TMI Blog1999 (12) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee manufactures and trades in lubricant oils. For this purpose it imports base oil. It is required to store lubricant and base oil during the course of the business. For storing this oil, the assessee has hired certain tanks under contracts with the abovementioned eight parties and paid them hire charges. The question raised in these appeals is whether tax is to be deducted at source at 20% on the said hire charges under the provisions of section 194-I of the Income-tax Act. For the sake of convenience, we reproduce below this section, to the extent relevant for our purposes : - 194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to any person any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment there of in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of - (a) fifteen per cent if the payee is an individual or a Hindu undivided family; and (b) twenty per cent in other cases: Provided. . . Explanation. -For the purposes of this section, - (i) rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Bombay Municipal Corporation Act, 1988 defines land as under : land includes land which is being built upon or is built upon or covered with water, benefits to arise out of land, things attached to the earth or permanently fastened to anything attached to the earth and rights created by legislative enactment over any street . Section 3(s) defines building as : Building is defined to include a house, stable, shed, hut and every other such structure whether of masonary bricks, wood, mud, metal or any other material whatever . The Hon ble Court has analysed the meanings of the word land , building and structures , on the basis of the Dictionary meanings and the various judgments of Court on the impugned subject. It has also analysed the mechanical and engineering aspects of the tank construction and ultimately it had no hesitation to hold that the petroleum storage tanks are structures or things attached to the land within the definition of sections 3(r) 3(s) of the Act referred to above and consequently they are exigible to property tax. The Explanation to the section 194-I goes one step further and states that if any payment is made for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... she was of the view that storing oil in tanks is also akin to storing goods in a warehouse and so the word building used in this section would include storage tanks of the type involved in the present case. The learned counsel for the assessee mentioned that regarding storage tanks as a warehouse is a far fetched analogy. The storage tanks in question are not for human habitation or animal habitation and so it is pleaded that they cannot be regarded as building. It is conceded that the storage tanks may be regarded as civil construction in terms of section 44AD but cannot be regarded as building within the meaning of section 194-I. It is also mentioned that the brackets enclosing the words including factory building restricts the scope of the word building and would prelude other structures from being included within the scope of building in the section. It is also mentioned that what is erected on land may be a structure and may not always be a building. It is also mentioned that at any rate, the matter is concluded against the Department by the decision of the Hon ble Bombay High Court in the case of Bharat Petroleum Corpn. v. Municipal Corporation of Greater Bombay A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of 2 per cent under the impression that the provision of section 194C are attracted and as there has been some deduction of tax at source, it is pleaded that in view of the said Hon ble Andhra Pradesh High Court decision, the assessee cannot be regarded either as an assessee in default or be made liable for interest under section 201(1A). It is also pleaded that the assessments have already been made on the eight parties to whom the hire charges in question have been paid and as they have paid their taxes as per the demand raised on them, the action proposed by the Assessing Officer would only result in a kind of double taxation, because the eight parties would be left with no remedy for getting the refund of the amounts now sought to be collected from the assessee towards deduction of tax at source under section 194-I. 6. The learned Departmental Representative on the other hand supported the reliance of the Assessing Officer on Board s Circular No. 718, dated 22-8-1995 as per which building includes a warehouse and it is pleaded that a warehouse can spread horizontally or vertically and a warehouse does not cease to be a warehouse because it is designed to store oil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t January, 1996. The rental charges shall be reviewed and revised upwards subject to a minimum of ten per cent thereon and shall be effective from 1st February, 1996 for the balance period of contract. (d) Nitrogen/compressed air pigging charges of ₹ 15,000 or ₹ 30,000 for 6 or 12 pipeline respectively depending on the line used to load/unload your luboils. The Nitrogen/compressed air pipeline pigging charges shall be payable per parcel. In case your product is unloaded into some other tanks from the same steamer at the same time the charges shall be payable for one pigging operation. (e) Tank cleaning charges of ₹ 15,000 each in respect of Tank 108, 111 117 per operation shall be paid to us extra. (f) Custom bonding charges per tank per month will be charged at ₹ 7,500 for availing of bonding facilities. (g) Weighment charges @ ₹ 30 per tanker will be collected from the tanker personnel at the terminal. (h) Overtime at specified rates as mentioned in Annexure A forming part of this agreement shall be paid to us in case terminal facilities are requisitioned beyond prescribed terminal hours or on paid holidays or on p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structure within the meaning of section 3(s). We have already extracted hereinabove the relevant portion of the order of the CIT(A) wherein section 3(r) and section 3(s) of the Bombay Municipal Corporation Act, 1988 have been reproduced by him. It is clear that under the definition of building in terms of section 3(s) of the said Act, the word includes a structure. The Hon ble Supreme Court noted the distinction made in certain English decisions between a structure and a building to the effect that a structure must have wider embrace and that every structure is not a building, though it may well be that ever building is a structure. Similarly, so far as the definition of land is concerned in Bombay Municipal Corporation Act, it included, inter alia, things attached to the earth. We find that there is no such extended definition of land or of building in section 194-I. Under section 194-I of the Income-tax Act, rent has to be paid for the use of land or of building (including factory building) and nothing else. If a plant is taken on hire and hire charges are paid, to our mind, the provisions of section 194-I are not attracted in respect of such payments and that, to us, is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 32A of the Income-tax Act and so the hon ble Madras High Court was considering whether the assessee was carrying on the manufacture of an article or thing within the meaning of section 32A and it considered that erection of boilers does not amount to carrying on the manufacture of an article or thing and so the assessee was not eligible for the grant of investment allowance in the light of the decision of the Apex Court in the case of CIT v. N.C. Budharaja Co. (1993) 204 ITR 412/70 Taxman 312. This decision, to our mind, is not helpful to the assessee. As already mentioned, every immovable property cannot be regarded as a building. 10. In the circumstances, we hold that the payments in question are not liable for deduction of tax at source under the provisions of section 194-I of the Income-tax Act. Accordingly, we set aside the orders of the revenue authorities and delete the interest levied under section 201(1A) and also hold that the assessee cannot be regarded as an assessee in default in terms of section 201 of the Income-tax Act. 11. The assessee has taken various other ground but no arguments have been advanced before us. We accordingly dismiss those g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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