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Income Tax Appellate Tribunal, “J” Bench, Mumbai
Before: Shri B.R. Baskaran (AM) & Shri Amit Shukla (JM)
The assessee has filed this appeal challenging the order dated 5.11.2014 passed by Ld CIT(A)-14, Mumbai for assessment year 2011-12, wherein the Ld CIT(A) has confirmed the demand raised by the AO u/s 201(1)/201(1A) of the Act.
The Ld A.R submitted that the assessee has provided manpower to various shipping companies as per the agreement entered between the assessee and shipping companies. He submitted that the assessee selects persons as per the requirement of shipping companies. He submitted that the appointment letter of the person is issued to the assessee. He further submitted that the “Articles of agreement for employment of seafarers (employees)” is, however, entered between the Shipping company and employee. Accordingly he submitted that the contract of employment is only
2 M/s. Doehle Dauntic India Pvt. Ltd. between the shipping company and the employee. He submitted that, for administrative convenience, the assessee has taken up the responsibility to receive salaries of employees and the same is disbursed to them after deduction of charges of the assessee. Accordingly he submitted that the assessee has acted only as facilitator and it did not provide any professional or technical service. He submitted that the tax authorities have taken the view that the assessee was required to deduct tax at source u/s 194J of the Act and accordingly raised demand u/s 201(1) of the Act. He submitted that the payees are either not liable to pay income tax or they have already paid income tax by filing their respective return of income. Hence the assessee cannot be treated as an assessee in default under 3rd proviso to sec. 201 of the Act. Accordingly he submitted that the orders passed by the tax authorities are liable to be quashed.
On the contrary, the Ld D.R submitted that the appointment letters have been issued in the name of the assessee and the terms and conditions of employment fixes the responsibility to comply with the provisions of Income tax Act upon the assessee.
We have heard rival contentions and perused the record. The assessee has acted as manpower (manning) agency and it has selected/supplied employees (seafarers) as per the requirement of shipping companies. We notice that the appointment letter has been issued by the Shipping company to the assessee herein. A perusal of terms and conditions of the appointment letter would show that the responsibility to comply with the Income tax provisions is placed upon the assessee. The articles of agreement for employment of seafarers have been issued by the shipping company directly to the employees.
In our view, the nature of relationship between the assessee and shipping company, between the shipping company and seafarers and between the assessee and seafarers have to be determined first, which will in turn
3 M/s. Doehle Dauntic India Pvt. Ltd. would help in determining the nature of liability under the Income tax Act. The nature of relationship could be determined by examining whole gamut of activities along with the agreements and other documents. A perusal of the orders passed by the tax authorities would show that they have not determined the nature of relationship/contract, as stated above. Hence the view of the tax authorities that the provisions of sec. 194J would apply to the facts and circumstances of the case, in our opinion, is not substantiated. Under these set of facts, we are of the view that this issue requires fresh examination. Accordingly we set aside the order passed by Ld CIT(A) and restore the issue to the file of the AO for examining the same afresh. We also direct the AO to give the benefit of 3rd proviso to sec. 201(1) of the Act to the assessee.
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.
Order has been pronounced in the Court on 05.12.2016