ITO (TDS) 1(3), MUMBAI vs. BUHARIWALA LOGISTICS, MUMBAI

v/s Buhariwala Logistics, 1st, Floor, VAkharia House, 51/53 Bora Bazar Street Fort, ……………. Respondent Mumabi 400001 PAN AAFFBO409F Assessee by : Shri. Dilip S. Domce & Shri. Ashish J. Jain Revenue by : Shri. T.A Khan Date of Hearing-08.06.2017 Date of Order –13.07.2017

O R D E R PER: SANDEEP GOSAIN, JUDICIAL MEMBER. These four appeals filed by the revenue are directed against the order of Ld. CIT(A)-14, Mumbai dated 16.11.2012 and pertains to 1418 /Mum./2013 Buhariwala Logistics, to assessment year 2008-09, 2009-10, 2010-11 & 2011-12 respectively.

Since, the issues raised in all appeals are identical, except 2. for the year of assessment, therefore for the sake of convenience they are clubbed, heard and disposed of by this consolidated order.

First of all we take up for decision revenue’s appeal in AY 2008-09.

The grounds of appeal raised in revenue‟s appeal read as under:

(1) The Ld. CIT(A) has erred on facts and in circumstances of the case and in la deleting the addition on account of TDS payment made to BPT, Airport, Ware Housing storage charges etc. u/s.1941 and treating the same as T.D.S. payment u/s. 194C, without properly appreciating the factual and legal matrix of the case as clearly brought out in order u/s. 201(1)/201(1A) of the Income- tax Act, 1961.

(2) The Ld. CIT(A) has erred on facts and in circumstances of the case and in law in not appreciating the fact that the definition of rent in explanation (1) to Section 194 I is very wide in its ambit and includes within its sweep, payment by whatever name called which is paid pursuant to any agreement or arrangement. to 1418 /Mum./2013 Buhariwala Logistics, (3) The Ld. CIT(A) has erred on facts and in circumstances of the case and in law in deleting the addition on account of TDS payment towards survey fees made u/s. 194J and treating the same as TDS. payment u/s. 194C, without properly appreciating the fact that the services required technical or professional knowledge and the payments were effected by the assessee to the respective parties.

(4) The Ld. CIT(A) has erred on facts and in circumstances of the case and in law in deleting the addition on account of TDS payment towards hiring of forklift/cranes charges made u/s. 194 I and treating the same as TD.S. payment u/s. 194C, without properly appreciating the fact that the charges were for hiring of machineries which attracted section 194 I of the I.T.Act, 1961.

(5) The Ld. CIT(A) has' erred on facts and in circumstances of the case and in law in deleting the interest amounting to Rs.13,54,459/-levied u/s. 201(1A) of the I.TAct, 1961 by holding that the payment of CWC, BPT, AAI, CFS, ICD Depots and warehousing charges paid to other agencies, Forklift/Crane charges does not fall within the purview of section u/s. 194 I and Survey fees u/s. 194J of the I.T.Act.

(6) The Ld. CIT(A) has erred on facts and in circumstances of the case and in law in deleting the demand of Rs.24, 12,491/- on account of short deduction of tax on payments of CWC, BPT, AAI, CFS, ICD Depots and warehousing charges to 1418 /Mum./2013 Buhariwala Logistics, paid to other agencies, Forklift/Crane charges does not fall within the purview of section u/s. 194 I and Survey fees u/s. 194J of the I.T Act without appreciating the factual and legal matrix of the case, as clearly brought out by the A:O. in his order u/s. 201 (1) /201 (1A) of the Income-tax Act, 1961.

(7) The Ld. CIT(A) has erred on facts and in circumstances of the case and in law in deleting the interest u/s. 201(1A) of the I.T Act, 1961 on the short deduction of tax determined by the AO as the tax determined has already been deleted by him and interest deletion is consequential to the quantum deletion for which further appeal has been recommended vide grounds no. 1 to 6.

As per the facts of the case, the assessee is a partnership firm and engaged in the business of custom house agent (CHA). A servey operation u/s 133A was carried out at the assessee‟s premises on 24.02.11. On verification of records and from the information gathered, it was noted by the revenue that the assessee was allegedly not deducting taxes from various payments at the correct prescribed rates. Therefore after serving notices and seeking reply, the AO passed the order of assessment because in his opinion the assessee either did not deduct the tax as per law or made short deduction of taxes while making various payments in the course of its business. Thus in this way, demand was raised by the AO u/s 201(1)/201(1A) of the Act. to 1418 /Mum./2013 Buhariwala Logistics, Aggrieved by the order of AO, the assessee preferred appeal before Ld CIT(A). Ld. CIT(A) after considering the case of both the parties, partly allowed the appeal filed by the assessee.

Aggrieved by the order of Ld. CIT(A), the assessee preferred the appeal before us on the ground mentioned herein above.

Ground No. 1 to 7

We have heard the counsels for both the parties and we have also gone through the documents placed on records as well as orders passed by the revenue authorities.

4.1 Grounds of appeal

Nos. 4 to 7 raised by the appellant in AY 2008-09 are as under (similar grounds of appeal have been raised in assessment year 2009-10). “4. The AO erred in holding that tax ought to have been deducted at source under section 194-I of the Act in respect of payments made by the Appellant to CWC, Bombay Port Trust, Airport Authority, Container Freight Stations and inland Container Deposits etc. (the said agencies)

5. The AO failed to appreciate that the said agencies are discharging their function of safe custody of cargo until clearance of the same by the Customs 5 to 1418 /Mum./2013 Buhariwala Logistics, authorities in accordance with the Customs and Allied Acts and Rules made there under. The Appellant submits that it has no choice in whether or not to avail such services and there is no privity of contract with such agencies. Therefore it cannot be held liable for deduction of tax at source on such payments.

6. The AO failed to appreciate that payment was made to the said agencies towards demurrage, late clearance charges for safe custody of cargo until clearance of the same by the Custom authorities. He erred in holding that such payment was for provision of storage space and therefore tantamount to rent without appreciating that while keeping safe custody of the cargo no space was made available by these authorities to the Appellant.

8. The AO ought to have held that no tax was required to be deducted by the Appellant in respect of payment made to the said agencies. " 4.2 As stated above, a survey operation u/s 133A of the Act was carried out at the appellant's premises on 24.02.2011. During the course of survey, the AO noticed that the appellant had made payments on behalf of its clients to various entities such as Central Warehousing Corporation (CWC), Container Freight Station (CFS), Bombay Port Trust (BPT) and Airport Authorities of India (AAI) for the services rendered which included use of spaces for storage of import/export materials. While making payments to these authorities, however tax was either not deducted or deducted under Section 194C. The AO noted that during FYs 2007-08 and 2008-09, the appellant had paid aggregate sums of RS.84,04,724/- and Rs.95,47,670/- respectively to Port Trust, Airport, CFS, CWC etc on behalf of its clients for the services rendered by them which primarily included provision of space for storage of import/export cargo. Referring to Explanation to Sec 194I of the Act, the AO held that 'rent' includes any payment, by whatever name called, under any lease or any agreement or arrangement for the use of any land, building etc whether or not owned by the payee. According to the AO, it was the appellant's explanation that it had no contract with the above entities and therefore in terms of legal opinion, the transactions did not fall within the ambit of Section 194C or. 194I and hence TDS was not required to be deducted by the appellant. 4.3 The AO however rejected the appellant's explanation. The AO observed that the appellant, as CHA was acting on behalf of the importers and to 1418 /Mum./2013 Buhariwala Logistics, exporters and the nature of services rendered to them mainly included storage of materials and usage of space. In AO's opinion the authorities primarily provided storage space and therefore the payment was in the nature of rent requiring deduction of tax under Section 1941. According to the AO, the term "rent" for the purposes of Section 1941 was very wide and therefore any payments made to Ports, Airports, ICOs & CFSs were liable to be subjected to TDS u/s 1941. According to the AO, the person responsible for deducting the tax was the person making payments to the deductees and therefore the appellant being the CHA, was the person responsible for paying "rent" to these entities. Since the appellant did not deduct the tax u/s 1941 of the Act, the AO treated the appellant to be "an assessee-in-default" and accordingly demands of Rs.25,62,432/- (AY 2008-09) and Rs.26,09,181/- (AY 2009-10) inclusive of interest have been raised. 4.4 The AO further noted that the appellant had incurred (additional) storage and warehousing expenses amounting to Rs.39,95,951/- and Rs.95,56,8901- and the expenditure was incurred on behalf of the clients. According to the AO, the appellant had deducted tax u/s 194C at 2% whereas the tax should have been deducted under Section 1941 of the Act. For failure of the appellant to deduct tax under Section 1941, the AO raised net demand, inclusive of interest, at RS.8,46,340/- in AY 2008-09 and Rs. 20,80,434/- in AY 2009-10. 4.5 In this regard, the appellant has stated that in arriving at his conclusion, the AO did not correctly appreciate the nature of assessee's business activities and the role which the appellant played in providing CHA services. The appellant's business involves assisting its clients to comply with legal formalities in importing/exporting goods by air or ship, obtaining clearances from Port Trust, Airport authorities and the Customs and providing logistic support for movement of goods etc. The Customs House Agent's Licensing Regulations 2004 define CHA to mean "a person licensed under these Regulations to act as agent for the transaction of any business relating to the entry or departure of conveyances or the import or export of goods at any Customs Station". As per Regulation 3, a CHA is a person who fulfils the conditions prescribed in Clause 6 of the said Regulations and is licensed by the Commissioner of Customs. Any person who desires to carry on the activity as CHA has to clear the examination held by the Customs Department. In case of companies, anyone of the directors is required to hold such license. Regulation 13 exhaustively sets out the obligations of CHA to 1418 /Mum./2013 Buhariwala Logistics, which inter alia include his obligation to promptly pay over to the Government, when due, sums received for payment of any duty, tax or other debts or obligations owing to the Government and promptly account to his client for funds received for him from the Government or received from him in excess of Governmental or other charges payable in respect of clearance of cargo or baggage on behalf of the client. 4.6 The Customs House Agent's Licensing Regulations 2004 therefore show that a CHA is an interface between the Customs Authorities and the importer/ exporter. These regulations therefore also show that the CHA, in the matter of compliance with Import & Export Regulations, is expected to act as an impartial interface between the Customs Authorities and the trade represented by him. In the course of providing a range of services, the appellant defrays various expenses on clearing, forwarding and delivering goods, for and on account of its clients. The expenses which the appellant defrays on its client's account are claimed from them as reimbursements. In the invoice raised on the clients, the appellant raises separate claims for reimbursement of expenses, defrayed on client's behalf and fees for the services rendered are claimed separately. 4.7 Furthermore, apart appellant is also engaged from the business of Custom House Agent (CHA), the in providing shifting & movement of personal effects within India. In the course of appellant's business of providing services for movement of personal effects, on occasions, the appellant needs to store the goods for some periods. For the purpose of temporary storage of goods therefore, the appellant rents warehousing/ storage facilities provided by various private parties. In respect of hiring of storage space, the appellant had deducted tax from these payments u/s 1941 of the Income-tax Act, 1961. With reference to tax so deducted under Section 1941, and without appreciating the above facts, the AO has treated the appellant to be an "assessee-in-default" u/s 201 in respect of "Payments to Port Trusts, CFS, CWC" and "Storage & Warehousing Expenses" aggregating to Rs.1 ,24,00,675/- (AY 2008-09) and Rs.1 ,91,04,560/- (AY 2009-10). These payments inter alia included payments of Rs.16,50,004/- (AY 2008-09) and Rs.25,65,067/- (AY 2009-10) made to private warehouses/storage facilities rented by the appellant in the course of its business of shifting & moving personal effects on which tax was rightly deducted in terms of provisions of Section 1941 of the Income-tax Act, 1961. The balance payments of Rs.1,07,50,671/- (AY 2008-09) and to 1418 /Mum./2013 Buhariwala Logistics, Rs.1,65,39,493/- (AY 2009-10) comprised of payments made to CFS/ICO/CWC/BPT in the course of business as Custom House Agent ('CHA'). The appellant has objected to the AO's action of holding the appellant to be an "assessee-in-default" for not deducting tax under Section 1941 in respect of the payments of Rs.1 ,07,50,671/- and Rs.1 ,65,39,493/- made to CFS/ICO/CWC/BPT. In the background of above facts, the appellant has contended that the AO grossly erred in law as well as on facts in invoking provisions of Section 1941 in respect of above payments made. Further submissions of the appellant (for the sake of brevity, in AY 2008-09) are reproduced as under:

1. 1. The appellant submits that the AO grossly erred in law as well as on facts in invoking provisions of Section 1941 in respect of payments made towards demurrage, ground rent} terminal handling charges to CWCs, BPT, 1CDs & AA1 and storage & warehousing charges paid to other private parties. We deal with each of the aforesaid alleged default in the following paragraphs.

2. At the outset it is pertinent to submit that apart from the business of business of Custom House Agent (CHA), the appellant is also engaged in providing shifting & movement of personal effects within India. In the course of assessee's business of providing services for movement of personal effects; on occasions the assessee needs to store the goods for some periods. For the purpose of temporary storage of goods therefore, the appellant rents warehousing/ storage facilities provided by various private parties. In respect of hiring of storage space appellant had deducted tax from these payments u/ s 1941 oJ the Income-tax Act, 1961. With reference to tax so deducted under Section 1941, the AO has treated the appellant as an "assessee-in-default" u/ s 201 in respect of "Payments to Port Trusts, CFS, CWC" and "Storage & Warehousing Expenses" amounting to Rs.84,04,724/- and Rs.39,95,951/- respectively aggregating to Rs. 1,24,00,675/ -. These payments inter alia included payments of Rs.16,50, 004/ - made to private warehouses/storage facilities rented by the appellant in the course of its business of shifting & moving personal effects on which tax was rightly deducted in terms of provisions of Section 194I of the Income-tax Act, 1961. The balance payments of Rs.1,07,50,671/- comprised of payments made to CFS/ICD/CWC/EPT in the course of business as Custom House Agent (,CHA ']. Statement giving break-up of the aforesaid payments is enclosed for your ready reference and record. The appellant has objected to the AO's action oJ holding the appellant to be an "assessee-in-default" for not deducting tax to 1418 /Mum./2013 Buhariwala Logistics, under Section 1941 in respect of the payments of Rs.1,07,50,671/- made to CFS/ lCD/ CWC/ EPT.

3. In respect of CFS/ ICD/ CWC charges, the appellant submits that the AP failed to appreciate that the payments were not in the nature of (rent' and therefore no tax was required to be deducted under Section 1941 of the Income-tax Act, 1961. It is submitted that the payments were made to the Port Authorities & CFS for keeping custody of goods till the requisite clearances are obtained from the Custom Authorities. It is not in the nature of 'rent' proper. For your kind perusal and record we enclose herewith publication of Ministry of Commerce, Government of India on setting up Container Freight Station and the Report of the Inter-Ministerial Group on Customs Procedure and functioning of Container Freight Station published by the Planning Commission, Government of India in which functioning of the CFS and the role it plays in performing functions in Custom clearance procedure is detailed. An Inland Container Depot (ICD) also serves the same functions as CFS. The only difference being a CFS is located near the Port whereas an ICD is located in the hinterlands. A CFS is defiled to be common user facility with public authority status equipped with fixed installations offering services for handling and temporary storage of import/export laden carried under Customs control and with Customs and other agencies competent to clear goods for home use, warehousing, temporary admissions, re-export, outright export and transhipment of cargo. The main benefit of CFS relates to easier Custom clearance facility with reduced transportation and inventory cost. The Customs Act, 1962 and procedures framed there under ensure that import & export of goods are in compliance with Customs and other laws in force. Customs procedures are intended to provide definitive methods by which goods can enter country on payment of applicable duties. To regulate and exercise effective control over import/ export activities, goods are allowed at notified places under Section 7 of the Customs Act, 1962. Custodians are appointed under Section 45 of the Customs Act, 1962 for safe storage of goods till they are cleared for home consumption or warehoused. The functioning of the notified entities permitted to handle the cargo is regulated by the "Handling of cargo in Customs Area Regulations 2009" which provide for the manner in which imported goods/export goods shall be received, stored, delivered or otherwise handled in the Customs area. The regulations also prescribe the responsibility of persons engaged in the aforesaid activities. These to 1418 /Mum./2013 Buhariwala Logistics, regulations apply to all "Custom Cargo Service Providers" (CCSPs) who are allowed to operate in Customs area and permitted to handle import/export goods. These persons/ entities include the custodians holding custody of import/ export goods and also handling of goods and all persons working on behalf of custodians such as forklift or material handling equipment etc. or any other person permitted to handle the goods in any capacity in the Customs area. As per the Circular No. 13 of 2009 issued by CBEC, Department of Revenue, the Regulations relating to handling of imported/export goods specified under Section 8 of the Customs Act, 1962 covers all custom facilities such as Ports, Airports, ICDs & CFSs. Copies of the Regulations and the Circular is enclosed. It will be thus be noted that Ports, Airports, ICDs & CFSs who are the custodian of the goods/ cargo are integral part of Customs facilities and they function under the control and in conformity with the regulations framed by the Ministry of Finance, Department of Revenue under the Customs Act, 1962. As such the dealings of the clients as also of the CHA with these custodians are therefore to be regarded as dealings with the statutory authorities as they are discharging the functions of the Customs authorities in the matter of clearance of cargos. Accordingly the charges which are required to be paid to these public authorities in discharge of their responsibilities and obligations have the character of statutory payments to which extant provisions of Chapter XVIJ- B of the 1. T. Act could not be applied and more particularly to the dealings of CHA with these authorities because both CHA as well as custodians form integral part of regulatory framework put in place by the Ministry of Finance, Department of Revenue to give effect to the provisions of Customs Act, 1962 and both function under the regulations of the said Ministry.

4. The procedure for clearance of goods under the Customs involved series' of processes such as assessment of the shipments (with regard to their value/classification etc), physical examination of the cargo, and payment of Customs Duty etc. on the basis of Bill of Entry presented by the Importer or its CHA. The CBEC prescribes the procedures through notifications, rules, Circulars which are updated from time to time and implemented by field formations. With growing volume of international trade the need for expeditious clearance of goods has gained importance as the Ports are facinq problems of congestion. In. this background the concept of CFS has grown in importance. A CFS/ICD is an extended arm of Port/Airport where goods meant for import/ export are kept till completion to 1418 /Mum./2013 Buhariwala Logistics, of clearance formalities. For the services provided till completion of clearance formalities, charges are raised by CFS stations/ ICDs on the person whose cargo / goods pass through the CFS/ ICD till clearance formalities are complete. The CFS/ ICD raise charges for keeping the custody of goods till the goods are cleared by Customs authorities. These are mandatory charges based on fixed tariffs fixed by the Port Authorities in consultation with the Customs Authorities. The CFSs which are public authorities do not per se provide the importers/ exporters with warehousing space and/ or facilities simplicitor. CFS is a Custom notified area meant to be utilized only till the Custom clearance is obtained. Once the Custom clearance formalities are complete the goods need to be cleared from the CFS area and unlike warehouse simplicitor; a person cannot store his goods or occupy the space for indefinite period. The goods lie in the Custom notified area and in numerous instances the goods are kept in open without the roof there is no demarcated space which is utilized by the importer/ exporter to store the goods. The appellant and/ or its clients do not exercise any right to control or supervise or domain over the place where the goods are kept by the Port Authorities. The appellant submits that payments to CFS/ICD are not in the nature of rent payments but they are in the nature of mandatory custodial charges. In case of goods landing at seaports, the containers shipped, are kept by the custom authorities with CFS/ICD until the clearance. These entities raises fixed statutory charges for the custody of goods. The appellant submits that without defraying these charges an importer client of the appellant cannot receive the custody of the goods. As statutory custodians of the goods enjoying public authority status, these entities have custody of the cargo and do not release the same unless full payment is made. Further no written or oral contract exists by and between the Custodian and appellant and/or the importer/exporter for the custody of goods. These charges are unilaterally raised by the public authorities based on standard tariffs prescribed under the statutory regulations. The appellant has no option but to pay these charges in their entirety on behalf of its clients. Since the payments are neither in the nature of 'rent' nor they are paid pursuant to any agreement, the appellant was not liable to withhold taxes on such payments under the provisions of Section 1941 of the Income- tax Act, 1961.

5. Till all the requisite statutory procedures are complete and clearances are obtained, the import/ export consignments are received, handled, and to 1418 /Mum./2013 Buhariwala Logistics, temporarily retained at the CFS/ lCD. There is usually a free period during which no charges are levied. However once the free period expires, charges are levied on the import/ export cargo based on weight and/ or value and/ or classification of goods. These charges are levied by the authorities at fixed tariffs. These charges are not for storage of goods but for receiving, moving, handling and keeping custody of goods till the clearance of goods in conformity with customs procedures. In fact the charges levied are based on the weight / value of the consignment and not on the space occupied. The appellant cannot decide the place where it is to be stored and supervise the same. Neither the appellant nor the clients to whom the goods belong can exercise any possessory rights or can exercise domain on the place where the goods are kept. It is also not a case where any particular space is allotted to the importer/ exporter to store its goods. Thus it is possible that a cargo which weighs less but occupies more space would not be charged on the space used and similarly a smaller cargo occupying less space but having higher weight would be charged more. These are mandatory charges payable when goods lie with the CFS/ICD Authorities and these are recovered at the standard rates, determined as per the tariff notifications of the public authorities.

6. Explanation to Sec 1941 defines the «rent" to mean any payment whatever name called under any lease, sub lease, tenancy or any other agreement or arrangement for the use of land, building etc. In this regard one should appreciate that the dominant purpose and object of making payment of any sum by whatever name called should have live and proximate cause or nexus with use of any land or building. Such connection should not be remote or illusory. Similarly the object of the payment should not be availment of specialized service provided by the payee. One mu.st apply function test in deciding the object and purpose for which the payment is made. When the cargo reaches a Port through an Airline/ Shipping Line, the appellant's objective is to get the goods unloaded and obtain clearance from the Custom Authorities. Having regard to the statutory rules and procedures laid down in the Customs & allied Acts, the cargo is unloaded, handled, transported, inspected compulsorily by the Port authorities notified under the Customs Act. Any customer who wishes to import / export goods has to necessarily undertake these formalities and compulsorily get its consignment handled, maintained & moved to/from the airline / shipping line from the notified Port authorities. When a customer avails the facility to 1418 /Mum./2013 Buhariwala Logistics, provided by the Port authorities; he does not do so with an intent to occupy and use their premises, building or land appurtenant thereto. The facilities of the Port Authorities are compulsorily availed to 7. This position can also be illustrated by taking an example. When a person is desirous of watching a movie; he visits a cinema house. As a part of movie watching exercise the cinegoer has to necessarily sit in the auditorium in which movie is exhibited. Such an auditorium also provides various other facilities such as air conditioning, comfortable sitting arrangements, specialized sound systems etc. The cinegoer occupies the auditorium during the period when the move is exhibited. However merely because the cinegoer occupies some place within the auditorium and avails the facilities situated therein; cannot lead to conclusion that the price which the cinegoer pays for purchasing the ticket from the movie Hall Owner includes price paid for renting of the cinema building. Applying the function test and adopting purposive interpretation one has to say that the price paid is for watching the movie and occupation and use of the auditorium space is only incidental to the attainment of primary object of watching film. Similarly in the present case the charges are paid not for usage of space in the customs area but for the custody of goods till the statutory procedural formalities were complete for clearance of the consignments. Even the charges were not based on the area occupied by the cargo in question. It is not levied for use of any land or building pursuant to an agreement/ arrangement. While obtaining the clearance of goods, the appellant and/or its customers have no option but to utilize the infrastructure of the CFS authorities for movement, handling and custody of goods till custom clearance formalities are complied with and duties are paid. However such use is only incidental or peripheral in nature and for such casual connection, payments to CFS Authorities cannot be construed to be "rent" within the meaning of Sec 194I of the Act. In the circumstances the AO was grossly unjustified in law and on facts in treating the appellant “as assessee in default” for not deducting tax u/s. 1941.

8. As regards payments made BPT & AAI, the appellant submits that the same were paid to Port Trust and Airport authorities and these charges were similar to CFS/ICD charges since the Port/Airport also handle and provide services similar to CFS/ICD but these are rendered within Port/ Airport areas designated by the Customs. EPT & AAI are amongst the oldest institutions handling international trade in the country. CFSs and ICDs are new age infrastructure facilities but till their advent the custom clearance formalities to 1418 /Mum./2013 Buhariwala Logistics, were primarily completed within the Port/Airport areas. With growth in international trade the Ports started facing congestion problems leading to development of CFS/ICD as alternate facility for completion of Custom clearance formalities. However BFT/ AAI also provides or offers facilities similar to CFS/ICD to the importer/ exporter of the goods and for which the charges are paid and therefore the reasoning as set out in the foregoing paragraphs mutatis mutandis apply to EFT/ AAI Charges as well. The EFT charges are based the weight and/ or the value of the shipment. The cargo arriving on a ship would be discharged at the wharf, shifted and stored at a safe and secure location within the Port for assessment, examination and delivery. For such cargo related activities, the Port levies charges, and if the goods are not cleared or removed from the Port within the free period, demurrage is also charged. Demurrage is also charged on the weight but on a per day basis after the free period is over. Similar charges are also levied by the AAI where the goods are transported by air.

9. Attention in this regard is invited to provisions of Explanation (i) to Section 1941 of the Income-tax Act, 1961 which defines the term 'rent' so as to mean any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any(a) land; or (b) building (including factory. building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (j) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above are owned by the payee.

10. Therefore, in order to qualify any payment as rent, the first pre- condition is that it should be made pursuant to the following: - Lease Agreement, or - Sub-Lease Agreement, or - Tenancy Agreement, or - Any other agreement or arrangement, 11. In plain words, the most essential condition to classify any payment as 'rent' is that it should be made pursuant to an agreement and/or arrangement. It is well understood that in order to enter into an agreement there must be two consenting parties. In the present case neither appellant nor its clients who are the owner of the goods, have any option but to to 1418 /Mum./2013 Buhariwala Logistics, comply with the statutory regulations prescribed under the Customs and the allied Act in terms of which they are liable to incur and pay the charges for which claims are raised by the Port/Airport Authorities for custody of goods in conformity with statutory Tariff notifications. The basic premise on which liability to deduct tax arises, is the existence of a valid contract or an arrangement between the payer and the payee and it is this which is absent in the present case. In the absence of any oral or written arrangement, provisions of Section 1941 are undisputedly inapplicable to payments made in conformity with statutory Tariff notifications to the statutory authorities. The payments were not for getting the right to use the premises of the CWC/ CFS/ ICD/ Port/ Airport Authorities but it was a payment for services provided to the importer/ exporter till the clearance of consignment in conformity with Customs procedures. It is thus clear that the nature and character of charges levied by CFSs, ICDs, CWC, AAI & BPT is not that of 'rent'. The appellant therefore reiterates that such payments were not paid to the authorities pursuant to any arrangement/ agreement rather the payments were made in accordance with Tariff notifications to the statutory authorities and therefore appellant was not liable to deduct tax u/ s 1941 on such payments.

12. Even otherwise there is no oral or written contract between the appellant and the recovering authority. The appellant is only the medium through whom the client makes payments of his statutory obligations. The appellant being an intermediary and was merely defraying the expenses on its client's account and claimed reimbursements. The appellant submits that the CWC/ CFS/ICD/ BFT/ AAI provides services for the cargo belonging to specific person and accordingly in the records of CWC/ CFS/ ICD/ AAI/ BFT the entries are made with regard to owner of the cargo and the assessee's name appears only as CHA of the owner. The legal obligation and the liability to bear these charges solely rests with the owner of the goods who is either the importer / exporter and who is represented by the CHA. As such the person responsible for making the payments, in law, is the person to whom the goods belong and not the CHA who is merely an intermediary or interface. The payment made through the CHA does not represent his expenditure nor is CHA a person responsible for making payment of income by way of rent. CHA is only a medium or conduit through whom the payment is routed to the CFS/ ICD/ BPT/ AAl by the importer / exporter of cargo. In law and in fact the person who utilizes the services of CFS/ lCD/ BPT/ AAI is to 1418 /Mum./2013 Buhariwala Logistics, the person who has legal obligation, if any, to deduct tax at source and such legal obligation cannot be shifted to an intermediary or interface created in terms of Customs House Agent's Licensing Regulations 2004. Clause 13 of the said Regulations clearly spells out the obligations which the CHA is legally liable to discharge. The obligations are set out exhaustively and nowhere the CHA is made to bear liability of deduction of tax while making payments to the custom notified entities having public authority status and who are intimately involved in the customs clearance procedures. It is settled proposition of law that the liability to pay income-tax is on the person who earns the income. Chapter XVIJ-B does impose and shift such obligation to third person but such obligation is considered to be creation of vicarious liability. In the circumstances the legal provisions creating vicarious liability on a third party needs to be strictly construed and therefore unless the law specifically requires to deduct tax at source and the statutory conditions are not fulfilled, vicarious liability cannot be invoked by unnecessarily enlarging the scope of tax deduction provisions. In the impugned order the AO treated the appellant to be an assessee-in-default for non-deduction of tax under Section 1941. In this regard it is relevant to refer to the provisions of Section 1941 which reads as follows: "Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident 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 thereof 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 .... “ The liability in law to deduct tax under Section 1941 is on the person responsible to pay any income by way of rent to the payee. It was therefore necessary to demonstrate that it was the assessee who was the person responsible for paying income by way of rent. The person responsible for the purposes of Section 1941' is the person who has agreement or arrangement with the payee and who utilizes or avails the services provided by the payee and not the person through whom the payment is merely routed. The obligations of the assessee as CHA are defined in the regulations which do not make him person responsible for deduction. The appellant was only an intermediary or a pass through entity; through whom the payment was made but the person responsible to pay the income was the importer/exporter. On these facts and circumstances therefore it is the to 1418 /Mum./2013 Buhariwala Logistics, appellant's contention that it had no liability to deduct tax at source under Section 1941.

13. Without accepting but assuming, even then the privity of contract would be between the customer and the Port/Airport authorities. This is illustrated by the fact that the appellant never claimed credit in respect of the service tax paid on the payments made to Port/ Airport authorities. The bills, invoices, etc. were raised by the Port/Airport authorities on the name of the importer/ exporter. The appellant claimed reimbursement of the actual payment defrayed on behalf of their clients. Neither the appellant levied service tax on the reimbursements claimed nor did it claim CENVAT credit in respect of service tax component included in the payments made to Port/ Airport authorities. The aforesaid facts further strengthen the appellant's contention that there was no agreement/contract between the appellant and the Port/ Airport authorities which would entail deduction of tax under Section 1941 of the Income-tax Act, 1961 by the appellant. The appellant, in fact has no say and these expenses are mandatorily payable by the appellant's clients in order clear their goods. The appellant was merely an intermediary between the importers/exporters on one hand and the Port/Airport Authorities on the other. The appellant received funds from its customers and in turn made payments to the Port/Airport Authorities. These services were never availed or consumed by the appellant for its own benefit but the services were availed and consumed by the importers/ exporters. The payments made to these entities are statutory in nature and strictly as per their published and fixed tariffs. These entities are appointed by and are functioning as custodians under the authority of the Government of India. The appellant and/ or its clients cannot choose and/ or decide upon the appointment of such entities. There is no agreement / arrangement / contract either written or oral between the ICDs, CFSs, BPT, AAI and the appellant and/ or its clients. In the absence of any contract and considering the fact that the appellant was only a pass through entity for making payments to them; it is submitted the appellant was not the person responsible for deducting tax u/ s 1941 on the payments made to these Authorities.

14. Attention in this regard is invited to the decision of the Delhi Bench of the Income-tax Appellate Tribunal in the case of Hah Logistics Vs DCIT (ITA No. 1864/Del/2011) dated 4th November 2011.The facts involved in the to 1418 /Mum./2013 Buhariwala Logistics, foregoing decision are similar to the facts involved in the present case. In the decided case the assessee firm was clearing and forwarding agent. The assessee had made payments to shipping lines towards freight, terminal handling, C.F.S. charges & detention charges for and on behalf of their client's importer/exporters. The AO held the assessee was required to deduct tax at source u/ s 194C of the Act and since no tax was deducted at source, the payments made by the assessee was disallowed invoking the provisions of Section 40(a)(ia) of the Act. On appeal before the ITAT, the Tribunal observed that the bills issued by shipping companies were raised in the name of assessee's clients. The invoices were initially paid by the assessee but thereafter the assessee got the same reimbursed from its client. The ITA T therefore held that the assessee was nothing but an intermediary between the exporters and the shipping lines and it merely facilitates their contract for carrying the goods. It was thus held that the assessee was not a person responsible for deducting the tax at source in terms of sec. 194C of the Act. Similar view has been expressed by coordinate Bench of ITAT in the case of DCIT Vs Jay Kay Freighters Private Limited (ITA No. 3407/D/2011) dated 08.0B.2012.

5.1 The ground of appeal

No. 8 raised by the appellant in A.Y 2008-09 is as under (similar ground of Appeal No.8 has been raised in assessment year 2009-10): to 1418 /Mum./2013 Buhariwala Logistics, 'The AO erred in holding that payment of survey fees of Rs 2,09,705/- to the Surveyors as survey fees was in the nature of fees for technical services on which tax ought to have been deducted at source under section 194J of the Act. 5.2 The AO noted that during the relevant years, the appellant paid survey fees of RS.2,09,705/- (AY 2008-09) and Rs.6,66,881/- (AY 2009-10) from which tax was deducted under section 194C. According to the AO, even though the surveyors were appointed by shipping lines/CFS, the payments were affected by the appellant on behalf of its clients. The services performed by the surveyors required technical or professional knowledge and therefore tax was required to be deducted under section 194J and not u/s 194C. Accordingly, the AO worked out the net shortfall for non-deduction of tax under Section 194J inclusive of interest at Rs.31,092/- (AY 2008-09) and RS.91 ,327/- (AY 2009-10). 5.3 The appellant has, in this regard submitted that the survey fees were inclusive of payments made towards insurance of cargo/consignment. Hence it should be understood that insurance premium is not in the nature of professional/technical service and is therefore not liable for deduction of tax under the provisions of Section 194J of the Income-tax Act, 1961. As regards the balance amount of survey fees, the appellant's contention is that these services do not involve any technical skill, knowhow or knowledge and therefore payments made did not qualify for tax deduction under Section 194J of the Income-tax Act, 1961. The surveyors merely inspect the cargo for the damages, if any, which might have taken place during the period when the cargo, was either in transit/shipment or lying in the custody of the Port Authorities. Therefore, the AO grossly erred in law as well as on facts in holding the appellant to be an "assessee-in-default" for not deducting tax under Section 194J in respect of these payments. Further submissions of the appellant (for the sake of brevity, in AY 2008-09) are reproduced as under:

19. In this ground the appellant has objected to the order of the AO passed u/s 201 treating the appellant to be an 'assessee-in-default' for not deducting tax on survey fees under Section 194J of the Income-tax Act, 1961. At the outset the appellant submits that the survey fees of Rs. 2,09,705/- were inclusive of payments made towards insurance of carqo/ consignment of Rs. 1,71,471/-. Copy of the statement giving the break-up of insurance premium paid is enclosed. It is undisputedly evident and understood that to 1418 /Mum./2013 Buhariwala Logistics, insurance premium is not in the nature of professional! technical service and is therefore not subject to deduction of tax under the provisions of Section 194J of the Income-tax Act, 1961. The appellant thus submits that the AO ought to be directed to delete the demand raised on account of alleged default in not withholding tax under Section 1 94J on the payments made towards insurance premium amounting to Rs. 1, 71,4711 -. As regards the balance amount of survey fees of Rs.38,234/ -, the appellant submits that none of these services involved any technical skill, knowhow or knowledge and therefore payments made did not qualify for deduction under Section 194J of the Income-tax Act, 1961. The surveyors merely inspect the cargo for the damages, if any, which might have taken place during the period when the cargo, was either in transit/shipment or lying in the custody of the Port Authorities. It did not involve any technical or professional skill or knowledge. The surveyors have to empanel themselves with the Custom Authorities. Their job is only to inspect whether the carqo/ container got damaged or spoiled or whether they remained without suffering any damage. Post inspection they issue a survey certificate in terms of the statutory notifications issued under the Customs and allied Acts. It would therefore be appreciated that no professional competence or technical skill is involved in the job of the surveyor. The AO however, not only failed to appreciate the foregoing material jurisdictional facts of the case but also failed to consider the fact that payments amounting to Rs 38,234/ - did not exceed the prescribed threshold limits. Therefore the AO grossly erred in law as well as on facts in holding the appellant to be an “assessee-in-default” for not deducting tax under Section 194J in respect of payments made towards survey fees and accordingly the demand of Rs.31,092/- raised u/s 201(1)/201(1A) deserves to be deleted. 5.4 I have considered the above submissions of the appellant, the order passed by the AO as well as the facts and circumstances of the case. The issue in this ground is non-deduction of tax under Section 194J in respect of survey fees. In the AO's opinion these payments represented fees for technical services requiring deduction of tax under Section 194J. The surveyors are appointed by shipping lines or CFS for inspection of cargo and material and submission of the survey report for assessment of goods. 5.5 These payments were admittedly made by the appellant on behalf of its clients and the appellant obtained its reimbursement. Therefore, I find force in the submissions of the appellant that in the matter of payment of these to 1418 /Mum./2013 Buhariwala Logistics, charges, the appellant as CHA acted only as an intermediary. The appellant's functioning as CHA is governed by Customs House Agent's Licensing Regulations 2004. Regulation 13 exhaustively lists out the obligations and responsibilities of the CHAs. Viewed from this angle, I am of the opinion that the appellant was not the person responsible for payment of income by way of fees for technical services requiring deduction of tax under Section 194J and therefore the appellant could not be regarded as an assessee-in-default for non- deduction of tax under Section 194J of the Act. The appellant has admittedly deducted tax under Section 194C at applicable rates. 5.6 From the details furnished, I also note that these payments also included RS.1 ,71 ,4711- (AY 2008-09) and RS.5,73,660/- (AY 2009-10) on account of insurance premium paid on behalf of the clients. The law does not provide for deduction of tax from the amount of premium paid to insurance companies for obtaining insurance cover. Hence the actual amount of survey fees paid is Rs.38,234/- (AY 2008-09) and Rs.93,221/- (AY 2009-10) which, in view of above reasons shall not be liable to tax deduction u/s 194J of the Act. On these facts, therefore I hold that the AO was not justified in treating the appellant as "an assessee-in-default" for short deducting tax, in view of the provisions of Section 194J in respect of above payments. Accordinly, the demands of tax and interest raised by the AO u/s. 201(1)/201(1A) of the Act are deleted. 5.7 Above ground of appeal is allowed.

ii) ITO (TDS) Vrs. Express Transport Pvt. Ltd. (ITA No. 1473 to 1475/M/13 dated 17.12.14, „E‟ Bench). iii) ITO (TDS) Vrs. S.R. Pusalkar and Company (ITA No. 7385 to 7387/M/12 dated 18.03.15, „E‟ Bench). iv) ITO (TDS) Vrs. M. Dharmdas and Company (ITA No. 1505 to 1507/M/13 dated 10.07.15, „B‟ Bench). i) ITO (TDS) Vrs. Manilal Patel Clearing and Forwarding Pvt. Ltd. (ITA No. 4856 to 4858/M/13 dated 06.11.15, „B‟ Bench).

raised by revenue. to 1418 /Mum./2013 Buhariwala Logistics, Ground No. 8 &

9. Grounds 8 and 9 are general in nature therefore needs no 7. specific adjudication.

8. In the net result, appeal filed by the revenue stands dismissed. Now we take up appeal no. 1416, 1417 & 1418/Mum/2013.

9. Since we have already decided appeal no. ITA/1415/Mum/2013 and the grounds in the present appeals are also identical with that of the appeal adjudicated by us in the above paras of this order. Therefore, our decision given therein squarely applies to these appeals too. Considering the same, all the grounds raised by the revenue in the instant appeals are dismissed.