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2016 (2) TMI 883 - AT - Income TaxTDS u/s 194I or 194C - logistic service for carrying goods by sea route in containers - Held that:- The use of containers is incidental to the whole process of transportation of goods between ship and shore and it cannot be considered as a standalone transaction in its own character. The question of tax deduction under section 194I could have, if at all, arisen only when it was a rental simplictor of the equipment. That is not even the case here. No doubt the bills have been raised on the basis of the size of the container because irrespective of the weight of the container, it is size which determines how much space is taken by the goods transported. The billing on the basis of the size of the container cannot lead to the conclusion that the billing is for container rental rather than transportation of goods contained in the container. The very foundation of the impugned demands raised by the Assessing Officer is thus devoid of any legally sustainable foundation. The activity, for which the impugned payments are made, is the activity of transporting the goods which is a service in nature. The assessee was thus quite justified in deducting tax at source under section 194C. What is to be seen is whether use of the asset which is said to have been used, is incidental activity for attaining some other goal or is it the core activity which can be viewed on standalone basis in its own character. On the facts of this case, as we have held earlier in the order, the use of containers is only incidental and cannot be viewed as a core or standalone activity. It is merely incidental to transportation of, or loading and unloading of, cargo. The payments cannot, therefore, be treated as constituting payment for rent of containers. In any event, tax deduction at source liability is only a vicarious liability and when the principal liability of the assessee is discharged, it ceases exist. In the present case, the assessee has filed tax returns of the recipient to demonstrate that the recipient has duly included the payments in question in the computation of his income, and duly discharged tax liability on the same. No infirmity is pointed out in the information so furnished. The Assessing Officer was, for this reason also, not justified in raising the demands in question. He had noted the contention of the assessee, in this respect, but left it at that. Such an approach cannot meet any judicial approval.
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