2018 (11) TMI 786 - AT - Income Tax

Appellant's Tax Liability Reconsidered: Precedent Shifts Assessment

M/s. Atlantic Bay Shipping Company Versus Dy. Commissioner of Income Tax – TDS 1 (1), Mumbai

M/s. Atlantic Bay Shipping Company Versus Dy. Commissioner of Income Tax – TDS 1 (1), Mumbai - TMI Issues:1. Whether the appellant was correctly held as an assessee in default for not deducting tax under section 194J of the Income Tax Act.2. Whether the appellant's liability for tax deduction should be under section 194C instead of section 194J.3. Whether the appellant can be considered an assessee in default if the deductees have paid the taxes directly.4. Whether the decision in a previous case involving a similar issue should be followed.Analysis:1. The appellant contested being held as an assessee in default for not deducting tax under section 194J. The AO observed that the appellant failed to deduct tax u/s.192 from the wages paid to crew members, leading to the default status. The learned CIT(A) found the services rendered qualified as fees for professional services under section 194J. However, based on the Hindustan Coca Cola Beverages case, it was argued that if the deductees paid the taxes, the appellant should not be considered in default.2. The appellant argued that their liability for tax deduction should fall under section 194C instead of 194J. The appellant's business involved supplying shipping crews to a company, and a tripartite agreement was in place. The Tribunal in a similar case emphasized the need to determine the nature of relationships between the parties involved to ascertain the correct tax liability. The Tribunal directed a fresh examination of the issue, considering the specific circumstances.3. The appellant raised the issue of whether they could be considered an assessee in default if the deductees had paid the taxes directly. The learned CIT(A) directed the AO to compute the tax liability following the Hindustan Coca Cola Beverages case, where it was held that if taxes were paid by the deductees, the appellant should not be treated as an assessee in default. The Tribunal upheld this direction, emphasizing the importance of following higher court decisions.4. The Tribunal considered a previous case involving a similar issue and decided to follow the precedent set in that case. The Tribunal remanded the matter to the lower authorities with directions to examine the applicability of section 194J based on the previous decision. The Tribunal held that the decision in the earlier case should guide the current judgment, leading to the allowance of the appeals for statistical purposes.