TaxTMI 
TaxTMI 
2011 (3) TMI 353
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....wable u/s. 40(a)(ia) of the I. T. Act, 1961. 2. The CIT(A) has also erred in not giving a clear cut finding as required under section 251(1)(a) of the IT Act." 3. The assessee has filed the Cross Objections on the following grounds: "1. The learned AO as well as the CIT(A) erred in fact and in law holding that disallowance is required to be made u/s. 40(a) (ia) of the Act from the payments made to foreign shipping companies or their agents despite the fact that Circular No. 723 dated 19-9-1995 clearly provided that provisions of section 194C as well as provisions of section 195 are not applicable to payments made to shipping agents of non-residents and therefore no disallowance invoking provisions of section 40....
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....ted that in terms of Circular No. 723 dated 19-9-1995, section 194C of the IT Act is not applicable in the case of shipping agents who act on behalf of non-resident shipping companies and that the assessee was not liable to deduct TDS on the freight reimbursed to the shipping agent M/s. Global Link Shipping and Logistics, Mumbai. The learned CIT(A) considering the explanation of the assessee noted that the assessee has offered to furnish confirmation from the shipping company that taxes have been paid in the return of income filed u/s 172 of the IT Act. The learned CIT(A) also noted that Circular No. 723 clearly states that provisions of section 172 of the IT Act over-ride the provisions of section 194C of the IT Act. It was further noted t....
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....al. It was also explained that these payments are actually reimbursement to shipping agents and, therefore, section 194C of the IT Act is not applicable in this case. The assessee also relied upon CBDT Circular No. 723 (supra). The above facts were specifically pleaded before the authorities below but the same have not been properly understood. The Circular No. 723 dated 19-9-1995 (supra) copy of which is filed by the assessee in the paper book is reproduced as under: "913. TAX deduction at source from payment made to foreign shipping companies 1. Representations have been received regarding the scope of sections 172, 194C and 195 of the Income-tax Act, 1961, in connection with tax deduction at source from payments made ....
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....payments made to any resident. On the other hand, section 172 operates in the area of computation of profits from shipping business of non-residents. Thus, there is no overlapping in the areas of operation of these sections. 5. There would, however, be cases where payments are made to shipping agents of non-resident shipowners or charterers for carriage of passengers etc., shipped at a port in India. Since, the agent acts on behalf of the non-resident ship-owner or charterer, he steps into the shoes of the principal. Accordingly, provisions of section 172 shall apply and those of sections 194C and 195 will not apply. Circular No. 723, dated 19-9-1995." 8. The provisions of section 172 of the IT Act is also repr....
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....y other person on his behalf, the [Assessing] Officer may, if the return is filed within thirty days of the departure of the ship, deem the filing of the return by the person so authorised by the master as sufficient compliance with this sub-section. (4) On receipt of the return, the [Assessing] Officer shall assess the income referred to in sub-section (2) and determine the sum payable as tax thereon at the rate or rates [in force] applicable to the total income of a company which has not made the arrangements referred to in section 194 and such sum shall be payable by the master of the ship. [(4A) No order assessing the income and determining the sum of tax payable thereon shall be made under sub-section (4) after the ....
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....t of tax found payable by him on such assessment shall be paid by him or refunded to him, as the case may be. [(8) For the purposes of this section, the amount referred to in sub-section (2) shall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature.]" 9. The AO invoked the provisions of section 40(a)(ia) of the IT Act for non-deduction of TDS as required u/s 194C of the IT Act. However, the above provision is application for the amounts payable to the residents or the amounts payable to contractors or sub-contractors being resident. Similarly, the provisions of section 194C of the IT Act apply to the area of operation of TDS which is confined to payments ....