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Issues involved: Rectification petition u/s 154 of the Income Tax Act, 1961 regarding applicability of sec.195 on charter hire charges paid to foreign shipping companies.
Summary: The Revenue filed a Miscellaneous Petition seeking rectification of the Tribunal's order related to the assessment year 2005-06. The Revenue contended that the charter hire charges paid by the assessee to foreign shipping companies should be considered as "royalty" and thus, sec.195 provisions are applicable. The Revenue argued that the Tribunal should have followed a previous decision of the Chennai Bench, ITAT in a similar case. However, the Tribunal had focused on whether a disallowance under sec.40(a)(i) was necessary due to non-compliance of sec.195, even though the non-resident charterer had already paid the tax under sec.172. The Tribunal held that sec.195 did not apply in this case as the tax liability had been satisfied under sec.172, which deals with the levy and recovery of tax in shipping business of non-residents. Additionally, the issues raised by the Commissioner had already been decided in favor of the assessee by ITAT, Chennai 'D' Bench for the assessment year 2007-08. The Tribunal found no error in its order, neither on facts nor in law, and dismissed the Miscellaneous Petition.
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