TaxTMI 
TaxTMI 
2017 (1) TMI 1573
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....ls)-2 Vadodara has erred in law and in facts in confirming the action of the ld. Assessing Officer in the disallowance of Rs. 7,88,50,812/- invoking the provisions of sec. 40(a)(ia) being the payment made towards sea freight expresses ignoring the provisions contained in sec 172 and CBDT Circular No.723 dated 19.09.1995. The claim of the appellant be allowed as made." 2. Briefly stated, the relevant material facts are like this. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has made payments in respect of freight aggregating to Rs. 7,88,50,812/- without deduction of tax at source. It was for this reason that the aforesaid amount of Rs. 7,88,50,812/- was disallowed under section 40(a....
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....of Section 194C and 195 of the IT Act, 1961 were not applicable in that case. Accordingly, relying upon the Circular No.723, the disallowance made by the AO of such payments was deleted. But, in this decision there is no fact on record to show that whether the applicability of the provisions of section 172 of the Act on persons to whom payments have been made had been ascertained or not and this fact has neither been discussed by the AO or CIT (A) or the ITAT in its order, as is apparent from the order of the ITAT. In this regard, it is seen that the ITAT Mumbai Bench in its recent decision in the case of Raj Girish Karia 48 Taxmann.com 175 (Mum-Trib) has examined the provisions of section 195 and Section 172 and also Circular No.723 of the....
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.... present case was asked about the facts of assessment of such nonresident shipping companies as per the provisions of section 172 of the IT Act, 1961. The AR, vide order sheet noting dated 26.11.2014 stated that further evidence regarding assessment of recipients of the payments u/s 172 of the Act is not available with the appellant and presently it cannot be furnished by it. 4.4. The allowability of such payments made by the assessee is to be decided in the light of the discussions made above. In majority of the cases, the appellant has only furnished copy of ledger accounts containing particulars of invoices and charges paid for export of goods by sea. In cases copies of invoices have also been furnished and in few cases some cas....
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.... show that these provisions have to be applied to every journey a ship, belonging to or chartered by a non-resident, undertakes from any port in India. Section 172 is a selfcontained code for the levy and recovery of the tax, ship-wise, and journey wise, and requires the filing of the return within a maximum time of thirty days from the date of departure of the ship. 3. The provisions of section 172 are to apply, notwithstanding anything contained in other provisions of the Act. Therefore, in such cases, the provisions of sections 194C and 195 relating to tax deduction at source are not applicable. The recovery of tax is to be regulated, for a voyage undertaken from any port in India by a ship under the provisions of section 172. ....
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....ned by non-resident owner or charterer to leave Indian port only upon taking care of dues of Indian authorities in respect of tax on income embedded in freight receipts. It is also elementary that under section 119 of the Act the CBDT has the powers to relax rigor of law in appropriate cases and once the CBDT does so the relaxation so given is to be implemented by the field authorities in letter and in spirit. In effect thus, even if there is a deviation from the strict legal provisions by the virtue of a CBDT Circular, such permitted deviations are to be duly respected and honoured by the field authorities. In view of this analysis, when we go through the Circular no.723 (supra) we find that it is a conscious decision of the Board that sec....