GUJRAT PIPAVAV PORT LTD, MUMBAI V. DCIT TDS 1(1), MUMBAI

ITA 7056/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3266 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 20-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 194C; 201(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G BE NCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER A ND SHRI C.N. PRASAD, JUDICIAL MEMBER / I .TA NOS.7056 & 7057/MUM/2014 ( / ASSESSMENT YEARS: 2010-11 & 1011-12 M/S. GUJARAT PIPAVAV PORT LTD., 301 TRADE CENTRE, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 / VS. THE DCIT - TDS - 1(1), SMT. K.G. MITTAL AYURVEDIC HOSPITAL BLDG., CHARNI ROAD, MUMBAI ./ ./ PAN/GIR NO. AAACG 6975B ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI NIRAJ SETH / RESPONDENT BY: SHRI AIRIJU JAIKARAN / DATE OF HEARING :16.06.2016 ! / DATE OF PRONOUNCEMENT :24.08.2016 / O R D E R PER C.N. PRASAD, JM: THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGAIN ST THE ORDERS OF THE LD. CIT(A)-12, MUMBAI DATED 18.08.2014 PERTA INING TO ASSESSMENT YEARS 2010-11 & 2011-12 ARISING OUT OF THE ORDERS PASSED U/S. 201(1) AND 201(1A) OF THE ACT. SINCE C OMMON ISSUES ARE INVOLVED IN BOTH THESE APPEALS, THEY WERE HEARD TOG ETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. ITA NOS.7056 & 7057/M/2014 2 2. THE ASSESSEE HAS RAISED FOLLOWING COMMON GROUNDS IN ITS APPEALS: 1. TAX IS DEDUCTIBLE U/S. 194C OF THE I.T. ACT 19 61 (THE ACT) ON THE PAYMENTS MADE TO M/S. UTSAV LOGISTICS PVT. LTD) AND NOT U/S. 194J OF THE ACT AS ALLEGED BY THE TDS OFFICER. 1.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS LEGALLY ERRED IN HOLDING THAT PAYMENTS TO UTSAV LOGISTICS UNDER A CONTRACT FOR MOVEMENT OF GOODS IN THE PORT PREMISES IS LIABL E FOR DEDUCTION OF TAX AT SOURCE UNDER THE PROVISIONS OF SEC. 194J AND NOT SEC. 194C OF THE ACT. 1.2. WITHOUT PREJUDICE TO ABOVE AND IN THE ALTERNATIVE AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS LEGALLY ERRED IN HOLDING THAT T HE PROVISIONS OF SEC. 194J AND NOT SEC. 194-I ARE ATTRACTED FOR USE OF REACHSTACKER A SPECIALIZED CRANE AND OTHER MATERIAL HANDLING EQUIPMENT. 3. BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING, CONSTRUCTING, OPERATING AND MAINTAINING PORT ON BUILD OWN, OPERATE AND TRANSFER (BOOT) BASIS. DURING TH ESE ASSESSMENT YEARS, THE ASSESSEE PAID EQUIPMENT HIRE CHARGES TO M/S. UTSAV LOGISTICS PVT. LTD. (ULPL) AND DEDUCTED TDS @ 2% U/ S. 194C OF THE ACT. THE ASSESSEE HIRED REACHSTACKER FOR THE PURPO SE OF LOADING THE CONTAINERS INTO CARGO SHIPS. THE CONTRACTOR I.E. U LPL SHALL SUPPLY IN ACCORDANCE WITH THE HIGHEST PROFESSIONAL STANDARDS ONE EMPTY STACKER WITH THE INTEGRATED TELESCOPIC STREADERS AN D ALL NECESSARY SPARES AND ACCESSORIES AND ADEQUATE NUMBER OF SUI TABLE QUALIFIED AND EXPERIENCED PERSONNEL FOR OPERATION AND MAINTEN ANCE OF THE EMPTY STACKER AS PER THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH ULPL. LOOKING AT THE NATURE OF SERVICES TO BE RENDERED BY THE CONTRACTOR TO THE ASSESSEE COMPANY, THE ASSESSING O FFICER WAS OF THE ITA NOS.7056 & 7057/M/2014 3 VIEW THAT ULPL HAS RENDERED TECHNICAL SERVICES TO T HE ASSESSEE AND THEREFORE THE HIRE CHARGES PAID BY THE ASSESSEE FOR THE MAINTENANCE AND OPERATION OF REACHSTACKER IS LIABLE FOR TDS AS FEES FOR TECHNICAL SERVICES U/S. 194J OF THE ACT AND SINCE THE ASSESSE E HAS NOT DEDUCTED TDS @ 10% U/S. 194J OF THE ACT AND HAS DEDUCTED ONL Y 2% U/S. 194C OF THE ACT. SHOW CAUSE NOTICE WAS ISSUED AS TO WHY THE ASSESSEE SHOULD NOT BE TREATED AS DEFAULTER U/S. 201(1) FOR SHORT DEDUCTION OF TAX U/S. 194J OF THE ACT. 4. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FIL ED ITS REPLY DATED 5.12.2012 SUBMITTING THAT ASSESSEE HAS ENGAGED ULP L FOR MOVING CONTAINERS FROM ONE PLACE TO ANOTHER WITHIN PORT PR EMISES AS IS EVIDENT FROM THE COPY OF INVOICE RAISED BY THE ULP L AND THE ASSESSEE COMPANY. IT WAS CONTENDED THAT AS PER THE TERMS AN D CONDITIONS OF THE AGREEMENT, IT IS EVIDENT THAT ULPL WILL PROVIDE REACHSTAKER ALONGWITH OPERATOR. , ITS MAINTENANCE AND OTHER REL ATED EXPENSES WILL BE THE RESPONSIBILITY OF ULPL AND REACHSTAKER WILL BE OPERATED AS PER THE DIRECTIONS OF THE ASSESSEE COMPANY FOR MOVING CONTAINERS FROM ONE PLACE TO ANOTHER WITHIN PORT PREMISES. THEREF ORE, THE SCOPE OF WORK AND TERMS AND CONDITIONS CLEARLY INDICATE THA T ASSESSEE HAS UTILIZED CARRIAGE SERVICES RENDERED BY ULPL I.E. LO ADING/UNLOADING AND MOVEMENT OF CONTAINERS WITH THE USE OF EQUIPMEN T AND MANPOWER NOT AVAILED ANY TECHNICAL OR PROFESSIONAL SERVICES WITHIN THE PROVISIONS OF SEC. 194J OF THE ACT. THE ASSESS EE ALSO RELIED ON THE CIRCULAR OF CBDT NO. 558 DATED 28.3.1990 AND SUBMIT TED THAT IN CASE OF SERVICE CONTRACTS, THE PROVISIONS OF SEC. 194J A RE NOT APPLICABLE. IT WAS FURTHER CONTENDED THAT FOR A PAYMENT TO BE LIA BLE FOR TDS U/S. 194J OF THE ACT SUCH PAYMENT SHOULD BE FOR FEES FOR TECHNICAL SERVICES ITA NOS.7056 & 7057/M/2014 4 AND SUCH FEES SHOULD BE FOR RENDERING ANY TECHNICAL , MANAGERIAL OR CONSULTANCY SERVICES AND NOT FOR ANY OTHER PURPOSES . IT WAS ALSO CONTENDED THAT THE PAYMENT TO BE COVERED U/S. 194J OF THE ACT THERE SHOULD BE A CONSIDERATION FOR ACQUIRING OR USING TE CHNICAL KNOW-HOW PROVIDED OR MADE AVAILABLE BY HUMAN ELEMENT. IT WA S ALSO CONTENDED THAT THERE SHOULD BE DIRECT AND LIVE-LINK BETWEEN PAYMENT AND RECEIPTS/USE OF TECHNICAL SERVICES/INFORMATION. THEREFORE, IT WAS CONTENDED THAT THE SERVICES RENDERED BY ULPL BY NO STRETCH OF IMAGINATION CAN BE CATEGORIZED AS TECHNICAL AND PRO FESSIONAL SERVICES AS IT DOES NOT SATISFIES PROVISIONS OF SEC. 194J R. W. EXPLANATION 2 TO SECTION 9(I)(VII) OF THE ACT. 5. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT TH E CONTENTIONS OF THE ASSESSEE THAT THE PAYMENTS MADE TO ULPL FOR HIRING THE EQUIPMENT (REACHSTAKER) IS LIABLE FOR TDS U/S. 194C AND NOT UNDER 194J OF THE ACT. THE ASSESSING OFFICER TREATED THE PAYMENTS MADE BY THE ASSESSEE ARE TOWARDS TECHNICAL SERVICES THEREFO RE THE ASSESSEE IS LIABLE TO DEDUCT TDS U/S. 194J OF THE ACT. THEREFO RE, THE ASSESSEE WAS HELD AS DEFAULTER U/S. 201(1) OF THE ACT FOR THE B ALANCE TDS. HOWEVER, THE ASSESSING OFFICER ON VERIFICATION OF T HE CERTIFICATES FROM THE AUDITORS OF THE PAYEE FIRM I.E. ULPL TO TH E EFFECT THAT ULPL HAS FILED THEIR RETURN OF INCOME INCLUDING THE PAYM ENTS RECEIVED BY THEM FROM THE ASSESSEE COMPANY AND SINCE ULPL HAS P AID TAX THEREON, IN VIEW OF THE JUDGEMENT OF THE HONBLE SU PREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P) LTD VS CIT, HE HELD THAT NO FURTHER TAX IS TO BE RECOVERED FROM THE AS SESSEE COMPANY. HOWEVER, THE ASSESSING OFFICER HELD THAT THE ASSESS EE IS LIABLE FOR INTEREST U/S. 201(1A) OF THE ACT ON THE AMOUNT OF S HORT DEDUCTION OF TAX AT SOURCE OF RS. 73,79,898/- AND RS. 1,09,05,37 7/- AND CHARGED ITA NOS.7056 & 7057/M/2014 5 INTEREST OF RS. 13,28,381/- AND RS. 19,62,967/- U/ S. 201(1A) OF THE ACT FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12 RE SPECTIVELY. 6. ON APPEAL, THE LD. CIT(A) SUSTAINED THE ACTION O F THE ASSESSING OFFICER THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO ULPL IN ACCORDANCE WITH THE PROVIS IONS OF SEC. 194J OF THE ACT. HOWEVER, THE LD. CIT(A) HELD THAT SINCE ULPL IS A LOSS COMPANY AND SINCE TO TAX IS LIABLE TO BE PAID, NO INTEREST LIABILITY COULD BE RAISED U/S. 201(1A) ON THE ASSESSEE COMPAN Y. THE LD. CIT(A) THUS DIRECTED THE ASSESSING OFFICER TO VERIF Y THE RETURNS OF ULPL AND IF THERE ARE LOSS RETURNS BY ULPL INTEREST U/S. 201(1A) SHOULD NOT BE CHARGED. AGAINST THE ORDER OF THE L D. CIT(A) IN ACCEPTING THE CONTENTION OF THE ASSESSING OFFICER T HAT THE PAYMENTS MADE BY ASSESSEE ARE LIABLE FOR TDS U/S. 194J AS F EES FOR TECHNICAL SERVICES ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. THE LD. COUNSEL FOR THE ASSESSEE PLACING RELIANCE ON THE DECISION OF THE TRIBUNAL I N THE CASE OF ACIT VS MERCHANT SHIPPING SERVICES PVT. LTD (2010) (129 ITD 109) SUBMITS THAT ALMOST AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE MUMBAI BENCH AND HELD THAT THE PAYMENTS MADE FOR THE SERVI CES PROVIDED BY THE NSICT FOR THE MOVEMENT OF ITS CARGO IN RESPECT OF IMPORT AND EXPORT DONE BY ITS CUSTOMERS, MOVEMENT OF CARGO IN PORT WHICH LIFTING OF CONTAINERS FROM CUSTOMERS TRAILER/RAIL WAGONS BY THE OPERATION OF RUBBER TYRE GANTRY CRANES, MOVEMENT OF THE CONTAINERS FROM YARD TO THE VESSEL SIDE AND MOVING THE CONTAIN ERS FROM TRAILERS AT THE QUAY SIDE ON TO THE VESSEL WITH THE OPERATIO N OF QUAY CRANES, IS NOT FEES FOR MANAGERIAL OR TECHNICAL SERVICES COVER ED U/S. 194J OF THE ITA NOS.7056 & 7057/M/2014 6 ACT. THE LD. COUNSEL FOR THE ASSESSEE FURTHER PLAC ING RELIANCE ON THE DECISION OF THE RAJKOT BENCH IN THE CASE OF KANDLA PORT TRUST VS DCIT (16 TAXMANN.COM 273) SUBMITS THAT ASSESSEE RUNNING A PORT AND IN ORDER TO CARRY OUT ITS OPERATIONS, MACHINERIES, HE AVY CRANES, WEIGH BRIDGE, ELEVATOR, EPBX SYSTEMS WERE INSTALLED AND P AYMENTS MADE TO CONTRACTORS FOR REPAIRS AND MAINTENANCE OF THESE MACHINERIES AND IN WHICH CASE IT WAS HELD THAT THE PAYMENTS WERE NOT M ADE FOR ANY MANAGERIAL OR TECHNICAL SERVICES BUT WAS MADE ONLY FOR ANNUAL MAINTENANCE CONTRACT FOR SERVICES. THEREFORE HE SU BMITS THAT THE PAYMENT MADE BY THE ASSESSEE IN HIRING REACHSTACKE R WHICH IS A KIND OF CRANE SHALL NOT BE FOR ANY TECHNICAL SERVICES AN D THUS THE PROVISIONS OF SEC. 194J HAVE NO APPLICATION. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE SUBMISSIONS MADE BY THE A SSESSEE AND THE CASE LAWS RELIED ON . THE ASSESSEE IN THIS CASE WH ICH IS ENGAGED IN THE BUSINESS OF OPERATING PORT ENTERED INTO AN AGREEMEN T WITH ULPL FOR HIRING EMPTY REACHSTACKER WITH THE INTEGRATED TELE SCOPIC STREADERS AND ALL NECESSARY SPARES AND ACCESSORIES AND ADEQUA TE NUMBER OF SUITABLE QUALIFIED AND EXPERIENCED PERSONNEL FOR TH E OPERATION AND MONITORING AND MAINTENANCE OF THE EMPTY STACKER WHI CH IS A SORT OF CRANE TO LIFT THE CONTAINERS AND MOVE THEM FROM ONE PLACE TO OTHER PLACE IN THE PORT AREA. THE IMAGE OF THE REACHSTAK ER IS DEPICTED FOR BETTER UNDERSTANDING. ITA NOS.7056 & 7057/M/2014 7 THE ASSESSEE DEDUCTED TDS U/S. 194C @ 2% ON THE PA YMENTS MADE TO ULPL TREATING IT AS CONTRACT SERVICE. TH E ASSESSING OFFICER WAS OF THE VIEW THAT THE CONTRACTOR WHO HAS PROVIDE D THE REACHSTACKER ALONGWITH SUITABLE QUALIFIED OPERATION AL PERSONNEL IS NOTHING BUT PROVIDING TECHNICAL OR MANAGERIAL SERVI CE TO THE ASSESSEE WITHIN THE MEANING OF FEES FOR TECHNICAL SERVICES A S PROVIDED IN EXPLANATION-2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SEC. 9 OF THE ACT. THEREFORE, SINCE THE ASSESSEE DID NOT DEDUCT TDS UN DER SECTION 194J OF THE ACT, THE ASSESSING OFFICER HELD THE ASSESSEE AS DEFAULTER AND PASSED ORDER U/S. 201(1) FOR SHORT DEDUCTION OF TDS . HOWEVER, SINCE THE RECIPIENT I.E. ULPL HAS OFFERED THE RECEIPTS FR OM ASSESSEE AS ITS INCOME, THE ASSESSING OFFICER FOLLOWING THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BE VERAGE (P) LTD. VS CIT (211 CTR 545) HELD THAT NO FURTHER TAX CAN B E RECOVERED FROM THE ASSESSEE COMPANY BUT HE WORKED OUT THE INTEREST LIABLE TO BE CHARGED U/S. 201(1A) AT RS. 13,28,381/- AND RS. 19, 62,967/- FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12 RESPECTIVELY. THE LD. CIT(A) SUSTAINED THE VIEW OF THE ASSESSING OFFICER THAT TH E SERVICES ITA NOS.7056 & 7057/M/2014 8 RENDERED BY THE CONTRACTOR ULPL TO THE ASSESSEE IN PROVIDING REACHSTACKER AND ITS OPERATIONAL PERSONNEL WOULD AM OUNT TO PROVIDING TECHNICAL/MANAGERIAL SERVICES, THEREFORE ASSESSEE IS LIABLE TO DEDUCT TDS U/S. 194J OF THE ACT. HOWEVER, SINCE THE RECIPIENT ULPL HAVE ALREADY ACCOUNTED FOR THE RECEIPTS AS INCOME, HE HAS ACCEPTED THAT NO FURTHER TAX IS TO BE RECOVERED FROM THE ASS ESSEE. THE ASSESSEE FURTHER CONTENDED BEFORE THE LD. CIT(A) THAT EVEN T HE INTEREST IS NOT LIABLE TO BE CHARGED FOR THE REASON THAT THE RECIPI ENT I.E. ULPL OWING TO THE LOSSES NO TAX WAS PAYABLE FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12 AND THEREFORE NO INTEREST LIABILITY COU LD BE RAISED U/S. 201(1)/201(1A) OF THE ACT IN VIEW OF THE DECISIONS VIZ., CIT VS RISHIKESH APARTMENTS CO. OP. HOUSING SOCIETY LTD (2 001) (119 TAXMANN 239), THOMAS MUTHOOT VS DCIT TDS KOTTAYAM (2012) (150 TTJ 65) (COCH.) AND ITO VS EMERALD CONSTRUCTION CO . (P) LTD (209) (29 SOT 495) (JODH.). THIS CONTENTION OF THE ASSES SEE WAS ACCEPTED BY THE LD. CIT(A) AND DIRECTED THE ASSESSING OFFICE R TO VERIFY THE CLAIM OF THE ASSESSEE IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS AND IF IT IS FOUND THAT THERE WAS NO TAX LIABILITY ON T HE PART OF RECIPIENT OF THE IMPUGNED AMOUNT, THE ASSESSEE SHALL STAND ENTIT LED FOR RELIEF ON ACCOUNT OF INTEREST U/S. 201(1A) OF THE ACT. 9. WE FIND FROM THE ORDER OF THE LD. CIT(A) THAT TH E CIT(A) HAS ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT SINCE THE RECIPIENT HAS ACCOUNTED FOR THE CONTRACT RECEIPTS RECEIVED FROM T HE ASSESSEE, NO TAX IS REQUIRED TO BE DEDUCTED. HE ALSO ACCEPTED THE C ONTENTION THAT OWING TO THE LOSSES BY THE RECIPIENT ULPL NO TAX I S LIABLE TO BE PAID BY THE RECIPIENT AND THEREFORE NO INTEREST LIABILIT Y COULD BE RAISED U/S. 201(1A) OF THE ACT ON THE ASSESSEE AND HE HAS GIVEN A DIRECTION ITA NOS.7056 & 7057/M/2014 9 TO THE ASSESSING OFFICER TO VERIFY AND PASS NECESSA RY ORDERS TO DELETE THE INTEREST IF THE ULPL IS FOUND TO HAVE FILED RET URNS DECLARING LOSSES. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE A SSESSEE HAS NO GRIEVANCE AT THIS STAGE AS THE CONTENTION OF THE AS SESSEE WERE ACCEPTED AND NO LIABILITY TO TAX U/S. 201(1) OR INT EREST U/S. 201(1A) ARE EXISTED. THEREFORE, WE LEFT OPEN THE ISSUE OF WHETHER THE PAYMENTS MADE BY THE ASSESSEE TO ULPL FALL UNDER FE ES FOR TECHNICAL SERVICES U/S. 194J OR FALL UNDER PROVISIONS OF SEC. 194C OF THE ACT AS CONTRACT SERVICE. THE ASSESSEE MAY RAISE ITS OBJEC TIONS AT APPROPRIATE STAGE. 10. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST, 2016. SD/- SD/- (D.KARUNAKARA RAO ) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $ %' /JUDICIAL MEMBER MUMBAI; (' DATED 24 TH AUGUST, 2016 . % . ./ RJ , SR. PS ITA NOS.7056 & 7057/M/2014 10 !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI