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2006 (10) TMI 259 - AT - Income TaxDeduction of tax at source u/s 194C Or 194J - Payment made to Clearing and Forwarding Agents (‘C&FA’) - managerial services - HELD THAT:- We found that the C&F Agents was required to store, dispose, deliver or redeliver goods as may be determined and notified to such C&F Agents by the assessee. The C&F Agents was required to store the goods by the assessee with all care, prudence and responsibility so that such goods are free from risks as theft, pilferage and damages. We also found that C&F Agents was liable for all damages, pilferage and other losses incurred due to negligence, etc., and undertake to pay on demand in writing made by the assessee without protest the market value of the goods entrusted to such agents. The goods of the assessee was to be received and held by the C&F Agents as bailee/trustee, for and on behalf of the assessee. Thus, it is crystal clear from the terms of the agreement that payment was made by the assessee to the C&F Agents, was for consolidated set of services which have been broadly described. The main object of the agreement was to ensure correct handling and delivery of goods as per the terms of the assessee. We found that as per the nature of services rendered, the same are in pari materia to the services as contemplated u/s 194C, and the same was not for any professional or technical services as mentioned u/s 194J of the Act. Thus, any payment of any sum shall be liable for deduction of tax only under one section, therefore, payment is also liable for tax deduction only under one section, as warranted by the nature of services stipulated therein. Combined reading of provisions of sections 194C and 194J vis-a-vis C.B.D.T. Circular makes it abundantly clear that in the instant case payment made by the assessee to the C&F Agents, was for the services which was pre-dominantly for "carrying out work", inter alia, relating to storage despatch, transportation, loading and unloading of goods, etc. Thus, the assessee has rightly deducted tax at source u/s 194C of the Act. Hence, we are inclined to agree with the learned AR that assessee was not in default for deduction of tax as per provisions of section 194C at the rate of 2 per cent and that lower authorities were not justified for treating the services rendered to the assessee as falling u/s 194J of the Act and thereby liable for deduction of tax at 5%. In the result, the appeals of the assessee in all the years are allowed.
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