEMENT WITH THIS COMPANY WAS LIKE THIS. THESE SERVICES WERE USED FOR TRANSPORTATION OF GOODS FROM SHORE TO THE SHIP, AND VICE VERSA. THE GOODS REQUIRED TO BE TRANSPORTED IS FIRST STUFFED IN THE CONTAINERS GIVEN BY THE LOGISTIC SERVICE PROVIDER AND THEN IT WAS TRANSPORTED, BY SEA, BY THE LOGISTIC SERVICE PROVIDER TO THE AGREED PLACE. AS NOTED BY THE ASSESSING OFFICER HIMSELF, THE SHIP W HICH BRINGS THE GOODS HAS TO BE STOPPED IN THE MID SEA, AS IT CANNOT BE ANCHORED AT THE SHORE AND THE TRANSPORTATION IS FOR CARRYING THE GOODS FROM SHIP TO THE SHORE, AND VICE VERSA . THE BILLING FOR THIS TRANSPORTATION WAS DONE ON THE BASIS OF THE SIZE OF THE CONTAINER, AND, ONCE THE GOODS REACHED THE DESTINATION, THE CONTAINERS WERE TO BE RETURNED TO THE SERVICE PROVIDER. ANY DAMAGE TO THE CONTAINERS, DURING THE COURSE OF THIS TRANSPORTATION, WAS ON ASSESSEES ACCOUNT. THE ASSESSEE WAS DEDUCTING TAX AT SOURCE, UNDER SECTION 194C OF THE ACT, FROM THE PAYMENTS MADE TO SHREYAS FOR TRANSPORTATION OF GOODS. IN JANUARY 2009, THE ASSESSEE WAS SUBJECTED TO A SURVEY UNDER SECTION 133A. DURING THE COURSE OF THIS SURVEY, IT WAS NOTED THAT THE ASSESSEE WAS DEDUCTI NG TAX AT SOURCE UNDER SECTION 194 C, EVEN THOUGH, AS IS THE STAND OF THE ASSESSING OFFICER, TAX IS DEDUCTIBLE UNDER SECTION 194 I OF THE ACT. THE REASONING WAS THIS. THE ASSESSING O FFICER WAS OF THE VIEW THAT THE ACTIVITY OF CARRYING THE GOODS FROM SHIP TO THE SHORE CANNOT BE I.T.A. NO.: 479 AND 480/RJT/201 3 ASSESSMENT YEARS: 2008 - 09 AND 2009 - 10 PAGE 3 OF 5 TERMED AS TRANSPORTATION AND THAT IN THE PRESENT CASE, THE BARGES ARE USED AS EQUIPMENT FOR UNLOADING THE GOODS FROM THE SHIP WHICH, BY NO STRETCH OF IMAGINATION, CAN BE TERMED AS TRANSPORTING. THE ASSESSING OFFICER FURTHER OBSERVED THAT BY USING THE INCORRECT NOMENCLATURE IN THE BILLS, THE BASIC NATURE OF ACTIVITIES CANNOT BE CHANGED AND THAT IN THE PRESENT CASE, THE ASSESSEE HAS USED THE TERM TRANSPORTATION FOR UNLOADING ACTIVITY DONE BY THE BARGES. HE THEN NOTED THAT T HE DEFINITION OF RENT UNDER SECTION 194I ALSO COVERS RENT FOR EQUIPMENT AND PROCEEDED TO TREAT THE PAYMENTS MADE TO SHREYAS AS PAYMENTS FOR HIRE OF CONTAINERS ON WHICH TAX OUGHT TO HAVE BEEN DEDUCTED AT SOURCE UNDER SECTION 194I AND AT A RATE MUCH HIGHER T HAN THE RATE ENVISAGED UNDER SECTION 194C. THE ASSESSEES CONTENTION THAT NO DEMAND CAN BE RAISED UNDER SECTION 201 ANYWAY SINCE THE RECIPIENT HAS DISCHARGED HIS TAX LIABILITY ON THE INCOME EMBEDDED IN THESE PAYMENTS WAS NOTED, AND BRUSHED ASIDE. IT WAS IN THIS BACKDROP THAT THE IMPUGNED DEMANDS FOR SHORT DEDUCTION OF TAX AT SOURCE UNDER SECTION 201 R.W.S 194I, AND INTEREST THEREON, WERE RAISED. THESE DEMANDS WERE QUANTIFIED AT RS 17,32,992 AND RS 65,69,007 FOR THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 RESPE CTIVELY. AGGRIEVED BY THE DEMANDS SO RAISED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO DELETED THESE DEMANDS ON THE GROUND THAT THE PAYMENTS MADE BY THE ASSESSEE, IN SUBSTANCE, ARE PAYMENTS FOR TRANSPORTATION OF GOODS AND NOT MERE RENTAL OF THE CONTAINERS. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT THE ARRANGEMENT, FOR WHICH THE IMPUGNED PAYMENTS ARE MADE, IS AN ARRANGEMENT FOR TRANSPORTATION OF GOODS FROM SHIP TO THE SHORE AND VICE VERSA , WHICH, AS THE ASSESSING OFFICER HIMSELF PUTS IT, UNLOADING (AND LOADING) THE GOODS FROM THE SHIPS. THE USE OF CONTAINERS IS INCIDENTAL TO THE WHOLE PROCESS OF I.T.A. NO.: 479 AND 480/RJT/201 3 ASSESSMENT YEARS: 2008 - 09 AND 2009 - 10 PAGE 4 OF 5 TRANSPORTATION OF GOODS BETWEEN SHIP AND SHORE AND IT CANNOT BE CONSIDERED AS A STANDALONE TRANSACTION IN ITS OWN CHARACTER. THE QUESTION OF TAX DEDUCTION UNDER SECTION 194I COULD HAVE, IF AT ALL, ARISEN O NLY WHEN IT WAS A RENTAL SIMPLICTOR OF THE EQUIPMENT. THAT IS NOT EVEN THE CASE HERE. NO DOUBT THE BILLS HAVE BEEN RAISED ON THE BASIS OF THE SIZE OF THE CONTAINER BECAUSE IRRESPECTIVE OF THE WEIGHT OF THE CONTAINER, IT IS SIZE WHICH DETERMINES HOW MUCH SP ACE IS TAKEN BY THE GOODS TRANSPORTED. THE BILLING ON THE BASIS OF THE SIZE OF THE CONTAINER CANNOT LEAD TO THE CONCLUSION THAT THE BILLING IS FOR CONTAINER RENTAL RATHER THAN TRANSPORTATION OF GOODS CONTAINED IN THE CONTAINER. THE VERY FOUNDATION OF THE I MPUGNED DEMANDS RAISED BY THE ASSESSING OFFICER IS THUS DEVOID OF ANY LEGALLY SUSTAINABLE FOUNDATION. THE ACTIVITY, FOR WHICH THE IMPUGNED PAYMENTS ARE MADE, IS THE ACTIVITY OF TRANSPORTING THE GOODS WHICH IS A SERVICE IN NATURE. THE ASSESSEE WAS THUS QUI TE JUSTIFIED IN DEDUCTING TAX AT SOURCE UNDER SECTION 194C. WHAT IS TO BE SEEN IS WHETHER USE OF THE ASSET WHICH IS SAID TO HAVE BEEN USED, IS INCIDENTAL ACTIVITY FOR ATTAINING SOME OTHER GOAL OR IS IT THE CORE ACTIVITY WHICH CAN BE VIEWED ON STANDALONE B ASIS IN ITS OWN CHARACTER . ON THE FACTS OF THIS CASE, AS WE HAVE HELD EARLIER IN THE ORDER, THE USE OF CONTAINERS IS ONLY INCIDENTAL AND CANNOT BE VIEWED AS A CORE OR STANDALONE ACTIVITY. IT IS MERELY INCIDENTAL TO TRANSPORTATION OF, OR LOADING AND UNLO ADING OF, CARGO. THE PAYMENTS CANNOT, THEREFORE, BE TREATED AS CONSTITUTING PAYMENT FOR RENT OF CONTAINERS. WE MAY ALSO ADD THAT THE ASSESSEE HAS CITED A NUMBER OF JUDICIAL PRECEDENTS, INCLUDING HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF JAPAN AIRLIN ES LIMITED VS CIT [(2015) 60 TAXMANN.COM 71 (SC)] WHICH SUPPORT THE CASE OF THE ASSESSEE, BUT SINCE WE HAVE DECIDED THE MATTER ON FIRST PRINCIPLES ON THE NARROW COMPASS OF ITS OWN FACTS, WE SEE NO NEED TO DEAL WITH THESE CASES IN MUCH DETAIL. IN ANY EVENT, TAX DEDUCTION AT SOURCE LIABILITY IS ONLY A VICARIOUS LIABILITY AND WHEN THE PRINCIPAL LIABILITY OF THE ASSESSEE IS DISCHARGED, IT CEASES EXIST. IN THE PRESENT CASE, THE ASSESSEE HAS FILED TAX RETURNS OF THE RECIPIENT TO DEMONSTRATE THAT THE RECIPIENT HAS DULY INCLUDED THE PAYMENTS IN QUESTION IN THE COMPUTATION OF HIS INCOME, AND DULY DISCHARGED TAX LIABILITY ON THE SAME. NO INFIRMITY IS POINTED OUT IN THE INFORMATION SO FURNISHED. THE ASSESSING OFFICER WAS, FOR THIS REASON ALSO, NOT JUSTIFIE D IN RAISING THE DEMANDS IN I.T.A. NO.: 479 AND 480/RJT/201 3 ASSESSMENT YEARS: 2008 - 09 AND 2009 - 10 PAGE 5 OF 5 QUESTION. HE HAD NOTED THE CONTENTION OF THE ASSESSEE, IN THIS RESPECT, BUT LEFT IT AT THAT. SUCH AN APPROACH CANNOT MEET ANY JUDICIAL APPROVAL. 6. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE CONCLUSIONS OF THE LEARNED CIT(A) AND DECL INE TO INTERFERE IN THE MATTER. 7. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. PRONOUNCE D IN THE OPEN COURT TODAY ON 29 TH DAY OF JANUARY 2016. SD/XX SD/XX S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD; JANUARY 29 , 2016 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT