Income Tax Appellate Tribunal - Chennai
R.R. Warehousing Pvt. Ltd., Chennai vs Department Of Income Tax on 30 June, 2015
आयकर अपील य अ
धकरण, 'बी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
" B" BENCH, CHENNAI
ी चं पज
ू ार , लेखा सद य एवं
ी वी. दग
ु ा" राव, या#यक सद य के सम%
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER &
SHRI V. DURGA RAO, JUDICIAL MEMBER
आयकर अपील सं./ I.T.A. Nos.1939, 1940, 1941, 1942
& 1943/ Mds/2014
( नधा रण वष / Assessment Years : 2009-10, 2010-11, 2011-12,
2012-13 & 2013-14)
The Income Tax Officer, M/s. R.R. Warehousing P. Ltd,
TDS Ward II(3), Vs 2nd floor, W-Block, No.97,
Chennai Anna Nagar,
Chennai 600 040
[PAN: AACCR 0240E]
(अपीलाथ'/Appellant) (()यथ'/Respondent)
अपीलाथ क ओर से / Appellant by : Shri. S. Dasgupta, IRS, JCIT.
यथ क ओर से / Respondent by : Shri. S. Sridhar, Advocate
सन
ु वाई क तार ख/Date of hearing : 21.04.2015
घोषणा क तार ख /Date of Pronouncement : 30.06.2015
आदे श / O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER
These five appeals by Revenue are directed against the common order of Commissioner of Income Tax (Appeals)-VII, Chennai, :- 2 -: I.T.A.No.1939 to 1943/Mds/2014.
dated 28.03.2014 for the assessment years 2009-2010 to 2013-2014. Since issue in these five appeals are common in nature, these appeals are clubbed together, heard together, and disposed of by a common order for the sake of convenience.
2. The facts of the case are that the assessee business is to provide service of logistics support and warehousing facilities to its clientele (i.e) i. C & F. ii. Handling and managing the articles/products including receiving, inspecting, storing, stock keeping, packing and repacking of goods.
iii. Assist the clientele for inspection of goods towards furtherance of business.
iv. Despatch and handling of goods on instruction from clintle.
v. Inventory management and proper storage.
vi. To provide for safety for handling and storage of goods. 2.1 The assessee is in the business of providing the above facilities took the services from the following persons to execute its business operations on a contractual basis based on agreements entered with them.
i) J. Suresh Chandra :- 3 -: I.T.A.No.1939 to 1943/Mds/2014.
ii) J. Ramachandran
iii) J. Kamakshi
iv) J. Sulochana.
The above persons are the owners of the property in which the goods of the clientele were stored. The Assessing Officer perused the materials took into cognizance the agreement of the property dated 20.02.2006 and has come to the conclusion that the payment to the aforesaid persons were only towards rent for lease of the premises where the services were rendered. It was a fact that initially the premises where the warehousing facility were made available to the clientele was taken on lease by the agreement dated 20.02.2006 but however this agreement was later on novated by another agreement dated 22.02.2006 wherein the assessee had contracted with the owners of the property to do all the logistic support and other allied activates to be provided by the owners of the property. By virtue of this agreement for composite services, the earlier agreement of lease simpliciter was cancelled. This fact has not been properly appreciated by the Assessing Officer as she has given undue weightage only to the agreement of lease simplicitor and not the latter agreement which was a comprehensive agreement of providing various services. The Assessing Officer's omission to consider the latter agreement has :- 4 -: I.T.A.No.1939 to 1943/Mds/2014.
resulted in concluding that the payments made to the concerned persons were for rentals and hence the tax to be deducted at source was to be in accordance with section 194I of the Act and not under section 194C of the Act as contended by the assessee and by viture of this interpretation, the Assessing Officer passed the impugned order under section 201 and 201(1A) of the Act for the assessment year 2008-09 to 2013-2014.
The details of the taxes paid/payable u/s.201(1)/201 (1A) of the Act are as under:-
F.Y TDS Payable TDS paid @ 2% Balance payable @10% only 2008-09 55,32,737 6,70,194 48,62,543 2009-10 34,63,563 4,78,000 9,85,563 2010-11 12,98,028 3,27,750 9,70,278 2011-12 14,66,969 3,69,000 10,97,969 2012-13 19,22,199 2,55,040 16,67,159 (1st quarter) TOTAL 1,36,83,496 20,99,984 1,15,83,512 Demand u/s.201 (1A) F.Y Interest Payable Interest paid Balance payable 2008-09 43,97,562 39,129 43,59,433 2009-10 23,36,591 31,760 23,04,831 2010-11 7,19,817 19,643 7,00,174 2011-12 5,71,524 19,800 5,51,724 2012-13 4,02,932 16,196 3,86,736 (1st quarter) TOTAL 84,28,426 1,25,528 83,02,898 :- 5 -: I.T.A.No.1939 to 1943/Mds/2014.
Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals).
3. On appeal the Commissioner of Income Tax (Appeals) upon perusing the both the agreements and also the bills and other relevant documents produced by the assessee observed that the earlier agreement of lease has been novated by the assessee and the bills produced clearly indicate that the contractees have rendered the allied services and the payment with reference to these bills are for services and not a mere rental for the warehouses. There is no bar in law against the novation.
3.1 The ld. Authorised Representative for assessee also produced the certificate that the deductees have offered the sums paid to them as Income in their respective Returns filed and also paid the taxes due thereon. The Commissioner of Income Tax (Appeals) had carefully perused all the materials and records and find that the assessee has deducted tax @2% on the payments made to the concerned persons in accordance with section 194C of the Act treating the payments as contract for service but whereas the assessing :- 6 -: I.T.A.No.1939 to 1943/Mds/2014.
officer has treated the payment as a lease rental and therefore he opines that the tax to be deducted at source ought to be at 10% in accordance with section 194I of the Act.
3.2 The Authorised Representative for assessee emphasized that the assessee has deducted tax at source under section 194C of the act since the nature of services rendered by the deductees were of the nature that the payments made to them were for service rendered by them and not for the mere space provided by them. In support of his claim, the authorised representative relied on the following case laws:-
1. National Panasonic India(P) Ltd vs DCIT 4TTJ(Delhi)
2. CIT vs Hindustan Lever Ltd 216 Taxman 280(Del HC)
3. S.A.A Isphani Trust vs income tax officer (TDS) 216 Taxman (Madras)
4. Hindustan Coco Cola Beverage pvt Ltd vs. CIT 293 ITR 226 (SC)
5. CIT vs Samsung electronics Co. Ltd 320 ITR 209 (Karnataka)
6. Transmission corporation of AP Ltd vs CIT 289 ITR 587 SC
7. Vijay ship breaking corporation vs CIT 314 ITR 309 SC :- 7 -: I.T.A.No.1939 to 1943/Mds/2014.
3.3 The Authorised Representative for assessee further emphasized the proviso to section 201 of the Act which reads as under:-
"Any person including the principal officer of a company who fails to deduct the whole or any part of the tax in accordance with the provisions of collection and recovery of tax on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident i. Has furnished his return of income under section 139 ii. Has taken into account such sum for computing income in such return of income and iii. Has paid the tax due on the income declared by him in such return of income .
And the person furnishes a certificate to this effect from an accountant in such form as may be prescribed''.
In accordance with the above proviso to section 201 of the Act, the deductees have furnished the Returns of income and have taken into consideration the sums received while computing the income and has duly paid the taxes thereon and further the certificate to this effect has been furnished in such form as per the mandate of the proviso and hence the assessee ought not to be treated as an assessee in default.
3.4 The authorised representative for assessee further :- 8 -: I.T.A.No.1939 to 1943/Mds/2014.
argued that once the proviso to section 201 has been duly complied with, the assessee cannot be treated as an assessee in default and hence the order of the assessing officer is bad not been appreciated in proper perspective by the Assessing Officer and the impugned order suffers from serious legal infirmity. The Hon'ble supreme court in the case of Hindustan coco cola beverage (P) Ltd vs. CIT reported in 293 ITR 226 (SC) held that on a perusal of the circular no.275/201/95-IT(B) dated 29th January 1997 issued by CBDT it puts an end to the controversy after the deductor has satisfied the officer in charge of TDS that taxes due have been paid by the deductee but however it held that interest under section 201(1A)of the act is leviable till the date of payment of taxes by the deductee.
3.5 In the case of CIT vs. Hindustan Lever Ltd reported in 216 Taxman 280 (Del), the high court of Delhi had an occasion to decide the issue of tax deduction with respect to similar set of facts with that of assessee therein. In that case the Delhi court held that section 194I of the act can be applied to cases where only the immovable properties are let :- 9 -: I.T.A.No.1939 to 1943/Mds/2014.
out and the High Court further held in order to bring the case for Tax deduction under section 194I the burden is on the revenue to establish that the payments are only for rentals and not otherwise.
3.6 The CIT (A) observed that considering the aforesaid case laws with that of the assessee's case, it is clear that the agreement for composite services and corroborated with the bills raised by them amply goes to prove that the payments made to the concerned persons are for rendering services and not for mere letting out of the property and therefore the deduction of Tax in accordance with Section 194C of the Act is in order.
3.7 The Commissioner of Income Tax (Appeals) observed that on a further analysis of the facts and materials made available and considering the provisions of law and the ruling of the court, it is made clear that the assessee has made the correct deduction of tax in terms of section 194C of the act and therefore the order of the assessing officer to levy additional tax in terms of section 201 of the act is erroneous :- 10 -: I.T.A.No.1939 to 1943/Mds/2014.
based on the misconception of facts and the law applicable thereto. Further the law laid down by the Honorable supreme court is very clear on the levy of Additional tax under section 201 of the Act and applying the law laid down by the Apex court in the case of Hindustan Coco Cola Beverages (P) Ltd vs. CIT reported in 293 ITR 226(SC) it fortifies the stand of the assessee since the deductees have admitted the sums received as income in their Returns filed and has paid appropriate Taxes there on. Further on applying the principles of law laid down by the Delhi High Court in the case CIT vs. Hindustan Lever Ltd reported in (2013) 216 taxman 280(Del) to the facts of the case, the Assessing officer by mere rejection of the agreement cannot infer that no services has been rendered by the deductees, there has been no material made available in the hands of the Department to prove that no services were rendered by the contractee to the assessee and hence the mere rejection of the latter agreement cannot be a ground for concluding that the payments have the characters of lease rental. 3.8 Considering the facts of the case and applying the :- 11 -: I.T.A.No.1939 to 1943/Mds/2014.
rulings of the Hon'ble Supreme Court, the Commissioner of Income Tax (Appeals) found the assessee has discharged its onus of having fulfilled the conditions laid down in terms of proviso to section 201 of the Act and therefore has to succeed in these appeals.
3.9 In view of the aforestated findings and conclusions, the CIT (A) came to the opinion that the order of the assessing officer is not in accordance with the law and hence the additional tax assessed/demanded and interest u/s 201(1A) there on are deleted and the appeals are allowed. Against this, the Revenue is in appeal before us.
4. The ld. Departmental Representative submitted that the Id Commissioner of Income Tax (Appeals) failed to take cognisance of the fact that the deductor itself has in its audited balance sheets for the year ended on 31.3.2009, 31.03.2010, 31.3.2011 and 31.3.2012 booked the expenditure relating to godowns under the head 'godown rent' and tax was also deducted u/s 194I. The CIT(A) erred in giving credence to the subsequent agreement dated 22.2.2006 which was nothing but an arrangement between the company and its shareholders to :- 12 -: I.T.A.No.1939 to 1943/Mds/2014.
hoodwink the liability u/s 194I more so when the lessors / directors have declared income from godowns under the head 'income from house property' and not as a business income. The directors have not offered any income from business or profession in their individual return of income. If the argument of the deductor that fresh service agreement was made is correct, as argued by the deductor, then the income from such service should have been offered in their individual returns of income as income from contract / business for taxation and not under house property. The Id CIT(A) erred in admitting fresh evidence for the first time the bills raised for services provided by the lessors which were never submitted before the AO. As per the audited books of accounts of the deductor the said payments were booked under the head 'godown rent' and TDS liability was admitted as per the provisions of section 194I.
4.1 The ld. Departmental Representative submitted that Commissioner of Income Tax (Appeals) ought to have called for a remand report from the AO on the fresh evidence submitted by the deductor, which is in violation of Rule 46A. The Id CIT(A) went by the form of the agreement for composite services which :- 13 -: I.T.A.No.1939 to 1943/Mds/2014.
was purportedly novated for original lease agreement without appreciating the fact that the deductor in its audited accounts and 44AB report admitted TDS liability u/s.194I which was remaining unpaid when the return of income was filed by the assessee. The deductor company in response to the show cause notice, filed a letter dated 1.5.2014 enclosing copy of revised agreement dated 22.2.2006 wherein it was stated that they are liable to deduct TDS only at the rate of 2% as applicable for contractors. The deductor only from 01.05.2014 started claiming that the payments to the Directors were in the nature of payment for certain services under contract and it cannot be treated as rent where TDS is to be deducted at 10%. The deductor has changed the version that the TDS rate of 10% is not applicable and started arguing that the applicable rate is only 2% as per the new service agreement. The Id CIT(A) failed to appreciate the fact that nothing prevented the deduct or to furnish the copy of revised agreement dated 22.02.2006 to the Assessing Officer prior to 01.05.2014 when the hearing of the case have been going on right from 31.08.2012. Even at that stage nor till the order was passed, the deductor has not furnished any bills or voucher before the Assessing Officer for verification, which has only been furnished :- 14 -: I.T.A.No.1939 to 1943/Mds/2014.
before the CIT(A) during the appellate proceedings. This only proves that the claim of the deductor was not proper and revised agreement was only to camouflage the true nature of the payments made between the parties and escape the liability under provisions of Chapter XVIIB of the Act. Even in the revised agreement, the basic focus is only storage, packing etc and the other services are only allied services like loading, unloading, dispatching, etc and the other services are done only when the other party requests for the same. Hence primarily it is only letting out of land and building for storage of goods in the nature of warehousing facilities. This apart, the auditors in their tax audit report u/s 44AB for the financial year 2009- 10 relevant to Asst year 2010-11 signed on 1.9.2010 have certified that the company has not remitted the TDS with respective authorities vide column 27(a) of the report and vide col 27(b)(iv) of the same report, the tax deducted but not paid to the credit of the central government is to the tune of M89,96,300/-. The Form No 3CA was also signed both by the CMD and auditor on 30.8.2012. If the revised agreement have come into force really on 22.02.2006, then the TDS dues would not be to the extent of M89,96,300/- as stated in form 3CD as the deductor would have deducted only at the rate of 2% which would be very much les; only when the TDS deducted was :- 15 -: I.T.A.No.1939 to 1943/Mds/2014.
at the rate of 10% then the TDS dues would be to the extent mentioned above. This is more so because the company has remitted only very meagre amount of TDS from financial year 2008-09 onwards. This show that either the form 3CD issued by the Chartered Accoutant for assessment year 2010-11 is bogus or that the version of the dedcutor has revised agreement has come into force on 22.02.2006 is false, because both does not tally. 4.2 The ld. Departmental Representative further submitted that fearing disallowance u/s 40(a)(ia) the deductor has not filed its income tax returns for A.Y.2011-12 onwards. This is supported by the fact that the deductor has not furnished the details called for by the AO in the summons issued till the date of order, viz. trial balance, profit and loss account and balance sheet for the period 1.4.2011 to 31.8.2012 of branch account, copy of signed Form 3CA and Form 3CD of the deductor for AYs 11- 12 and 12-13. It has also been ascertained from the jurisdictional AO wherein the company was assessed under PAN AACCR0240E, it was learnt that the company did not filed its return for AY 11-12 till the date of order, filed return for A.Y.10-11 and 12-13 only on 8.10.2011 and 30.4.2013 respectively, beyond the due dates stipulated by the :- 16 -: I.T.A.No.1939 to 1943/Mds/2014.
Income tax Act. Further, when the submissions were made to TDS Officer on 25.3.2013 all the directors of the company have on the same date, filed letter to their individual AOs stating that they have claimed TDS from the deductor company only at the rate of 2% even for earlier years. If the service agreement had actually taken place on 22.02.2006 as stated by the deductor and upheld by ld. Commissioner of Income Tax (Appeals), then what is the necessary for all the directors to file a letter only on 25.03.2013 to their respective AOs to reiterate that they have claimed only TDS at the rate of 2%. This fact has also been totally ignored by the ld.CIT. In addition to this all the lessees of the deductor company were deducting TDS only at the rate of 10% on the payments made to the deductor towards letting out of warehouse. Even the agreements between the deductor and its lessees clearly show that basic service is only letting out of godown and not based on allied services. The Id CIT(A) erred in holding that the decision of the Apex Court in Hindustan Coca Cola Beverage Private Limited is applicable in the instant case. 4.3 The ld. Departmental Representative further submitted that the Id CIT(A) failed to appreciate that the said decision is :- 17 -: I.T.A.No.1939 to 1943/Mds/2014.
applicable only where the deductee has declared the income in his income tax return and also paid the tax thereon. . It is submitted that even if the ratio of the Hon'ble Apex Court cited supra is applicable, then the deductor is liable for interest u/s 201(lA) on the TDS which ought to have been deducted by the deductor. In the instant case, the deductees are said to have filed their tax returns but they have not paid the taxes on the lease income received from the deductor. They have only sought credit for the tax deducted by the deductor company, when the company has not remitted the tax deducted to Central Government account. The deductor and the deductees have sought to retain the tax deducted without remitting it to Government and also tried to claim credit for the same in the income tax returns of the directors, which is clearly illegal and in violation of the provisions of the Act. The Hon'ble Supreme Court in the case of CIT vs Panipat Woollen & General Mills Co Ltd (103 ITR 66) has held that a party cannot escape the consequences of law merely by describing an agreement in a particular form though in essence and in substance it may be a different transaction. The decision relied on by Id CIT(A) in the case of National Panasonic India (P) Ltd reported in 94TTJ of Hon'ble Delhi Tribunal is not applicable to the facts of the case. In :- 18 -: I.T.A.No.1939 to 1943/Mds/2014.
that decision, it was held that where agreement or arrangement which gives rise to payment of rent must necessarily be an agreement or arrangement predominantly for use of land or building, then TDS has to be deducted at the rate applicable u/s 194I and not u/s 194C; that the case deals only with the business between a manufacturer and its agent, being C & F agent and prayed the appeal may be allowed.
5. The ld. Authorised Representative for assessee relied on the order of the Commissioner of Income Tax (Appeals).
6. We have heard both the parties and perused the material on record. The main contention of the ld. Departmental Representative is that the Commissioner of Income Tax (Appeals) should not have considered the subsequent rental agreement dated 22.02.2006 to suggest that the assessee earned business income as only as against original claim of the assessee as income from house property. According to Departmental Representative the Commissioner of Income Tax (Appeals) is not justified in giving credence to subsequent rental agreement. However, facts suggests that the assessee carried on business of warehousing activities in its godown which was letout to various persons. The income from ''warehousing'' is chargeable :- 19 -: I.T.A.No.1939 to 1943/Mds/2014.
under the head ''Business Income'' and not under the head ''income from House Property'' as held by jurisdictional High Court in the case of CIT vs. NDR Warehousing Pvt. Ltd 90 CCH 0249 (Chen) and also by the Bombay High Court in the case of Nutan Warehousing Company Ltd vs. DCIT 326 ITR 94. These facts are not controverted by the Department Representative. Being so, this is an admitted fact that once income of the letout of ware housing is treated as business income then tax deduction at source to be made u/s.194C of the Act. Being so, in our opinion the Commissioner of Income Tax (Appeals) is justified in observing that the assessee is liable to deduct tax at source u/s.194C, since the nature of the service rendered by the assessee is not only providing space but also providing warehousing activity and the income derived from such activity is ''business income'' and
7. not income from ''house property''.
8. Further, we make it clear that if the tax deducted and the same was deposited in the Government account, the due credit shall be given to that extent. If the recipient has declared income in their return of income, the assessee cannot be liable for payment of TDS once again in view of the judgment of Supreme Court in the case of Hindustan Coca Cola Beverage P. Ltd vs CIT reported in 293 ITR 226 :- 20 -: I.T.A.No.1939 to 1943/Mds/2014.
wherein it has been held that where deductee, recipient of income, has already paid taxes on amount received from deductor, department once again cannot recover tax from deductor on same income by treating deductor to be assessee in default for short fall in its amount of tax deducted at source. However, the department is at liberty to recover the amount of interest, if any, arising out of delayed payments of taxes under the provisions of Section 201(1A) of the Act from assessee. With these observations, we are inclined to dismiss the appeal of the Revenue.
9. In the result, the appeals of the Revenue in ITA Nos.1939 to 1943/Mds/2014 are dismissed.
Order pronounced on Tuesday, the 30th of June, 2015, at Chennai.
Sd/- Sd/-
(वी. दग
ु ा" राव) (चं पज
ू ार )
V. DURGA RAO (CHANDRA POOJARI)
या#यक सद य / JUDICIAL MEMBER लेखा सद य/ ACCOUNTANT MEMBER
चे#नई/Chennai.
$दनांक/Dated:30.06.2015.
KV
आदे श क त'ल(प अ)े(षत/Copy to: 1. अपीलाथ /Appellant 2. यथ / Respondent 3. आयकर आय+ ु त (अपील)/CIT(A) 4. आयकर आय+ ु त/CIT 5. (वभागीय त न.ध/DR 6. गाड फाईल/GF.
:- 21 -: I.T.A.No.1939 to 1943/Mds/2014.