The Tax Publishers2020 TaxPub(DT) 5367 (Ahd-Trib) : (2021) 186 ITD 0711


Section 195 Section 172

There was no obligation upon the assessee to deduct taxes at source under section 195 in respect of demurrage charges paid to the non-resident shipping company as such income was liable to be brought under tax under section 172.

Tax deduction at source - Under section 195 or 172 - Foreign remittance towards demurrage charges to non-resident -

Assessee made foreign remittance towards demurrage charges to the non-resident. AO held assessee had not produced the supporting documents indicating that the payment had been offered to tax under section 172 by the shipping company. Therefore, assessee was treated as assessee-in-default under section 201(1) for non-deduction of tax at source under section 195. Held: As per various judicial pronouncements, provisions of section 195 are not applicable to the reimbursement of demurrage charges paid to the non-resident shipping company on behalf of the assessee. Further, it is clearly clarified by the CBDT vide Circular No. 723 dated 19-9-1995 that as long as the ship in respect of which freight payment is made is owned or chartered by non-resident the provision of section 172 are applicable and the provision of section 195 or 194C cannot be involved. In view of the facts, treating assessee as assessee-in-default could not be held as justified.

REFERRED : CIT v. V.S. Dempo & Co. Pvt. Ltd. (2016) 381 ITR 303 (Bom-HC) : 2016 TaxPub(DT) 1042 (Bom-HC), CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. [Tax Appeal No. 315 of 2013] : 2013 TaxPub(DT) 2222 (Guj-HC), Deepak Fertilizers & Petrochemicals Corporation Limited v. Pr. CIT (Central) (2019) 112 315 (Mum-Trib) : 2020 TaxPub(DT) 66 (Mum-Trib) and Steelco Gujarat Limited v. Asstt. CIT (2018) 92 27 (Ahmd) : 2018 TaxPub(DT) 1835 (Ahd-Trib).

FAVOUR : In favour of assessee.

A.Y. : 2016-17



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