TaxTMI 
TaxTMI 
2013 (8) TMI 1013
X X X X Extracts X X X X
X X X X Extracts X X X X
....eals is being disposed of by a consolidated order. 2. In ITA No.614/Rjt/2012, the assessee has taken the following grounds of appeal:- "The grounds stated here under are independent of and without prejudice to one another: Ground I: Treating payment of Waterfront Royalty amounting to Rs. 19,382,533 to Gujarat Maritime Board ('GMB') to be in the nature of Rent and liable to Tax Deduction at Source ('TDS') under section 194-I of the Act. 1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals)-II, Rajkot ['CIT(A)'] has erred in confirming the order of the Deputy Commissioner of Income-tax - TDS Circle, Rajkot ('TDS Officer') that Waterfront Royalty paid by the Appellant to GMB under the Pipavav Concession Agreement is rent and therefore subject to TDS under Section 194-I of Income-tax Act, 1961 ('the Act'). 1.2 The Appellant prays that it cannot be treated as 'assessee in default' under Section 201 of the Act in respect of payments made to GMB. Ground II: Levy of interest under Section 201 (1A) at the rate of 1.5 percent for the period from 1 July 2010 to 25 Mar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e by the assessee in this behalf. We find that the issue raised by the assessee in the additional grounds of appeal is purely legal issue. We therefore admit them for adjudication. 5. The ITA No.641/Rjt/2012, the Revenue has taken following grounds of appeal:- "1. The Ld. CIT(A) has erred in law as well as facts of the case in deleting the order u/s 201(1) of the I.T. Act of Rs. 32,62,080/- and interest charge under section 201(1A) of the I.T. Act of Rs. 21,04,042/- for A.Y. 2006-07 by treating the "GMB has already paid all the taxes for the captioned year, the same cannot be again recovered from the appellant" of the A.O. 2. The Ld. CIT(A) erred in not considering the fact that the assessee has neither submitted the copy of return of income of GMB nor any evidences with regard to his claim, it has just suffice that GMB has filed its return of income with the Income-tax Department within due date. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 4. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 5. It is, therefore, prayed that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng Officer, the assessee explained that the amount paid in pursuance of Concession Agreement was not in the nature of rent as defined in section 194I and therefore the assessee was not required to deduct the tax at source u/s 194I. It was further explained that the assessee had deducted the tax at source out of the aforesaid payments entered into books as wharfage charges u/s 194J by way of abundant caution although the assessee was not required to deduct the tax at source even u/s 194J. The Assessing Officer however held that the payments made by the assessee by way of wharfage charges to Gujarat Maritime Board were in the nature of rent as defined in section 194I and therefore the assessee was required to deduct tax at source u/s 194I and not u/s 194J. Since the assessee did not deduct the tax at source out of the wharfage charges paid to Gujarat Maritime Board, the Assessing Officer treated the assessee in default u/s 201(1) and accordingly called upon the assessee to pay a sum of Rs. 32,62,080/-u/s 201(1) in addition to interest amounting to Rs. 21,04,042/- u/s 201(1A). Similar order was passed by the Assessing Officer for the Assessment Year 2007-08. 9. Aggrieved by the ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cified rate and specified period on regular basis, though the basis is dependent on volume and nature of handling of the cargo during the month. "Rent" means any payments, by whatever name called, under any lease or any other agreement or arrangement for the use of any land etc. The meaning of "rent" in sec. 194I is wide in its ambit and scope. During the course of proceedings, the appellant has harped on the argument of inadvertent mistake in recording the payment under the head 'wharfage charges' but has not explained as to why it has deducted tax at source even u/s 194J while claiming that the payment under consideration was not liable for TDS under either of the provisions i.e. 194I or 194J. Thus, the ground taken by the appellant by challenging the action of the Assessing Officer who treated the water front royalty payment in the nature of rent is rejected. 7.0 Now coming to the second ground with regard to the fact that the GMB has already paid all the taxes for the captioned year, the same cannot be again recovered from the appellant. In view of the decisions relied upon by the appellant in its submission dated 8th August, 2012 as filed in this office on 13th Augu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on Co. (P.) Ltd. [2009] 29 SOT 495 (Jodh.). 11. In reply, the ld. Departmental Representative supported the order passed by the Assessing Officer. He also relied upon various clauses of the Concession Agreement and submitted that the assessee itself has shown the impugned payments as wharfage charges in the books of accounts which obviously means that the payments were made for using the wharf on monthly basis and therefore the Assessing Officer and the ld CIT(A) have rightly held that the provisions of section 194I were applicable to the assessee and not section 194J. His second submission was that exemption was not available to Gujarat Maritime Board u/s 10 of the Income-tax Act. According to him, Gujarat Maritime Board was required to file return of income for claiming exemption u/s 11 of the Income-tax Act and therefore the assessee was required to pay interest till the completion of assessment of Gujarat Maritime Board. In this connection he relied upon Circular No.4/2002 dated 16.07.2002 issued by the Board. In support of his submissions, he relied upon several decision, e.g., CIT v. D. Rathinam [2011] 335 ITR 101/197 Taxman 486/9 taxmann.com 239 (Mad.); CIT v. Reebok Indi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he sake of being conveniently loaded or unloaded, or a space of ground, artificially prepared, for the reception of merchandise from a ship or vessel, so as to promote the discharge of such vessel. "Water-front" means land or land with buildings fronting on a body of water. After careful perusal of both the agreements, namely, the Lease & Possession Agreement and the Concession Agreement, we are convinced that the impugned payment shown by the assessee in its books of accounts as wharfage is, in substance, nothing but payment made for using the land together with structure on the margin or shore of navigable waters alongside of which vessels were brought for the sake of being conveniently loaded or unloaded. Waterfronts are part of land and therefore any payment in lieu of its use would squarely fall under the definition of rent as given in section 194(i) of the Income-tax Act. In our view, the ld CIT(A) has correctly appreciated the factual and legal aspects of the case. His order in this behalf is therefore confirmed. 14. Apropos the applicability of section 194J to the impugned payments, it was submitted by the ld. Authorized Representative for the assessee that impugned paym....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hand, has relied on Circular No.4/2002 dated 16.07.2002 issued by the Central Board of Direct Taxes and submitted that such a concession was available in respect of payment to those institutions only whose income were unconditionally exempt u/s 10 and who were also not statutorily required to file the return of income as per the provisions of section 139. He submitted that the income of Gujarat Maritime Board was neither exempt u/s 10 of the Income-tax Act nor was the said Board exempted from filing the return of income as per the provisions of section 139. For the sake of convenience, the aforesaid circular is reproduced herewith:- "1. Subsequent to the amendment to section 197A made by the Finance Act, 2002 whereby a new sub-section (1B) has been inserted with effect from 1st June, 2002, representations have been received seeking clarification whether the prescribed self-declaration under the said section can be submitted by entities exempt from tax under section 10 even if the payments referred to in sub-section (1A) to be made to them exceed the threshold limit not subject to tax. 2. This matter has been examined by the Board. It has been decided that in case of those fun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....v) of clause (25); (xii) Employees' State Insurance Fund referred to in clause (25A); (xiii) Corporations referred to in clause (26BB); (xiv) Boards referred to in clause (29A)." 16. We have considered the submissions made by both the parties and also perused the authorities referred to by them. Ld. Departmental Representative is right in his submission that the income of the payee, i.e., Gujarat Maritime Board, is not unconditionally exempt from tax u/s 10. The said Board is also not exempted from filing return u/s 139. The fact as to whether the impugned sums have been taken into account by the payee for computing its income cannot be ascertained till the return of income is filed by the payee and requisite evidence in this behalf is furnished by the payer/deductor before the AO. It is the case of the Revenue in its grounds of appeal that such evidence was not filed by the assessee. In order to address such issues and ensure uniformity, simplicity and objectivity in matters as those before us, the TDS provisions have since been rationalised. A Proviso (i.e., first proviso) has been inserted in sub-section (1) of section 201 with effect from 01.07.2012 according to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....also proposed to provide that where the payer fails to deduct the whole or any part of the tax on the payment made to a resident and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the such resident, the interest under section 201(1A)(i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident payee. Amendments on similar lines are also proposed to be made in the provisions of section 206C relating to TCS for clarifying the deemed date of discharge of tax liability by the buyer or licensee or lessee. These amendments will take effect from 1st July, 2012." 18. First Proviso inserted in sub-section (1) of section 201 seeks to achieve three-fold objectives. One, it seeks to (1) ensure that there is no loss to the Revenue, i.e., (i) the resident payee has furnished his return of income u/s 139, (ii) the resident payee has taken into account such sum on which tax was required to be deducted at source for computing income in such return of income, (iii) the resident payee has paid the tax due on the income declared by him in such return of income, (....