The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that the payment of wharfage charges are not subject to TDS under section 196 of the Income Tax Act, 1961.
The assessee was in the business of providing port facilities for shipment of cargo, from its site near Jaigad in Ratnagiri District. The assessee was asked to furnish details of Wharfage charges and also asked whether any tax was deducted at source on the said expenses.
The assessee claimed that the said charges were paid to Maharashtra Maritime Board and no tax was deducted from the said expenses. The Assessing Officer held that the above said the payment was subject to TDS.
Before the Tribunal, the assessee claimed that the provisions of TDS would not be attracted in the case. The Revenue, on the other hand, contended that it is ‘rent’ as described in section 194-I of the Act.
The Tribunal noted that in order to establish its case of rent, the first and foremost step which needs to be covered is whether there is a contract between the parties for the payment of rent.
After analyzing the provisions of the Explanation (i) under section 194-I of the Act and the connected judgments, the Tribunal opined that Wharfage charges paid by the assessee are charges which facilitate the loading/unloading of goods at the waterfront and for providing facilities.
“Wharfage charges are charged from the assessee and in such case, we hold that there is no use of land but even if it was held that there is any use of land, then the same was incidental but such payments could not be treated as ‘rent’ and the assessee be liable to deduct tax at source under section 194-I of the Income Act. The Wharfage charges paid by the assessee are to be allowed as a deduction under section 37(1) of the Act. The ground of appeal No.2.2 raised by the assessee is thus, allowed,” the Tribunal said.
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