2018 (7) TMI 1806 - AT - Income Tax

TDS u/s 194I - non deduction of TDS on wharfage charges paid to KPT - whether KPT is a pubic charitable trust and no TDS is liable to be deducted at source by the assessee? - Held that - Wharfage charges paid to the KPT is not rent and no TDS is liable to be deducted under the provisions of section 194I of the Act. In view of the same, the order dt. 30-11-2015 passed by the CIT-A in confirming the order of AO that the assessee is in default and charging of interest thereon u/s. 201/201(1A) of the Act is not justified and it is set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Nature of wharfage charges paid to Kolkata Port Trust (KPT) and applicability of TDS under Section 194I of the Income Tax Act.
2. Applicability of TDS on payments to a public charitable trust exempt under Section 11/12AA of the Income Tax Act.

Detailed Analysis:

Issue 1: Nature of Wharfage Charges and Applicability of TDS under Section 194I

Arguments by the Assessee:
- The assessee argued that wharfage charges paid to KPT were not in the nature of rental payments for the usage of land. Instead, these charges were for various facilities provided by KPT, such as access to ships for unloading cargo, which do not constitute the right to use any demarcated space or platform.
- The assessee referred to the CBDT Circular No. 1/2008, which clarified that payments for cooling charges to cold storage owners, where no demarcated space is provided, do not attract TDS under Section 194I.
- The assessee also cited the Supreme Court’s decision in the case of Japan Airlines Co. Ltd., which held that charges for landing and parking of aircraft do not constitute rent under Section 194I.

Tribunal’s Findings:
- The Tribunal noted that the wharfage charges were for the use of a platform built out from the shore into the water, supported by piles, providing access to ships and boats for loading and unloading cargo. These charges varied based on the type of cargo and were not fixed or permanent.
- The Tribunal referred to the Major Ports Act, 1963, which empowers the Board to execute works and provide appliances such as wharves, quays, docks, etc., without allocating any permanent demarcated space.
- The Tribunal found that the wharfage charges were not for the use of land per se but for the facilities provided by KPT, similar to the Supreme Court’s ruling in Japan Airlines Co. Ltd. Therefore, these charges do not attract TDS under Section 194I.

Conclusion:
- The Tribunal held that the wharfage charges paid to KPT are not in the nature of rent and, thus, no TDS is liable to be deducted under Section 194I of the Income Tax Act.

Issue 2: Applicability of TDS on Payments to a Public Charitable Trust

Arguments by the Assessee:
- The assessee contended that even if the wharfage charges were treated as rent, KPT is a public charitable trust whose income is exempt under Section 11/12AA of the Income Tax Act. Therefore, no TDS is required to be deducted on payments to KPT.
- The assessee referred to the Tribunal’s earlier decision in the case of M/s Gourishankar Bihani, where it was held that no TDS is deductible on payments to KPT as it is a charitable institution.

Tribunal’s Findings:
- The Tribunal acknowledged that KPT is registered as a charitable institution under Section 12A of the Income Tax Act, and its income is exempt under Section 11.
- The Tribunal found that the assessee’s case was identical to the M/s Gourishankar Bihani case, where it was held that no TDS is required to be deducted on payments to KPT.

Conclusion:
- The Tribunal allowed the additional ground raised by the assessee, holding that no TDS is liable to be deducted on payments to KPT, a public charitable trust exempt under Section 11/12AA of the Income Tax Act.

Final Judgment:
- The appeals filed by the assessee for the assessment years 2011-12 and 2012-13 were allowed. The orders of the CIT(A) confirming the AO’s decision to treat the assessee as in default for non-deduction of TDS on wharfage charges were set aside. The Tribunal held that the wharfage charges paid to KPT are not in the nature of rent and no TDS is required to be deducted under Section 194I. Additionally, no TDS is required on payments to KPT, a public charitable trust exempt under Section 11/12AA.