The Bombay High Court ruled that storage tanks not classifiable as land or building and that TDS is deductible on storage charges.
Assessee used to pay storage charges. Therefore, assessee had hired tanks of various parties and paid them storage charges. The Assessing Officer, during the course of survey action, noted that assessee had made certain payments under different heads of expenses to which provisions of TDS applies and assessee had not deducted TDS from such payments such as storage charges which were in the nature of rent paid by assessee for storage of imported goods. The Assessing Officer found that the provisions of Section 194I of the Income Tax Act were attracted and assessee was in default for not complying with the same.
The ITAT, by the impugned order, allowed the appeal of assessee and set aside the assessment order. It is this order that is impugned in these appeals. In the impugned order the ITAT has come to the factual finding that “It is an admitted position that the facts of the assessee’s case are identical with those of Gulf Oil India Ltd. referred to by the learned Commissioner ( Appeals ) in his appellate order.”
The only issue that arises in these appeals is whether respondent ( assessee ) ought to have deducted tax under Section 194I or Section 194C of the Income Tax Act from the storage charges paid by assessee. According to the Assessing Officer the payment of storage charges is covered under Section 194I of the Act and hence, tax had to be deducted at source at the rate of 20%, whereas assessee says it would be under Section 194C of the Income Tax Act and hence, deducted tax at source only at 2%.
The counsel for the appellants submitted that the Apex Court analysed the meanings of the words land, building and structures on the basis of the dictionary meanings and various judgments. The Court analysed the mechanical and engineering aspects of the tank construction and ultimately it had no hesitation to hold that the petroleum storage tanks are structures or things attached to the land within the definition of land or building of BMC Act and consequently exigible to property tax.
A Division Bench of Justices KR Shriram and Sharmila U Deshmukh observed that “In our view, the storage tanks in question do not qualify either as land or as building within the meaning of Section 194I of the Income Tax Act. In terms of Section 194I of the Income Tax Act, there has to be a lease, sub-lease or tenancy or any other agreement involving land or any building excluding factory building. It is not the case of the Revenue that the storage tank was taken on lease or sub-lease or tenancy.”
“Assessee’s case would fall under the part “or any other agreement involving land or any building …. together with furniture, fittings and the land appurtenant thereto …..”. It is nobody’s case that assessee has taken any land or building together with furniture, fittings and the land appurtenant thereto. 14 In the circumstances, we hold that the payments in question are liable for deduction of tax at source under the provisions of Section 194I of the Income Tax Act” the Court noted.
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