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TMI Blog2015 (4) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... fees, section 194-I to rentals and section 194C to handling charges instead of section 194C applicable to all payments. Accordingly, the demand of Rs. 48,417 raised under section 201(1) due to short deduction of TDS of Rs. 7,649 under section 194J and of Rs. 40,768 under section 194-I is being bad in law needs to be cancelled. 2. Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in confirming applicability of section 194-I instead of section 194C on rentals of Rs. 2,80,000 paid without appreciating that the agreement is not predominantly for the use of land or building but is integral part of the service contract. Thus demand of Rs. 40,768 raised under section 201(1) due to short deduction of TDS under section 194-I is bad in law and needs to be cancelled. 3. Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in confirming ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer did not accept the explanation and proceeded to invoke the provisions as proposed and worked out the short deduction of TDS under section 194-I to the tune of Rs. 40,768 and short deduction of TDS under section 194J to the tune of Rs. 7,649. 4. Aggrieved with the same, the matter travelled to the Commissioner of Income-tax (Appeals). 5. During the first appellate proceedings, the assessee submitted that the agreement with M/s. Tolaram & Sons is para materia with the agreement with M/s. Ketki Enterprises, therefore, the payments made are towards composite agreement for multiple services. The payments of rental as well as management fees are a kind of composite payments which are made in accordance with depot agreement and therefore, it is not a rent per se and therefore, the provisions of section 194-I of the Act are not applicable to the rental amounts and similarly, the provisions of section 194-J are not applicable to the management fees payments. Explaining the provisions relating to the rent defined in the provisions of section 194-I of the Act, learned counsel mentioned that there is no use of land or building in this case and the assessee is not residing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made as rent for depot, the tax should have been deducted as per provisions of section 194-I. Further, the appellant has made management fees amounting to Rs. 92,000 and the tax has been deducted as part of a composite contract under section 194C. Whereas the Assessing Officer has held that since the management fees paid is for professional services, the same is covered for deduction of tax under section 194J. In this regard, the appellant submitted that on perusal of agreements of Ketki Tolaram & Co. it can be noticed that both of them have been appointed representative for the appellant to promote sale and to act as depot agent to hold the stock and deliver it to the customers when sold. The payment made to depot agent are for the services incidental to their role as acting agent/distributor and the contract for these services cannot be separated from their contract to act as distributors/agent. The appellant argued that the provisions of section 194-I are not applicable on this payment. Reliance has been placed on the decision in the case of National Panasonic India P. Ltd. v. Deputy CIT [2005] 94 TTJ (Delhi) 899; [2005] 3 SOT 16 (Delhi) and also in the case of Glaxo Smithklin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be read as "composite payments" as per learned counsel. He also brought our attention to various clauses of the agreement to state that the payments are made to a depot agent for discharging the agency services which includes various responsibilities. 8. Per contra, the learned Departmental representative relied dutifully on the orders of the Assessing Officer and the Commissioner of Income-tax (Appeals). Further, he mentioned that the clause 7 of the depot agreement earmarks rentals and therefore, the argument based on "composite or indivisible services" does not hold good. 9. We have heard both parties in this regard and perused the depot agreement with M/s. Tolaram & Sons, depot agent. Being an agency agreement, the agent is under obligation to render variety of services apart from owning a warehouse measuring 900 sq.ft. to stock 300 to 500 barrels at a time (clause-5(b)). Other responsibilities are narrated from "(a) to (w)" of the said clause 5. Clause 7 provides for the assessee to make the rental payment of Rs. 24,000 per month towards rent for oil division and Rs. 3,000 per month towards polymer division. From the above, it is evident that the assessee is required to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is clearly earmarked the amount of sum payable towards rent. Clause 5(b) also provides for a condition that the payee must own the premises of specified one in terms of specified capacity. The said condition reads as follows : "shall own a covered warehouse measuring 900 sq.ft. to stock 300/ 500 barrels at a time." 12. The above provisions of section 194-I relating to "rent" cover "any other agreement or arrangement". If the payments are made for composite services as is the case in M/s. Ketki Enterprises, our decision would have been different. In this case, the payment made is described as "rentals" paid for premises owned by the assessee and specifications are earmarked. In these facts, the arrangement including the agency services agreement, in our opinion, will fall under the definition of "rent" providing in section 194C of the Act. Therefore, the decisions relied upon by learned counsel in the case of National Panasonic India P. Ltd. v. Deputy CIT [2005] 3 SOT 16 (Delhi) is distinguishable on facts. Accordingly, we confirm the order of the Commissioner of Income-tax (Appeals) on this i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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