2014 (10) TMI 499 - AT - Income Tax

Cargo handling charges to be taxed u/s 194J @ 5% or u/s 194 @ 2% - Held that - Following the decision in Glaxo Smithkline Consumer Healthcare Ltd. Versus Income-tax Officer, Ward 49(3), New Delhi 2006 (10) TMI 259 - ITAT DELHI the services are also clearly not in the nature of technical, consultancy or managerial services, therefore, tax in respect of these services are not to be deductible u/s 194J of the Act - CBDT in its Circular No. 720, dated 30-8-1995 had also provided that various provisions of Chapter XVII relating to deduction of tax at sources are mutually exclusive and that Chapter XVII deals with a particular kind of payment to the exclusion of all other sections in this Chapter - any payment of any sum shall be liable for deduction of tax only under one section, therefore, payment is also liable for tax deduction only under one section, as warranted by the nature of services. Combined reading of provisions of sections 194C and 194J vis-a-vis CBDT Circular No. 720 makes it abundantly clear that in the instant case payment made by the assessee to the C&F Agents, was for the services which was pre-dominantly for carrying out work , inter alia, relating to storage dispatch, transportation, loading and unloading of goods, etc. - Thus, the assessee has rightly deducted tax at source under section 194C of the Act - assessee was not in default for deduction of tax as per provisions of section 194C at the rate of 2 per cent and that lower authorities were not justified for treating the services rendered to the assessee as falling under section 194J of the Act and thereby liable for deduction of tax at 5% - the decision taken by the CIT (A) in deleting the demand of tax u/s 201(1) of the Act in respect of Cargo Handling Charges is fair and reasonable and it does not call for any interference Decided against revenue.

Summary

Issues Involved:
1. Applicability of TDS on Cargo Handling Charges under Section 194C or 194J.
2. Applicability of TDS on Passenger Service Fees (PSF) under Section 194I.
3. Interest charges under Section 201(1A) for short deduction or non-deduction of TDS on PSF and Cargo Handling Charges.

Detailed Analysis:

1. Applicability of TDS on Cargo Handling Charges under Section 194C or 194J:
The primary issue raised by the Revenue was whether the Cargo Handling Charges (CHC) incurred by the assessee are liable for deduction at source as per the provisions of Section 194C or 194J. The assessee, engaged in the business of transportation of passengers and cargo by air, deducted tax under Section 194C. The Assessing Officer (AO) argued that CHC, which includes X-ray charges, loading, and unloading charges, requires technical skills and should be categorized as 'fees for technical services' under Section 194J. The AO raised a demand for non-deduction of TDS under Section 194J. The CIT (A) ruled in favor of the assessee, stating that CHC does not fall under professional or technical services as defined under Section 194J and thus, Section 194C is applicable. The Tribunal upheld the CIT (A)'s decision, referencing similar judgments in cases like Glaxo Smithkline Consumer Healthcare Ltd, confirming that CHC payments are for services that fall under Section 194C.

2. Applicability of TDS on Passenger Service Fees (PSF) under Section 194I:
The Revenue contended that PSF should be treated as 'Rent' under Section 194I since it is paid for the use of airport premises and facilities. The assessee argued that PSF is collected on behalf of the airport authorities and does not attract Section 194I. The Tribunal referred to the ITAT Mumbai decision in the case of Jet Airways (India) Ltd, which held that PSF collected by airlines on behalf of airport authorities does not attract the provisions of Section 194I. The Tribunal concluded that the CIT (A) correctly ruled that PSF is not in the nature of rent and does not require TDS under Section 194I.

3. Interest Charges under Section 201(1A) for Short Deduction or Non-Deduction of TDS on PSF and Cargo Handling Charges:
The Revenue raised concerns about the interest charges under Section 201(1A) due to short deduction or non-deduction of TDS on PSF and CHC. The Tribunal noted that since the demand for TDS under Section 201(1) was deleted for both PSF and CHC, the issue of interest charges under Section 201(1A) becomes academic. Consequently, the grounds raised by the Revenue regarding interest charges were dismissed as academic.

Conclusion:
The Tribunal dismissed all the appeals filed by the Revenue, upholding the CIT (A)'s decisions. The Tribunal confirmed that CHC payments fall under Section 194C and not Section 194J, and PSF collected by airlines does not attract TDS under Section 194I. Additionally, the issue of interest charges under Section 201(1A) was rendered academic due to the dismissal of the primary grounds.