Freight payments to foreign shipping companies held taxable in India; addition under withholding and disallowance provisions upheld.

Freight payments made to foreign shipping companies were held to accrue in India because the right to receive freight arose on delivery/unloading at Indian ports; consequence: the aggregate Rs. 8,83,16,208 was upheld as taxable and added under the withholding/disallowance provisions. The tribunal rejected reliance on Instruction No. 1934 and time charter distinctions as inapplicable, and noted absence of 15CA, nil deduction certificates or permanent establishment evidence; consequence: payer's failure to deduct tax under the withholding regime justified disallowance. The jurisdiction and limitation plea failed for want of supporting evidence and was dismissed.

---

---

Issues: (i) Whether the Freight payments of Rs. 8,83,16,208/- made to foreign shipping companies are taxable in India and correctly disallowed by adding the amount under section 40(a)(i) read with section 195 of the Income-tax Act, 1961; (ii) Whether the assessment was passed without jurisdiction and barred by limitation.

Issue (i): Whether the freight payments to foreign shipping companies accrued or were deemed to accrue in India so as to attract taxation and disallowance under section 40(a)(i) r.w.s.195.

Analysis: The Tribunal examined the terms of the agreements showing payment payable "before breaking bulk" and concluded that the right to receive freight arose on delivery/unloading at Indian ports. Instruction No. 1934/14-02-1996 was considered and held to be directed to Government Departments/PSUs and time-charter situations and thus not applicable to the appellant's facts. The assessee did not produce 15CA remittance details, nil deduction certificates under section 195, or PE certificates from the foreign shipping companies. Reliance on precedents and factual distinction regarding time-charter arrangements was considered and rejected on the record. Authorities on accrual of income were applied to conclude that the right to receive freight accrued in India.

Conclusion: The addition of Rs. 8,83,16,208/- under section 40(a)(i) read with section 195 is upheld; the freight payments are taxable/ deemed to have accrued in India. Decision is against the assessee.

Issue (ii): Whether the assessment was without jurisdiction and barred by limitation.

Analysis: The assessee failed to furnish any evidence or particulars demonstrating lack of jurisdiction or limitation defense before the CIT(A) and before the Tribunal. The lower authority's finding that no supporting documents were produced was noted.

Conclusion: The ground asserting lack of jurisdiction and limitation is dismissed for want of supporting evidence; decision is against the assessee.

Final Conclusion: The Tribunal confirms the CIT(A)'s orders and dismisses the appeals for AY-2012-13, AY-2013-14 and AY-2016-17, upholding the addition under section 40(a)(i) read with section 195 and rejecting the jurisdiction/limitation plea.

Ratio Decidendi: Freight charges payable "before breaking bulk" constitute income that accrues or is deemed to accrue in India under sections 5 and 9 of the Income-tax Act, 1961, and in absence of nil deduction/15CA/PE evidence the payer must deduct tax under section 195 or suffer disallowance under section 40(a)(i) of the Income-tax Act, 1961.

---