ITAT Mumbai allows Assessee's plea, deletes disallowance under section 40(a)(ia) for non-deduction of TDS.

The ITAT Mumbai ruled in favor of the Assessee, directing the deletion of the disallowance under section 40(a)(ia) for non-deduction of TDS on terminal handling charges. The ITAT held that the payment fell under a CBDT Circular, exempting it from TDS deduction requirements.

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Issues: Disallowance under section 40(a)(ia) for non-deduction of TDS on terminal handling charges

In this case, the appellant, an Assessee, appealed against the order of CIT(A)-23, Mumbai regarding the disallowance of Rs. 10,78,418 under section 40(a)(ia) for non-deduction of TDS on terminal handling charges for the assessment year 2008-09. The Assessee had paid terminal handling charges totaling Rs. 12,44,840 to various parties involved in handling exports at the terminal. The Assessing Officer (AO) disallowed Rs. 10,78,418 for non-deduction of tax at source. The Assessee contended that there was no liability to deduct tax based on Circular No.723 dated 19th September 1995. The matter was brought before the ITAT Mumbai.

The ITAT Mumbai examined the Circular No.723 dated 19/09/1995, which pertains to tax deduction at source for payments to foreign shipping companies. The Circular clarified that in certain cases, the provisions of section 172 would apply, and not sections 194C and 195. Referring to a previous Tribunal decision following the same Circular, the ITAT allowed the Assessee's appeal, setting aside the CIT(A)'s order and directing the AO to delete the addition of Rs. 10,78,418. The ITAT held that since the payment fell under the CBDT Circular, there was no requirement for TDS deduction.

Therefore, the ITAT Mumbai ruled in favor of the Assessee, allowing the appeal and directing the deletion of the disallowance under section 40(a)(ia) for non-deduction of TDS on terminal handling charges.

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