TaxTMI 
TaxTMI 
2008 (5) TMI 311
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....nto an agreement with the Kanoria Sugar & General Mfg. Co. Ltd. vide licence agreement dt. 9th July, 2001 to the licensing of the right to manufacture including production, operation and maintenance of the unit and in consideration of the premises made the agreement on the terms and conditions for the period of 90 months. According to the agreement, licensor and licensee have shown interest to undertake the activities by means of taking over right for production or manufacturing of AC pressure pipes to utilize all the production facilities provided at the premises of the company including use of all facilities, utilities, machines, factory, office premises, and the residential quarters which are in Sch. A, Band C as part of the agreement. The licensee shall pay the licence fees to Ramco Ind. Ltd. as under: (i) As per cls. 7 and 8 of the agreement-minimum fees is Rs. 40 lakhs if the production is below 10,000 tonnes. (ii) Rs. 400 per ton on production upto 20,000 tonnes. (iii) Rs. 500 per ton on that portion of production in excess of 20,000 tonnes. 4. As per cl. 20 of the agreement, the licensee shall be free to sub-let or under-let the whole or part o....
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....e also because in that case, agreement was not for renting out the premises but for managing and conducting restaurants/food outlets on payment of royalty/commission on which the owner had complete control. The AO noted that as per the licence agreement in this case, the assessee shall have to pay the minimum licence fees and other fees as noted above for permitting the licensee to utilize all the production facilities provided in the premises of the licensor including use of all the facilities, utility, machine, factory, office, tools, equipments and residential quarters as per schedule attached with the agreement. The AO therefore, held that it is a composite agreement for whole of the factory including plant and machinery, etc. subject to payment noted above. The AO therefore, held that provisions of s. 194-I are applicable and that since the assessee failed to deduct tax at source, therefore, the assessee shall be deemed to be in default under s. 201(1)/201(1A) of the Act, and as such, assessee is liable for tax and the interest in all the financial years under consideration. Assessee was directed to pay total demand of Rs. 7,32,849, Rs. 16,39,692 and Rs. 10,87,005 in all the f....
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....de and if the same is taken care of, the short fall in TDS/advance tax paid by it is less than 10 per cent of the tax due as per return. The self-assessment tax paid by it along with interest is only in respect of other business income of the licensor. The assessee relied upon several decisions in support of the contention that when tax is paid by the payer, the assessee cannot be treated to be assessee in default of the tax. The submission of the assessee and evidence filed were forwarded to the AO for the remand report. The Addl. CIT, Range-2, filed his comments before learned CIT(A) in which, it was precisely explained that assessee entered into lease agreement and paid the lease rent to M/s Ramco Ind. Ltd. for use of land and building including factory building and assessee was allowed to utilize all the production facilities in the premises of the licensor including the office premises and residential quarters. The assessee is also entitled to sublet or under-let whole or part of the said factory to any other company. The AO therefore, submitted that entire factory building including quarters etc. were let out to the assessee therefore, it is a case which falls under s. 194-I ....
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....ing of the return under s. 143(1)/passing of the assessment order under s. 143(3), whichever is earlier of each assessment year of M/s Ramco Ind. Ltd. 10. The learned CIT(A) considering submissions of the assessee and material on record noticed that since the appropriate taxes on such income have been apparently paid by the recipient/payee/licensor. M/s Ramco Ind. Ltd. (subject to necessary verification and confirmation by the AO) such amount cannot be again recovered from the assessee as per clear judicial views available on the subject as are cited by the assessee before him because same would amount to double taxation. The appeals of the assessee were accordingly partly allowed. 11. Learned counsel for assessee did not press ground No. 3 in all the appeals of the assessee. The same are therefore, dismissed. Now, we take up the remaining grounds in both the appeals for disposal of the appeals as under: Departmental appeals-IT Appeal Nos. 176 to 178/Ind/2005 12. In all the Departmental appeals, the Revenue has taken argumentative grounds of appeals. Learned Departmental Representative submitted that no evidence has been furnished to substantiate that tax on the related....
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....ance tax on the licence fees accrued to it. The details are noted by learned CIT(A) on p. 9 of the appellate order also which would therefore, prove that the licensor has substantial income in crores on which proper taxes have been paid, which includes the income from licence fees. The shortfall in TDS/advance tax is less than 10 per cent of the tax as per the return upon which self-assessment tax is paid along with interest. The assessee therefore, cannot be treated to pay tax under s. 201 for non-deduction of TDS. He has relied upon decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages (P) Ltd. vs. CIT (2007) 211 CTR (SC) 545 : (2007) 293 ITR 226 (SC) in which Hon'ble Supreme Court held "without deciding the question whether the Tribunal could have reopened the appeal for rectifying an error apparent on the record, that, in view of Circular No. 275/201/95-IT(B), dt. January, 1997, and since the assessee had paid the interest under s. 201 (IA) and there was no dispute that the tax due had been paid by the deductee (Pradeep Oil), the Tribunal came to the right conclusion that the tax could not be recovered once again from the assessee." He has also ....
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....M/s Ramco Ind. Ltd. and copy of the computation of their income and acknowledgement of filing of return. All taxes are paid quarterly. The decisions cited above are therefore, directly applicable to this case. Therefore, we do not find any merit in the Departmental appeals. Even otherwise, the learned CIT(A) allowed the claim of, assessee subject to verification by the AO therefore, there should not have been any grievance against the order of the learned CIT(A). The Departmental appeals fall and are accordingly dismissed. Assessee's appeals-ITA Nos. 115 to 117/Ind/2005 16. On ground No. 1 in all the appeals of the assessee. the assessee challenged the order of the learned CIT(A) in upholding that provisions of s. 194-I of the IT Act are applicable to the amount of licence fees paid/payable to M/s Ramco Ind. Ltd. for utilization of its production facilities. 17. Learned counsel for assessee reiterated the submissions made before authorities below and referred to pp. 1 to 12 of the paper book, which is licence agreement and also referred to pp. 13 to 140 which are details of the plant and machinery given on licence to the assessee. Paper book 143 is the details of the r....
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....king of factory building and quarters was thus not essence to the agreement therefore, provisions of s. 194-I are not applicable in this case. He has relied upon order of Tribunal, Delhi Bench, in the case of National Panasonic India (P) Ltd. vs. Dy. CIT (2005) 94 TTJ (Del) 899. 18. On the other hand, learned Departmental Representative relied upon orders of the authorities below and submitted that burden is on the assessee to prove that provisions of s. 194-I are not applicable. Learned Departmental Representative submitted that entire factory building and plant and machinery were given to the assessee therefore, it was a composite agreement to give the entire land and building in question along with right to manufacture therefore, the case of the assessee would fall under s. 194-I of the IT Act. 19. We have considered rival submissions and material available on record. Sec. 194-I of the IT Act provides- "Any person, not being an individual or an HUF, 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 dr....
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....premises, spare parts, tools and equipments, essential for efficient running of the said unit, along with residential quarters also. The assessee is entitled to sublet or under-let the whole or part of the factory building or plant and machinery. It would therefore, clearly prove that entire factory building including plant and machinery for manufacturing facilities has been given through the agreement to the assessee and the minimum payment was definitely a consideration for use of entire facility including land and building including factory building and furniture and fittings and plant and machinery. The agreement in question is therefore, composite agreement for the whole factory building including plant and machinery and residential quarters and the consideration paid is for the entire factory building including plant and machinery. The assessee has not clarified as to how it can use effectively the plant and machinery without using the factory building. The details of gross block of fixed assets on 31st March, 2003 as filed at paper book-A/13 show that the total gross value of land. building and plant and machinery was Rs. 9,35,08,298 out of which, the value of plant and mach....
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....concept. Once the rent is comprehended as a composite concept then it is not capable of being fragmented". Learned CIT(A) also referred to the decision of Hon'ble Andhra Pradesh High Court in the case of Krishna Oberoi in which, the word "rent" in context of s. 194-I has been examined and it was held that the rent has been defined in a wider sense to include not only consideration paid under a lease or sub-lease or tenancy but also the consideration paid under any other agreement or arrangement for the use of any land or building, etc. It was further held that the assessee was engaged in running of five star hotel and customers are provided furnished rooms and other facilities for consideration which is known as room charges. However, certain companies entered into agreement to utilize hotel services for accommodating their officials and lesser amount is charged. In that context, the petitioner approached the corporate customers requesting them not to deduct TDS under s. 194-I. It was therefore, held that the charges paid to the petitioner by its customers for use and occupation of hotel rooms should be regarded as rent within the meaning of s. 194-I. Learned CIT(A) also noted ....
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....e date of payment of such tax by the recipient/payee. The learned CIT(A) also noted that the advance tax paid by the payee cannot be treated as tax paid with reference to the amount received by such payee from the tax deductor, as such the advance tax remains consolidated amount without any specific appropriation towards the specific amount with reference to which such taxes have been paid. He further observed that only on such payee filed return of income including therein, the amount received in the nature of income from the tax deductor, thereafter such amount is so appropriated by the Department by passing the order. Since learned CIT(A) already held that taxes have already been paid by the payee M/s Ramco Ind. Ltd., therefore, AO was directed to recalculate interest under s. 201(1A) with reference to the terminal date of processing of return under s. 143(1)/regular assessment order under s. 143(3), whichever is earlier, in the case of M/s Ramco Ind. Ltd. 24. Learned counsel for assessee reiterated the submissions made before authorities below and submitted that this finding of the learned CIT(A) is not in accordance, with law. He has submitted that though interest is mandat....