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The Tax Publishers2015 TaxPub(DT) 4867 (Mum-Trib)div class=Section1> ITO v. Universal Traffic Co. INCOME TAX ACT, 1961 --Deduction of tax at source--Under section 194CExpenses paid by customs house agent--The assessee, a partnership concern, was engaged in the business of customs house agents. Survey operation under section 133A was carried out. It was noted by the AO that the assessee had not deducted tax at source with respect to various expenses like freight charges, seal wire charges, warehouse charges, detention charged, de-stuffing charges, crane/fork lift charges and survey fee, etc. The assessee claimed that the provisions of sections 194C and 194J are not applicable as there was no contract of the assessee with the payees and further the assessee was merely acting as an agent, therefore, not responsible to deduct tax on the payments so made. However, the AO did not find favour with the explanation of the assessee and treated the assessee as assessee-in-default under section 194C read with section 194J and accordingly, raised the demand under section 201 and interest thereupon. The CIT(A) decided the appeal in favour of the assessee. *Held:* Such person who acts as an agent has no liability to deduct tax at source because he is acting merely as an intermediary between the airlines/shipping lines as also custodians of goods on one hand and the importers/exporters on the other. The contract is between the parties and not with the agent. The invoices and other shipping documents are in the names of importer/exporter and the assessee merely receives funds and disburses to the airline/shipping lines till clearance by the customs. The statutory warehousing charges is also the sole liability of the clients and the assessee merely defrays the expenses on behalf of the clients, thus, the assessee/agents are not liable to deduct tax under section 194C of the Act. Thus, it was unjustified on the part of the AO to hold the assessee as “assessee-in-default. In the absence of any contractual relationship between the assessee and airlines/shipping lines/Authorities the assessee agent is not liable to withhold tax/deduct tax under section 194C. Similarly, in the present case, the payees had offered the corresponding income in their returns, therefore, the alleged TDS liabilities, raised upon the assessee was not enforceable. The freight charges, detention charges and de-stuffing charges, etc. were paid to foreign lines or to their agents or shipping lines for transportation of cargo thus, the privity of contract was not between the assessee and foreign airlines/shipping airlines to whom such charges were paid, thus, the assessee could not be held to be a person responsible to deduct tax on such payments while acting for his clients. In view of these facts, there was no infirmity in conclusion drawn by the CIT(A). So far as survey fee was concerned, it is paid to the persons or agencies appointed by CCSP's who conduct inspection of the goods. Inspection of cargo is integral step for custom clearance. Likewise seal wire charges were paid to local labour operating within the customs notified premises to seal/unseal the cargo/container, thus, such payments were paid on behalf of the client and the assessee was merely acting as intermediator for the smooth clearance on behalf of the clients. Identical was the situation for crane/fork lift charges. There was no infirmity in the conclusion drawn by the CIT(A). The impugned orders were upheld. Income Tax Act, 1961, Section 194 Income Tax Act, 1961, Section 201(1) Income Tax Act, 1961, Section 201(1A) *Relied:Hah Logistics v. DCIT (ITA No. 1864/Del./2011) order dated 4-11-2011 from Delhi Tribunal, DCIT v. Jay Kay Freighters Pvt. Ltd. (ITA No. 3407/Del/2011) order dated 8-8-2012, judgment of Delhi High Court in CIT v. Cargo Linkers 218 CTR (Del) 295, S.K. Asgar v. ITO (ITA No. 2000/K/2009) order dated 31-8-2010 and ITO v. S.S. Impex (ITA No. 997/K/2011) order dated 23-9-2011, the decision in Bhagwati Steels (2010) 326 ITR 108 (P&H) and the ratio laid down in CIT v. United Rice Land Ltd. (2010) 322 ITR 594 (P&H), Hindustan Coca Cola Beverages Pvt. Ltd. v. CIT (2007) 293 ITR 226 (SC),Ramkrishna Vedanta Math v. ITO (ITA No. 477/Kol/2012), order dated 31-7-201 and ACIT v. Accenture Sericves (P) Ltd., Mumbai Bench of the Tribunal*. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2015 TaxPub(DT) 4867 (Mum-Trib)div class=Section1>

ITO v. Universal Traffic Co.

INCOME TAX ACT, 1961

--Deduction of tax at source--Under section 194CExpenses paid by customs house agent--The assessee, a partnership concern, was engaged in the business of customs house agents. Survey operation under section 133A was carried out. It was noted by the AO that the assessee had not deducted tax at source with respect to various expenses like freight charges, seal wire charges, warehouse charges, detention charged, de-stuffing charges, crane/fork lift charges and survey fee, etc. The assessee claimed that the provisions of sections 194C and 194J are not applicable as there was no contract of the assessee with the payees and further the assessee was merely acting as an agent, therefore, not responsible to deduct tax on the payments so made. However, the AO did not find favour with the explanation of the assessee and treated the assessee as assessee-in-default under section 194C read with section 194J and accordingly, raised the demand under section 201 and interest thereupon. The CIT(A) decided the appeal in favour of the assessee. Held: Such person who acts as an agent has no liability to deduct tax at source because he is acting merely as an intermediary between the airlines/shipping lines as also custodians of goods on one hand and the importers/exporters on the other. The contract is between the parties and not with the agent. The invoices and other shipping documents are in the names of importer/exporter and the assessee merely receives funds and disburses to the airline/shipping lines till clearance by the customs. The statutory warehousing charges is also the sole liability of the clients and the assessee merely defrays the expenses on behalf of the clients, thus, the assessee/agents are not liable to deduct tax under section 194C of the Act. Thus, it was unjustified on the part of the AO to hold the assessee as “assessee-in-default. In the absence of any contractual relationship between the assessee and airlines/shipping lines/Authorities the assessee agent is not liable to withhold tax/deduct tax under section 194C. Similarly, in the present case, the payees had offered the corresponding income in their returns, therefore, the alleged TDS liabilities, raised upon the assessee was not enforceable. The freight charges, detention charges and de-stuffing charges, etc. were paid to foreign lines or to their agents or shipping lines for transportation of cargo thus, the privity of contract was not between the assessee and foreign airlines/shipping airlines to whom such charges were paid, thus, the assessee could not be held to be a person responsible to deduct tax on such payments while acting for his clients. In view of these facts, there was no infirmity in conclusion drawn by the CIT(A). So far as survey fee was concerned, it is paid to the persons or agencies appointed by CCSP's who conduct inspection of the goods. Inspection of cargo is integral step for custom clearance. Likewise seal wire charges were paid to local labour operating within the customs notified premises to seal/unseal the cargo/container, thus, such payments were paid on behalf of the client and the assessee was merely acting as intermediator for the smooth clearance on behalf of the clients. Identical was the situation for crane/fork lift charges. There was no infirmity in the conclusion drawn by the CIT(A). The impugned orders were upheld.

Income Tax Act, 1961, Section 194

Income Tax Act, 1961, Section 201(1)

Income Tax Act, 1961, Section 201(1A)

Relied:Hah Logistics v. DCIT (ITA No. 1864/Del./2011) order dated 4-11-2011 from Delhi Tribunal, DCIT v. Jay Kay Freighters Pvt. Ltd. (ITA No. 3407/Del/2011) order dated 8-8-2012, judgment of Delhi High Court in CIT v. Cargo Linkers 218 CTR (Del) 295, S.K. Asgar v. ITO (ITA No. 2000/K/2009) order dated 31-8-2010 and ITO v. S.S. Impex (ITA No. 997/K/2011) order dated 23-9-2011, the decision in Bhagwati Steels (2010) 326 ITR 108 (P&H) and the ratio laid down in CIT v. United Rice Land Ltd. (2010) 322 ITR 594 (P&H), Hindustan Coca Cola Beverages Pvt. Ltd. v. CIT (2007) 293 ITR 226 (SC),Ramkrishna Vedanta Math v. ITO (ITA No. 477/Kol/2012), order dated 31-7-201 and ACIT v. Accenture Sericves (P) Ltd., Mumbai Bench of the Tribunal.