TaxTMI 
TaxTMI 
2024 (1) TMI 745
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....used the relevant materials available on record. 4. The assessee is an Indian Company applied under Section 195(2) of the Act for determining tax liability on the remittance to the Titan Shipping Limited, Marshal Islands, towards damage charges for physical damage sustained by vessels and losses caused to the owner of the vessels to the tune of USD 4,50,000/-. In terms of the Office order dated 05.07.2017, the details of the copy of contract, copy of order delivery of product in Indian Port, documents of delivery of goods at Porbandar Port India, documents supporting liability on buyer for any damage to vessels and documents supporting the damage happened to the vessels in Port of Porbandar, India on 16.08.2017 submitted before the Ld. AO upon perusal of which, it was found that the damage to the vessels has happened in India during the business carried out by the ship in India. Upon perusal of said documents, the Ld. AO observed as follows: "It is observed that Marshal Island based company 'Titan Shipping Limited' has received lump sum consideration towards its claim of damage charges of vessels which was initially denied by remitted but finally to be paid as per quadripart....
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....payment of USD 4.50,000 to the Titan Shipping Limited, Marshal Islands." 2. Ld. Assessing Officer has, as reproduced herein above, in the order passed u/s 195(2) of IT. Act. determined the liability of tax @20% on payment of USD 4.50,000 to the Titan Shipping Limited, Marshal Islands u/s 195(2) of IT Act. Ld. Assessing Officer observed that section 172 cannot be applied and correct section is section 195 of I.T. Act. He has also observed that there is no DTAA between India and Marshal Islands and remitter has not provided various details in Rule 37BB and therefore, TDS @ 20% should be applicable u's 195 of I.T. Act, as per provision of section 206AA of IT Act 3. In our humble submission, the findings of Id Assessing Officer are not correct as mentioned herein above in details. 3.1 Circular no.723 issued by Central Board of Direct Tax did. 19-09-1995 provides that provision of section 172 is applicable. Copy of Circular is enclosed herewith marked as Annexure-Cl. The relevant para- 4 and 5 of the circular are as under 4. Section 194C deals with work contracts including carriage of goods and passengers by any mode of transport other than railways. This section applies....
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.... return required by this sub-section before the departure of the ship from the port and provided the master of the ship has made satisfactory arrangements for the filing of the return and payment of the tax by any other person on his behalf, the 29[Assessing] Officer may of 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 29 [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 30[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. 31[(4A) No order assessing the income and determining the sum of tax payable thereon shall be made under subsection (4) after the expiry of nine months from the end of the financial year in which the return under sub-section (3) is furnished: Provided that where the return under sub-section (3) has been furnished before the 1st day of April, 2007, such order shall be made ....
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....ocuments were not submitted before i Dy Commissioner of Incometax, (International Taxation)-1, Ahmedabad while making application u/s. 195/2) of I.T. Act. (i) Copy of Certificate of Incorporation dtd 9 December, 2013 (ii) Copy of Tax Residency Certificate (iii) Copy of Certificate No P-01335-01/18 issued by Special Agent of the Republic of the Marshall Islands 5. Accordingly, provisions of section 205 AA of IT Act will not be applicable to the fact of our case. 6. Moreover, provisions of section 195 of IT Act will not be applicable to the fact of our cane Hence no tax should be levied. 7. Reliance is placed on the following decision in support of our contentions: Kuloday Technopack P Lid v/s ITO 8/2/2) (2017) 86 taxmann.com 74 (Mum Tril. The gist of the said decision is reproduced hereunder: "1. Section 122 read with sections 194C, 195 and 40 (a)(ia) of the Income tax Act 1961- Non-resident Shipping business of (Applicability of TDS provisions) Assessment years 2009-10 and 2010-11-Whether in view of CBDT Circular No. 723, dated 19.09.1995, ocean freight, demurrage charge, handling charges or other amount of similar mature which are paid on behalf of foreign ....