INCOME TAX ACT, 1961

Section 194C

Tax deduction at source - Under section 194C - Payment of ocean freight - Non-deduction of tax on the payments made to the shipping agents under section 194C/195

During the assessment proceedings, the assessing officer (AO) found that the assessee has not deducted the TDS on charges incurred towards Ocean Freight. Therefore, the AO disallowed the above expenditure under section 40(a)(ia) of the Act. Assessee contended that the he has paid the Ocean Freight Charges to the agents of non-resident ship owners, therefore, argued that as per Circular 723 of CBDT, dt. 19-9-1995, the assessee was not obliged to deduct the TDS under section 194C and 195 of the Act. Held: There was no indication from assessment order that assessee failed to furnish any of information called for by AO. He made the addition for non-deduction of tax at source without examining the applicability of TDS provisions in case of Ocean Freight. As per Circular No. 723 of CBDT, there is no requirement of deduction of tax at source in case of payments made to shipping agents for carriage of passengers, shipped at a port in India. Therefore, matter was remanded back to AO with a direction to examine the issue of deductibility of tax on the payments made to shipping agents under section 194C/195.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2009-10

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