Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Income Tax Officer (TDS) -2 (3) Versus Mitsui OSK Lines India Pvt. Ltd.

2015 (7) TMI 1016 - ITAT MUMBAI

Liability to deduct tax u/s 194J - demand raised by the AO vide order u/s.201(1)1/201(1A) - whether the payments made to Nhava Sheva International Container Terminal Private Limited are not in the nature of 'fees for professional services' but the payments are for carriage of goods and thus defined as 'work' in Explanation III to section 194C(2) of the Act, and hence the same are not covered under the provisions of section 194J? - direction of CIT(A) that payments made to NSICT be treated as cov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in case of export and vice versa in case of import of goods. This payment cannot be characterized as anything other than for the carriage of goods. When we view Explanation III (c) below section 194C(2) it becomes apparent that the payment made by the assessee to NSICT is covered within this provision and the assessee rightly deducted tax at source u/s. 194C of the Act. See ACIT Versus Merchant Shipping Services (P) Ltd. [2010 (11) TMI 692 - ITAT, Mumbai]

We, therefore, hold that the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.5.2013 of the CIT(A)-14, Mumbai,for the above mentioned two years the Assessing officer (AO) has raised following identical Grounds of Appeal: "i) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that the assessee was under no liability to deduct tax u/s 194J of Income Tax Act 1961 and deleting the demand raised by the AO vide order u/s.201(1)1/201(1A) of the Income Tax Act on account of short deduction of tax on the payments made to Nhava Sheva .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

but the payments are for carriage of goods and thus defined as 'work' in Explanation III to section 194C(2) of the Act, and hence the same are not covered under the provisions of section 194J of the Income Tax Act, 1961. iii) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in not appreciating the fact that the container handling services are technical services rendered by Nhava Sheva International Container Terminal Private Limited which requires TDS u/ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e necessary at the time of the hearing of the case or thereafter. 3. The order of the CIT(A) being erroneous be set aside and A.O's order be restored." 2. Assessee is engaged in the business of shipping and is an agent for Mitsui O.S.K. Lines Ltd. of Japan in India. A survey action u/s. 133A of the Act was carried out at the business premises of the assessee on 9.3.2005 so as to ascertain/verify whether the assessee-company properly complied with the provisions of the Chapter VII-B of t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

its customer with machines and technical manpower, that any payment made to NSICPL on account of container handling charges should be subjected to TDS u/s. 194J of the Act and not u/s. 194C of the Act. Finally, the AO held that the assessee was deemed to be an assessee indefault. Finally the AO treated the assessee deemed to be an assessee in default for its failure to deduct tax at source @ 5.5%. He worked out the default to ₹ 59,25,477/- u/s. 201 (1)of the Act. As the assessee had paid t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ndered by NSICPL were composite services and covered by section 194C of the Act, that the job carried out by the assessee was in the nature of carrying out any work including supply of labour or carrying out any work in pursuance of a contract, that it had correctly deducted the tax at source as per provisions of s.194C of the Act, that the prov. of s.194J were applicable in respect of payment made by way of fee for professional services/ fee for technical services, that the services rendered by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s nor in category of fee for technical services. The assessee referred to case ofMerchant Shipping Services Pvt. Ltd. (49 DTR 97) wherein it was held that payment made to NSICPL were covered by s.194C of the and not by s.194J. After considering the submission of the assessee and order of AO u/s.201,the FAA held that the payments to NSICPL are coved by the provisions of s.194C of the Act, that the assessee had rightly deducted tax at source @2%, that assessee could not be treated as an assessee i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he Act from AY 2005-06 for a period of 30 years. She also relied upon the order of Glaxco Smithkline Pharmaceuticals Ltd. (48 SOT 643) , Aditya Marine Ltd. (224 Taxmann 169) & Yash Container Terminal Pvt. Ltd. (ITA No.6341/Mum/2009) AY 2007-08 order dt.6.4.2011 . 5. We have perused the material before us. We find that while deciding the case of Merchant Shipping Services (P) Ltd. the Tribunal had dealt the issue as under :- 2. The only ground raised by the Revenue is against the direction of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ava Sheva International Container Terminal Limited (hereinafter referred to as "NSICT") and deducted tax at source at the rate of 2.05% as provided u/s.194C for which payment was made. The Assessing Officer, during the course of proceedings u/ss.201(1) and 201(1A), noted that NSICT entered into technical service agreement with P & O Australia under which P & O Australia was to provide technical know-how to the assessee-company. It as also noted by the AO that NSICT had also cha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

return for fees. In view of these facts the Assessing Officer opined that NSICT was rendering / providing technical and specialized services to its customers including the assessee along with machines and technical manpower and hence tax was deductible u/s 194J. On being show caused, the accounts Manager of the assessee explained that payments made to NSICT were for container movement under the contract and there were no professional or technical services involved in the movements of containers .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion 194J, sought to be applied by the Assessing Officer, were not applicable. Vide para 11 of the assessment order, the Assessing Officer accepted the assessee's contention that the payment was made towards container handling charges. He however held that container handling was a technical and specialized service. In his opinion the assessee-company was required to deduct tax at source u/s.194J and not u/s.194C. Resultantly he worked out short deduction of tax at source at ₹ 36,08,701 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lized services to the assessee. He further argued that P & O Australia entered into technical service agreement with NSICT providing them the technical knowhow, from where it would naturally follow that NSICT also provided technical services to its customers including the assessee. He further stated that NSICT charged service tax in its invoices raised on the customers,which was clear indicator of they being provider of technical services. The learned Departmental Representative argued that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

we proceed further, it is sine qua non to zero in on the exact nature of services for which the assessee made the payments in question. Ordinarily shipping agent is a person whose business is to prepare shipping documents, arrange shipping space and insurance and further deal with the customs requirements. It is apparent from the assessment order that during the course of its business as shipping agent, the assessee availed the services provided by NSICT for the movement of its cargo in respect .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the containers from vessel on to the trailers at the quay side with the operation of quay crane ; movement of the containers from yard to esselide; and operation of rubber tyre grantry cranes / rail mounted gantry cranes for lifting the containers off from trailers to customer's trailers / rail wagons. The above description of the work done by NSICT for the assessee was brought to the notice of authorities below and the A.O. has recorded the same in para 10 of the assessment order. The vera .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

made to NSICT at the rate of 2.05%. As against that the Assessing Officer has held that such payments are covered u/s.194J, on which tax was deductible at the rate of 5.05%. In order to appreciate the entire controversy in right perspective it would be apt to consider the provisions of section 194J vis-a-vis section 194C. 11.On circumspection of Explanation (2) to section 9(1)(vii) in juxtaposition to section 194J, it becomes apparent that the fees for technical services is consideration for the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

only to the technical services and it is nobody's case that the assessee made any payment for managerial or consultancy services. In the like manner the AO has not pressed into service the later part of the Expl. 2, which deals with provision of services of technical or other personnel. It is rightly so because of the fact that NSICT raised invoices in respect of movement of cargo and there is no reference to any specific provision of services by technical or other personnel. Rule of ejusde .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

provision must fall within the genus of 'services of technical' personnel. It cannot be considered as any personnel unrelated to the managerial, technical or consultancy services. Even though NSICT had the services of several personnel in the process of movement of cargo, those personnel, in the absence of any finding by the AO that they possessed some technical expertise, cannot be considered within the ambit of this provision as falling under 'other personnel'. 13. Further nar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

technical services' as consideration for rendering of any "managerial, technical or consultancy services", it becomes apparent that the word "technical" is preceded by the word "managerial" and succeeded by the word "consultancy". As both the 'managerial' and 'consultancy' services are possible with human endeavor, the word 'technical' should also be seen in the same light. To be more precise, any payment for technical services, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

with man, machine and material, such payment would not partake of the character of fees for technical services. ...... 15.Coming back to the facts of the instant case it is noticed that the assessee made payment to NSICT for the movement of the containers from or up to the vessel. In order to facilitate the movement of containers, NSICT provided the services of different types of cranes such as quay cranes, rubber tyre gantry cranes and rail mounted gantry cranes. These cranes are used for spec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ice to one and all. Anybody interested in movement of containers could avail the facility. The assessee has also made payment on bill to bill basis. In other words, payment was made for user of a standard facility provided by NSICT, specifically for the movement of containers from or to the vessel. 17. From the mandate of section 65(82) of Finance Act, 1994 it is vivid that Port Services consist of cargo handling, dock services and container handling services. When we view the registration of NS .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

only in the category of 'technical services' unless the prescription of Explanation (2) to section 9(1)(vii) is fulfilled. A payment to be covered u/s.194J should be fees for technical services and such fees should be for rendering of any technical, managerial or consultancy services and not anything else. In order to rope in any service provider within the net of section 194J, it is of paramount importance to check the true nature of service provided on the touchstone of the mandate of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oduction of programmes for such broadcasting or telecasting. It is obvious that this activity cannot be done without the use of some sophisticated machinery. Similarly section 194I requires deduction of tax at source from rent. Explanation to this section defines 'rent' to mean payment for the use of inter alia (e) plant; (f) equipment. This is a direct payment for the use of machinery. No machinery or equipment can be manufactured without some sort of technical service. If we accept the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e was no liability on the assessee to deduct tax at source from the payments made to NSICT within the meaning of section 194J and the ld. CIT(A) was justified in holding so. 22. Now let us examine and evaluate the contention of the assessee that the payments made to NSICT are covered u/s.194C of the Act. This section mandates that any person responsible for paying any sum to any resident for carrying out any work including supply of labour for carrying out any work in pursuance of contract betwe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

include: 'carriage of goods and passengers by any mode of transport other than by railways'. A cursory glance on clause (c) of Explanation III brings out that carriage of goods by any mode of transport other than by railways has been included in the definition of "work" as applicable to section 194C. Carriage of goods means the movement of goods from source to destination. In case of exports,source is the godown of customer and the destination in India is vessel and vice versa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

9;s trailers / rail wagons, which were lifted from such trailers / rail wagons on the cranes by NSICT and were then moved from yard to vessel side.This movement of cargo is part of the journey of the container from the place of source to the place of destination, which is vessel. The assessee made payment for carriage of goods from the customer's trailers up to the vessel in case of export and vice versa in case of import of goods. This payment cannot be characterized as anything other than .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version