2013 (9) TMI 682 - HC - Income Tax

TDS to be deducted u/s 194I or section 194C of the Income Tax Act - Assessee is a limited company engaged in the business of clearing and forwarding of cargo, shipping agency and other ancillary trading activities Is the service provided is cargo handling service Held that - Work involved is mainly labour oriented work with the help of various machineries and equipments. This work involves providing of man power for loading and unloading, shifting and transportation of the cargo to the destination as well. It is also evident from these terms and conditions that the possession and control over equipments and man power do not vest with the appellantcompany which is a determinant factor so as to decide the applicability of the provisions of Section 194I. The rates for each kind of cargo have also been specified on the basis of the volume of the cargo being handled and not on the basis of time period involved in the execution of the said contract TDS to be charged under section 194C Decided against the Revenue.

Summary

Issues:
1. Discrepancies in TDS verification under various provisions of the Income Tax Act for the financial year 2006-07.
2. Short deduction of tax at source under Section 194C instead of Section 194I.
3. Appeal against the order passed by the Assessing Officer and subsequent decisions by CIT [A] and Tribunal.
4. Interpretation of nature of work/contract and applicability of TDS provisions under section 194I.
5. Applicability of the decision in the case of Commissioner of Income Tax [TDS] v. Swayam Shipping Services Private Limited.
6. Consideration of substantial questions of law raised by the Revenue.

Analysis:
1. The appellant, a limited company engaged in clearing, forwarding, and trading activities, faced discrepancies in TDS verification for the financial year 2006-07. The Assessing Officer found short deduction of tax at source under various provisions of the Income Tax Act amounting to Rs. 19,50,696, leading to a demand of Rs. 29,74,811.
2. The Assessing Officer observed that TDS was made under Section 194C instead of Section 194I for certain payments made by the appellant towards cargo handling charges to different entities. The CIT [A] partly allowed the appeal, setting aside the order for some contracts but confirming it for others.
3. The Revenue, dissatisfied with the CIT [A] decision, appealed before the Tribunal. The Tribunal dismissed the appeal based on the nature of work/contract and a previous court decision, leading to the present Tax Appeal by the Revenue.
4. The issue revolved around the interpretation of the nature of work/contract and the correct application of TDS provisions under Section 194I. The CIT [A] highlighted specific terms in the contract agreements to determine the applicability of TDS provisions, ultimately allowing the appeal based on labor-oriented work with specific rates for cargo handling activities.
5. The Tribunal heavily relied on the decision in the case of Commissioner of Income Tax [TDS] v. Swayam Shipping Services Private Limited to support its dismissal of the Revenue's appeal. The decision emphasized the control over equipment and manpower as a crucial factor in determining the applicability of TDS provisions.
6. After considering the arguments presented by the Revenue's advocate and the observations made by the CIT [A], the Court concluded that the issue was directly covered by the decision in the Swayam Shipping case. As a result, no substantial question of law arose in the present Tax Appeal, leading to its dismissal.

This detailed analysis covers the issues, legal interpretations, and decisions involved in the judgment, providing a comprehensive understanding of the case.