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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Per CHANDRA POOJARI, AM:
This appeal filed by the assessee is directed against the order of the CIT(A),
Kottayam and pertains to the assessment year 2010-11.
The only issue in this appeal is with regard to disallowance of payment of
Rs.18,14,139/- made to Seven Ocean Shipping co. since the TDS was not
deducted.
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The facts of the case are that assessee is a partnership firm engaged in the
business of processing and marketing of spices, filed return of income for
assessment year 2010-11 on 14/10/2010 showing total income of Rs.8,27,980/-.
The assessment was completed u/s. 143(3) of the Act on 14/03/2013 by
assessing the total income at Rs.29,41,558/-.
Before the CIT(A), the Ld. AR submitted that the assessee had engaged the
services of Seven Ocean Shipping Co. service for clearing and forwarding agents
for clearing goods from the exporters dock. According to the Ld. AR, detailed
analysis of the ledger account showed that out of the invoices settled by the
assessee the fee part levied by the clearing and forwarding agent is nil, i.e. to
say the amount coming within the purview if TDS is only as under:
Total Amount paid : Rs.18,14,139/- 2. Less: expenses met by the company : Rs.18,14,139/- As per invoice (Marked as B) NIL
The Ld. AR relied on the decisions of the CIT(A), Kottayam in the case of Premier
Marine Foods dated 27/08/2015 and ITAT, Cochin in ITA No. 509/Coch/2015
dated 26/09/2016 wherein it has been clearly laid out and settled that TDS is to
be confined only to item No. 3 mentioned above., Therefore, it was prayed to
deleted the addition.
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4.1 The CIT(A) relied on the decision of the ITAT, Cochin Bench in assessee’s
own case in ITA No. 461/Coch/2013 wherein vide order dated 24/09/2014 it was
held that payments made by the assessee to Seven Ocean Shipping are covered
by the provisions of section 194I of the Act and therefore, the assessee is liable
to deduct tax on such payments. Following the decision of the ITAT, the CIT(A)
confirmed the findings of the Assessing Officer.
Against this, the assessee is in appeal before us.
We have heard the rival contentions and perused the record. We find that a
similar issue came up for consideration before this Tribunal in assessee’s own
case in ITA No. 461/Coch/2013 dated 24/09/2014 wherein it was held as under:
“10. We have heard both the parties and perused the record. The assessee has hired ships and according to the contention of the assessee, the assessee was not required to deduct TDS u/s. 194C of the Act and being so, the provisions of sec. 40(a)(ia) of the Act cannot be applied to the assessee’s case. The Ld. AR relied on the judgment of Hon’ble Madras High Court in the case of CIT vs. Poompuhar Shipping Corporation Ltd. (282 ITR 3). We have carefully gone through the above judgment. In that case, the assessment year under consideration is 1994-95. The Hon’ble High Court clearly stated that for the assessment year 1994-95, the provisions of sec. 194C is not applicable as Explanation to sec. 194C was incorporated with effect from 01-07-1995 and it would not be applicable retrospectively. This provision came into force with effect from 1st July, 1995, i.e., only for the future assessment years and it would not be applicable to the assessment year 1994-95 and no tax is to be deducted for the assessment year 1994-95. Further, the Ld. AR submitted that there is no written contract for hiring the ships. It will be noted that the law does not stipulate existence of written contract as a condition
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precedent for invoking the provisions of sec. 194C/194I of the I.T. Act. As per the agreement, the assessee used to hire ships from others and hiring of ship by the assessee is in the nature of transport contract and hence, deduction of TDS u/s. 194I is to be made and since the assessee failed to deduct TDS, disallowance under section 40(a)(ia) of the I.T. Act was justified as held by the co-ordinate Bench in the case of DCIT vs. Shri Reez Karakkattil Raghavan Friends Transport Co. (2013) 140 ITD 598 (Cochin) as under:
“section 194C would be applicable when a person is responsible for paying any sum to any residents for carrying out any work including supply of labour for carrying out any work in pursuance of a contract at the time of payment or crediting the said amount. The Legislature with effect from1-4-1995 inserted Explanation 4(c) to include the term ‘work’ – carriage of goods or passengers by way of mode of transport other than by railways. Therefore, the contract shall be for carriage of goods or passengers other by than railway.
In this case, admittedly, the carriage of goods was not entrusted with the lorry/truck owners from whom the taxpayer has hired the lorries/trucks or with the taxpayer himself. Admittedly, the responsibility of carriage of goods remains with ‘L’. No work of carriage of goods was entrusted either with the taxpayer or with the lorry/truck owners from whom the taxpayer hired the lorries/trucks. Therefore, there is no contract for carriage of goods between the taxpayer and the lorry/truck owners from whom the trucks/lorries were hired. As such, provisions of section 194C are not applicable to this transaction.
In the admitted facts of the case it is a simple case of hiring the lorry/truck and payment of hire charges. Therefore, at the best, it would fall u/s. 194I. Since the provisions of section 194I are admittedly not applicable for the year under consideration, the taxpayer is not liable to deduct tax from payment of hire charges to the lorry/truck owners.”
10.1 Further, the Jurisdictional High Court in the case of Three Star Granites Pvt. Ltd. vs. ACIT (2013) (266 CTR (Ker) 326 for the assessment year 2007-08 held that section 194I specifically contemplates liability with any person paying rent to deduct income tax at rate of ten per cent for use of any machinery or plant or equipment. (As far as the assessment year in question is concerned,
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rat of tax was increased to ten per cent). Legislative intent was clear, in that, it intends liability to deduct tax in respect of “any machinery or plant or equipment”. No reason to dilute width of words “any machinery” contained in sub-section (i) with the aid of the Explanation defining the word “rent”. Explanation in circumstances cannot have effect of confining words “any machinery” as only machinery which was immovable property. Thus provisions of section 194I are attracted in case where assessee took the machineries on lease and paid hire charges for the same.
10.2 In view of the above discussion, we are inclined to dismiss this ground.
6.1 In view of the above order of the Tribunal, we are inclined to dismiss the
appeal of the assessee.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on this 7th February, 2019
sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER
Place: Kochi Dated: 7th February, 2019 GJ Copy to: 1. All Koshys All Spices, Block No.18/609/6, Pakkil P.O., Nattakom, Kottayam. 2. The Income Tax Officer, Ward-1, Kottayam. 3. The Commissioner of Income-tax(Appeals), Kottayam. 4. The Pr. Commissioner of Income-tax, Kottayam. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order
(ASSISTANT REGISTRAR) I.T.A.T., Cochin
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