2015 (7) TMI 660 - AT - Income Tax

Liability to deduct tax u/s 1941 - AO has treated assessee in default with regard to non-deduction of tax at source in case of terminal handling charges, container freight station charges, Mumbai Port trust charges and Crane/Forklift charges - CIT(A) deleted liability - Held that - CIT(A) has recorded a categorical finding of fact that in so far as terminal handling charges are concerned, the same has been paid by the assessee to foreign shipping lines or their agents on behalf and on account of its clients for which reimbursements were claimed. Such a payment does not constitute assessee s own expenditure. These charges pertains to handling of material at the time of unloading of the cargo, thus, does not fall within the definition of rent , as set out in Explanation 1 to section 194I. There is no live link and rational nexus with such an expenditure to the use of any land, building or plant. Such charges received by the foreign shipping line are integral part of there Revenue generation from the operations of the ships and accordingly, they are chargeable to tax as profits of the shipping business. The Ld. CIT(A) has further noted that the assessee has noted particulars of payments made to shipping lines and to their agents and has held that they are not in the nature of rent. Finding of the CIT(A) on this score is upheld. Regarding Container Freight Station charges, Bombay Port Trust charges, the Ld. CIT(A) has discussed the relevant provisions of Custom s Act and their Regulations made therein in connection with the grant of customs clearance. The payment made under these heads are more of a statutory nature under the regulation of Customs Act and the payment is made by the assessee only in the capacity of intermediary as approved by the Custom Department. It does not represent expenditure of the assessee but the expenditure of the clients handled by the assessee and it is only reimbursement of actual expense. Further, the goods, which passed through CFS do not belonged to the assessee and the services provided for handling till the clearance of the custom was not availed or utilized by the assessee but by the owner of the goods. Finding of the CIT(A) on this score is upheld. Regarding payments for grant of Crane/Forklift charges, the assessee s case has been that, it is not rented any crane/Forklift albeit it engages the services of crane operators/contractors for loading/unloading of goods. The contractors engaged to use local labours to move the goods and use of crane/forklift and also engaged drivers/operators to drive these vehicles. The assessee does not have any right over any forklift/cranes. Thus, the nature of payment falls within the ambit of a contract within the meaning of section 194C for which the assessee has deducted TDS under the said section and the provisions of section 194I will not apply. The Ld. CIT(A) after discussing this issue in detail has held that such a payment does not entail deduction of TDS u/s 194I but u/s 194C. Further, on similar matters, the Tribunal has upheld the same reasoning that any such kind of charges a TDS are not liable to be deducted. Thus, the order of the CIT(A) is upheld and the grounds raised by the revenue are dismissed. - Decided in favour of assessee.

Summary

Issues Involved:
- Liability to deduct tax under sections 194I, 194C, and 1941 of the Income Tax Act 1961.
- Treatment of terminal handling charges, container freight station charges, Bombay Port Trust charges, and Crane/Forklift charges.
- Applicability of TDS provisions on various payments made by the assessee.
- Deletion of interest levied under section 201(1A) of the IT Act 1961.

Analysis:

Issue 1: Liability to deduct tax under sections 194I, 194C, and 1941
The Revenue filed appeals against the CIT(A)'s order related to the liability of the assessee to deduct tax under various sections of the Income Tax Act. The CIT(A) held that the assessee was not liable to deduct tax under section 194I for certain charges, and the issues were common for different assessment years. The grounds raised by the Revenue were related to the applicability of tax deduction provisions, and the CIT(A) erred according to the Revenue. However, the CIT(A) analyzed each payment type in detail and allowed the assessee's contentions, concluding that no TDS was required under section 194I.

Issue 2: Treatment of specific charges
The AO had treated the assessee as an assessee in default for non-deduction of tax at source concerning terminal handling charges, container freight station charges, Bombay Port Trust charges, and Crane/Forklift charges. However, the CIT(A) examined each payment type separately. For terminal handling charges, it was found that these charges were not the assessee's own expenditure but were paid on behalf of clients, thus not falling under the definition of 'rent' under section 194I. Similar reasoning was applied to container freight station charges and Bombay Port Trust charges, where the payments were considered statutory in nature and not representing the assessee's expenditure.

Issue 3: Applicability of TDS provisions
The CIT(A) analyzed the nature of payments made by the assessee under different heads and concluded that TDS was not required under section 194I but under section 194C for certain charges. The assessee's submissions were detailed and supported by previous Tribunal decisions. The CIT(A) upheld the assessee's contentions, stating that the payments were not subject to TDS under section 194I, and the Tribunal had previously ruled similarly on such charges.

Issue 4: Deletion of interest levied under section 201(1A)
The CIT(A) had deleted the interest levied under section 201(1A) of the IT Act 1961, stating that the payments in question did not fall within the purview of section 194I. The Revenue challenged this deletion, but the CIT(A)'s decision was upheld, and the grounds raised by the Revenue were dismissed.

In conclusion, the appeals filed by the Revenue were dismissed for the assessment years in question, and the CIT(A)'s order regarding the liability to deduct tax and treatment of specific charges was upheld based on detailed analysis and legal interpretations.