Intermark Shipping Agencies P. Ltd., GANDHIDHAM V. The Income Tax Officer, TDS-4, GANDHIDHAM

ITA 640/RJT/2012

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2473 (ITAT-RAJKOT)
• Duration Of Justice: 7 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 18-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND SONTAKKA
• Assessee Lawyers: MJ RANPURA
• Keywords: TDS; Capital Gains
• Section: 194C; 201(1); 201; 9(1); 9(1); 9(1); 194J; 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED , ACCOUNTANT MEMBER AND MS. MADHUMITA ROY , JUDICIAL MEMBER ./ ITA NO. 640 /RJT/20 12 / ASS ESSMENT YEAR: 201 0 - 1 1 INTERMARK SHIPPING AGENCIES PVT. LTD. II FLOOR, AJANTA COMM. CENTER NO. 1, PLOT NO. 277/278, WARD 12 - B GANDHIDHAM (KUTCH) VS ITO TDS - 4, GANDHIDHAM, PLOT NO. 32, SECTOR - 3, GANDHIDHAM, KACHCHH PAN NO. AAA CI5 689 L / (APPEL LANT) / (RESPONDENT) REVENUE BY : SHRI ARVIND SONTAKKA , DR ASSESSEE BY : SHRI M. J. RANPURA , A R / DATE OF HEARING : 24 / 02 /20 20 / DATE OF PRONOUNCEMENT : 28 / 02 / 20 20 PER BENCH : THE INSTANT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 23 .1 0 .201 2 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - II , RAJKOT ARISING OUT OF THE ORDER DATED 2 1 . 0 2 .201 2 PASSED BY THE ITO, TDS 4 , GANDHIDHAM UNDER SECTION 210(1)/ 201(1A) R.W.S. 194J OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT ) FOR THE ASSESSMENT YEAR (A.Y.) 20 1 0 - 1 1 . 2. THE FACTS OF THE CASE IS THIS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHIPPING AND CONTAINER LINE AGENT AND PROVIDE S SERVICES TO ITS CLIENTS IN RESPECT OF TRANSPORTATION AND HANDLING OF CARGO THROUGH SEA. THE ITA NO . 640 /RJT/201 2 INTERMARK SHIPPING AGENCIES PVT. LTD. VS. ITO AY 201 0 - 1 1 - 2 - ASSESSEE HAD SUB - CONTRACTED THE WORK OF HANDLING AND LOADING OF CONTAINERS FROM THE PORT TO THE VESSEL AND VICE VERS A TO MUNDRA P ORT & S PECIAL E CONOMIC Z ONE AND THE MUNDRA INTERNATIONAL CONTAINER T ERMINAL PRIVATE LTD . THERE IS NO SPECIFIC AGREEMENT OR CONTRACT BETWEEN THE ASSESSEE AND THE SAID COMPANIES. HOWEVER , THE COMPAN IES RAISED INVOICES IN RESPECT OF CARGO HANDLIN G CHARGES ON THE ASSESSEE ON THE BASIS OF TARIFF BOOKLET WHEREUPON THE ASSESSEE PAID HANDLING CHARGES TO THESE COMPANIES AFTER DE DUCTING TAX UNDER SECTION 194 C. O N 18. 11. 2009 A SURVEY ACTION UNDER SECTION 13 3A WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE APPELLANT COMPANY WHE N IT WAS FOUND THAT THE ASSE S SEE HAD DEDUCTED TAX AT SOURCE ON PAYMENT MADE ON ACCOUNT OF WATER FRONT ROYALTY CHARGES UNDER SECTION 194C INSTEAD OF UNDER SECTION 194J OF THE INCOME TAX A CT. THEREAFTER , IN RESPONSE T O THE SHOW - CAUSE DATED 12.12.20 11 IN ORDER TO EXPLAIN THAT THE ASSESSEE IS NOT A DEFAULTER IN TERMS OF SHORT DEDUCTION BY NOT DEDUCTING TAX UNDER SECTION 194J OF THE A CT THE ASSESSEE SUBMITTED THAT THE MUNDRA P ORT AND S PECIAL ECONOMIC Z ONE AND THE MUNDRA INTERNATIONAL C ON TAINER T ERMINAL PVT. LTD . ARE THE CONTRACTORS FOR HANDLING, DISCHARGING AND LOADING OF THE CONTAINERS OF THE ASSESSEE FROM THE SHIPS. THE ADVANCE PAYMENT HAS BEEN MADE TO THESE PARTIES AFTER DEDUCTING LO W ER TDS AS PER LOWER TDS CERTIFICATES PRODUCED BY THO SE PARTIES. IT IS ALSO A FACT BROUGHT TO THE NOTICE OF THE AUTHORITY THAT THESE PARTIES ARE ISSUING SEPARATE INVOICES REGARDING WATER FRONT ROYALTY THAT IS CONTAINER HANDLING AND WATER FRONT ROYALTY. IT WAS FURTHER SPECIFICALLY MENTIONED THAT SUCH WATER FR ONT ROYALTY IS A G OVERNMENT OF GUJARAT LEVY , NEITHER TDS IS APPLICAB LE ON SUCH PAYMENTS MADE TO THE G OVERNMENT. THIS PARTICULAR PAYMENT IS MERELY A REIMBURSEMENT AND NO TDS IS APPLICABLE ON ITA NO . 640 /RJT/201 2 INTERMARK SHIPPING AGENCIES PVT. LTD. VS. ITO AY 201 0 - 1 1 - 3 - SUCH REIMBURSEMENT AMOUNT AS THE CASE MADE OUT BY THE ASSESSEE BEF ORE THE R EVENUE. HOWEVER , SUCH PLEA OF THE ASSESSEE WAS NOT FOUND TENABLE. THE LD. AO WAS OF THE VIEW THAT THE CERTIFICATE ISSUED BY THE IT AUTHORITY IN FAVOUR OF MUNDRA PORT AND S PECIAL E CONOMIC Z ONE FOR L O W ER DEDUCTION UNDER SECTION 194C. THE QUESTION RA ISED BY THE A SSESSING O FFICER AS TO WHETHER THE PAYMENT CLASSIFIES FOR DEDUCTION UNDER SECTION 194C OR 194J. ACCORDING TO THE LEARNED A SSE SSING O FFICER THE NAME OF MUNDRA P ORT AND S PECIAL E CONOMIC Z ONE AND MUNDRA INTERNATIONAL CONTAINERS TERMINAL PV T . LTD . ARE NOT MENTIONED IN THE LIST OF PORT AND THE PAYMENT MADE BY THE ASSESSEE TOWARDS WATER FRONT ROYALTY TO THESE AGENTS IS NOT A PAYMENT TO THE G OVERNMENT. THE SAID PAYMENTS ARE MADE FOR THE USE OF A PLACE SUCH AS PORT WITH MULTIPLE INFRASTRUCTURAL FACILIT IES ; SUCH PAYMENTS WOULD BE COVERED AS ROYALTY WITHIN THE MEANING OF S ECTION 194J OF THE A C T AS ALSO OBSERVED BY THE L D . A SSESSING O FFICER AND , THEREFORE , TAX HAS TO BE DEDUCTED AT SOURCE ACCORDINGLY AS PER THE RATES PROVIDED IN THAT SECTION. HE, THUS , HE L D THE ASSESSEE TO BE IN DEFAULT WITHIN T HE MEANING OF THE PROVISION OF S ECTION 201(1) R.W.S. 194J FOR RS 50 , 658/ - AND INTEREST PA YABLE WAS DETERMINED THAT RS.14 , 181/ - UNDER SECTION 201(1A) OF THE A CT. THE SAID A DDITION HAS BEEN UPHELD BY THE FIR ST A PPELLATE A UTHORITY. HENCE , THE INSTANT APPEAL BEFORE US. HEARD THE PARTIES, PERUSED THE RECORDS. 3. THE SHORT POINT INVOLVED IN THIS PARTICULAR CASE IS THIS AS TO WHETHER THE PAYMENT IN QUESTION CAN BE TERMED AS R OYALTY UNDER SECTION 9 OF THE A CT AND IF THAT B E SO WHETHER THE ASSESSEE IS LIABLE TO DEDUCT TAX UNDER SECTION 194J OF THE A CT. EXPLANATION 2 OF CLAUSE(VI) OF SUB - SECTION 1 OF S ECTION 9 DEFINES R OYALTY AS FOLLOWS : - ITA NO . 640 /RJT/201 2 INTERMARK SHIPPING AGENCIES PVT. LTD. VS. ITO AY 201 0 - 1 1 - 4 - EXPLANATION 2. - FOR THE PURPOSES OF THIS CLAUSE, ROYALTY MEANS CONSIDERATION (INCLUD ING ANY LUMP SUM CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD CAPITAL GAINS ) FOR - (I) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF A PATENT, IN VENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (II) THE IMPARTING OF ANY INFORMATION CONCERNING THE WORKING OF, OR THE USE OF, A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROP ERTY; (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (IV) THE IMPARTING OF ANY INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL; 57 [(I VA) THE USE OR RIGHT TO USE NAY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT 58 BUT NOT INCLUDING THE AMOUNTS REFERRED TO IN SECTION 44BB;] (V) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF 58 ANY COPYRIGHT, LITERARY , ARTISTIC OR SCIENTIFIC WORK INCLUDING FILMS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION OR TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING, BUT NOT INCLUDING CONSIDERATION FOR THE SALE, DISTRIBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILMS; OR (VI) THE RENDERING OF ANY SERVICES IN CONNECTION WITH THE ACTIVITIES REFERRED TO IN SUB - CLAUSES (I) TO 57 [(IV), (IVA) AND] (V). 4. ROYALTY DEFINED AS PER THE SAID EXPLANATION IS RELATED TO CONSIDERATION PAID FOR TRANSFER OR USE OF RIGHT IN RESPECT TO IN TELLECTUAL PROPERTY SUCH AS PATENT, INVENTION, MODEL, DESIGN, COPYRIGHT, SECRET FORMULA, TRADEMARK ETC. IN THE INSTANT CASE, THE APPELLANT HAD NOT AVAILED ANY OF SUCH RIGHT AND THEREFORE, THE SUM PAID TOWARDS WFR CANNOT BE EQUATED WITH ROYALTY WITHIN TH E MEANING OF SECTION 194J OF THE ACT. IN VIEW OF THE ABOVE, IT IS CLEAR THAT WATER FRONT CHARGES PAID BY THE APPELLANT TO THE MPSEZ AND MICPL CANNOT BE EQUATED WITH ROYALTY WITHIN THE MEANING OF SECTION 194J OF THE ACT. IN THIS ASPECT WE HAVE CAREFULLY CONSIDERED THE JUDGMENT PASSED BY THE C O - ORDINATE B ENCH IN THE CASE OF GUJARAT PIPAVAV PORT LTD . VS . DCIT DECIDED IN ITA NOS. 614 AND 615/RJT/2012 AS RE LIED UPON BY THE ASSESSEE. THE C O - ORDINATE B ENCH HAS BEEN PLEASED TO HOLD THAT THE PAYMENT MADE THEREIN BY THE ASSESSEE BEING A PORT TOWARDS WATERFRONT ROYALTY TO THE TUNE OF RS. 1.93 CRORES TO GUJARAT ITA NO . 640 /RJT/201 2 INTERMARK SHIPPING AGENCIES PVT. LTD. VS. ITO AY 201 0 - 1 1 - 5 - M ARITIME B OARD AFTER DEDUCTING TAX UNDER SECTION 194J IS NOT IN THE NATURE OF ROYALTY . THE RELEVANT PORTION OF THE WRITTEN SYNOPSIS GIVEN BY THE APPELLANT BEFORE US ON THIS PARTICULAR ASPECT OF THE MATTER ON THE BASIS OF THE SAID JUDGMENT IS REPRODUCED HEREIN BELOW: RELIANCE PLACED ON THE DECISION OF HON BLE ITAT, RAJKOT BENCH, RAJKOT IN THE CASE OF GUJARAT PIPAVAV PORT LTD. VS. DCIT IN ITA NOS. 614 & 615/R JT/2012 (COPY ATTACHED AT PAGE 53 TO 69). IN THIS CASE, THE ASSESSEE BEING A PORT PAID WATER FRONT ROYALTY OF RS. 1.93 CRORES TO GUJARAT MARITIME BOARD AFTER DEDUCTING TAX U/S. 194J OF THE ACT. HOWEVER, THE AO AND CIT(A) HELD THAT THE SUM PAID BY THE AS SESSEE IS NOT IN THE NATURE OF ROYALTY AND THEREBY, THEY TREATED THE PAYMENT IN THE NATURE OF RENT AND REQUIRED THE ASSESSEE TO DEDUCT TAX U/S. 194 - I OF THE ACT. IN AN APPEAL BEFORE HON BLE ITAT , IT WAS HELD AS UNDER: 14. APROPOS THE APPLICABILITY OF S ECTION 194J TO THE IMPUGNED PAYMENTS, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT IMPUGNED PAYMENTS WERE IN THE NATURE ROYALTY U/S 194J(C) OF THE INCOME - TAX ACT AND HENCE THE ASSESSEE WAS RIGHT IN DEDUCTING TAX AT SOURCE U /S. 194J. AT THE TIME OF HEARING, THE ATTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS INVITED TO THE DEFINITION OF ROYALTY AS GIVEN IN EXPLANATION (BA) TO SECTION 194J READ WITH EXPLANATION 2 TO CLAUSE (VI) OF SUB - SECTION (1) OF SECTION 9. HE WAS PO INTEDLY ASKED TO STATE AS TO WHICH CLAUSE OF EXPLANATION 2 TO CLAUSE (VI) OF SECTION 9(1) WOULD BRING THE IMPUGNED PAYMENTS MADE BY THE ASSESSEE TO GMB WITHIN THE AMBIT OF ROYALTY . HE WAS POINT BLANK AT THIS STAGE. WE HAVE PERUSED THE DEFINITION OF ROY ALTY AS GIVEN IN EXPLANATION 2 TO CLAUSE (VI) OF SECTION 9(1) AND FIND THAT THE SCOPE OF ROYALTY IS LIMITED TO CONSIDERATION PAID FOR TRANSFER OF CERTAIN RIGHTS IN RESPECT OF, E.F., PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY, ETC. THE IMPUGNED SUM PAID BY THE ASSESSEE DOES NOT FALL UNDER ANY OF THE CLAUSES OF EXPLANATION 2 TO CLAUSE (VI) OF SUB - SECTION (1) OF SECTION 9. AS STATED EARLIER, THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE ALSO COULD NOT E STABLISH AS TO HOW THE IMPUGNED PAYMENTS MADE BY THE ASSESSEE FELL UNDER EXPLANATION 2 TO CLAUSE (VI) OF SUB - SECTION (1) OF SECTION 194J. IN THIS VIEW OF THE MATTER, IT IS HELD THAT THERE WAS NO BASIS WITH THE ASSESSEE FOR DEDUCTING TAX AT SOURCE U/S. 194 J. IN VIEW OF THE ABOVE, IT IS CLEAR THAT WATER FRONT CHARGES PAID BY THE APPELLANT TO THE MPSEZ AND MICPL CANNOT BE EQUATED WITH ROYALTY WITHIN THE MEANING OF SECTION 194J OF THE ACT. R ESPECTFULLY RELYING UPON THE RATIO LAID DOWN BY THE C O - ORDIN ATE B ENCH AS REPRODUCED HEREIN ABOVE WE ARE OF THE CONSIDERED OPINION THAT THE PAYMENT IN QUESTION MADE BY THE ASSESSEE TO MUNDRA P ORT AND S PECIAL E CONOMIC Z ONE AND THE MUNDRA INTERNATIONAL C ONTAINER S P VT. LTD . CANNOT BE TERMED AS R OYALTY AND HENCE THE APPELLA NT CANNOT BE MADE LIABLE TO DEDUCT TAX UNDER SECTION 194J OF THE ACT. IN THAT VIEW OF THE MATTER WE FIND ITA NO . 640 /RJT/201 2 INTERMARK SHIPPING AGENCIES PVT. LTD. VS. ITO AY 201 0 - 1 1 - 6 - NO MERIT IN SUCH ADDITION MADE BY THE AUTHORITIES BELOW. T HE SAME IS THUS HEREBY DELETED. 5 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED . O RDER PRONOUNCED IN THE COURT ON 28 TH FEBRUARY , 2020 AT RAJKOT . SD/ - SD/ - ( WASEEM AHMED ) ACCOUNTANT MEMBER ( MADHUMITA ROY ) JUDICIAL MEMBER RAJKOT ; DATED, 28 / 02 /20 20 TANMAY DATTA , SR.PS TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, RAJKOT 6. / GUARD FILE . / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, RAJKOT 1. DATE OF DICTATION - 24 / 02 /20 20 2. DATE ON WHICH THE TYP ED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25 /02 /20 20 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. - 26 / 02/2020 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT /02 /2020 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 8 /02/2020 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER .. 8. DATE OF DESPATCH OF THE ORDER