Clarification regarding applicability of provisions of Section 194-I to payments made by the customers on account of cooling charges to the cold storage owners

CIRCULAR NO. 1/2008, DATED 10-1-2008

Representations have been received from various quarters regarding applicability of the provisions of Section 194-I to cooling charges paid by the various customers to the owners of cold storages.  It has been represented that the cold storage owners provide a composite service, which involves preservation of essential food items including perishable goods at various temperatures suitable for specific food items for required periods and storage of goods being incidental to the activity of preservation.  The cooling of goods is controlled through mechanical process.  The customer brings its packages for preservation for a required period and takes away its packages after paying cooling charges.  The customer does not hire the building, plant/machinery etc. in any manner and does not become a tenant of any kind.

2. The matter has been examined.  The main function of the cold storage is to preserve perishable goods by means of a mechanical process, and storage of such goods is only incidental in nature.  The customer is also not given any right to use any demarcated space/place or the machinery of the cold store and thus does not become a tenant. Therefore, the provision of 194-I is not applicable to the cooling charges paid by the customers of the cold storage. 

3. However, since the arrangement between the customers and cold storage owners are basically contractual in nature, the provision of section 194-C will be applicable to the amounts paid as cooling charges by the customers of the cold storage.   This may be brought to the notice of the Assessing Officers under your charge.

F.No.275/59/2007-IT(B)