2022 (4) TMI 798 - AT - Income Tax

ITAT Chennai allows appeal on withholding tax dispute. Assessee prevails in case on international ocean freight charges.

The ITAT Chennai ruled in favor of the assessee in a case concerning the assessment of demand under sections 201(1) and 201(1A) for AY 2010-11. The ... TDS u/s 195 - Assessee-in-default - demand u/s 201(1) / 201(1A) - assessee paid international ocean freight charges for import of coal to various shipping agencies including M/s Noble Chartering Inc., a British Virgin Islands incorporate entity - HELD THAT:- The undisputed position that emerges is that impugned payments have not been made by the assessee during AY 2010-11 and these payments have been made in subsequent years. This being so, the impugned demand as raised against the assessee in this year would have no legs to stand. Therefore, considering the aforesaid position, we delete the impugned demand as raised against the assessee. - Decided in favour of assessee. Issues:1. Assessment of demand under sections 201(1) and 201(1A) for Assessment Year (AY) 2010-11.2. Applicability of withholding tax on international ocean freight charges.3. Assessee's appeal against the order of Commissioner of Income Tax (Appeals)-16.4. Additional ground raised by the assessee regarding the erroneous inclusion of ocean freight payments for a subsequent year.5. Submission of additional evidence by the assessee to support the claim.Analysis:Issue 1: Assessment of demand under sections 201(1) and 201(1A) for AY 2010-11The appeal by the assessee for AY 2010-11 stemmed from the order of the Commissioner of Income Tax (Appeals)-16, Chennai, regarding the demand raised against the assessee under sections 201(1) and 201(1A) of the Income Tax Act. The demand was based on the assessee being held as assessee-in-default for not deducting tax at source on international ocean freight charges paid to various shipping agencies, including M/s Noble Chartering Inc. The Assessing Officer (AO) concluded that the payments to M/s Noble Chartering Inc. were taxable as the entity was a tax resident of a jurisdiction without a Double Taxation Avoidance Agreement with India.Issue 2: Applicability of withholding tax on international ocean freight chargesThe AO determined that the assessee owed a demand of Rs. 20.61 Lacs due to non-deduction of tax at source on payments made to M/s Noble Chartering Inc. for international ocean freight charges. The AO's decision was based on the absence of tax deduction on these payments, leading to the conclusion that the charges were taxable in the hands of the payee under the Income Tax Act. The demand was specifically related to a payment of Rs. 358.49 Lacs made to M/s Noble Chartering Inc.Issue 3: Assessee's appeal against the order of Commissioner of Income Tax (Appeals)-16The assessee contested the order of the Commissioner of Income Tax (Appeals)-16 during the appellate proceedings, arguing that the payments in question were not liable to withholding tax. Despite the assessee's submissions, the Commissioner of Income Tax (Appeals) upheld the demand, prompting the assessee to file an appeal before the ITAT Chennai with various grounds of appeal.Issue 4: Additional ground raised by the assessee regarding the erroneous inclusion of ocean freight payments for a subsequent yearThe assessee raised a significant additional ground during the proceedings, highlighting that the ocean freight payments subject to the demand were actually made in a subsequent year (financial year 2013-14) and not during AY 2010-11. This additional ground challenged the accuracy of including these payments in the demand raised against the assessee.Issue 5: Submission of additional evidence by the assessee to support the claimIn support of the additional ground raised, the assessee submitted additional evidence in the form of a certificate from a Chartered Accountant and an affidavit from the director of the assessee-company. The certificate and affidavit confirmed that the payments to M/s Noble Chartering Inc. were made in the financial year 2013-14 and not during AY 2010-11, as erroneously stated in the demand.In the final judgment delivered on 22nd March 2022, the ITAT Chennai acknowledged the discrepancy in the timing of the payments, noting that the impugned payments were not made during AY 2010-11 but in subsequent years. Consequently, the demand raised against the assessee for that year was deemed invalid, leading to the allowance of the appeal. The additional grounds and evidence presented by the assessee played a crucial role in clarifying the factual inaccuracies in the demand assessment, resulting in the favorable decision by the ITAT Chennai.