TaxTMI 
TaxTMI 
2015 (8) TMI 80
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.... on facts in holding that the assessee was liable to deduct tax at source @ 1% instead of 2% u/s 194C of the I.T. Act on payments made by the assessee to M/s. Max Logistics (P) Ltd. treating it as a subcontractor instead of contractor." 2.1 Brief facts of the case are that the assessee is a State Govt. Undertaking incorporated with the objects to aid, counsel, assist, finance, protect and promote the interest of small industries in state of Rajasthan. During the course of carrying out its objects, the Commissioner of Custom and Central Excise, Jaipur vide public notice no,. 15/95 (customs) dated 19-07-1995 appointed the assessee as the custodian of imported goods received in containers which landed at ICD, Jodhpur until they are cleared fo....
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....or; liability for TDS was fixed @ 2% u/s 201(1) and the interest was charged u/s 201(1A). 2.2 Aggrieved, the assessee went in first appeal where the ld. CIT(A) referred to custom departments notification and various clauses of the agreement and the Schedules appended thereto. After considering the assessee's submissions, notification, agreements and other materials available on record, the ld. CIT(A) held the transactions between Custom department and assessee to be of a contractor and relations of M/s. Max Logistics (P) Ltd. with assessee as a sub-contractor liable for TDS @ 1% by following observations. "4.3 I have carefully considered the findings of the AO as also the submission of the appellant. It may be noted that the only disp....
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....ntly assigned in part to M/s. Logistic (P) Ltd. and that accordingly TDS @ 15% was correctly deducted as such transactions were in the nature of sub-contract. On careful consideration of all relevant facts including perusal of agreement between the assessee and Department of Central Excise and Customs as also agreement between assessee and M/s. Logistic (P) Ltd., it is noted that assessee has delegated only part of that work which was assigned to the assessee originally by the Department of Central Excise and Customs. It is noted that the assessee was declared Custodian of ICD, Jodhpur by Department Central Excise and Customs and part of the same work were subsequently delegated/ assigned by the assessee to M/s. Logistic (P) Ltd. and accord....
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....sthan State Govt. Undertaking and it was found that the assessee was not deducting proper TDS. According to the public notice no. 20/89-Customs, it is clearly stated that RAJSICO has been termed as the custodian of the goods at ICDs and the charges received by it cannot be covered under any contractual payment and consequently its arrangement with M/s. Logistic (P) Ltd. should be considered as of a contract rather than sub-contractor. Status of RAJSICO was that of a custodian with a liberty to assign contract to any party to handle the works. Thus RAJSICO in its own right could issue contracts. From the contents of the agreement dated 13-06- 2007, it is amply clear that M/s. Logistic (P) Ltd. was a contractor and not a sub-contractor for th....
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....2) The said M/s. Max Logistics (P) Ltd. has paid all due taxes on its income. In view thereof, Hon'ble Supreme Court judgments in the case of Hindustan Coca Cola Beverages (P) Ltd. vs. CIT, 293 ITR 226 (SC) & CIT vs. Eli Lilly & Company (I) (P) Ltd. 312 ITR 225 are fully applicable and in this situation holding the assessee in default and recovery of the demand amounts to double taxation. The same has been held to be not tenable by the Hon'ble Supreme Court in these judgments. (iii) The assessee is a State Govt. Undertaking; the TDS is deducted after seeking the opinion from its legal Department and after due consultation. In any case, this is a case of holding bona fide belief the Max Logistics was a sub contractor. On this count ....
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....loss, damage in transit. (vi) The Custodian shall not charge or collect any demurrage charges after detention; certificate is issued by the Customs Department. (vii) The Custodian shall be responsible for proper receipt, handling and storage of goods and also shall maintain proper records of all such goods." The Hon'ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. vs. CIT 82 ITR 363 (SC) held that in income tax proceedings it is imperative to ascertain the real nature of the transaction. The nature should not merely be decided on the basis of book entries or use of common terminology. The word 'Custodian' is used in the public notice is emphasized by ld. AO to hold that there is no contract between custom and asses....