ACIT, COPORATE CIRCLE 3(1), CHENNAI vs. J-ARK LOGISTICS PVT. LTD. (FORMERLY KNOWN AS TAEWOONG LOGISTICS PVT LTD.), CHENNAI

On appeal, the ld. CIT(A) allowed the appeal of the assessee by holding that no TDS was required to be made in respect of statutory payments, as they are not in the nature of contractual payments, so as to attract provisions of section 194C of the Act by relying on the decision of & C.O. No. 116/Chny/18 ITAT, Mumbai Benches in the case of M/s. Express Transport Pvt. Ltd., [in to 1429/Mum/2013] and in the case of ITO Vs. M. Dharmadas and Company [in ITA Nos.1505, 1506 & 1507/Mum/2013]. The ld.CIT(A) also took note of the decision of Hon’ble High Court of Delhi in the case of CIT Vs. Cargo Linkers reported in (2008) 218 CTR 695 (Del), wherein, it was held that if the assessee is only intermediary, it is not a “person responsible” for deduction of TDS in terms of section 194C of the Act. The ld. CIT(A) also noted that the assessee is also an intermediary, similar to the facts of the case of CIT Vs. Cargo Linkers (supra) and further, he followed his predecessor’s order for the assessment year 2013-14 and directed to delete the additions. Aggrieved by the aforesaid action of the ld. CIT(A), the Department preferred an appeal before this Tribunal and CO was preferred by the assessee supporting the action of the ld.CIT(A).

At the time of hearing before the Division Bench of this Tribunal, the assessee moved a proposal for constitution of Special Bench, by contending that there were divergent views on the issue of deduction of TDS on payment made to CFS. It was the contention of the assessee that the views expressed by the Coordinate Bench at Chennai in favour of Department in the cases of Prahari Agency Pvt. Ltd. vs. ITO (ITA & C.O. No. 116/Chny/18 No.1701/Chny/2018), Shri Shanmugar Services vs. ITO (ITA No. 1136 & 1137/Chny/2017), Welgrow Line (India) p Ltd vs. ACIT (ITA No. 1719/Chny/2014), , whereas, contrary views in favour of assessee were expressed by the Hon’ble High Court of Delhi in the case of CIT v. Cargo Linkers (179 Taxman 151) and Coordinate Benches of Tribunal at Mumbai in the case of M/s. Express Transport Pvt. Ltd (ITA Nos. 1473 to 1475 /Mum/ 2013). Therefore, the proposal for constitution of Special Bench to resolve the conflicting views was placed before the Hon’ble President, which was acceded to, by order dated 17.05.2024; and questions were framed for determination by the Special Bench, which assembled on 05th July, 2024.

Upon hearing initial arguments from both sides, the Special Bench, at the first instance, required the assessee to clarify the relevant fact as to, whether the assessee was at all an ‘intermediary’ making payment on behalf of customers, so as to ascertain whether the conflicting decisions, as pointed out above, had any bearing on the issue involved in the present case before us. The assessee, in response, had placed on record, copy of agreement with Samsung. Reading of the agreement revealed that, it was executed on principal to principal basis. Thereafter,

The Special Bench, having heard, observed that the assessee has abandoned the contention of whether the payments being made as an intermediary on behalf of their principal, which, were subjected to section 194C of the Act and held the assessee conceded that it was acting as a principal and not as an intermediary. The relevant portion in para 9 are reproduced herein below for better understanding: 9. Having heard both the parties, we find that the foundational premise on which this Special Bench was constituted is now non-existent. This Special Bench was constituted to resolve the conflicting views of the coordinate Benches at Mumbai vis-à-vis the coordinate Benches at Chennai on the issue viz., whether the payments being made by an ‘intermediary’ on behalf of their principal were subject to Section 194C and consequently whether such non- deduction of tax on such payments would result in inviting rigors of Section 40(a)(ia) of the Act. The assessee has abandoned this contention and conceded that it was acting as a principal and not as an intermediary. In the given circumstances the learned AR is also not placing reliance on the decision of the Delhi High Court. Accordingly, we find that there is no alleged legal conflict involved in the present case, which is required to be resolved by this Special Bench.

On perusal of the above findings of the Special Bench, we have to decide the issue of whether the payments being made by the assessee being a principal were subjected to section 194C of the Act and consequently whether such deduction of tax on such payments would result in inviting disallowance under section 40(a)(ia) of the Act as a principal and not as an intermediary.

During the course of hearing, the ld. AR Shri S. Raghunathan, Advocate explained his inability to produce all invoices, payment receipts, etc. as required for fair adjudication of the issue in terms of the findings of the Special Bench. He fairly conceded that this evidences were not asked by the Assessing Officer in view of the contention raised, the assessee being all along as an intermediary. He further submits that the invoices, receipts, etc. showing the payments to Container Freight Station (CFS) in statutory nature runs into voluminous and prayed to remand the matter to the file of the Assessing Officer for fresh adjudication in terms of the findings of the Special Bench treating the assessee as principal. He further reiterated that the assessee is ready to produce all evidences showing the payments made towards CFS are statutory in nature attracting no TDS. Therefore, taking into account the assessee’s inability to produce all the required evidences and also AY being identified as old, we deem it proper to remand the matter to the file of the Assessing Officer with a direction to adjudicate the issue by treating the assessee as principal taking into account all relevant evidences on record that may be produced by the assessee and pass order in accordance with law. Thus, the ground raised by the assessee is allowed for statistical purposes.

In view of our decision in remanding the matter to the file of the Assessing Officer, the Cross Objection arising out of appeal requires no adjudication being academic in nature and accordingly, the CO stands dismissed.

In the result, the appeal filed by the Revenue is allowed for statistical purposes and the CO filed by the assessee is dismissed.