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Income Tax Appellate Tribunal, G ” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI C.N. PRASAD
आदेश / O R D E R
PER C.N. PRASAD, JM:
These two appeals are filed by the assessee against the orders of the Ld. CIT(A)-12, Mumbai dated 18.08.2014 pertaining to assessment years 2010-11 & 2011-12 arising out of the orders passed u/s. 201(1) and 201(1A) of the Act. Since common issues are involved in both these appeals, they were heard together and disposed of by this common order for the sake of convenience.
The assessee has raised following common grounds in its appeals: “1. Tax is deductible u/s. 194C of the I.T. Act 1961 (‘the Act’) on the payments made to M/s. Utsav Logistics Pvt. Ltd) and not u/s. 194J of the Act as alleged by the TDS Officer.
1.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has legally erred in holding that payments to Utsav Logistics under a contract for movement of goods in the port premises is liable for deduction of tax at source under the provisions of Sec. 194J and not Sec. 194C of the Act.
1.2. Without prejudice to above and in the alternative and on the facts and in the circumstances of the case, the Ld. CIT(A) has legally erred in holding that the provisions of Sec. 194J and not Sec. 194-I are attracted for use of Reachstacker “a specialized crane” and other material handling equipment.”
Brief facts are that the assessee is engaged in the business of developing, constructing, operating and maintaining port on Build own, operate and transfer (Boot) basis. During these Assessment Years, the assessee paid equipment hire charges to M/s. Utsav Logistics Pvt. Ltd. (ULPL) and deducted TDS @ 2% u/s. 194C of the Act. The assessee hired Reachstacker for the purpose of loading the containers into cargo ships. The contractor i.e. ULPL shall supply in accordance with the highest professional standards one empty stacker with the integrated telescopic streaders and all necessary spares and accessories and adequate number of suitable qualified and experienced personnel for operation and maintenance of the empty stacker as per the agreement entered into by the assessee with ULPL. Looking at the nature of services to be rendered by the contractor to the assessee company, the Assessing Officer was of the view that ULPL has rendered technical services to the assessee and therefore the hire charges paid by the assessee for the maintenance and operation of Reachstacker is liable for TDS as fees for technical services u/s. 194J of the Act and since the assessee has not deducted TDS @ 10% U/S. 194J of the Act and has deducted only 2% u/s. 194C of the Act. Show cause notice was issued as to why the assessee should not be treated as defaulter u/s. 201(1) for short deduction of tax u/s. 194J of the Act.
In response to the said notice, the assessee filed its reply dated 5.12.2012 submitting that assessee has engaged ULPL for moving containers from one place to another within port premises as is evident from the copy of invoice raised by the ULPL and the assessee company. It was contended that as per the terms and conditions of the agreement, it is evident that ULPL will provide reachstaker alongwith operator. , its maintenance and other related expenses will be the responsibility of ULPL and reachstaker will be operated as per the directions of the assessee company for moving containers from one place to another within port premises. Therefore, the scope of work and terms and conditions clearly indicate that assessee has utilized carriage services rendered by ULPL i.e. loading/unloading and movement of containers with the use of equipment and manpower not availed any technical or professional services within the provisions of Sec. 194J of the Act. The assessee also relied on the circular of CBDT No. 558 dated 28.3.1990 and submitted that in case of service contracts, the provisions of Sec. 194J are not applicable. It was further contended that for a payment to be liable for TDS u/s. 194J of the Act such payment should be for fees for technical services and such fees should be for rendering any technical, managerial or consultancy services and not for any other purposes. It was also contended that the payment to be covered u/s. 194J of the Act there should be a consideration for acquiring or using technical know-how provided or made available by human element. It was also contended that there should be direct and live-link between payment and receipts/use of technical services/information. Therefore, it was contended that the services rendered by ULPL by no stretch of imagination can be categorized as technical and professional services as it does not satisfies provisions of Sec. 194J r.w. Explanation 2 to section 9(i)(vii) of the Act.
However, the Assessing Officer did not accept the contentions of the assessee that the payments made to ULPL for hiring the equipment (reachstaker) is liable for TDS u/s. 194C and not under 194J of the Act. The Assessing Officer treated the payments made by the assessee are towards technical services therefore the assessee is liable to deduct TDS u/s. 194J of the Act. Therefore, the assessee was held as defaulter u/s. 201(1) of the Act for the balance TDS. However, the Assessing Officer on verification of the certificates from the auditors of the payee firm i.e. ULPL to the effect that ULPL has filed their return of income including the payments received by them from the assessee company and since ULPL has paid tax thereon, in view of the judgement of the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages (P) Ltd Vs CIT, he held that no further tax is to be recovered from the assessee company. However, the Assessing Officer held that the assessee is liable for interest u/s. 201(1A) of the Act on the amount of short deduction of tax at source of Rs. 73,79,898/- and Rs. 1,09,05,377/- and charged interest of Rs. 13,28,381/- and Rs. 19,62,967/- u/s. 201(1A) of the Act for the Assessment Years 2010-11 and 2011-12 respectively.
6. On appeal, the Ld. CIT(A) sustained the action of the Assessing Officer that the assessee was liable to deduct tax at source on the payments made to ULPL in accordance with the provisions of Sec. 194J of the Act. However, the Ld. CIT(A) held that since ULPL is a loss company and since to tax is liable to be paid, no interest liability could be raised u/s. 201(1A) on the assessee company. The Ld. CIT(A) thus directed the Assessing Officer to verify the returns of ULPL and if there are loss returns by ULPL interest u/s. 201(1A) should not be charged. Against the order of the Ld. CIT(A) in accepting the contention of the Assessing Officer that the payments made by assessee are liable for TDS u/s. 194J as fees for technical services assessee is in appeal before us.
The Ld. Counsel for the assessee reiterated the submissions made before the authorities below. The Ld. Counsel for the assessee placing reliance on the decision of the Tribunal in the case of ACIT Vs Merchant Shipping Services Pvt. Ltd (2010) (129 ITD 109) submits that almost an identical issue has been considered by the Mumbai Bench and held that the payments made for the services provided by the NSICT for the movement of its cargo in respect of import and export done by its customers, movement of cargo in port which lifting of containers from customer’s trailer/rail wagons by the operation of rubber tyre gantry cranes, movement of the containers from yard to the vessel side and moving the containers from trailers at the quay side on to the vessel with the operation of quay cranes, is not fees for managerial or technical services covered u/s. 194J of the Act. The Ld. Counsel for the assessee further placing reliance on the decision of the Rajkot Bench in the case of Kandla Port Trust Vs DCIT (16 Taxmann.com 273) submits that assessee running a port and in order to carry out its operations, machineries, heavy cranes, weigh bridge, elevator, EPBX systems were installed and payments made to contractors for repairs and maintenance of these machineries and in which case it was held that the payments were not made for any managerial or technical services but was made only for annual maintenance contract for services. Therefore he submits that the payment made by the assessee in hiring reachstacker which is a kind of crane shall not be for any technical services and thus the provisions of Sec. 194J have no application.
We have heard the rival contentions, perused the orders of the authorities below and the submissions made by the assessee and the case laws relied on . The assessee in this case which is engaged in the business of operating port entered into an agreement with ULPL for hiring empty reachstacker with the integrated telescopic streaders and all necessary spares and accessories and adequate number of suitable qualified and experienced personnel for the operation and monitoring and maintenance of the empty stacker which is a sort of crane to lift the containers and move them from one place to other place in the port area. The image of the reachstaker is depicted for better understanding.
The assessee deducted TDS u/s. 194C @ 2% on the payments made to ULPL treating it as contract service. The Assessing Officer was of the view that the contractor who has provided the reachstacker alongwith suitable qualified operational personnel is nothing but providing technical or managerial service to the assessee within the meaning of fees for technical services as provided in Explanation-2 to clause (vii) of sub-section (1) of Sec. 9 of the Act. Therefore, since the assessee did not deduct TDS under section 194J of the Act, the Assessing Officer held the assessee as defaulter and passed order u/s. 201(1) for short deduction of TDS. However, since the recipient i.e. ULPL has offered the receipts from assessee as its income, the Assessing Officer following the decision of the Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage (P) Ltd. Vs CIT (211 CTR 545) held that no further tax can be recovered from the assessee company but he worked out the interest liable to be charged u/s. 201(1A) at Rs. 13,28,381/- and Rs. 19,62,967/- for the Assessment Years 2010-11 and 2011-12 respectively. The Ld. CIT(A) sustained the view of the Assessing Officer that the services rendered by the contractor ULPL to the assessee in providing reachstacker and its operational personnel would amount to providing technical/managerial services, therefore assessee is liable to deduct TDS u/s. 194J of the Act. However, since the recipient ULPL have already accounted for the receipts as income, he has accepted that no further tax is to be recovered from the assessee. The assessee further contended before the Ld. CIT(A) that even the interest is not liable to be charged for the reason that the recipient i.e. ULPL owing to the losses no tax was payable for the Assessment Years 2010-11 and 2011-12 and therefore no interest liability could be raised u/s. 201(1)/201(1A) of the Act in view of the decisions viz., CIT Vs Rishikesh Apartments Co. Op. Housing Society Ltd (2001) (119 Taxmann 239), Thomas Muthoot Vs DCIT TDS Kottayam (2012) (150 TTJ 65) (Coch.) and ITO Vs Emerald Construction Co. (P) Ltd (209) (29 SOT 495) (Jodh.). This contention of the assessee was accepted by the Ld. CIT(A) and directed the Assessing Officer to verify the claim of the assessee in the light of the judicial pronouncements and if it is found that there was no tax liability on the part of recipient of the impugned amount, the assessee shall stand entitled for relief on account of interest u/s. 201(1A) of the Act.
We find from the order of the Ld. CIT(A) that the CIT(A) has accepted the contentions of the assessee that since the recipient has accounted for the contract receipts received from the assessee, no tax is required to be deducted. He also accepted the contention that owing to the losses by the recipient ULPL no tax is liable to be paid by the recipient and therefore no interest liability could be raised u/s. 201(1A) of the Act on the assessee and he has given a direction to the Assessing Officer to verify and pass necessary orders to delete the interest if the ULPL is found to have filed returns declaring losses. Therefore, we are of the considered view that the assessee has no grievance at this stage as the contention of the assessee were accepted and no liability to tax u/s. 201(1) or interest u/s. 201(1A) are existed. Therefore, we left open the issue of whether the payments made by the assessee to ULPL fall under fees for technical services u/s. 194J or fall under provisions of Sec. 194C of the Act as contract service. The assessee may raise its objections at appropriate stage.
In the result, the appeals filed by the assessee are allowed for statistical purpose.
Order pronounced in the open court on 24th August, 2016.