No TDS on Payment Made to Indian Agent of Non-Resident Shipping Company, Section 172 to Prevail
Facts of the case
- Assessee filed its return of income for the assessment year 2013-14 declaring total loss of ₹35 crore (approx.). It paid freight amounting to ₹ 2.03 crore (approx.) to Inter Ocean Shipping and Logistic Services for export without deducting the tax at source.
- Case selected for review under section 263 and Assessing officer (AO) disallowed the whole amount of freight under section 40(a)(ia) of Income Tax Act, 1961.
Contention of department
- Department contended that since no TDS return showing the details of deduction of any tax in respect of the aforesaid export freight had been filed, therefore the order passed by AO is prejudicial and erroneous to the interest of revenue.
Contention of the assessee
- Assessee following the provisions laid down under section 172 of Income Tax Act, 1961, for taxation of levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India, contended that payment of freight paid to Inter Ocean Shipping and Logistic Services which is an agent acting on behalf of non-resident shipping company provision for deduction of tax at source are not applicable.
Decision held and our conclusion
- The Tribunal held in pursuance of CBDT circular No. 723 dated 19th September 1995, the Tribunal held that where payment is made to the shipping agents of the non-resident, ship owner or charter, the agent steps into the shoe of the Principal i.e. shipping company.
- Accordingly, provisions laid down under section 172 of the Act shall be applicable and no TDS u/s 194C or 195 shall be deducted.
- Thus, it can be said that in case of any payments made for freight and other charges for exports is made to agent of overseas shipping company, provisions of section 172 shall prevail and no withholding shall be done.
Source: [2020]116 taxmann.com 107 (Gujarat- High Court)
