DCIT(TDS)-2(1), MUMBAI V. J.M.BAXI & CO., MUMBAI

ITA 5507/MUM/2013

• Counselvise Citation: 550719914 RSA 2013
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 19-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.7017/MUM/2013 ASSESSMENT YEAR 2008-09 ITA NO.7018/MUM/2013 / ASSESSMENT YEAR 2010-11 J.M.BAXI & CO., 16, BANK STREET, FORT, MUMBAI 400 001. VS. THE DY.COMMISSIONER OF INCOME TAX (TDS)-2(1), KG MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI 400 002. PAN/GIR NO. :AAAFJ5198E ( APPELLANT ) .. ( RESPONDENT ) ITA NO.5507/MUM/2013 ASSESSMENT YEAR 2009-10 THE DY.COMMISSIONER OF INCOME TAX (TDS)-2(1), KG MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI 400 002. VS. J.M.BAXI & CO., 16, BANK STREET, FORT, MUMBAI 400 001. PAN/GIR NO. :AAAFJ5198E ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI HARSH SHAH REVENUE BY SHRI AKHILENDRA YADAV DATE OF HEARING : 05/08/2015 DATE OF PRONOUNCEMENT : 31/08/2015 O R D E R PER G.S.PANNU, A.M: THE CAPTIONED ARE TWO APPEALS BY THE ASSESEE FOR ASSESSMENT YEARS 2008- 09 AND 2010-11 AND ONE APPEAL BY THE REVENUE FOR AS SESSMENT YEAR 2009-10 / ITA NO.7017,7018&5507/MUM/2013 2 AGAINST RESPECTIVE ORDERS OF THE CIT(A), INVOLVING , A COMMON ISSUE RELATING TO THE DEDUCTION OF TAX AT SOURCE ON BERTH HIRE CHAR GES PAID TO MUMBAI PORT TRUST. 2. ALL THE ABOVE THREE APPEALS INVOLVE A COMMON IS SUE AS TO WHETHER THE AMOUNT OF BERTH HIRE CHARGES PAID BY THE ASSESSEE A PPELLANT TO MUMBAI PORT TRUST IS SUBJECT TO DEDUCTION OF TAX AT SOURCE U/S 194C OF INCOME TAX ACT, 1961(IN SHORT THE ACT) AS CONTRACT CHARGES OR U NDER SECTION 194I OF THE ACT AS RENT. 3. THE STAND OF THE ASSESSEE IS THAT IT IS A PARTNE RSHIP FIRM ENGAGED IN THE BUSINESS OF SHIPPING AGENCY AND IT INTER-ALIA, PRO VIDES STEVEDORING AND BULK CARGO OPERATIONS, CLEARING & FORWARDING, SHIPPING L OGISTICS SUPPORT SERVICES AND PROJECT LOGISTICS AMONGST OTHER SERVICES. IT WAS N OTICED THAT ASSESSEE MADE PAYMENTS ON MUMBAI PORT TRUST TOWARDS VARIOUS CHAR GES INCLUDING BERTH HIRE CHARGES TO WHICH TAX WAS DEDUCTED AT SOURCE IN TE RMS OF SECTION 194C OF THE ACT AS CONTRACTUAL CHARGES. AS PER ASSESSING OFF ICER SUCH PAYMENTS WERE IN THE NATURE OF RENT AND THUS, COVERED UNDER SECTIO N 194-I OF THE ACT. THEREFORE, ASSESSING OFFICER PASSED ORDERS U/S 201(1) OF THE ACT FOR SHORT DEDUCTION OF TAX AT SOURCE AND ALSO CHARGED INTEREST U/S 201( 1A) OF THE ACT FOR THE THREE ASSESSMENT YEARS AS UNDER :- A Y PARTICULARS 2008-09 2009-10 2010-11 BERTH HIRE CHARGES PAID BY APPELLANT 3,83,90,778/- 4,87,94,451/- 9,85,86,223/- / ITA NO.7017,7018&5507/MUM/2013 3 TO MUMBAI PORT TRUST TDS DEDUCTED BY ASSESSEE APPLYING RATE PRESCRIBED U/S 194C 3,95,425/- 13,21,571 19,77,576/- AMOUNT OF TDS AS PER AO APPLYING RATE PRESCRIBED U/S 194I 7,90,850/- 25,12,914 27,81,281/- SHORTFALL IN DEDUCTION OF TAXES AND ASSESSEE U/S 201(1) 3,95,426/- 11,91,243 8,03,704/- INTEREST U/S 201(1A) OF THE ACT 181896/- 381198/- 1,84,852/- 4. AGAINST THE AFORESAID, IN SO FAR AS THE ASSESSME NT YEARS 2008-09 AND 2010-11 ARE CONCERNED, THE CIT(A) VIDE ORDERS DATED 24/09/2013 HELD THE ISSUE AGAINST THE ASSESSEE BY REFERRING TO THE JUDG EMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF UNITED AIRLINES 152 TAXMAN 516 (DEL), WHEREAS FOR ASSESSMENT YEAR 2009-10, THE CIT(A), AFTER GOING TH ROUGH THE SCOPE OF SERVICES PROVIDED BY THE MUMBAI PORT TRUST IN LIEU OF THE B ERTH HIRE CHARGES, HELD THAT THE SAME WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT. IN COMING TO SUCH CONCLUSION, THE CIT(A) RELI ED UPON THE DECISION OF DELHI TRIBUNAL IN THE CASE OF DY. CIT VS. JAPAN AIRLINES , 93 ITD 163(DEL), WHICH WAS ALSO FOLLOWED BY THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF SINGAPORE AIRLINES LTD., VS. ITO (2006) 7 SOT 84 (CHENNAI). THEREFORE, WHEREAS THE ASSESSEE IS IN APPEAL FOR ASSESSMENT YEARS 2008-09 AND 2010-11, FOR / ITA NO.7017,7018&5507/MUM/2013 4 ASSESSMENT YEAR 2009-10 THE REVENUE IS IN APPEAL ON THE SINGULAR GROUND RELATING TO THE NATURE OF PAYMENTS MADE TO MUMBAI P ORT TRUST ON ACCOUNT OF BERTH HIRE CHARGES. 5. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE SUBMITTED THAT THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN TH E CASE OF SINGAPORE AIRLINES LTD. (SUPRA), WHICH HAS BEEN RELIED UPON BY THE CI T(A) HAS SINCE BEEN UPHELD BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SINGAPORE AIRLINES LTD., 209 TAXAMN 581(MAD) AND, THEREFORE, THE SAID ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2009-10 BE APPROVED. 6. ON THE CONTRARY, LD. DEPARTMENTAL REPRESENTATIVE HAS REITERATED THE ORDER OF THE CIT(A) FOR ASSESSMENT YEARS 2008-09 AN D 2010-11, WHERE THE BERTH HIRE CHARGES HAVE BEEN CONSTRUED TO BE IN TH E NATURE OF RENT SO AS IMPLY DEDUCTION OF TAX AT SOURCE UNDER SECTION 194- I OF THE ACT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. NOTABLY, THE HONBLE SUPREME COURT IN A RECENT DECISION IN THE CASE OF JAPAN AIRLINES CO. LTD. VS. CIT, (2015) 60 TAXMANN.CO 71(SC) HAS DISPROVED THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF UNITED AIRLINES (S UPRA) AND HAS INSTEAD APPROVED THE CONTRARY VIEW RENDERED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF SINGAPORE AIRLINES LTD. (SUPRA). THE ISSUE BEFORE THE HONBLE SUPREME COURT RELATED TO THE AMOUNTS PAID TO AIR PORT AUTHO RITY OF INDIA FOR AIRCRAFT / ITA NO.7017,7018&5507/MUM/2013 5 PARKING CHARGES AND LANDING FEE. THE STAND OF THE REVENUE WAS THAT SUCH CHARGES ARE FOR THE USE OF LAND AND, THEREFORE, T HE SAME ARE LIABLE FOR DEDUCTION OF TAX AT SOURCE UNDER SECTION 194-I OF T HE ACT AS RENT. THE HONBLE SUPREME COURT HAS NEGATED THE AFORESAID STAND AND THE FOLLOWING OBSERVATIONS ARE RELEVANT:- 21. IN FACT, THE CHARGES WHICH ARE TAKEN FROM THE AIRCRAFTS FOR LANDING AND EVEN FOR PARKING OF THE AIRCRAFTS ARE N OT DEPENDENT UPON THE USE OF THE LAND. ON THE CONTRARY, THE PROTOCOL PRESCRIBES A DETAILED METHODOLOGY OF FIXING THESE CHARGES. CHAPT ER 4 OF AIRPORT ECONOMICS MANUAL ISSUED BY INTERNATIONAL CIVIL AVIA TION ORGANIZATION DEALS WITH 'DETERMINE THE COST BASIS F OR CHARGING PURPOSES'. THE CHARGES ON AIR-TRAFFIC WHICH INCLUDE S LANDING CHARGES, LIGHTING CHARGES, APPROACH AND AERODROME C ONTROL CHARGES, AIRCRAFT PARKING CHARGES, AEROBRIDGE CHARG ES, HANGAR CHARGES, PASSENGER SERVICE CHARGES, CARGO CHARGES E TC. ARE TO BE FIXED APPLYING THE FORMULAE STATED THEREIN. A READI NG THEREOF WOULD CLEARLY POINT OUT THE COST ANALYSIS WHICH IS TO BE DONE FOR FIXING THESE CHARGES. THUS, WHEN THE AIRLINES PAY FOR THES E CHARGES, TREATING SUCH CHARGES AS CHARGES FOR 'USE OF LAND' WOULD BE ADOPTING A TOTALLY NAIVE AND SIMPLISTIC APPROACH WHICH IS FA R AWAY FROM THE REALITY. WE HAVE TO KEEP IN MIND THE SUBSTANCE BEHI ND SUCH CHARGES. WHEN MATTER IS LOOKED INTO FROM THIS ANGLE, KEEPING IN VIEW THE FULL AND LARGER PICTURE IN MIND, IT BECOMES VERY CLEAR T HAT THE CHARGES ARE NOT FOR USE OF LAND PER SE AND, THEREFORE, IT C ANNOT BE TREATED AS 'RENT WITHIN THE MEANING OF SECTION 194-1 OF THE AC T. 22. WE, THEREFORE, ARE OF THE CONSIDERED OPINION TH AT THE VIEW TAKEN BY THE MADRAS HIGH COURT IS CORRECT AND WE ARE UNAB LE TO SUBSCRIBE TO THE VIEW TAKEN BY DELHI HIGH COURT IN UNITED AIR LINES CASE. THE JUDGMENT IN UNITED AIRLINES CASE AS WELL AS THE IMP UGNED JUDGMENT OF THE DELHI HIGH COURT ARE ACCORDINGLY OVER-RULED. 7.1 IN OUR CONSIDERED OPINION, THE PARITY OF REASON ING LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF JAPAN AIRLINE S CO. LTD. (SUPRA) ARE REQUIRED TO BE APPLIED TO THE PRESENT CASE ALSO. A S PER HONBLE SUPREME COURT TO TREAT THE CHARGES PAID TO THE AIRPORT AUTHORITY OF INDIA AS MERELY FOR USE OF / ITA NO.7017,7018&5507/MUM/2013 6 LAND WOULD A BE SIMPLISTIC APPROACH AND THAT ONE W ILL HAVE TO KEEP IN MIND THE SUBSTANCE BEHIND SUCH CHARGES . IN THIS BACKGROUND, THE NATURE OF THE CHARGES PAID WAS UNDERSTOOD NOT AS RENT FOR THE P URPOSES OF SECTION 194-I OF THE ACT. IN OUR CONSIDERED OPINION, IN THE PRESENT CASE WHAT IS OF RELEVANCE IS TO EXAMINE THE SUBSTANCE OF THE TRANSACTION NAMELY THE EXACT SCOPE AND SERVICES RENDERED BY MUMBAI PORT TRUST IN RETURN OF RECEIVING BERTH HIRE CHARGES. IN THIS CONTEXT, LD. REPRESENTATIVE FOR T HE ASSESSEE HAS REFERRED TO THE FOLLOWING ASSERTIONS MADE BEFORE THE CIT(A):- 1. BERTH HIRE CHARGES ARE FIXED AND REALIZED ACCOR DING TO THE PROVISIONS UNDER SECTION 48 AND 49 OF MAJOR PORT TRUSTS ACT, 1963. THIS IS A CHARGE FOR SHIPPING OF GOODS FROM OR TO SUCH VESSELS TO OR FROM ANY DOCK B ERTH OR MOORING. THESE CHARGES ARE REALIZED ON THE BASIS OF PER GRT OF THE VESSEL CONCERNED. 2. THE APPELLANT SUBMITS THAT BERTH HIRE CHARGES W ERE NOTHING BUT PORT CHARGES. THE COST ELEMENTS COMPRISED IN A COMPOSITE BERTH HI RE CHARGES AS PROVIDED BY THE MUMBAI PORT TRUST ARE AS BELOW:- OPERATIONAL & MAINTENANCE MOORING LAUNCHES DEPLOYED AT DOCKS. SWING GATES & BRIDGES CAPSTANS & SLUICES DOCK MATERS ESTABLISHMENT MAINTENANCE OF DOCK & HARBOUR WALLS, MARINE STRUCTU RE, ETC. PROPORTIONATE SALVAGE & UNDERWATER REPAIRS EXPENSES PROPORTIONATE DREDGING & MARINE SURVEY EXPENSES EXPENSES ON POLLUTION CONTROL OPERATIONAL & MAINTENANCE ELECTRIC WHARF CRANES UP TO 6 TONE AT ID 13 TON ELECTRIC WHARF CRANE SUPERVISION & GENERAL EXPENSES WATER SUPPLY TO SHIPPING & DOCKS THE ABOVE COST ELEMENTS DISPLAY A VERY CLEAR PICTUR E OF THE REAL SERVICES PROVIDED BY MUMBAI PORT TRUST. THUS, AS DISPLAYED ABOVE IT IS NOT A CASE OF RENT SERVICES, BUT A COMPOSITE CONTRACT ENTERED INTO FOR VARIOUS P ORT SERVICES FOR WHICH CHARGES INCLUDING BERTH HIRE CHARGES TO BE PAID. THE ABOV E COST ELEMENT ANNEXURE IS ENCLOSED ALONGWITH THE BELOW REFERRED LETTER DATED 19 TH APRIL 2010 FROM MUMBAI PORT TRUST. / ITA NO.7017,7018&5507/MUM/2013 7 7.2 CONSIDERING THE AFORESAID FACTUAL MATRIX, WHICH I S NOT IN DISPUTE, IN OUR VIEW IT WOULD BE IN APPROPRIATE TO CONSIDER THE PAYMENT OF B ERTH CHARGES AS RENT SIMPLICITOR, AND RATHER THE SAME IS BEING PAID FOR A HOST OF OTHER SERVICES WHEN THE VESSELS ARE ANCHORED AT THE PORT AREA. THEREFORE, ASSESSEE HAS RIGHTLY DEDUCTED THE TAX AT SOURCE ON BERTH HIRE CHARGES PAID TO MUMBAI PORT TRUST IN TER MS OF SECTION 194C OF THE ACT AS CONTRACTUAL CHARGES. IN THIS MANNER, THE STAND OF THE A SSESSEE IS UPHELD AND THE REVENUE FAILS. 8. IN THE RESULT, WHEREAS THE APPEALS OF THE ASSESS EE FOR ASSESSMENT YEARS 2008-09 AND 2010-11 ARE ALLOWED, THE APPEAL OF THE REVENUE FOR 2009-10 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/08/2015 SD/- SD/- ( SANJAY GARG ) ( G.S.PANNU ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 31/08/2015 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI VM , SR. PS