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2014 (4) TMI 1099 - AT - Income TaxDisallowance u/s. 40(a)(ia) - non- deduction of TDS on terminal handling charges - Held that - As carefully perusing the orders of the lower authorities and the Circular of the Board No.723 dated 19/09/1995 the Circular relates to tax deduction at source for payment made to foreign shipping companies and at point No.5 the CBDT has clarified that 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 section 194C and 195 will not apply. - Decided in favour of assessee.
Issues: Disallowance under section 40(a)(ia) for non-deduction of TDS on terminal handling charges
In this case, the appellant, an Assessee, appealed against the order of CIT(A)-23, Mumbai regarding the disallowance of Rs. 10,78,418 under section 40(a)(ia) for non-deduction of TDS on terminal handling charges for the assessment year 2008-09. The Assessee had paid terminal handling charges totaling Rs. 12,44,840 to various parties involved in handling exports at the terminal. The Assessing Officer (AO) disallowed Rs. 10,78,418 for non-deduction of tax at source. The Assessee contended that there was no liability to deduct tax based on Circular No.723 dated 19th September 1995. The matter was brought before the ITAT Mumbai. The ITAT Mumbai examined the Circular No.723 dated 19/09/1995, which pertains to tax deduction at source for payments to foreign shipping companies. The Circular clarified that in certain cases, the provisions of section 172 would apply, and not sections 194C and 195. Referring to a previous Tribunal decision following the same Circular, the ITAT allowed the Assessee's appeal, setting aside the CIT(A)'s order and directing the AO to delete the addition of Rs. 10,78,418. The ITAT held that since the payment fell under the CBDT Circular, there was no requirement for TDS deduction. Therefore, the ITAT Mumbai ruled in favor of the Assessee, allowing the appeal and directing the deletion of the disallowance under section 40(a)(ia) for non-deduction of TDS on terminal handling charges.
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