Tribunal Upholds Disallowance of TDS on CFS Charges by Custom House Agent

The Tribunal upheld the CIT(A)'s decision, affirming the AO's disallowance of Rs. 24,01,000/- under section 40(a)(ia) for non-deduction of TDS on CFS charges at Chennai Port by a Custom House Agent. The Tribunal ruled that the amended provisions of section 40(a)(ia) by the Finance Act, 2014, are prospective and not retrospective, applying only from assessment year 2015-16. The assessee's alternate plea under the second proviso to section 40(a)(ia) inserted by the Finance Act, 2019, was rejected for lack of evidence. Appeals for both assessment years were dismissed.

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Issues Involved:
1. Non-deduction of TDS on CFS charges at Chennai Port.
2. Applicability of amended provisions of section 40(a)(ia) by the Finance Act, 2014.
3. Alternate plea regarding second proviso to section 40(a)(ia) inserted by the Finance Act, 2019.

Summary:

1. Non-deduction of TDS on CFS charges at Chennai Port:
The assessee, a Custom House Agent, did not deduct TDS on CFS charges paid at Chennai Port, claiming no agreement existed with the recipients, unlike at Tuticorin Port where TDS was deducted. The AO disallowed Rs. 24,01,000/- under section 40(a)(ia) for non-deduction of TDS, which was upheld by the CIT(A).

2. Applicability of amended provisions of section 40(a)(ia) by the Finance Act, 2014:
The Tribunal initially directed the AO to disallow only 30% of expenses without TDS, based on the Finance Act, 2010. However, the revenue argued, citing the Supreme Court's decision in Choudhary Transport Company, that the 2014 amendment is prospective, not retrospective. The Tribunal agreed, stating the amendment applies only from assessment year 2015-16, thus rejecting the assessee's plea for 30% disallowance for assessment years 2009-10 and 2010-11.

3. Alternate plea regarding second proviso to section 40(a)(ia) inserted by the Finance Act, 2019:
The assessee's alternate plea under the second proviso to section 40(a)(ia), effective from 01.04.2020, was rejected due to lack of evidence, including the payee's income declaration and the required accountant's certificate.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to sustain the AO's additions for non-deduction of TDS under section 194C. The appeals for both assessment years were dismissed.

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