IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NOS. 1513 TO 1515/MUM/2013 : (A.Ys : 2009-10, 2010-11, & 5459/MUM/2013 2008-09 & 2011-12) ITO, TDS-1(2), Vs. M/s. Chinubhai Kalidas & Bros. Mumbai (Appellant) 2nd floor, Kulkarni Patil Bhavan, 14, Murzaban Road, Mumbai 400 001 (Respondent) PAN : AACFC2969G Assessee by : Shri Dilip Damle Revenue by : Shri Rakesh Kumar Agarwal Date of Hearing : 09/09/2016 Date of Pronouncement : 23/09/2016 ORDER PER G.S. PANNU, AM : captioned four appeals preferred by Revenue pertaining to Assessment Years 2008-09, 2009-10, 2010-11 and 2011-12 involve common issues relating to same assessee. Since appeals relate to single assessee and involve common issues, they have been clubbed and heard together and consolidated order is being passed for sake of convenience and brevity. Appeal for Assessment Year 2008-09 is taken as lead case to appreciate controversy. 2 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 ITA No.1515/MUM/2013 (A.Y 2008-09) 2. captioned appeal by Revenue is directed against order of CIT(A)-14, Mumbai dated 23.11.2012, pertaining to Assessment Year 2008-09, which in turn has arisen from order passed by Assessing Officer, Mumbai dated 30.3.2011 under section 201(1) and 201(1A) of Income Tax Act, 1961 (in short Act ). 3. In this appeal, Revenue has raised following Grounds of appeal :- 1. Ld. CIT(A) has erred on facts and in circumstances of case and in law in deleting addition of short deduction determined on account of TDS payment made to CWC, CFS BPT, AAI u/s. 194I and without properly appreciating factual and legal matrix of case as clearly brought out in order u/s. 201(1)/201(1A) of Income-tax Act, 1961. 2. Ld. CIT(A) has erred on facts and in circumstances of case and in law in not appreciating fact that definition of rent in explanation (1) to section 194I is very wide in its ambit and includes within its sweep, payment by whatever name called which is paid pursuant to any agreement or arrangement. 3. Ld. CIT(A) has erred on facts and in circumstances of case and in law in deleting addition on account of TDS payment towards survey fees made u/s. 194J and without properly appreciating fact that services require technical or professional knowledge and payments were effected by assessee to respective parties for rendering such specialized professional/technical services. 4. Ld. CIT(A) has erred on facts and in circumstances of case and in law in deleting addition on account of TDS payment towards Internet Charges made u/s. 194J, without properly appreciating fact that 3 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 services require technical or professional knowledge and payments were affected by assessee to respective parties for rendering professional/technical services. 5. Ld. CIT(A) has erred on facts and in circumstances of case and in law in deleting addition on account of TDS payment towards hiring of forklift/cranes charges made u/s. 194I and treating same as TDS payment u/s. 194C, without properly appreciating fact that charges were for hiring/rental of machineries which attracts provisions of section 1941 of I.T. Act, 1961. 6. Ld. CIT(A) has erred on facts and in circumstances of case and in law in deleting addition on account of TDS payment towards Fumigation Charges made u/s. 194J and treating same as TDS payment u/s. 194C of Act, without properly appreciating fact that services require technical or professional knowledge and payments were affected by assessee to respective parties for rendering professional/technical services. 7. Ld. CIT (A) has erred on facts and circumstances of case and in law by deleting interest levied u/s. 201(1A) of I.T. Act 1961 by holding that payment of CWC, CFS, BPT, AAI, Forklift/Crane Charges does not fall within purview of section u/s. 194I and Survey fees, Internet Charges and Fumigation charges u/s. 194J of I.T. Act. 8. Ld. CIT(A) has erred on facts and in law in deleting demand of Rs. 94,24,617/- on account of short deduction of tax on payments of CWC, CFS, BPT, AAI, Forklift/Crane Charges does not fall within purview of section u/s. 194I and Survey fees, Internet Charges and Fumigation charges u/s. 194J of I.T. Act., without appreciating factual and legal matrix of case, as clearly brought out by A.O. in his order u/s. 201(1) / 201(1A) of Income-tax Act, 1961. 9. learned CIT(A) has erred on facts and circumstances & in law in deleting interest u/s 201(1A) of IT Act, 1961 on short deduction of tax determined by AO as tax determined has already been deleted by him and interest deletion is consequential to quantum deletion for which 4 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 further appeal has been recommended vide ground No.1 to 8. 4. Before we proceed to adjudicate individual Grounds of appeal, brief background can be summarized as follows. respondent-assessee is Partnership firm which is, inter-alia, engaged in business of Customs House Agent (CHA) in accordance with licensing conditions prescribed by Customs Act, 1961. survey action u/s 133A of Act was carried out in premises of assessee on 24.2.2011 in consequence of which orders u/s 201(1) and 201(1A) of Act were passed by Assessing Officer for captioned Assessment Years. For Assessment Year 2008-09, Assessing Officer found assessee as assessee in default for not having deducted tax at source under various sections prescribed in Chapter XVII-B of Act. As consequence, demand of Rs.94,24,617/- was determined u/s 201(1) r.w.s. 201(1A) of Act. assessee firm carried matter in appeal before CIT(A) who has disagreed with Assessing Officer and allowed pleas of assessee on various issues against which Revenue is in appeal before us. 5. first issue before us is manifested by Ground of appeal nos. 1 and 2, wherein as per Assessing Officer, assessee ought to have deducted tax at source u/s 194I of Act on payments made to Central Warehousing Corporation (CWC), Container Freight Station (CFS), Bombay Port Trust (BPT) and Airport Authority of India (AAI) for services rendered by such entities which included use of space for storage of imported/exported materials. As per Assessing Officer such payments were to be construed as payment of rent within meaning of Sec. 5 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 194I of Act and thus, assessee having not deducted tax at source, was assessee in default in terms of Sec. 201(1) and 201(1A) of Act. plea of assessee, which has been accepted by CIT(A), is that such payments have been made on behalf of its clients/customers for which assessee claimed reimbursement from its clients. It was, therefore, asserted by assessee that same did not constitute expenditure for assessee so as to be construed as rent within meaning of Sec. 194I of Act. It was also explained that such expenses, for instance, Freight Station Charge (CFS) are statutory expenses which are paid for removal of material from ship/steamer. All such charges are paid on behalf of importer/exporter which are reimbursed to assessee on actual basis against receipts issued to assessee by recipients. CIT(A) has in his detailed order upheld plea of assessee that on such payments no deduction of tax at source is required to be made u/s 194I of Act. Pertinently, CIT(A) has also referred to Handling of Cargo in Customs Areas Regulations, 2009 issued by Department of Revenue, Ministry of Finance and other regulatory provisions to cull out obligations and responsibilities of Customs House Agent. On this basis, he has observed that respondent-assessee, who is Customs House Agent (CHA), only acts as intermediary and its services are consumed by respective importer/exporter and that any arrangement reflected by impugned payments is to be viewed between such importer/exporter and ultimate recipients of payments, namely CWC, CFS, BPT and AAI. In this background, CIT(A) held that assessee had no obligation to deduct tax at source u/s 194I of 6 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 Act, and therefore, it could not be treated as assessee in default within meaning of Sec. 201(1) and 201(1A) of Act. 6. Against aforesaid, only plea brought out by ld. DR is that meaning of expression rent used in Sec. 194I of Act is very wide and would include within its sweep payment by whatever name called, made in pursuance of any arrangement or agreement and, therefore, under present circumstances payment made by assessee constituted rent which was liable for deduction of tax at source u/s 194I of Act. 7. On other hand, learned representative for assessee pointed out that Department had taken similar action in multiple set of cases involving Customs House Agents and that in few of such cases, Tribunal has already adjudicated issue and upheld stand of assessee that such payments are not liable for deduction of tax at source u/s 194I of Act. In this context, our attention was drawn to following decisions, wherein stand of assessee has been upheld: i) CIT v. Cargo Linkers, (2008) 218 CTR (Del) 695 ii) Hah Logistics v. DCIT ITA No. 1864/Del/2011 iii) DCIT v. Jay Kay Freighters Pvt. Ltd., ITA No. 3407/Del/2011 iv) ITO v. M/s. Universal Traffic Co. & ITO v. M/s. Express Transport Pvt. Ltd., ITA Nos. 1426 to 1429/Mum/2013 and 1473 to 1475/Mum/2013 Apart therefrom, reliance has been also placed on another decision of Tribunal in case of M Dharamdas and Company, ITA Nos. 7 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 1505 to 1507/Mum/2013 dated 10.7.2015, wherein undersigned was one of Members constituting Bench, wherein also, plea of assessee has been upheld. 8. On other hand, ld. DR has not referred to any contrary decision. In this view of matter and considering findings of CIT(A) noted above, which have not been controverted by Department before us, we approve conclusion of CIT(A) that payments made to CWC, CFS, BPT and AAI cannot be construed as rent for purposes of Sec. 194I of Act. Thus, insofar as Ground of appeal nos. 1 and 2 are concerned, same are dismissed. 9. issue raised by Revenue in Ground of appeal no. 3 relates to survey fees paid by assessee on which no tax was deducted at source. stand of Assessing Officer is that such payments are liable for deduction of tax at source u/s 194J of Act on ground that such payments are in nature of fees for professional or technical services. On this aspect also, CIT(A) has differed with Assessing Officer and held that assessee was not liable for deduction of tax at source u/s 194J of Act. As per CIT(A), service fees is paid to persons or agencies for inspection of goods which is required to be done while importing/exporting goods. CIT(A) has noted that such inspection of cargo is one of integral steps in customs clearance procedure at export stations and that while making such payments, assessee only acts as intermediary because such payments are made on behalf of importers/exporters and assessee thereafter obtains reimbursements. Thus, CIT(A) held that assessee cannot be 8 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 construed as assessee in default within meaning of Sec. 201(1) and 201(1A) of Act as assessee had no obligation to deduct tax at source. 10. On this aspect of controversy also, we find no error on part of CIT(A) because payments have been made by assessee in capacity of intermediary between its client exporter/importer and recipients who have conducted inspection of goods so as to facilitate customs clearance. reasoning adverted by CIT(A) is similar to that considered by us while dealing with payments made to CWC, CFS, BPT and AAI and, therefore, conclusion drawn by CIT(A) to effect that assessee cannot be construed as assessee in default within meaning of Sec. 201(1) and 201(1A) of Act is hereby upheld. Thus, in Ground of appeal no. 3 also Revenue fails. 11. issue raised by Revenue in Ground of appeal no. 4 relates to internet charges paid by assessee on which no tax was deducted at source. fact-position is that such payments have been made by assessee-firm to concerns providing broadband facilities. As per Assessing Officer, payments have been made for obtaining technical service and, therefore, tax was liable to be deducted at source u/s 194J of Act. Notably, Sec. 194J of Act prescribes for deduction of tax at source on payments made for obtaining any managerial, technical or consultancy services, as also for services of technical or other personnel, which could be regarded as fees paid for technical services. stand of assessee was that broadband company did not provide any technical knowledge to assessee and that broadband 9 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 service provider was having standard network facility and assessee or any other person is allowed to avail such facilities to connect to internet. plea of assessee was that internet connectivity has been availed by it for its business purpose. CIT(A) has held that when assessee utilizes standard telecommunication network facility belonging to service provider, it does not involve rendering of any technical services so as to require payer to deduct tax at source u/s 194J of Act. In coming to such decision, CIT(A) has relied upon judgment of Hon'ble Madras High Court in case of Skycell Communications Ltd. vs. DCIT, 251 ITR 53 as also decision of Chandigarh Bench of Tribunal in case of HCL Infotel Ltd. vs. ITO (99 TTJ 440). Against such decision, Revenue is in appeal before us. 12. After considering rival stands on this issue, in our view, parity of reasoning laid down by Hon'ble Madras High Court in case of Skycell Communications Ltd. (supra) clearly covers controversy against Revenue. In case before Hon'ble Madras High Court, it has been held that mobile telephone facilities provided by cell phone companies to their subscribers for making/receiving calls etc. cannot be construed as technical services and thus, it cannot be brought into ambit of Sec. 194J of Act. In present case, when assessee is availing internet services from broadband service provider, it does not entail that such broadband service provider is making available technical service so as to require assessee to deduct tax at source u/s 194J of Act. Therefore, we hereby affirm order of CIT(A) on this aspect also. Accordingly, Revenue fails in Ground of appeal no. 4 also. 10 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 13. issue raised by Revenue in Ground of appeal no. 5 relates to payment made towards hiring of Forklift/Cranes on which assessee had deducted tax at source in terms of Sec. 194C of Act, whereas as per Assessing Officer, tax was liable to be deducted u/s 194I of Act treating payments to be in nature of rent . Accordingly, assessee was held to be assessee in default for short deduction of tax at source u/s 201(1) and 201(1A) of Act. In this context, plea of assessee was that payments were made to contractors for services of handling and transportation of cargo after customs clearance. Assessee explained that it hired services of contractors for handling of goods and in course of providing such service, contractors engaged services of Cranes and Forklift operators. assessee explained that it considered services being provided by contractors as composite service for handling of goods on which requisite tax was deducted at source in terms of Sec. 194C of Act. It was pointed out that there was no contract entered by assessee for hiring of Forklifts and Cranes specifically so as to hold that assessee had made any payments towards rental of Forklifts and Cranes. CIT(A) has accepted plea of assessee by noticing that payments in question were made by assessee towards composite contract for handling of goods and that it is contractors who had in-turn hired Cranes/Forklifts for their use. Thus, CIT(A) upheld stand of assessee that such payments are subject to deduction of tax at source u/s 194C and not u/s 194I of Act, as contended by Assessing Officer. 11 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 14. Before us, ld. DR has merely pointed out that payments made by assessee included charges for hire/rental of machineries which attract deduction of tax at source u/s 194I of Act. 15. On other hand, learned representative for respondent- assessee pointed out that Mumbai Bench of Tribunal in case of ACIT vs. Accenture Services (P.) Ltd., 44 SOT 290 (Mum.) has held that Sec. 194I of Act is not attracted where payments are made for availing of transport services inspite of fact that it involved use of transport vehicles. 16. We have carefully considered rival submissions. charge being made by Assessing Officer is that payment to contractors involved charges for renting of Cranes/Forklifts, and therefore, such payments would fall within meaning of rent for purposes of Sec. 194I of Act. In our considered opinion, having regard to factual matrix brought out by CIT(A), Assessing Officer has clearly failed to appreciate nature of expenses in its true perspective. Factually speaking, payments have been made to contractors for providing services of handling and transportation of cargo after customs clearances were obtained. Such charges, inter-alia, entailed loading and unloading of cargo for which contractors utilized Forklifts/Cranes being maintained by them. Quite clearly, assessee has not entered into any contract for hiring of Forklifts or Cranes, but it is case where contractor has utilized same in discharge of his services to assessee-firm. Therefore, in such situation, it is not possible to conclude that assessee contracted for renting of 12 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 Forklifts/Cranes so as to treat payments as rent for purposes of Sec. 194I of Act. CIT(A), in our view, correctly came to conclude that payments have been made by contractors against work executed on behalf of assessee which clearly attracts deduction of tax at source u/s 194C of Act and not u/s 194I of Act, as contended by Assessing Officer. Thus, on this aspect also Revenue fails. 17. next issue raised by Revenue by way of Ground of appeal no. 6 relates to payments made towards fumigation charges. In this context, Assessing Officer noticed that assessee had paid fumigation (pest control) charges on which tax was deducted u/s 194C of Act whereas according to Assessing Officer, tax ought to have been deducted in terms of Sec. 194J of Act considering such payments as fees for technical or professional services. CIT(A) upheld stand of assessee by concluding that such services do not involve rendering of any professional or technical services and that deduction of tax at source u/s 194C of Act was correctly done by assessee. Against such decision, Revenue is in appeal before us. 18. Before us, ld. DR has reiterated stand of Assessing Officer that services are in nature of technical or professional services, which would require deduction of tax at source u/s 194J of Act. In our considered opinion, plea raised by Revenue is without any basis. Factually speaking, it emerges from record that persons entrusted with job of fumigation carry out spraying of chemicals, etc. to prevent attack of pests so that cargo/goods being handled by 13 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 assessee do not get damaged. Ostensibly, payments made by assessee would, inter-alia, include cost of chemicals, pesticides, etc. Apart from bald assertions, Revenue has not been able to demonstrate use of any technical information or skill which is required to perform such fumigation activities and, therefore, invoking of Sec. 194J of Act in present case is unwarranted and has been correctly negated by CIT(A). Thus, on this aspect also, Revenue fails. 19. Grounds of appeal no. 7 and 9 relate to interest levied u/s 201(1A) of Act, which has been deleted by CIT(A). Since assessee has not been found to be in default within meaning of Sec. 201(1) of Act, deletion of interest u/s 201(1A) of Act is consequential and has been rightly deleted by CIT(A). Thus, said grounds are dismissed. 20. only ground remaining is Ground of appeal no. 8 which is only repetition of issues which have already been dealt with by us in earlier paras. Thus, said ground is dismissed as misconceived. 21. In result, appeal of Revenue is dismissed. 22. Insofar appeals for Assessment Year 2009-10 to 2011-12 are concerned, issues as well as facts and circumstances are pari materia to those considered by us in Revenue s appeal for Assessment Year 2008-09 in earlier paragraphs; and, thus our decision in appeal for Assessment Year 2008-09 shall mutatis mutandis apply for Assessment Years 2009-10 to 2011-12 also. 14 M/s. Chinubhai Kalidas & Bros. ITA Nos. 1513 to 1515 & 5459/Mum/2013 23. Resultantly, all appeals of Revenue are dismissed. Order pronounced in open court on 23rd September, 2016. Sd/- Sd/- (PAWAN SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Date : 23rd September, 2016 SSL Copy to : 1) Appellant 2) Respondent 3) CIT(A) concerned 4) CIT concerned 5) D.R, C Bench, Mumbai 6) Guard file By Order Dy./Asstt. Registrar I.T.A.T, Mumbai ITO, TDS-1(2), Mumbai v. M/s. Chinubhai Kalidas & Bro