TMI Blog2011 (11) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... ession of the vehicles were given to the assessee. While dealing with Section 194I in the case of Vodafone Essar Ltd. vs DCIT (2010 (12) TMI 842 - ITAT, MUMBAI)it was held that merely making use of the facility without himself using the equipment and without taking possession the payment cannot be said to be a rent. Therefore, the payment made cannot be said to be "rent" as provided in section 194-I of the Act – Decided in favor of assessee. - IT APPEAL NOS. 771 & 924 (RjT.) OF 2010 - - - Dated:- 11-11-2011 - A.L. GEHLOT, N.R.S. GANESAN, JJ. J.P. Shah and R.S. Singh for the Appellant. M.K. Singh for the Respondent. ORDER A.L. Gehlot, Accountant Member These appeals of the assessee are directed against the order of CIT(A)-II, Rajkot dated 02-03-2010 for assessment year 2007-08 and dated 31-12-2009 for assessment year 2008-09. 2. Since common issues are involved, these appeals were heard together and are disposed by this common order. Grounds of appeal in both the appeals are identical, for the sake of convenience, the grounds raised in appeal for assessment year 2007-08 are reproduced below: "(1) Ld.CIT(A) has erred on facts and law by treating the Ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has also been noticed that the assessee has made payments to various pilots, who are engaged on daily basis for bringing vessels in and out of the port. On this payment also, the assessee deducted tax u/s 194C of the Act. The revenue is of the view that such payment is covered u/s 194J of the Act. 6. The assessing officer, after considering assessee's submission recalculated the TDS liability u/s 194J and 194-I as per pages 9 10 of the order of the Dy.CIT, TDS Circle, Rajkot. The Dy.CIT, TDS Circle calculated the liability u/s 194J at Rs.3,15,320 and Rs. 5,34,217 u/s 194-I and 194J for assessment year 2007-08 and for assessment year 2008-09 at Rs.11,86,250 u/s 194J and Rs.20,08,840 u/s 194-I and 194J of the Act. 7. The ld.AR submitted that the assessee deducted tax at source u/s 194C of the Act on payments towards annual maintenance contract (AMC, hereinafter referred), pilotage contract and taxi and tug boat hiring charges. The ld.AR submitted that the assessing officer did not point out any specific terms which needs to be considered while treating the AMC to be subjected u/s 194J of the Act. The ld.AR submitted that the term "contractor" has been defined as, "the one who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office building. The ld.AR submitted that making of cranes, weigh bridge, elevator, EPBX is certainly an engineering operation and in case of any breakdown, in order to make the same operational again, it is obvious that technical knowledge of the machines and spares are required otherwise a person will not know the functioning of said machines and in that event, it cannot be made operational. Cranes installed are worth crores of rupees and in case of any technical breakdown, even if the operation is stopped for few hours, there is heavy loss to the port. Also the weigh bridge, elevator, EPBX installed are of day to day utility to the port and any break down for substantial time cost heavily to the port. It is also the submission of the ld.AR that contracts awarded to the above parties are in the nature of work contracts covering the supply of spares, maintaining the equipment in working condition, repair to such equipment and making good the loss for loss of equipment caused to the assessee. The ld.AR submitted that in order to repair such machines, obviously technical specification is required by the employee of the contractee and merely because the employee possesses the techni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of pilot is similar to the work of truck driver, who steers /navigate the vehicles on road. Here, instead of driver, the word used is more sophisticated as "pilot". But it cannot be said that the payments made to truck drivers will attract TDS u/s 194J of the Act. The contracts with pilots are simplicitor 'work contracts' wherein it is the duty of pilot to assist in guiding the vessels. Thus, the same cannot be subject to TDS u/s 194J merely because pilot possesses technical degree or competence with that respect. 12. In respect of tax deducted at source on payments to jeeps/vehicles taken on contractual basis, the ld.AR submitted that these vehicles were taken by the assessee from Thakker Travels and Rishabh Travels. The ld.AR submitted that the assessee entered into contract with travel agents for providing vehicles wherein payments are made based on kilometer rent. The contract is work contract wherein the contractor has to provide vehicle/diesel and driver is also provided by the contractor and he has to guide the vehicle run at the desired place and he has been paid charges based on kilometers run. The ld.AR submitted that one of the essential conditions of "rent" is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 one per cent of the payment as applicable of such sum as income-tax. The Apex court in the case of Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435/67 Taxman 346 held that 'any work' means any work and not a 'work contract' which has a special connotation in the lip law. Indeed, in the sub-section, the 'work' referred to therein expressly includes supply labour to carry out a work. 'Work' envisaged in the subsection, therefore, has a wide import and covers 'any work' which one or the other of the organizations specified in the sub section can get carried out through a contractor under a contract and further includes obtaining by any of such organizations. Supply of labour under contract with a contractor for carrying out its work which would have fallen outside 'work' but for specific inclusion in the sub-section. 15. Now let us see what is the meaning of "fee for technical services". The meaning of "fee for technical services provided in Explanation (2) of section 9(1)(vii) reads as under: ""Explanation (2) - For the purposes of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r pilotage job at either place in exigencies. The payment is provided to be made for days. He is available for pilotage operation. The other condition in the agreement are in respect of engagement of initial period, termination of the contract by giving one month notice, accommodation, medical facilities, etc. On consideration of the terms and condition of the agreement and above definition of technical services we find that the payment to pilots is in the nature of salary as their contracts agreement were not for managerial and technical or consultancy services. We, therefore, are of the view that the payment made to pilots is not covered by section 194J of the Act. We hold accordingly. 19. Even otherwise also the alternative contention of the assessee is acceptable in the light of the law laid down by the Apex Court in the case of Hindustan Coca Cola Beverages (P.) Ltd. v. CIT [2007] 163 Taxman 355 wherein it has been held that if payee has already paid tax due on the payment received by him from the assessee, the tax could not be recovered once again from the deductor. The assessee has furnished the list of such pilots along with their PAN. 20. Now coming to the next issue w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enjoyment that over a stipulated period of time in order that a payment can be said to be rent. But the more important observation in this order is as to the meaning and import of the word "use" in relation to any equipment is not to be understood in the broad sense of availing of the benefit of an equipment, but it indicated that there must be some positive act of utilization, application or employment of the equipment for the desired purpose. It was held that if an advantage was taken from sophisticated equipment installed and provided by another, it could not be said that the customer used the equipment, it would be a case of a customer merely making use of the facility without himself using the equipment. It was necessary, according to the decision that the customer came face to face with the equipment, operated it or controlled its functions in some manner. But if the customer did nothing to or with the equipment and did not exercise any possessory rights in relation thereto, it can only be said that he made use of the facility created by the service provider who was the owner of the entire network and related equipment. In this case the AAR was dealing with a private company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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