2012 (12) TMI 846 - HC - Income Tax

TDS on C & F agents - 2.2% under Section 194C OR 22% under Section 194-I - assessee is a well known manufacture of consumer goods such as detergent, soaps etc. hiring godowns on rent and also engages c & f agents - Held that - What is discernable from the materials on record is that the assessee had rented premises from their landlords. Payments of rent were made after deducting the tax in terms of Section 194-I. What the assessee paid to the c & f agents as warehousing charges was the consideration in terms of the agreement which was tax deductible under Section 194C at 2.2.%. In this factual background it was for the revenue to have established how Section 194-I could be attracted to the amounts or charges paid to the c & f agents in terms of the agreements. No infirmity in the findings of the CIT(Appeals) as endorsed by the ITAT that Section 194-I can only be applied when the immovable properties are let out & none of the heads of payments made to C & F Agents by the assessee is a head of payment by way of rent - in favour of assessee.

Summary

Issues:
Interpretation of Section 194-I for TDS on payments made to c & f agents.

Analysis:
The High Court was presented with the issue of whether Tax Deducted at Source (TDS) was recoverable from the assessee under Section 194-I at 22%. The assessing officer contended that the assessee should have deducted tax at the rate of 22% under Section 194-I instead of 2.2% under Section 194C for payments made to c & f agents for warehousing charges. The CIT(Appeals) partly allowed the assessee's claims, directing separation of some amounts. The ITAT held that Section 194-I applies only to rent from immovable properties and not to payments made to c & f agents. The ITAT found that no element of rent was paid by the assessee to the c & f agents, upholding the view of the CIT(Appeals.

After remand, the CIT(A) deleted the entire demand made by the assessing officer, and the revenue's appeal to the ITAT was dismissed. The ITAT analyzed lease deeds, agreements, and payment details, concluding that no rent was paid to the c & f agents. The revenue argued that the amounts paid to the c & f agent should be treated under Section 194-I, but the High Court disagreed. The Court found that the revenue failed to establish how Section 194-I could be applied to the charges paid to the c & f agents, as the payments were for warehousing services under Section 194C, not rent under Section 194-I.

In conclusion, the High Court upheld the findings of the CIT(Appeals) and the ITAT, ruling in favor of the assessee and dismissing the revenue's appeal. The Court found no infirmity in the lower authorities' conclusions, emphasizing that the revenue did not provide sufficient evidence to support applying Section 194-I to the payments made to the c & f agents.