TaxTMI 
TaxTMI 
2014 (12) TMI 719
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....ed 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, in brief are that the assessee, a partnership concern, carries on the business of custom house agents. Survey operation u/s 133A of the Act was carried out on 24/02/2011, at the premises of the assessee, to verify the compliance with the provision of chapter XVII-B of the Act. It was noted by the Assessing Officer that the assessee has not deducted tax at source with respect to various expenses like freight charges, seal wire charges, warehouse charges, detention charged, de-stuffing charges, crane/fork lift charges and survey fee etc. A show cause notice was issued to the assessee as to why the assessee may not be treated as "assessee in default" for non deduction of tax at source on the aforesaid expenses. In response, the assessee claimed that the provisions of section 194 C and 194J of the Act are not applic....
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....ayees. 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 appellant's services for completing customs formalities and getting the goods cleared. From sample copies of shipping documents and statement of Account, it is noted that the shipping documents were drawn up in the names of the importer/exporter. The appellant also demonstrated that reimbursement of Actual amount of freight, de-stuffing and detentions charges only were claimed for which bills were raised by foreign lines. No income element was embedded in the same. On totality of these facts, therefore it is clear that the appellant was nothing but a pass through entity in the transaction between its clients and the foreign lines through whom the goods belonging to the clients were being transported. 5.9 On similar facts, Hon'ble Delhi High Court, in the case of CIT Vs Cargo Linkers (supra), as cited by the appellant ....
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....ofits 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 come within the purview of DTAAs, income of such shipping companies is assessable under Section 172 of the Act which is a code in itself. In Circular No. 723 dated 19.09.1995, the Board has clarified that the provisions relating to tax deduction at source will not be applicable while making payments to foreign lines or their agents. I therefore hold that the appellant did not have any liability to deduct tax at source on the payments made to foreign lines towards freight. de-stuffing & detention charges. 5.12 From the impugned orders, I find that the AO has not disputed the fact that the appellant had furnished particulars of payments made to shipping lines and their agents. The details furnished show that the payments were made to foreign lines or their agents. In the circumstances, the provisions of Section 1940 do not ha....
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....oods. 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) & Jay Kay Freighters Pvt. Ltd (supra) and Delhi High Court in the case of Cargo Linkes (supra) are applicable with regard to payments made to CFS. 5.16 At the time of hearing, the Ld. ARs have also invited my attention to the publications of the Government of India, in which the role of the CFS has been described in detail. These publications belong to Ministry of Commerce and Planning Commission. A Container Freight Station has been defined by the Ministry of Commerce to mean a common user facility with public authority status equipped with fixed installations offering services for handling and temporary storage of import/export goods carried under the Customs control and with Customs and other agencies competent to clear the goods for home use, temporary admissions, re-export or trans-shipment of cargo. With increase of the interna....
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....mporter/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 regulations. I also note that in order to attract the provision of Section 194C there must be a contract or an agreement. The word "contract" or 'agreement" connotes that there is a mutual understanding between two parties on agreed terms. An agreement can only be between two willing parties who have option of agreeing or not agreeing to the terms. In the matter of import or export, the owner of the goods has no option but to utilize the services of the CCSPs for complying with Custom regulations and formalities to obtain Custom clearances. The payments are 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. I therefore find force in the submissions of the appellant that the charges paid to CCSPs (CFS in this case) were not in the natur....
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....oned 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 obtained. In connection with loading and unloading of the cargo, the contractors hired forklifts and cranes for which payments were made. The appellant hired the services of the contractors for handling of the goods and in the course of material handling services; the contractors engaged the services of cranes and forklift operators. It was therefore a case where the contractors provided their services of material handling, in the performance of which the cranes/forklifts were utilized by the contractors . It was therefore a case of "wet lease" or a composite contractor. Such payments therefore qualify for tax deduction under Section 1940. 5.21 This view is supported by the decision of jurisdictional ITAT, Mumbai Bench in the case of ACIT Vs Accenture Services (F) Ltd (supra) and ITAT, Cuttack Bench in the case of GIRDCO Limited Vs Asst. CIT (supra). ....
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....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 the appellant, the order passed by the AO as well as the facts and circumstances of the case. The AO has rejected the appellant's contention on the ground that the payees to whom payments were made, were providing the appellant with the areas or space for storage of goods and therefore the payments were in the nature of rent requiring deduction of tax under Section 194I. From the statutory framework as outlined by the Ld. ARs of the appellat in the above submissions as per the Customs Act, 1962 and the Regulations made there-under in connection with the grant of customs clearances, it appears to me that the payments which the appellant had to make to the parties were not for mere use of space. From the publications of Ministry of Commerce and Planning Commission, Government of India which are available in public domain it is noted that the role of CFS has ....
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.... 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 custodians who assist the Customs authorities in ensuring that importers/exporters of goods comply with the statutory customs procedures. These procedures inter alia include examination, assessment, levy & collection of duties, documentation and ultimately the delivery of the cargo. The CCSPs are required to provide various services in handling, storing and complying with customs procedures. 3.9 Thus CCSPs do not merely provide storage space but render a range of services, which they are obliged to provide in terms of regulations prescribed by the Customs Department functioning under the Ministry of Finance, Government of India. For these services rendered, the CCSPs are entitled to receive charges which are levied in conformity with tariff notifications approved by the Customs Department. In the matter of payment of charges to these entities, the importer/exporter....
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.... 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 storage area nor can exercise any control or domain over any particular space comprised in the facility. In the circumstances, therefore the facilities provided by the CCSPs are not in the nature of mere storage or warehousing but these are infrastructural facilities developed in accordance with and in conformity to the specifications and regulations prescribed by Ministry of Commerce as well as Ministry of Finance, Government of India. I therefore find force in the submissions of the Ld. ARs that the charges paid to CCSPs were not in the nature of rent simplicitor but they were in the nature of statutory charges or levies paid for complying with the above notified procedures. 3.12 I also find force in the submissions of the appellant that in the matter of payment of these charges, the appellant as CHA acted only as an intermediary. The appellant's functioning as CH....
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....ulations 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 importer/exporter whose goods are handled by CCSPs while in their custody. The person entrusted with the job of fumigation merely sprays chemicals, insecticides to prevent attack by pests etc. that the cargo/goods are not damaged. These persons simply perform manual, nontechnical operations involving spraying of chemicals, pesticides etc. to make the area pest/insect free. The charges paid inter alia include the cost of chemicals, pesticides etc. No technical skill is involved nor any technical information is given; neither any technical knowledge, design etc. is imparted while performing fumigation activities. On the facts of the case therefore, I find merit in the appellant's submissions that fumigation charges could not be brought within the ambit of fees for professional or technical services requiring tax deduction under Section 194J. I therefore hold that the appellant did....
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....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 Delhi High Court in CIT vs Cargo Linkers (218 CTR 295), where in the Hon'ble Court held that the assessee being a C& F agent, is an intermediary, who booked cargo for and on behalf of importers and exporters and facilitated the contract for carrying goods, therefore not liable to withhold tax u/s 194C from payments made towards air freight on behalf of its customers, decided in favour of the assessee. We are in agreement with the conclusion drawn by the ld. Commissioner of Income tax (Appeals) because such person who acts as an agent has no liability to deduct tax at source because he is acting merely as an intermediary between the airlines/shipping lines as also custodians of goods on one hand and the importers/exporters 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....