2023 (4) TMI 274 - AT - Income Tax

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

M/s. Shri Shanmugar Services Versus Income Tax Officer, Non Corporate Ward 2 (4), Chennai.

M/s. Shri Shanmugar Services Versus Income Tax Officer, Non Corporate Ward 2 (4), Chennai. - TMI 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.