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2015 (7) TMI 519 - ITAT CHENNAI

2015 (7) TMI 519 - ITAT CHENNAI - TMI - Tds deduction - section 194I OR under section 194C - assessee has deducted tax @2% on the payments made to the concerned persons in accordance with section 194C of the Act treating the payments as contract for service but whereas the assessing officer has treated the payment as a lease rental and therefore he opines that the tax to be deducted at source ought to be at 10% in accordance with section 194I - assessee in default - CIT(A) found the assessee has .....

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y Ltd vs. DCIT [2010 (2) TMI 397 - BOMBAY HIGH COURT]. These facts are not controverted by the Department Representative. Being so, this is an admitted fact that once income of the letout of ware housing is treated as business income then tax deduction at source to be made u/s.194C of the Act. Being so, in our opinion the Commissioner of Income Tax (Appeals) is justified in observing that the assessee is liable to deduct tax at source u/s.194C, since the nature of the service rendered by the ass .....

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stan Coca Cola Beverage P. Ltd vs CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA] wherein it has been held that where deductee, recipient of income, has already paid taxes on amount received from deductor, department once again cannot recover tax from deductor on same income by treating deductor to be assessee in default for short fall in its amount of tax deducted at source. However, the department is at liberty to recover the amount of interest, if any, arising out of delayed payments of taxes .....

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for the assessment years 2009-2010 to 2013-2014. Since issue in these five appeals are common in nature, these appeals are clubbed together, heard together, and disposed of by a common order for the sake of convenience. 2. The facts of the case are that the assessee business is to provide service of logistics support and warehousing facilities to its clientele (i.e) i. C & F. ii. Handling and managing the articles/products including receiving, inspecting, storing, stock keeping, packing and .....

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andra ii) J. Ramachandran iii) J. Kamakshi iv) J. Sulochana. The above persons are the owners of the property in which the goods of the clientele were stored. The Assessing Officer perused the materials took into cognizance the agreement of the property dated 20.02.2006 and has come to the conclusion that the payment to the aforesaid persons were only towards rent for lease of the premises where the services were rendered. It was a fact that initially the premises where the warehousing facility .....

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d by the Assessing Officer as she has given undue weightage only to the agreement of lease simplicitor and not the latter agreement which was a comprehensive agreement of providing various services. The Assessing Officer s omission to consider the latter agreement has resulted in concluding that the payments made to the concerned persons were for rentals and hence the tax to be deducted at source was to be in accordance with section 194I of the Act and not under section 194C of the Act as conten .....

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19,22,199 2,55,040 16,67,159 TOTAL 1,36,83,496 20,99,984 1,15,83,512 Demand u/s.201 (1A) F.Y Interest Payable Interest paid Balance payable 2008-09 43,97,562 39,129 43,59,433 2009-10 23,36,591 31,760 23,04,831 2010-11 7,19,817 19,643 7,00,174 2011-12 5,71,524 19,800 5,51,724 2012-13 (1st quarter) 4,02,932 16,196 3,86,736 TOTAL 84,28,426 1,25,528 83,02,898 Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 3. On appeal the Commissioner of Income Tax (App .....

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uced the certificate that the deductees have offered the sums paid to them as Income in their respective Returns filed and also paid the taxes due thereon. The Commissioner of Income Tax (Appeals) had carefully perused all the materials and records and find that the assessee has deducted tax @2% on the payments made to the concerned persons in accordance with section 194C of the Act treating the payments as contract for service but whereas the assessing officer has treated the payment as a lease .....

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tive relied on the following case laws:- 1. National Panasonic India(P) Ltd vs DCIT 4TTJ(Delhi) 2. CIT vs Hindustan Lever Ltd 216 Taxman 280(Del HC) 3. S.A.A Isphani Trust vs income tax officer (TDS) 216 Taxman (Madras) 4. Hindustan Coco Cola Beverage pvt Ltd vs. CIT 293 ITR 226 (SC) 5. CIT vs Samsung electronics Co. Ltd 320 ITR 209 (Karnataka) 6. Transmission corporation of AP Ltd vs CIT 289 ITR 587 SC 7. Vijay ship breaking corporation vs CIT 314 ITR 309 SC 3.3 The Authorised Representative fo .....

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ii. Has taken into account such sum for computing income in such return of income and iii. Has paid the tax due on the income declared by him in such return of income . And the person furnishes a certificate to this effect from an accountant in such form as may be prescribed . In accordance with the above proviso to section 201 of the Act, the deductees have furnished the Returns of income and have taken into consideration the sums received while computing the income and has duly paid the taxes .....

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the impugned order suffers from serious legal infirmity. The Hon'ble supreme court in the case of Hindustan coco cola beverage (P) Ltd vs. CIT reported in 293 ITR 226 (SC) held that on a perusal of the circular no.275/201/95-IT(B) dated 29th January 1997 issued by CBDT it puts an end to the controversy after the deductor has satisfied the officer in charge of TDS that taxes due have been paid by the deductee but however it held that interest under section 201(1A)of the act is leviable till .....

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4I the burden is on the revenue to establish that the payments are only for rentals and not otherwise. 3.6 The CIT (A) observed that considering the aforesaid case laws with that of the assessee's case, it is clear that the agreement for composite services and corroborated with the bills raised by them amply goes to prove that the payments made to the concerned persons are for rendering services and not for mere letting out of the property and therefore the deduction of Tax in accordance wit .....

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e law applicable thereto. Further the law laid down by the Honorable supreme court is very clear on the levy of Additional tax under section 201 of the Act and applying the law laid down by the Apex court in the case of Hindustan Coco Cola Beverages (P) Ltd vs. CIT reported in 293 ITR 226(SC) it fortifies the stand of the assessee since the deductees have admitted the sums received as income in their Returns filed and has paid appropriate Taxes there on. Further on applying the principles of law .....

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t the payments have the characters of lease rental. 3.8 Considering the facts of the case and applying the rulings of the Hon'ble Supreme Court, the Commissioner of Income Tax (Appeals) found the assessee has discharged its onus of having fulfilled the conditions laid down in terms of proviso to section 201 of the Act and therefore has to succeed in these appeals. 3.9 In view of the aforestated findings and conclusions, the CIT (A) came to the opinion that the order of the assessing officer .....

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g to godowns under the head 'godown rent' and tax was also deducted u/s 194I. The CIT(A) erred in giving credence to the subsequent agreement dated 22.2.2006 which was nothing but an arrangement between the company and its shareholders to hoodwink the liability u/s 194I more so when the lessors / directors have declared income from godowns under the head 'income from house property' and not as a business income. The directors have not offered any income from business or professio .....

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dited books of accounts of the deductor the said payments were booked under the head 'godown rent' and TDS liability was admitted as per the provisions of section 194I. 4.1 The ld. Departmental Representative submitted that Commissioner of Income Tax (Appeals) ought to have called for a remand report from the AO on the fresh evidence submitted by the deductor, which is in violation of Rule 46A. The Id CIT(A) went by the form of the agreement for composite services which was purportedly n .....

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only from 01.05.2014 started claiming that the payments to the Directors were in the nature of payment for certain services under contract and it cannot be treated as rent where TDS is to be deducted at 10%. The deductor has changed the version that the TDS rate of 10% is not applicable and started arguing that the applicable rate is only 2% as per the new service agreement. The Id CIT(A) failed to appreciate the fact that nothing prevented the deduct or to furnish the copy of revised agreement .....

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ents made between the parties and escape the liability under provisions of Chapter XVIIB of the Act. Even in the revised agreement, the basic focus is only storage, packing etc and the other services are only allied services like loading, unloading, dispatching, etc and the other services are done only when the other party requests for the same. Hence primarily it is only letting out of land and building for storage of goods in the nature of warehousing facilities. This apart, the auditors in th .....

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on 22.02.2006, then the TDS dues would not be to the extent of M89,96,300/- as stated in form 3CD as the deductor would have deducted only at the rate of 2% which would be very much les; only when the TDS deducted was at the rate of 10% then the TDS dues would be to the extent mentioned above. This is more so because the company has remitted only very meagre amount of TDS from financial year 2008-09 onwards. This show that either the form 3CD issued by the Chartered Accoutant for assessment year .....

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ss account and balance sheet for the period 1.4.2011 to 31.8.2012 of branch account, copy of signed Form 3CA and Form 3CD of the deductor for AYs 11- 12 and 12-13. It has also been ascertained from the jurisdictional AO wherein the company was assessed under PAN AACCR0240E, it was learnt that the company did not filed its return for AY 11-12 till the date of order, filed return for A.Y.10-11 and 12-13 only on 8.10.2011 and 30.4.2013 respectively, beyond the due dates stipulated by the Income tax .....

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.2013 to their respective AOs to reiterate that they have claimed only TDS at the rate of 2%. This fact has also been totally ignored by the ld.CIT. In addition to this all the lessees of the deductor company were deducting TDS only at the rate of 10% on the payments made to the deductor towards letting out of warehouse. Even the agreements between the deductor and its lessees clearly show that basic service is only letting out of godown and not based on allied services. The Id CIT(A) erred in h .....

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est u/s 201(lA) on the TDS which ought to have been deducted by the deductor. In the instant case, the deductees are said to have filed their tax returns but they have not paid the taxes on the lease income received from the deductor. They have only sought credit for the tax deducted by the deductor company, when the company has not remitted the tax deducted to Central Government account. The deductor and the deductees have sought to retain the tax deducted without remitting it to Government and .....

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National Panasonic India (P) Ltd reported in 94TTJ of Hon'ble Delhi Tribunal is not applicable to the facts of the case. In that decision, it was held that where agreement or arrangement which gives rise to payment of rent must necessarily be an agreement or arrangement predominantly for use of land or building, then TDS has to be deducted at the rate applicable u/s 194I and not u/s 194C; that the case deals only with the business between a manufacturer and its agent, being C & F agent .....

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assessee as income from house property. According to Departmental Representative the Commissioner of Income Tax (Appeals) is not justified in giving credence to subsequent rental agreement. However, facts suggests that the assessee carried on business of warehousing activities in its godown which was letout to various persons. The income from warehousing is chargeable under the head Business Income and not under the head income from House Property as held by jurisdictional High Court in the case .....

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