Pradeep Parikh, A.M. - In all these are six appeals in case of two assessees. In the case of Ganesh Alu Bhandar, there are cross-appeals, two each by the assessee and the department against the combined order of the learned CIT(A) dated 27-5-2002 for assessment years 1998-99 and 1999-2000. In case of Ashokkumar Narandas & Co., only assessee is in appeal against the combined order of the learned CIT(A) dated 27-5-2002 for assessment years 1998-99 and 1999-2000. Since the issues involved in all these appeals are common and inter-connected, we find it convenient to dispose of all the six appeals together by this consolidated order. The appeals of the assessees are taken up first for consideration.

2. Both the assessees have raised common grounds in their appeals. The first common ground is against holding that payment for use of cold storage is covered under section 194-I of the Income-tax Act, 1961 (the Act) and, therefore, tax was deductible on such payment.

3. The Assessing Officer observed that the two assessees had used part of the property owned by M/s. Vinayak Cold Storage (VCS for short) by keeping their goods in the said cold storage. In consideration thereof, the assessees had made following payments to VCS :—

The Assessing Officer was of the view that the payment made by the assessees was nothing but rent paid for the use of property of VCS and hence was covered by the provisions of section 194-I of the Act. However, since the assessees had not deducted tax at source from the payments made, and since no return in the prescribed Form No. 26J was filed, show-cause notice was issued to the assessees to show-cause why the tax deductible under section 194-I should not be charged. Assessees made detailed submissions, the gist of which is as follows :

(a)No space is taken on rent;

(b)The payments made are in substance preservation charges, though loosely it may be referred to as rent;

(c)Preservation charges are paid to save the goods from decay;

(d)Payment made is for services rendered and not for user of property;

(e)Payment is not controlled by Rent Control Act and no tenancy right is vested in the payer of the charges;

(f)Control of the cold storage rests with the cold storage operator and the payer has no access to it;

(g)Cold storage charges are determined per piece, bag or article as the case may be;

(h)Provisions of section 194-I relate to tenancy by whatever name called; and

(i)The payment is not in the nature of rent but is for the use of plant of the cold storage building.

In short, distinction was sought to be made between preservation charges and rent. The Assessing Officer, however, did not agree with the submissions of the assessees. He referred to C.B.D.T. Circular Nos. 715 dated 8-8-1995, 718 dated 22-8-1995 and 736 dated 13-2-1996 and held the applicability of section 194-I in the instant case to be at par with warehousing charges for keeping goods in the warehouse. Thus, since the assessees had failed to deduct tax at source under section 194-I of the Act, he levied tax at 20 per cent of the payment made and also levied interest under section 201(1A), the details of which are as follows:

4. Before the CIT(A), in addition to what was stated before the Assessing Officer, it as contended by the assessee that cold storage was treated as a manufacturing facility under the Factories Act, 1948 and that section 194-I was intended to bring into tax net person