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Income Tax Appellate Tribunal, ‘D ‘ BENCH, KOLKATA
Before: Shri S.S.Viswanethra Ravi & Shri Dr. Arjun Lal Saini
Since the issues raised in both the appeals are based on identical facts and, therefore, with the consent of both the parties, we proceed to hear both the appeals above together and dispose of the same by this consolidated order for the sake of convenience.
First, we shall take up the appeal in for A.Y 2011-12 by the assessee. A.Y 2011-12-by assessee
4. The assessee has filed the following grounds of appeal along with Form 36:-
1. For that the Commissioner of Income Tax (Appeals) erred in holding that wharfage charges paid by the appellant to Kolkata Port Trust was in the nature of rental payments made for usage of land and tax was required to be deducted at source on such payment. The said finding is without any basis and illegal.
2. For that the Commissioner of Income Tax (Appeals) erred in not appreciating the fact that there is no fixed platform or space given by the Kolkata Port Trust to the appellant and also did not appreciate the fact that the appellant was in addition to wharfage charges separately paying rental charges for usage of land and for which TDS was deducted under section 1941 of the Act.
3. For that the Commissioner of Income Tax (Appeals) erred in not appreciating the fact that the wharfage charges were paid for various facilities provided by Kolkata Port Trust and was not for the purpose of usage of any particular space or platform and erred in not applying the principles enunciated in Circular No.1 of 2008 issued b CBDT wherein in relation to cold storage it has been provided that when there is no right to use of any demarcated space provisions of Section 194I will not apply.
4. For that the appellant reserves its right to add further to the above and/ or amend any one of them at or before the time of hearing of the appeal.”
5. Thereafter, the assessee filed an application seeking to acknowledge the following additional ground, which reads as under:- “1. For that further and in any event and without prejudice, even if the payment made on wharfage is treated as rent, the income of Kolkata Port Trust, a pubic charitable trust being exempt under section 11/12AA of the Income Tax Act is not liable for deduction of tax at source and as such the finding of the CIT(A) may be reversed and appeal allowed on this ground.”
The Ld.AR submits that in any event if the payment made on wharfage is treated as rent as raised in the main grounds of appeal, without prejudice to the same and urged to admit the additional ground and to adjudicate the same as preliminary issue.
7. The ld. AR submits that the issue in additional ground raised above already been decided by the Co- ordinate Bench of this Tribunal by its order dated 18.12.2014 in the case of M/s Gourishankar Bihani and placed on record the copy of such order. The Ld.AR referred to para no-2 of such order and submitted that an identical issue was raised in the said case as to whether the CIT(A) therein was justified in confirming the disallowance of expenditure for non-deduction of TDS u/s 194I of the Act paid on account of rent to Kolkata Port Trust for short as “KPT” hereafter. Further, referred to para no-4 and submitted that having considered the order dated 08.06.2007 of ITAT, Kolkata in the case of Kolkata Port Trust vs DIT (Exemption) in the Co-ordinate Bench held that the “KPT” is a charitable Institution and no tax is deductible at source u/s 194I of the Act. The ld. AR drew our attention to the issue in challenge involving main grounds of appeal and submitted that the AO initiated proceedings u/s. 201(1)/201(1A) of the Act for non deduction of TDS u/sec 194I of the Act on account of payment made to “KPT” is identical to the facts and circumstances in the case of M/s. Gourishankar Bihani supra.
On the other hand, the ld. DR did not controvert the above submissions of ld.AR.
After hearing both the parties and perusing the record, we find that in the present case, the AO initiated proceedings U/Sec. 201(1)/201(1A) of the Act against the assessee for non deduction of TDS on wharfage charges paid to KPT and held that the assessee is in default and charged interest by an order dt. 31-03-2014 passed u/s. 201(1)/201(1) of the Act. As pointed out by the ld. AR, we find that this Tribunal in the case of M/s. Gourishankar Bihani supra had an occasion to decide an issue which is identical in the facts and circumstances of the present case involving additional ground as well as main grounds of appeal. In this regard, we may usefully reproduce the relevant portion at para’s 2 to 7 of the order dt. 18-12-2014 in the case of M/s Gourishankar Bihari supra:-
2. Only issue in this appeal of assessee is against the order of CIT(A), confirming disallowance of expenditure for non-deduction of TDS u/s. 194-I of the act, by invoking provisions of section 40(a)(ia) of the act, on rent paid to Kolkata Port Trust (KPT).
3. Brief facts are that the assessee has claimed expenditure on account of rent paid to KPT at Rs.54,21,256/-. The assessee has not deducted any tax at source on payment of this rent to KPT. The AO required the assessee to explain as to why expenditure claimed on account of payment of rent to KPT be disallowed by invoking provisions of section 40(a)(ia) of the Act for non-deduction of TDS u/s 194I of the Act. Accordingly, AO disallowed the expenditure debited on account of rent at Rs.54,21,256/- by invoking provisions of section 40(a)(ia) of the Act. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO. Aggrieved, now assessee is in second appeal before ITAT.
We have heard rival submissions and gone through facts and circumstances of the case. Facts are admitted and no dispute on the same. Before us, Ld. Sr. Advocate Shri J. P. Khaitan argued that the assessee has paid rent to KPT, which is a Public Charitable Trust registered u/s. 12AA of the Act. His first argument is that income of Public Charitable Trust registered u/s. 12AA of the Act is exempt and once the income is exempted, assessee is not liable to TDS. We find from the order of Tribunal dated June, 8, 2007 passed in in the case of Kolkata Port Trust v. DIT(Exemption), Kolkata that Kolkata Port Trust is a charitable institution eligible for registration u/s 12A of the Act and such registration was directed to be granted with effect from April, 1, 2005. Hon'ble Tribunal in deciding Kolkata Port Trust’s case, placed reliance, inter alia, on the judgment of the Hon'ble Gujarat High Court in the case of CIT v. Gujarat Maritime Board (2007) 289 ITR 139 (Guj). The revenue’s appeal against the judgment of Hon'ble Gujarat High Court was dismissed by Hon'ble Supreme Court in CIT v. Gujarat Maritime Board (2007) 295 ITR 561 (SC).
In such circumstances, we are of the view that Kolkata Port Trust is a charitable institution entitled for registration under section 12A of the Act. For assessment year 2007-08 involved in this appeal, Kolkata Port Trust was assessed in the status of a charitable institution and there was no demand raised against it and refund of the order of Rs.91.61 crores was issued to it. The aforesaid facts are mentioned in the letter dated May 4, 2012 of the Kolkata Port Trust enclosed at page 17 of assessee’s paper book. In view of the above facts and as argued by Ld. counsel for the assessee that the aforesaid position obtained in the case of Kolkata Port Trust viz. that it was granted registration and assessed as a charitable institution under the provisions of the Act, it cannot be disputed that the income of Kolkata Port Trust is not chargeable to tax under the provisions of the Act. Section 11 under which Kolkata Port Trust was assessed, inter alia, for the assessment year 2007-08 falls under Chapter III of the Act for “incomes which do not form part of total income’. We find that when income is not to be included in the total income, it is without a doubt, not chargeable under the provisions of the Act. In view of the above, we here referred to Section 2(45) of the Act, which defines “total income” and to mean the total amount of income referred to in section 5, computed in the manner laid down in the Act. Section 4 is the charging section and provides for levy of income tax on the total income, whereas, Section 5 lays down the scope of total income. Both sub-sections (1) and (2) of Section 5 of the Act start with the expression “subject to the provisions of this Act” and then go on to say what total income includes. Thus, where any income is not to be included in the total income, it is clearly not chargeable under the provisions of the Act. We then went through the provisions of section 194-I, which provides for deduction of tax from rent has to be read in conjunction with section 204(iii) of the Act. Section 194-I imposes the obligation to deduct tax on person “responsible for paying” income by way of rent. The expression “person responsible for paying” has been defined in section 204 of the Act. Clause (iii) of section 204 is relevant in the context of section 194-I. The material portion of section 204 relevant for the purposes of the instant appeal is set out herein below:-
“204. For the purposes of the foregoing provisions of this Chapter and section 2885, the expression “person responsible for paying: means- ****
(iii) in the case of credit, or, as the case may be, payment of any other sum chargeable under the provisions of this Act, the payer himself, or, if the payer is a company, the company itself including the principal officer thereof’”
The obligation to deduct tax from payments to residents is in respect of “sum chargeable under the provisions of this Act.” Section 195 is applicable in respect of payments to non- residents and also stipulates deduction of income tax at source from “sum chargeable under the provisions of this Act.” Thus, the obligation to deduct tax would arise only when the amount is “sum chargeable under the provisions of this Act”, whether the payee is a resident or non-resident. In respect of payments to residents, each of the provisions requiring tax deduction at source including section 194-I has to be read in conjunction with section 204 and no tax is required to be deducted if the amount payable is not chargeable under the provisions of the Act. The case of payment to a non-resident was considered by the Hon'ble Supreme Court in GE India Technology Centre P. Ltd.v CIT, (2010) 327 ITR 456 (SC), where it was held that provisions relating to tax deduction at source applied only to those sums which were chargeable to tax under the Act. The said case dealt with section 195 of the Act but the principle laid down therein is equally applicable even in respect of provisions relating to deduction of tax at source from payments to residents which have to be read along with section 204 of the Act. In the said case, the provisions of section 204 of the Act did not come up for consideration.
6. In term of the above, we are of the view that in the instant case no tax was deductible at source under section 194-I read with section 204 comprised in Chapter XVII- B from the rent paid by the assessee to KPT. This is because such rent was not to be included in the taxable total income of the KPT and was, therefore, not chargeable under the provisions of the Act. As argued by Ld. Senior Advocate that in the instant case no tax was at all payable by KPT for AY 2007-08. U/s 191 of the Act the person making the payment can be deemed to be an assessee in default within the meaning of sub-section (1) of section 201 only where the deductee/payee has also failed to pay such tax directly. This issue has been considered by Hon'ble Allahabad High Court in the case of Jagran Prakashan Ltd. V. DCIT (TDS) (2012) 345 ITR 288 (All) and by ITAT Kolkata bench in the case of Ramakrishna Vedanta Math v. ITO (2013) 55 SOT 417 (Kol). In the instant case, KPT was not required to pay any tax and in turn the assessee cannot be treated to be in default within the meaning of section 201(1). Accordingly, we are of the view that no disallowance ought to have been made under section 40(a)(ia) of the Act. But, Ld. Senior DR, Shri Amitava Roy relied on this Tribunal’s order of ‘B’ Bench in dated 14-10-2014 for the AY 2009-10 in the case of ACIT v. Hitech Logistics Ltd. wherein exactly the similar facts were there and the same party that KPT was the recipient of rent without the deduction of TDS and Hon'ble Bench decided the issue vide para-4 of its order as under:- “4. We have heard rival submissions and gone through facts and circumstances of the case. We find that the CIT(A) has deleted the disallowance for the reason that the payments made to Kolkata Port Trust do not attract the TDS provision. For this, he observed that “I find that the Kolkata Port Trust is under the Ministry of Surface Transport, where in the Govt. of India has full beneficial interest. Therefore, any payment made to Kolkata Port Trust will be covered u/s. 196 of the I. T. Act, 1961 and as such assessee’s appeal on this ground is allowed.” We find that the findings of CIT(A) is totally perverse and against law for the reason that the TDS from rent payment to Kolkata Port Trust is liable to TDS u/s. 194-I of the Act. Kolkata Port Trust is assessable entity within the provisions of Income Tax Act and it is not Government itself. It is a Corporate entity assessable to tax. Once the payment of rent on account of warehouse by the assessee was made to Kolkata Port Trust and is claimed as expenditure, the same is liable for TDS u/s. 194-I of the Act, for which the assessee has not deducted any TDS. The disallowance made by invoking the provisions of section 40(a)(ia) of the Act by the AO is within the provisions of law. Hence, we restore the disallowance and the order of CIT(A) is reversed. This issue of revenue’s appeal is allowed.”
Accordingly Ld Senior DR stated that the issue is covered in favour of Revenue. But other facet of arguments has not been countered.
In view of the above fact, we are of the view that in the instant case no tax was deductible at source under section 194-I read with section 204 comprised in Chapter XVII- B from the rent paid by the assessee to KPT. This is because such rent was not to be included in the total income of the KPT and was, therefore, not chargeable under the provisions of the Act. In the case law referred by Ld. Sr. DR the fact relating to the claim of exemption of the income of KPT was not before Tribunal or that issue was not raised but in the instant case, KPT was not required to pay any tax and in turn cannot be treated to be in default within the meaning of section 201(1). Accordingly, we are of the view that no disallowance ought to have been made under section 40(a)(ia) of the Act.
It is clear from the aforementioned order that this Tribunal directed the DIT(Exemption) to grant registration u/s. 12A of the Act w.e.f 01-04-2005 vide its order dt. 8-6-2007. The A.Y under consideration in the aforementioned case was 2007-08 and the Co- ordinate Bench found there was no demand raised and granted refund of Rs. 91.61 crores in the said A.Y 2007-08. The ld. DR did not dispute the same. Therefore, it is clear from the record that the “KPT” was assessed in the status of Charitable Institution in pursuance of order of this Tribunal and its income is exempt in terms of section 11 of the Act having registration u/s. 12A of the Act. In view of above discussion, we find force in the submissions of the ld.AR that the ‘KPT‘ is a pubic charitable trust and no TDS is liable to be deducted at source by the assessee and the additional ground raised by the assessee is allowed.
11.Further, the Ld.AR submits that, whether the wharfage charges paid by the assessee is in the nature of rent for use of dock in the “KPT”. In this connection, he refers to the facts relating to wharfage charges and submits that the assessee is a private limited company and engaged in the business of producing purified terephphalic acid. During the year under consideration the assessee used wharf or quay which provides access to the ships for its unloading of imported cargo. The AO found that the assessee paid a sum of Rs. 1.09 crores as wharfage charges to KPT for use of a platform(wharf or quay) made and provided by the KPT and opined that the said payment to KPT is in the nature of rent. The AO initiated proceedings u/s. 201(1)/201(1A) of the Act for non deduction of TDS u/sec 194I of the Act on account of payment of rent made to“KPT”.The CIT-A supported the view taken by the AO that the said payment is in the nature of rent and TDS is deductible u/s. 194 I of the Act.
Before us, the ld.AR filed a detailed paper book consisting of pages 1-140. The ld.AR referred to the provision u/sec 35 of Major Ports Act 1936 and submitted that the section 35 empowers the Board to execute works and provide appliances and may execute such works within or without the limits of the port and provide such appliances as it may deem necessary. Further, the section 37 provide power to Board to order sea-going vessels to use docks, wharves, etc.. after obtaining the approval of the Collector of Customs and by notification published in three consecutive issues of the Official Gazette, declare that such dock, berth, wharf, quay, stage, jetty or pier is ready for receiving, landing and shipping or for landing or for shipping goods or passengers from and upon sea-going vessels.
The ld.AR argued that wharfage is a fee charged by the KPT for the use of a platform built out from the shore into the water supported by piles and provides access to ships and boats for loading and unloading of cargo. He referred to page-1 of the paper book and submitted that the KPT issued cargo bill in the name of assessee mentioning name of vessel, particulars of cargo, quantity and rates. The vessel by name M.T Golden Dream was arrived in the KPT on 12- 02-2011. The KPT has allotted berth no. 00065 for unloading of imported acetic acid through pipeline, for which, the KPT charged Rs.1,28,878/- for a quantity of 1997.30 of acetic acid @ Rs. 58.50. The ld. AR argued that the said vessel arrived on 12-02-2011 and departed from the KPT on 15-02-2011. The assessee used such platform temporarily from 12-02-2011 to 15-02-2011 for unloading of the said cargo and it is not a rent attracting the provisions of section 194I of the Act as there was no permanent and continuous usage of said platform. He referred to page-3 of the paper book and argued that the KPT allotted another berth no. 00105 for vessel by name M.T Sunny Dream, which was arrived on 07-01-2011 and departed on 08- 01-2011 and unloaded a quantity of 6242.60 of paraexyne and the KPT charged Rs.5,26,749/- @ Rs.76.50. He argued that there is no permanent allotment of berths and it changes from time to time and the rates also vary from cargo to cargo. The ld. AR further argues when there is no permanent allotment of berth demarcating the space and no fixed rate and the payments made thereon cannot be construed as rent as viewed by the AO and CIT-A.
14. The ld. AR further refers to clarification issued by the CBDT vide Circular No. 1/2008 dt. 10-01-08, placed at page-135 of the paper book and submitted that the CBDT clarified the applicability of provisions of section 194I of the Act for the payments by the customer on account of cooling charges to the cold storage owners. He further argued that the CBDT taken into consideration the main function of the cold storage which preserves perishable goods by means of mechanical process and clarified that storage of such goods is only incidental in nature. The customer therein was given no right to use demarcated space and thus does not become a tenant attracting the provisions of section 194 I of the Act. The ld. AR further submits that the assessee deducted TDS u/s. 194C of the Act on wharfage charges paid to KPT and deposited the same to the government account. It is clear from the CBDT circular when there is no permanent space demarcated for any cooling activity and such process is incidental in nature and argued that the clarification was given in connection with cooling charges is similar to the wharfage charges paid to the KPT and the assessee cannot be termed as ‘tenant’ falling under the ambit of section 194I of the Act.
15. The ld.AR referred to the decision of Hon’ble Supreme Court in the case of Japan Airlines Co.Ltd reported in 377 ITR 372 (SC) and submitted that the Supreme court while dealing with the issue in hand considered the decisions of Hon’ble High Court of Delhi in the case of United Airlines reported in 287 ITR 281 and Singapore Airlines Ltd of Hon’ble High Court of Madras reported in 358 ITR 237. The ld. AR submits that the issue in both cases was that whether the TDS is to be deducted u/s. 194C or 194I for landing the aircrafts and parking thereof. The Hon’ble High Court of Delhi held that when the wheels of an aircraft coming into airport and touched the surface of the airfield and parking the aircraft in the airport is use of land and attracts the provisions of section 194I of the Act. The Hon’ble High Court of Madras held that the facility was not use of land per se and was provided in compliance with the various international protocol and there was no use of land and held no applicability of section 194I of the Act. The ld. AR submits that the Hon’ble Supreme Court affirmed the view taken by the Hon’ble High Court of Madras in the case of Singapore Airlines Ltd supra and overruled the view of Hon’ble High Court of Delhi in the case of Japan Airlines Co. Ltd. He also submits that the issue raised before the Hon’ble Supreme Court in the case of Japan Airlines Co.Ltd is similar and identical to the facts of present case and argued that the payments made by the assessee to KPT on account of wharfage charges cannot be considered as rent attracting the provisions of section 194I of the Act.
On the other hand, the ld. DR relied on the orders of AO & CIT-A.
Heard rival submissions and perused the material on record. We may refer to the relevant provisions contained in the Major Ports Act 1963 explaining the powers of Board of Port Trust, which reads as under: - 35. Power of Board to execute works and provide appliances.- (1) A Board may execute such works within or without the limits of the port and provide such appliances as it may deem necessary or expedient.
(2) Such works and appliances may include- (a) wharves, quays, docks, stages, jetties, piers and other works within the port or port approaches or on the foreshore of the port or port approaches, with all such convenient arches, drains, landing places, stairs, fences, roads, railways, bridges, tunnels and approaches and buildings required for the residence of the employees of the Board as the Board may consider necessary;
(b) buses, railways, locomotives, rolling stock, sheds, hotels, warehouses and other accommodation for passengers aid goods and other appliances for carrying passengers and for conveying, receiving and storing goods landed, or to be shipped or otherwise;
(c) moorings and cranes, scales and all other necessary means and appliances for loading and unloading vessels;
(d) reclaiming, excavating, enclosing and raising any part of the foreshore of the port or port approaches which may be necessary for the execution of the works authorised by this Act, or otherwise for the purposes of this Act;
(e) such breakwaters and other works as may be expedient for the protection of the port;
(f) dredgers and other machines for cleaning, deepening and improving any portion of the port or port approaches or of the foreshore of the port or port approaches;
(g) lighthouses, lightships, beacons, buoys, pilot boats and other appliances necessary for the safe navigation of the port and of the port approaches;
(h) vessels, tags or other boats for use within the limits of the port or beyond those limits, whether in territorial waters or otherwise, for the purpose of towing or rendering assistance to any vessel, whether entering or leaving the port or bound elsewhere, and for the purpose of saving or protecting life or property and for the purpose of landing, shipping or transhipping passengers or goods under section 42;
(i) sinking of tube-wells, and equipment, maintenance and use of boats, barges and other appliances for the purpose of the supply of water at the port;
(j) engines and other appliances necessary for the extinguishing of fires;
(k) construction of models and plans for carrying out hydraulic studies;
(l) dry docks, slipways, boat basins and workshops to carry out repairs or overhauling of vessels, tugs, boats, machinery or other appliances.
Power of Board to order sea-going vessels to use docks, wharves, etc.-
(1) When any dock, berth, wharf, quay, stage, jetty or pier erected at any port or port approaches under the provisions of this Act has been completed with sufficient warehouses, sheds and appliances for receiving, landing or shipping goods or passengers from and upon sea-going vessels, the Board may, after obtaining the approval of the Collector of Customs and by notification published in three consecutive issues of the Official Gazette, declare that such dock, berth, wharf, quay, stage, jetty or pier is ready for receiving, landing and shipping or for landing or for shipping goods or passengers from and upon sea-going vessels.
(2) As from the date of the publication of such notification for the third time, it shall be lawful for the Board, from time to time, when there is room at such dock, berth, wharf, quay, stage, jetty or pier, to order to come alongside of such dock, berth, wharf, quay, stage, jetty or pier for the purpose of landing and shipping goods or passengers or for landing or for shipping the same, any sea-going vessel within the port or port approaches which has not commenced to discharge goods or passengers, or which being about to take in goods or passengers, has not commenced to do so :
Provided that before making such order, the Board shall have regard, as far as possible, to the convenience of such vessel and of the shippers, in respect of the use of any particular dock berth, wharf, quay, stage, jetty or pier:
Provided further that if the Board is not the conservator of the port, the Board shall not itself make the order as aforesaid but shall require the conservator of the port, or other person exercising the rights, powers, and authorities of the conservator of the port, to snake such order.
As pointed out by the ld. AR that the section 35 of Major Ports Act 1963 empowers the Board to execute works providing appliances which includes wharves, quays, docks, stages, jetties, piers and other works within or without the port limits and also moorings and cranes, scales and all other necessary needs and appliances for loading and unloading. Section 37 explains that the board may issue notification declaring any dock, berth, wharves, quays, docks, stages, jetties, piers is ready for receiving, landing and shipping goods or passengers after obtaining approval of Collector of Customs. Therefore, it is clear from the above that there is no demarcated space. Further, we find the scale of rates approved by tariff authority for major ports published in gazette notification no. 30 dt. 15-02-2011, placed at page-96 of the paper book, wherein we noticed charges on break bulk and bulk cargo in Part- I relevant to wharfage. The said rates as we noticed are fixed as per tonne applicable to different categories of cargo i.e. for liquid/gas and it is clear that no fixed rate levied or recoverable on all cargo/container landed or shipped or transshipped within the port limit and approaches or passing through the declared landing stage of the port and, thus, the charges collected by the ‘KPT ‘is not a rent attracting the provision u/section 194I of the Act.
On perusal of details-(Cargo Bill), it is noticed that the KPT (Haldia Complex) issued the Cargo Bill to assessee, wherein details of cargo wharfage, bill No. Date, Vessel Name, Import Rot No. Particulars, quantity, Rate Amount, Vessel Arrival & Departure Date/Time are reflected from pages 1-95 of the paper book. As discussed above, on perusal of pages 96-134, it is noticed that the KPT approved scale of rates applicable for major ports, wherein it is found that wharfage was defined under section 2 (xxiii), wherein wharfage was defined as a basic dues recoverable on all cargo/container landed or shipped or transshipped within the port limit and approaches or passing through the declared landing stage of the port, whether the porterage was provided by the port or not and shall include hooking/unhooking operation on shore. We also find break up of bulk cargo charges in section 4.1, wherein the KPT levies rates varying on liquids/gas handled through pipeline and other than pipeline, though mechanical system and other than mechanical system.
20. It is further noticed that the Income Tax Department, Govt. of India clarified the applicability of provisions of section 194I, which reads as under:- Clarification regarding applicability of provisions of Section 194-I to payments made by the customers on account of cooling charges to the cold storage owners CIRCULAR NO. 1/2008, DATED 10-1-2008 Representations have been received from various quarters regarding applicability of the provisions of Section 194-I to cooling charges paid by the various customers to the owners of cold storages. It has been represented that the cold storage owners provide a composite service, which involves preservation of essential food items including perishable goods at various temperatures suitable for specific food items required periods and storage of goods being incidental to the activity of preservation. The cooling of building, plant/machinery etc. in any manner and does not become a tenant of any kind. 2. The matter has been eX4lmined. The main function of the cold storage is to preserve perishable goods by means of a mechanical process, and storage of such goods is only incidental in nature. The customer is also not given any right to use any demarcated space/place or the machinery of the cold store and thus does not become a tenant. 'Therefore, the provision of 194-I is not applicable to the cooling charges paid by the customers of the cold storage. 3. However, since the arrangement between the customers and cold storage owners are basically contractual in nature, the provision of section 194-C will be applicable to the amounts paid as cooling charges by tile customers of the cold storage. This may be brought to the notice of the Assessing Officers under your charge.”
21. Bare reading of aforementioned CBDT Circular, explains that the payment of cooling charges paid on account of for preservation of essential items including perishable goods at various temperatures suitable for specific food items is incidental to the activity of preservation and such activity is controlled through mechanical process. The CBDT clarified no provision u/s. 194I applicable to the right given to use any non demarcated space/place. In the present case, as we have seen from pages 1-95 of the paper book, the KPT was allotting different berth nos. basing on category of cargo and charging different rates for quantity of cargo applicable therein. Therefore, we find no demarcated space/place was given to assessee permanently and no fixed rate collected. Therefore, in our opinion the clarification issued by the CBDT is applicable to the facts in hand and the impugned order of the CIT-A confirming the view of the AO in finding that the assessee is in default and imposing interest thereon u/s 201/201(1A) of the Act for non deduction of TDS U/Sec 194 I of the Act is not maintainable and the same is liable to be quashed.
22. Further, the Hon’ble Supreme Court in the case of Japan Airlines pleases to explain the scope of applicability of section 194I of the Act and affirmed the decision of the Hon’ble High Court of Madras in the case of Singapore Airlines Ltd reported in 358 ITR 237 (Mad.), which held utilization of airport for providing the facility of landing and takeoff of airplanes and also for parking facility is not used of land. Relevant portion of decision of Hon’ble Supreme Court in the case of Japan Airlines Co. Ltd reported in 377 ITR 372(SC) is reproduced herein below:-
From the reading of this Section, it becomes clear that TDS is to be made on the 'rent'. The expression 'rent' is given much wider meaning under this provision than what is normally known in common parlance. In the first instance, it means any payment which is made under any lease, sub-lease, tenancy. Once the payment is made under lease, sub-lease or tenancy, the nomenclature which is given is inconsequential. Such payment under lease, sub-lease and/or tenancy would be treated as 'rent'. In the second place, such a payment made even under any other 'agreement or arrangement for the use of any land or any building' would also be treated as 'rent'. Whether or not such building is owned by the payee is not relevant. The expressions 'any payment', by whatever name called and 'any other agreement or arrangement' have the widest import. Likewise, payment made for the 'use of any land or any building' widens the scope of the proviso.
In the present case, we find that these Airlines are allowed to land and take-off their Aircrafts at IGIA for which landing fee is charged. Likewise, they are allowed to park their Aircrafts at IGIA for which parking fee is charged. It is done under an agreement and/or arrangement with AAI. The moot question is as to whether landing and take-off facilities on the one hand and parking facility on the other hand, would mean to 'use of the land'. 16. As pointed out above, the impugned judgment of the Delhi High Court refers to its earlier judgment in the case of United Airlines. Therefore, in order to ascertain the reasons that persuaded the High Court to take the view that it amounted to use of land, one has to scan through the reasons given in United Airlines case (supra). In this case, the High Court held that the word 'rent as defined in the provision has a wider meaning than 'rent' in common parlance. It includes any agreement or arrangement for use of land. In the opinion of the High Court, "when the wheels of an aircraft coming into an airport touch the surface of the airfield, use of the land of the airport immediately begins." Similarly, for parking the aircraft in that airport, there is use of the land. This is the basic, nay, the only reason given by the High Court in support of its conclusion. 17. The Madras High Court, on the other hand, had a much bigger canvass before it needed to paint a clearer picture with all necessary hues and colours. Instead of taking a myopic view taken by the Delhi High Court by only considering use of the land per se, the Madras High Court examined the matter keeping wider perspective in mind thereby encompassing the utilization of the airport providing the facility of landing and take-off of the airplanes and also parking facility. After taken into consideration these aspects, the Madras High Court came to the conclusion that the facility was not of 'use of land' per se but the charges on landing and take-off by the AAI from these airlines were in respect of number of facilities provided by the AAI which was to be necessarily provided in compliance with the various international protocol. The charges, therefore, were not for land usage or area allotted simpliciter. These were the charges for various services provided. The substance of these charges was ingrained in the various facilities offered to meet the requirement of passengers' safety and on safe landing and parking of the aircraft and these were the consideration that, in reality, governed the fixation of the charges. To our mind, the aforesaid conclusion of the High Court of Madras is justified which is based on sound rationale and reasoning. 18. We are convinced that the charges which are fixed by the AAI for landing and take- off services as well as for parking of aircrafts are not for the 'use of the land'. That would be too simplistic an approach, ignoring other relevant details which would amply demonstrate that these charges are for services and facilities offered in connection with the aircraft operation at the airport. To point out at the outset, these services include providing of air traffic services, ground safety services, aeronautical communication facilities, installation and maintenance of navigational aids and meteorological services at the airport. 19. Before the High Court of Madras, the assessee had filed the material in the form of Airport Economics Manual, the International Airports Transport Agreement (IATA) to the contracting states on charges for airport and air navigation services. This material which was shown for our perusal as well, would candidly show that there are various international protocols which mandate all such authorities manning and managing these airports to construct the airports of desired standards which are stipulated in the protocols. The services which are required to be provided by these authorities, like AAI, are aimed at passengers' safety as well as on safe landing and parking of the aircrafts. Therefore, it is not mere 'use of the land'. On the contrary, it is the facilities, that are to be compulsorily offered by the AAI in tune with the requirements of the protocol, which is the primary focus.
For example, runways are not constructed like any ordinary roads. Special technology of different type is required for the construction of these runways for smooth landing and take-off of the aircrafts. According to ICAO, a runway is a "defined rectangular area on a land aerodrome prepared for the landing and takeoff of aircraft." Runways may be a man-made surface (often asphalt, concrete, or a mixture of both) or a natural surface (grass, dirt, gravel, ice, or salt). Specialised kind of orientation and dimensions are needed for these runways which are prescribed with precision and those standards are to be adhered to. Further, there has to be proper runway lighting, runway safety area, runway markings etc. Technical specifications for such lighting, safety area and markings are stipulated which have to be provided. Insofar as runway lighting is concerned which is essentially used at airports that allow night landings, requires that there has to be Runway End Identification Lights, Runway End Lights, Runway Edge Lights, Runway Centerline Lighting System, Touchdown Zone Lights, Taxiway Centerline Lead-Off Lights, Taxiway Centerline Lead-On Lights, Land and Hold Short Lights, Approach Lighting System etc. Technical specifications for all these lights have to be complied with Same applies to runway markings. Runway markings and signs on most large runways include Threshold, Touch Down Zone, Fixed Distance Marks, Center Line etc. and all these have specific purpose. So much so, designs and quality of pavement on these runways are also to be taken compliant. All these technical specifications keep in mind the basic fact, namely, on landing the aircraft is light on fuel and usually less than 5% of the weight of the aircraft touches the runway in one go. On take-off the aircraft is heavy but as the aircraft accelerates the weight gradually moves from the wheels to the wings. It is while the aircraft is being loaded and taxiing prior to departure, that the apron experience significant loads from aircraft weight. We have emphasised the technological aspects of these runways in some detail to highlight the precision with which designing and engineering goes into making these runways to be fool proof for safety purposes. The purpose is to show that the AAI is providing all these facilities for landing and take-off of an aircraft and in this whole process, 'use of the land' pails into insignificance. What is important is that the charges payable are for providing of these facilities.
In fact, the charges which are taken from the aircrafts for landing and even for parking of the aircrafts are not dependent upon the use of the land. On the contrary, the protocol prescribes a detailed methodology of fixing these charges. Chapter 4 of Airport Economics Manual issued by International Civil Aviation Organization deals with 'Determine the cost basis for charging purposes'. The charges on air-traffic which includes Landing Charges, Lighting Charges, Approach and Aerodrome Control Charges, Aircraft Parking Charges, Aerobridge Charges, Hangar Charges, Passenger Service Charges, Cargo Charges etc. are to be fixed applying the formulae stated therein. A reading thereof would clearly point out the cost analysis which is to be done for fixing these charges. Thus, when the airlines pay for these charges, treating such charges as charges for 'use of land' would be adopting a totally naove and simplistic approach which is far away from the reality. We have to keep in mind the substance behind such charges. When matter is looked into from this angle, keeping in view the full and larger picture in mind, it becomes very clear that the charges are not for use of land per se and, therefore, it cannot be treated as 'rent within the meaning of Section 194-I of the Act.
We, therefore, are of the considered opinion that the view taken by the Madras High Court is correct and we are unable to subscribe to the view taken by Delhi High Court in United Airlines case (supra). The judgment in United Airlines case (supra) as well as the impugned judgment of the Delhi High Court are accordingly over-ruled.”
Respectfully following the above, we find force in the arguments of the ld.AR and in view of the discussion made herein above, we hold that the wharfage charges paid to the KPT is not rent and no TDS is liable to be deducted under the provisions of section 194I of the Act. In view of the same, the order dt. 30-11-2015 passed by the CIT-A in confirming the order of AO that the assessee is in default and charging of interest thereon u/s. 201/201(1A) of the Act is not justified and it is set aside. Therefore, the ground nos. 1 to 3 raised by the assessee along with Form No. 36 are answered as indicated above. for A.Y 2012-13- by assessee
We find that the additional ground raised in this appeal is similar to additional ground raised in for A.Y 2011-12. Since, we answered the said additional ground in favour of assessee in the aforementioned paragraphs and we adopt the same view in this appeal also. Accordingly, additional ground raised in this appeal by the assessee is allowed. Further, we find ground no’s. 1 to 3 raised along with From No. 36 are similar to the ground no’s. 1 to 3 raised in ITA No. 151/Kol/2016 for A.Y 2011-12 and we answered the said grounds in favour of assessee by setting aside the order of the CIT-A. We adopt the same view in this appeal also and accordingly, the order dt. 30-11-2015 passed by the CIT-A confirming the order of the AO passed u/s. 201/201(1A) of the Act is set aside. Therefore, the ground no’s. 1 to 3 raised by the assessee along with Form No. 36 are answered as indicated above.