TMI Blog2014 (12) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... orters on the other - The contract is between the parties and not with the agent - The invoices and other shipping documents are in the names of importer/exporter and the assessee merely receives funds and disburses to the airline/shipping lines till clearance by the customs. The statutory warehousing charges is also the sole liability of the clients and the assessee merely defrays the expenses on behalf of the clients, thus, the assessee/agents are not liable to deduct tax u/s 194C of the Act - The privity of contract is between the clients and not with the assessee - There was no contract between the assessee and the authorities rather the assessee is working as a facilitator/agent between the parties and the authorities - TDS is deductable u/s 194C on the payments made to the contractors/ sub-contractors thus the basic premise for deducting tax is on the contracting parties - In the absence of any contractual relationship between the assessee and airlines/shipping lines/Authorities the assessee agent is not liable to withhold tax/deduct tax u/s 194C of the Act – the same has been decided in Commissioner of Income-tax Versus Bhagwati Steels [2010 (1) TMI 411 - PUNJAB & HARYANA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent : Shri Atul Modi-AR ORDER Per Joginder Singh (JM) : This bunch of seven appeals is by the Department directed against the common order passed by ld. CIT(A) dated 22/11/2012 for the assessment years 2008-09 to 2011-12 in the case of Universal Traffic Co. and order dated 16.11.2012 for the assessment years 2008-09 to 2010-11 in the case of Express Transport Pvt. Ltd. The ground raised pertains to that the assessee was not liable to deduct tax u/s 194 I of the Income-tax Act against the order of the Assessing Officer that the assessee was in default within the provision of section 194 I of the Act in his order passed u/s 201(1) and 201(IA) of the Act. 2. During hearing of these appeals the ld. DR, Shri Neil Philip defended the conclusion drawn in the order of the Assessing Officer passed u/s 201(1) and 201(1A) of the Act respectively. On the other hand, Shri Atul Modi, ld. Counsel for the assessee defended the conclusion drawn in the impugned order. 2.1. We have considered the rival submissions and perused the material available on record. First we shall take up the appeals of the M/s Universal Traffic Company (ITA No. 1426 to 1429/Mum/2013). The facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t constitute appellants own expenditure. In the course of appeal, the appellant has filed documents demonstrating that the shipping documents were prepared directly in the names of the clients and not in the name of the appellant. On these facts, therefore, it is evident that the appellant was only an intermediary in the transaction. The privity of contract was not between the appellant and the foreign lines, to whom, freight, destuffing and detention charges were paid. Therefore, the appellant was not the person responsible to deduct tax on payments made to foreign lines on behalf of its clients. 5.8 Provisions of Chapter XVII-B are machinery provisions for collection and payment of taxes. It creates and fastens vicarious liability on various persons while making payments or crediting income to the Accounts of the payees. It is therefore material to determine the locus of the appellant in the transactions in which payments were made to foreign lines in connection with shipment and handling of goods, belonging to appellant's clients. Admittedly, in the present case the goods transported by foreign lines did not belong to the appellant. The importer/exporter availed appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT Vs United Rice Land Limited (supra) cited the appellant. Similar was the view of ITAT Kolkata Bench which was approved by the Calcutta High Court in the case of CIT Vs Stumm India (supra). In these decisions, it has been judicial ly held that unless there exists a contract between the assessee and the transporters who transported the goods, the assessee could not be held liable to deduct tax u/s 194C. 5.11 The freight, de-stuffing and detention charges received by the foreign shipping lines are integral part of the revenues generated by them from the operations of ships and accordingly they are chargeable to tax as profits of the shipping business. The appellant has furnished the particulars of these payments from which it is gathered that the recipients were all foreign lines or their agents. The taxability of the profits of foreign shipping lines is subjected to application of DTAAs or CBDT Circular No. 723 dated 19.09.1995. Wherever DTAAs are applicable, income of foreign shipping line is not chargeable in India but the same is taxable in the country where the shipping company is domiciled and has its place of residence. With regard to foreign shipping lines which do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x at source from the payments of freight, de-stuffing and detention charges. The AO is therefore directed to delete the demand raised u/s 201(1)/(1A) in respect of the aforementioned payments. 5.15 With regard to payment of Warehousing (CFS) charges, it is noted that the appellant being a CHA made the payments in its capacity as an intermediary approved by the Customs Department. The payment made by the CHA does not represent expenditure of the CHA. It is for this reason that CHA obtains only the reimbursement of Actual expense from its clients. There is no privity of contract between the appellant i.e. the payer and the CFS. The goods which pass through CFS do not belong to the appellant and the services provided for handling of cargo till clearance of customs are not availed or utilized by the appellant but by the owner of the goods. The liability to bear CFS charges is on the owner of the goods i.e. importer/exporter and therefore such charges represent expenditure of the owner of the cargo and not the appellant. For the reasons set out in the foregoing paragraphs, I am of the opinion that the decision of the Delhi Benches of ITAT in the case of Hah Logistic Vs DCIT (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms Cargo Service Providers (CCSP) and their obligations and responsibilities have been elaborately set out in Clause 6 of the said Regulations. The CBEC Circular No. 13 of 2009 has clarified that CFS. Port Trust, AAI, ]CDs etc. are all authorized to function as CCSPs and therefore they are obliged to function in conformity with the said regulations and render services to the importer and exporter of cargo in complying with Customs procedures and regulations. CCSPs are thus the notified custodians who assist the Customs authorities in ensuring that importers/exporters of goods comply with the statutory customs procedures. 5.17 For the services rendered, the CCSPs are entitled to receive charges which are levied in conformity with tariff notifications approved by the Customs. In the matter of payment of charges to these entities, the importer/exporter has no option because the charges are statutory in nature. Without these payments, the goods cannot be cleared from the notified customs area. The charges are paid on the basis of weight or value of cargo. The payments made to CCSPs are therefore in the nature of statutory custodial charges paid in conformity with customs notified reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wire charges', it is noticed that these payments are made to the local labor operating within the customs notified premises to seal/un-seal containers/cargo. The labor was appointed at the instance of the appellant's client and the payments were made to them on behalf of the client. The appellant was only an intermediary through whom the payments were affected. Furthermore, as claimed by the appellant that the payments made to each labor on behalf of per consignee/exporter did not exceed ₹ 20.000/- per instance or ₹ 50.000/- in aggregate, per labor. Hence, the payments being below these prescribed threshold limits under Section 194C of the Income-tax Act, 1961, there was no liability to deduct tax at source on the part of the appellant. The AO is directed to delete the demand raised u/s 201(1)/(1A) in respect of the aforementioned payments. 5.20 Regarding crane/ fork-lift charges, it is pleaded by the appellant that even these payments were in the nature of pure reimbursements. The appellant defrayed these charges on behalf of its customers. I find that the appellant hired contractors for handling and transportation of cargo. after Custom clearances were obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on their income. Reliance in this regard is placed by the appellant on the Supreme Court decision in the case of Hindustan Coca Cola Beverages Pvt Ltd Vs CIT (293 ITR 226), the Allahabad High Court decision in the case of Jagan Prakashan Ltd Vs DOlT (345 ITR 286) and ITAT Kolkata Bench decision in the case of Ramkrishna Vedanta Math Vs ITO in ITA No. 477 to 479/Kol/2012. 5.23 Although, these submissions of the appellant have merit. However in my opinion, these grounds have become infructuous and redundant, in view of my findings on merits with regard to above issues, except in respect of crane/ fork-lift charges. where I have directed the AO to grant necessary relief to the appellant u/s 201(1) in respect of tax already paid by the recipients of income in view of Supreme Court decision in the case of Hindustan Coca Cola Beverages Pvt. Ltd (supra). 2.3. Likewise in these appeals of M/s Express Transport Pvt. Ltd. (ITA No.1473 to 1475) for A.Y.s .2008-09 to 2010- 11, identically the ld. Commissioner of Income tax (Appeals), so far as deduction u/s 194 I of the Act is concerned, made an elaborate discussion and held as under: 3.6 I have considered the above submissions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SPs. A perusal of Regulation 5 shows that having land building is just one of the requirements to be complied with by a person to function as CCSP. In addition, such person needs to provide facilities and to install infrastructure and equipments within Custom notified areas so as to render a gamut of services as a statutory Custodian of cargo till Custom clearance formalities are completed by the importer/exporter of cargo/goods. The CBEC Circular No. 13 of 2009 has clarified that CFS, Port Trust, AAI, ICDs etc. are all authorized to function as CCSPs and therefore they are obliged to function in conformity with the said regulations and render services to the imported and exporter of cargo in complying with customs procedures and regulations. 38. The Customs procedures provide definitive measures by which goods enter or exit territorial boundaries on payment of applicable duties and taxes. In order to ensure that the customs notified procedures are followed properly, it is therefore necessary for the customs to ensure that the movement of cargo is regulated and therefore allowed to be kept within notified places till customs formalities are complete. CCSPs are the notified cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no option but to utilize the services of the CCSPs for complying with Customs regulations and formalities to obtain Customs clearances. The payments, as stated above, are largely in the nature of statutory charges for custody of goods by customs notified entities and the payer does not have any option but to make these payments. It may be so that the importer/exporter may have option to choose a CCSP but he has no choice but to compulsorily avail the services of a CCSP for completing Customs formalities. 3.11 I also find force in the submissions of the appellant that the CCSPs do not merely provide the storage space but render a range of services enabling the importer or exporter to comply with the Customs Regulations till clearance is obtained. The use and/or occupation of the space within the area belonging to CCSF is only incidental in the detailed procedure laid down by the Customs till the goods are cleared. It is not a case where the importer/exporter utilizes the services of 00SF for storage of goods simplicitor or that they can indefinitely utilize the space for storage of goods. It is for this reason that the importer/exporter cannot demand any specific space or st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the demand raised u/s 201 would stand vacated. On perusal of the information furnished, I find force in the submissions of the appellant. The AO had applied the rate of 10% on the gross payments towards survey fees without considering the fact that payments to some parties did not exceed threshold limit and in some instances lower tax deduction certificates were available with the appellant. For the reasons set out in the foregoing, I therefore direct the AO to verify the claim of the appellant and accordingly re-compute the demand u/s 201. In case of any difference, the AO shall pass a speaking order giving reasons for holding that appellant had short deducted tax u/s 194J on payments 4.7 With regard to fumigation charges, I find force in the submissions of the appellant that these services did not involve rendering of any professional or technical service. The 00SF regulations require that the area where the cargo is stored is properly fumigated so that the cargo is not damaged due to attack by the pests etc. The regulations put in place require the CCSPs to make arrangements for regular fumigation of the storage areas and in turn these charges are recovered from the import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT, Cuttack Bench in the case of GIRDCO Limited Vs Asst. CIT (49 SOT 363). In these decisions, it is held that where, in the performance of a service, plant equipments are used by the contractors then the transaction falls under section 1940 and not 1941. I therefore hold that the tax deduction at source in respect of fork lift and crane charges was not required to be made under Section 1941. The appellant could therefore not be regarded as an assessee-indefault for non-deduction of tax under Section 1941. Hence, the AG is directed to delete the demand raised u/s 201(1)/201(1A) in relation to forklift and crane charges. 2.5. If the observation made in the assessment order, conclusion drawn in the impugned order, material available on record and the assertion made by the ld. Respective counsel, if kept in juxtaposition and analyzed, we note that the ld. Commissioner of Income tax (Appeals) has placed reliance upon various judicial pronouncements from various Benches of the Tribunal like Hah Logistics vs DCIT (ITA No.1864/Del./2011) order dated 04th November 2011 from Delhi Tribunal, DCIT vs Jay Kay Freighters Pvt. Ltd. (ITA No.3407/Del/2011) order dated 08/08/2012, Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein is identical. It is worth quoting that the Hon ble Apex Court in Hindustan Coca Cola Beverages Pvt. Ltd. vs CIT (293 ITR 226) held that where the deductee concerns have already paid taxes on the payments made by the assessee payer then the Department could not deduct tax from the deductor on the same income by treating the latter to be an assessee in default . Similarly, in the present case, the payees have offered the corresponding income in their returns, therefore, the alleged TDS liabilities, raised upon the assessee was not enforceable. Ratio laid down in Ramkrishna Vedanta Math vs ITO (ITA No.477/Kol/2012) order dated 31/07/2012 by the Kolkata Bench of the Tribunal supports our view. We note that the freight charges, detention charges and de-stuffing charges, etc. were paid to foreign lines or to their agents or shipping lines for transportation of cargo thus the privity of contract is not between the assessee and foreign lines/shipping lines to whom such charges were paid, thus, the assessee cannot be held to be a person responsible to deduct tax on such payments while acting for his clients. The Hon ble Delhi High Court in CIT vs Cargo Linkers held that since the con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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