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The ACIT (TDS) , Jaipur Versus M/s Rajasthan Small Industries Corp Ltd Udyog

2015 (8) TMI 80 - ITAT JAIPUR

Liability to deduct tax at source - @ 1% or 2% u/s 194C - whether payments made by the assessee to M/s. Max Logistics (P) Ltd. treating it as a subcontractor instead of contractor - Held that:- The nature should not merely be decided on the basis of book entries or use of common terminology. The word ‘Custodian’ is used in the public notice is emphasized by ld. AO to hold that there is no contract between custom and assessee. On reading of the above mentioned clauses, the public notice gives a c .....

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are of the view that the M/s. Max Logistic (P) Ltd. with assessee was that of a sub-contractor. This being so, the TDS liability of the assessee in terms of Section 194C is exigible @ 1% which has rightly been upheld by the ld. CIT(A). Hence, we find no infirmity in order of the ld. CIT(A) which is upheld. - Decided against revenue. - ITA Nos. 284, 285 & 286/JP/2014, ITA No.4/JP/2013 - Dated:- 10-4-2015 - R P Tolani, JM And T R Meena, AM,JJ. For the Appellant : Shri Kailash Mangal (JCIT-DR) For .....

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stead of 2% u/s 194C of the I.T. Act on payments made by the assessee to M/s. Max Logistics (P) Ltd. treating it as a subcontractor instead of contractor." 2.1 Brief facts of the case are that the assessee is a State Govt. Undertaking incorporated with the objects to aid, counsel, assist, finance, protect and promote the interest of small industries in state of Rajasthan. During the course of carrying out its objects, the Commissioner of Custom and Central Excise, Jaipur vide public notice .....

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s work for execution as per Schedule III of the notification to M/s. Max Logistics (P) by a duly executed agreement. Schedule III of the agreement provides that the services which were required to be rendered by assessee were to be duly executed by Max Logistics in to the satisfaction of its contractual obligation to the custom department. In these facts and circumstances assessee regarded Max Logistics as its sub contractor and accordingly deducted TDS @ 1% u/s 194C for the payments made during .....

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tice issued to the assessee. A detailed reply was filed which did not find favour of the AO who held the Payments to M/s. Max Logistics to be as a contractor and not of a sub-contractor; liability for TDS was fixed @ 2% u/s 201(1) and the interest was charged u/s 201(1A). 2.2 Aggrieved, the assessee went in first appeal where the ld. CIT(A) referred to custom departments notification and various clauses of the agreement and the Schedules appended thereto. After considering the assessee's sub .....

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t to M/s. Logistic (P) Ltd. and the payment made to this concern were on account of work done which was in the nature of sub-contract and accordingly the appellant has deducted TDS @ 1% . On the other hand, AO s case is that payments made to M/s. Logistic (P) Ltd. were of contact nature and TDS was to be deducted @ 2%. Accordingly, the AO has determined short deduction of TDS and assessment order charged interest u/s 201(1A) of I.T. Act and demand raised in all the three assessment years as disc .....

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al Excise and Customs and that for handling and transportation involved in the above appointment as per clause 1 to 5 given by the Custom Department, the assessee as per agreement with M/s. Logistic (P) Ltd. assigned the work in relation to handling of import and export operations to M/s. Logistic (P) Ltd. It was argued that the work which has been received by the assessee from Customs and Central Excise Department was only subsequently assigned in part to M/s. Logistic (P) Ltd. and that accordi .....

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ed Custodian of ICD, Jodhpur by Department Central Excise and Customs and part of the same work were subsequently delegated/ assigned by the assessee to M/s. Logistic (P) Ltd. and accordingly the transactions were definitely of sub-contract nature. It is also noted that the in respect of assessment year 2009-10, the same transactions were held to be of sub-contract nature by worthy CIT (Appeals), Alwar in appellant own case in appeal no. 498/JPr/2011-12 and accordingly it was held that the payme .....

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1%. Therefore, there was no justification for raising of demand u/s 201(1) of the Act and the demand raised is accordingly deleted. As regards charging of interest u/s 201(1A) of I.T. Act , it may be stated that interest is to be charged from the date of deductibility till the date of actual payment of tax in the light of decision of Hon'ble Supreme Court in the case of CIT vs. Eli Lilly & Company (I) (P) Ltd. 312 ITR 225. The AO is directed to compute the interest u/s 201(1A) of I.T. A .....

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ment and consequently its arrangement with M/s. Logistic (P) Ltd. should be considered as of a contract rather than sub-contractor. Status of RAJSICO was that of a custodian with a liberty to assign contract to any party to handle the works. Thus RAJSICO in its own right could issue contracts. From the contents of the agreement dated 13-06- 2007, it is amply clear that M/s. Logistic (P) Ltd. was a contractor and not a sub-contractor for the purpose of this agreement, the payments made in pursuan .....

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Ltd. was a contractor and not a sub-contractor. While giving this finding, the AO failed to correctly analyze the relationship between ICD and the assessee and consequent relationship of the assessee with said M/s. Max Logistics (P) Ltd. The ld. AR of the assessee makes three points in this behalf. (i) The ld. CIT(A) has correctly held that the assessee was a contractor of ICD, Jodhpur. For commercial convenience, it was termed as a custodian. Thus the assessee's relationship with ICD, Jodhp .....

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es on its income. In view thereof, Hon'ble Supreme Court judgments in the case of Hindustan Coca Cola Beverages (P) Ltd. vs. CIT, 293 ITR 226 (SC) & CIT vs. Eli Lilly & Company (I) (P) Ltd. 312 ITR 225 are fully applicable and in this situation holding the assessee in default and recovery of the demand amounts to double taxation. The same has been held to be not tenable by the Hon'ble Supreme Court in these judgments. (iii) The assessee is a State Govt. Undertaking; the TDS is de .....

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the nature of a contract. The ld. CIT(A) after reading the public notification and material available on record has held the relationship to be that of contract. In this back ground, it will be worthwhile to refer the public notice No. 15/95 (Customs) dated 19-07-1995 which appoints the assessee as a custodian of cargo handling till they are exported. The important paras of this public notice are as under:- " ……(ii) if any imported gods meant for export are pilfered after unlo .....

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., Jaipur as Custodian shall execute a bond for ₹ 3.00 crores with surety. (v) The Custodian shall also ensure safe transport of export goods to the port of shipment and shall be responsible for any pilferage loss, damage in transit. (vi) The Custodian shall not charge or collect any demurrage charges after detention; certificate is issued by the Customs Department. (vii) The Custodian shall be responsible for proper receipt, handling and storage of goods and also shall maintain proper rec .....

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