TaxTMI 
TaxTMI 
2015 (7) TMI 519
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.... 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 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 activat....
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....t 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 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) ....
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....16 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 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....
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....t between the company and its shareholders to 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....
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.... 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 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 l....
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....ductor 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 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 ord....