Full Judgment Text
$~5
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 12.12.2012
+ ITA 516/2012
CIT ..... Appellant
Through: Mr. Karan Khanna, Adv.
versus
HINDUSTAN LEVER LTD ..... Respondent
Through: Mr. Percy J Pardiwalla, Sr. Adv. with Mr.
Satyen Sethi, Mr. Nishant Thakkar and Mr. Arta
Trana Panda, Advs.
CORAM:
MR. JUSTICE S. RAVINDRA BHAT
MR. JUSTICE R.V. EASWAR
S. RAVINDRA BHAT,J: (OPEN COURT)
The revenue claims to be aggrieved by the order dated 25.2.2011 of the
Tribunal. The substantial question of law urged by it is that the Tribunal fell
into error in holding that TDS was not recoverable from the assessee in terms of
the Section 194-I, at 22%.
2. The brief facts are that the assessee is a well known manufacture of
consumer goods such as detergent, soaps etc. It hires godowns on rent and also
engages c & f agents to manage them for various purposes. The assessing
officer, for the financial year 2000-01 was of the view, after examination of
form No.26G and 26J, that the assessee wrongly deducted tax at 2.2% under
Section 194C from the amounts paid to the c & f agents. The assessing officer
was of the opinion that the assessee ought to have deducted tax at the rate of
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22% under Section 194-I because they contain warehousing charges.
Therefore, he treated the assessee in default of ` 78,43,252/- and charged
interest of ` 25,29,448/- under Section 201(1A) and made consequential
demands. Later he also initiated penalty proceedings under Section 271C. The
assessee carried the matter in appeal; the CIT(Appeals) partly allowed the
assessee’s claims directing separation of some amounts after due verification.
The assessee carried the matter in further appeal to the ITAT; the revenue too
was aggrieved by the CIT(Appeals)’ order. It preferred cross objections. The
ITAT disposed of the cross-appeals holding as follows :
“ …In our view, Section 194-I can only be applied when the
immovable properties are let out. None of the heads of payments
made to C & F Agents by the assessee is a head of payment by
way of rent. Section 194-I is not a residuary clause. It has been
enacted specifically for rent from immovable property. The AO
passed the order under section 194-I of the Act. However, the
Commissioner (Appeals) not being confined to section 194-I only,
gave directions to the AO for bifurcation. In spite thereof the
assessee is correct in contending that these directions are not
based on material relevant to the record, in as much as it is borne
out from the records that it is only one parties before the AO,
which was taken into consideration before Commissioner
(Appeals). Moreover, as rightly pointed out by the Ld. Counsel
for the assessee, there is no such thing as “payment with regards
to management and other specialized services”. The payments
made to the C & F Agents even categorized by the assessee, have
been shown on records. In this view of the matter, the directions
of the learned Commissioner (Appeals) are ill placed. All
warehousing charges have wrongly been treated under section
194-I of the Act, even though, different heads of payment made to
the C & F Agents by the assessee company clearly show that was
no payment towards rent, which could be covered under section
194-I of the Act.
It has further been stated by the ld. counsel of assessee, that all of
the payments have been effected to C & F Agent in pursuance of a
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contract with him, which is being covered U/s 194C of the Act,
the payments made to him can’t be further divided under various
heads and apply the relevant rates (i.e. U/s 192 and 194J of the
Act) as per law. The sample copy of the C & F Agreement has
also been placed on records to support this argument by the
assessee.
The respective C & F Agents has paid the applicable tax in their
returns of Income on all such receipts of payments from appellant
company and the confirmations from C & F Agents have been
placed on records for this purpose.
It has also been argued by Ld. counsel, that the TDS provisions
are in the nature of machinery provisions which enables easy
collection and recovery of tax. The said provisions are
independent of the charging provisions which are applicable to
the recipient of income whereas the TDS provisions are
applicable to the payer of income. Since the applicable tax also
been suffered and paid at the C & F agent level on all such
payment, so it would be unfair on the part of the revenue to levy
additional tax on such payments which has been already suffered
full applicable tax as the level of its assessee. ”
3. After remand the CIT(A) deleted the entire demand of Rs.1,03,72,700/-
made by the assessing officer and allowed the appeal. The revenue’s appeal to
the ITAT was dismissed.
4. The Tribunal has considered the previous orders as well as the materials
on record such as the various lease deeds or the agreements that the assessee
had entered into with the landlord/lessors. It analysed those as well as the c & f
agreements and was able to discern that no element of rent was paid by the
assessee to the c & f agents. In view of these facts the ITAT upheld the view of
the CIT(Appeals) holding as follows :
“ 6. We have carefully considered the rival submission in the
light of material placed before us. A finding of fact has been
recorded by ld. CIT(A) that entire detail of payment shows that
ITA 516/2012 Page 3 of 5
there was no payment towards rent which could be covered by
sec. 194I of the Act and in respect of premises used by the C & F
Agents which were taken on rent by the assessee. TDS on rent
was also deducted u/s 194I of the Act. The findings of fact
recorded by CIT(A) have not been controverted by the revenue.
Therefore, we are of the opinion that no case has been made out
by the revenue to show that the nature of payments on which the
tax was deducted by the assessee represent “rent” on which the
tax was deductible u/s 194I of the Act. In absence of any such
material, we decline to interfere in the finding of facts recorded
by ld. CIT(A). Therefore, the appeal filed by the revenue is
dismissed.”
5. Ld. counsel for the revenue urges that the Tribunal fell into error in
holding that the amounts paid to the c & f agent were not liable to be treated
under Section 194-I. Counsel emphasizes that an overall reading of the c & f
agency agreements did not bring out as clearly – as was held by the Tribunal –
that the element of rent was present.
6. This Court is unpersuaded by the revenue’s contention. The
CIT(Appeals) and the ITAT had the benefit of examining the entire
documentary evidence which consisted of the various lease deeds and the c & f
agents agreements. The conclusions drawn by these authorities on the basis of
such scrutiny are concurrent. Even otherwise, if the revenue was of the opinion
that any consideration paid to the c & f agent comprised of some elements such
as rent, such a conclusion ought to have been supported by facts. What is
discernable from the materials on record is that the assessee had rented
premises from their landlords. Payments of rent were made after deducting the
tax in terms of Section 194-I. What the assessee paid to the c & f agents as
warehousing charges was the consideration in terms of the agreement which
was tax deductible under Section 194C at 2.2.%. In this factual background it
ITA 516/2012 Page 4 of 5
was for the revenue to have established how Section 194-I could be attracted to
the amounts or charges paid to the c & f agents in terms of the agreements.
7. In this view of these facts, there is no infirmity in the findings of the
CIT(Appeals) as endorsed by the ITAT. The substantial question of law is
answered in favour of the assessee and against the revenue.
Appeal is dismissed.
S. RAVINDRA BHAT, J
R.V.EASWAR, J
DECEMBER 12, 2012
vld
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