TMI Blog2004 (3) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 23,07,000 in financial year 1998-99 and Rs. 81,42,000 in financial year 1999-2000, which was in the nature of warehousing charges. The TDS was deducted at 2 per cent, the rates applicable to the contractor as per 194C of the Act. Survey was conducted to examine the issue and it was noticed that the assessee-company has entered into an agreement with Pradeep Oil Corporation on 11-11-1998 and took possession of the warehouse to warehouse its products. For ready reference, the relevant portion of the agreement is extracted as under: - "The Warehouser is a licensee in respect of railway land of 96750 sq. ft. at 13 KM Rohtak Road, Shakur Basti, Delhi (plot) whereon the Warehouser has constructed, and is maintaining, inter alia, a warehouse of constructed area of 47000 sq. ft. (Premises); and the company has approached the Warehouser for warehousing its products. And whereas the warehouser hits expressed his willingness and ability to warehouse the products is entitled so to do. 1. The warehouser agrees to warehouse the products only of the company owned either by the company or its authorized representatives dealers. The company envisages that during the period of agreement, its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised the same plea, which was turned down by the Assessing Officer and slapped consolidated penalty of Rs. 48,86,450 for the financial years 1998-09 and 1999-2000 against which an appeal was filed before the Commissioner of Income-tax (Appeals) assailing the penalty order on various grounds;. The CIT (Appeals) again re-examined all the grounds raised before him and directed the Assessing Officer to apply the rate of 15 per cent instead of 20 per cent, following his order in quantum. 6. Being not satisfied with the order of the CIT (Appeals) the assessee has preferred an appeal before the Tribunal and besides reiterating his contentions raised before the lower authorities, the learned counsel for the assessee has submitted that the recipient of the amount had shown it to be its business income and not a property income and the same was accepted by the Revenue. Hence the Revenue cannot treat this payment as payment of rent. He has also raised a plea of a reasonable cause for non-deduction of proper tax under section 194-I of the Act. In support of his various submissions the assessee has relied upon the following judgments: - (i) Board's Circular in F.No. 275/201/95-IT(B), date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, would not effect the chargeability of interest under section 201(1A) of the Act till the date of payment of tax by deductee assessee or the liability for penalty under section 271C of the Act. A reference was also made with regard to order of the ITAT by which order of charging interest under section 201(1A) was confirmed by the Tribunal. The nature of payment was also examined by the Tribunal in the aforesaid order and finally held that it was a payment of Rent. 8. Having considered the rival submissions and from a careful perusal of the record, we find that section 194C deals with the payments made to contractors or sub-contractors for carrying out any work [including supply of labour for carrying out any work] in pursuance of a contract executed between the contractor and different types of assessees envisaged in sub-section (1) of section 194C of the Act whereas section 194-I deals with the payment of rent by a person not being an Individual or a Hindu undivided family, who is responsible for paying to any person any income by way of the rent. In Explanation (1) to section 194-I the word "rent" has been defined and according to the explanation the rent means any paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his section referred to as the sub-contractor) in pursuance of a contract with the sub-contractor for carrying out or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax on income comprised therein;" "194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time or payment thereof in cash or by the issue of a cheque or draft of by any other mode, whichever is earlier, deduct income-tax thereon at the rate of- (a) fifteen per cent if the payee is an individual or a Hindu undivided family; and (b) twenty per cent in other cases; Provided that no deduction shall be made under this section where the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s authorized representative or dealers. The company envisages that during the period of agreement its product is not less than 300 trucks shall be handled by the warehouser. It was also mutually, agreed that the assessee company shall pay warehousing charges to the warehouser of a minimum Rs. 37,000 per day irrespective actual number of trucks carrying the product for handling the products upto 300 trucks a day. It was further agreed that the assessee-company shall pay at the time of entering into this agreement a sum of Rs. 1,35,00,000, which shall be adjusted in equal instalments in the bills of warehousing charges over the period of first 30 months of this agreement and future rent month by month. It was further agreed that the assessee-company shall pay at the time of entering into this agreement an amount of Rs. 67,50,000 which shall be refunded without interest thereon by the warehouser to the company upon the expiry of the arrangement under this agreement. The warehouser shall simultaneously provide to the company a bank guarantee for the said amount. According to clause 5, all charges, taxes, levies, duties payable, on the products warehoused in the warehouse to the Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has further clarified that non-enforcement of demand would not alter the liability to charge interest under section 201(1A) of the Act till the date of payment of taxes by the deductee-assessee or liability for the penalty under section 271C of the Act. Nowhere it has been stated or clarified either in the Act or by the CBDT that once the short deducted tax has been paid by the deductee-assessee, no penalty under section 271C can be levied. We have also examined the letter written by Pradeep Oil Corporation to the assessee regarding the treatment given by them to the receipts of the aforesaid payments of warehousing charges and we find that the declaration of the receipt as business receipt does not change the nature of payment in the hands of the assessee. Whatever nature of receipt was declared by M/s. Pradeep Oil Corporation in its hands, it was not examined by the Revenue authorities as the returns were processed under section 143(1)(a) of the Act. As such, the contention of the assessee that this payment was shown in the hands of the recipients as business receipts and was accepted by the Revenue do not refrain the Revenue from examining the real nature of payment made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x at the rate applicable to payment to contractors envisaged under section 194C of the Act. The Tribunal accordingly upheld the action of the Revenue initiated under section 201(1) read with section 201(1A) of the Act. This order of the Tribunal on the impugned issues still holds the field as it has not been reversed by the appellate authorities. 14. We, however, again examined the entire facts in order to determine whether the Revenue is justified for levying the penalty under section 271C of the Act and we find that since the doubt, if any, with regard to the nature of payment of warehousing charges has been clarified by the Board in 1995, there is no plausible reasons as to why and how the assessee had been claiming the payment of rent of warehouse or at the most warehousing charges as a payment to contractors under section 194-C of the Act and deducted the TDS @ 2 per cent only. We have also carefully examined the judgments referred to by the parties and we find that the judgments were rendered on different issues based on different facts and circumstance of the case. Since all these judgments are distinguishable on facts, no assistance can be drawn from them in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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