2014 (4) TMI 272 - AT - Income Tax

Deletion of demand raised u/s 201(1)/201(1A) of the Act Applicability of section 194C of the Act assessee is making payment to some Indian subsidiaries of foreign shipping company without deducting TDS under Section 194C - Revenue contended that the assessee company is an Indian arm of a multinational company Expeditors International - The assessee is engaged in the business of supplying chain management, logistics and freight forwarding which is related to movement of goods and cargo within India or outside India by road, rail, air or ship - During the course of survey at the assessee s premises, it is seen that the assessee is making payment to some Indian subsidiaries of foreign shipping company without deducting TDS under Section 194C of the Act. Held that - Section 194C is applicable to the payment made by the assessee to the subsidiaries of foreign shipping and airline companies - CIT(A) misunderstood the order of the AO and recorded the finding that the AO has accepted the plea of the assessee that Section 194C is not applicable in the case of the appellant and only Section 172 is applicable - In the relied upon by the assessee, the assessee has furnished the confirmation from all the agents for filing of the return u/s 172 of the act - No such confirmations were produced thus, the order fo the CIT(A) set aside and the matter is remitted back to the CIT(A) for fresh adjudication Decided in favour of Revenue.

Summary

Issues:
Revenue's appeal against CIT(A)'s order for AY 2006-07 to 2011-12 - Applicability of Sections 194C and 172, CBDT circulars, case laws, and relief granted.

Analysis:
1. The Revenue challenged the CIT(A)'s order deleting demands under Sections 201(1)/201(1A) of the IT Act, 1961, arguing that Section 194C applies to payments made to Indian subsidiaries of foreign shipping companies without TDS deduction. The Assessing Officer found Section 194C applicable, contrary to CIT(A)'s understanding. The CIT(A) relied on Circulars and case laws to support non-applicability of Section 194C, emphasizing Section 172's relevance for foreign shipping companies.

2. The assessee contended that Section 172, a self-contained tax code, governs payments to foreign shipping companies, exempting them from Section 194C. Referring to Circulars and legal precedents, the assessee argued against TDS deduction for such payments. The CIT(A) concurred, highlighting the necessity of tax payment by shipping companies under Section 172 for movement permissions.

3. Discrepancies arose between the Assessing Officer's and CIT(A)'s interpretations regarding the applicability of Sections 194C and 172. The Assessing Officer deemed Section 194C applicable to payments to non-resident shipping company agents, while the CIT(A) favored Section 172 for such transactions. The ITAT found the CIT(A)'s decision flawed due to misinterpretation, prompting a remand for reconsideration in alignment with legal provisions and precedents.

4. The ITAT directed a fresh adjudication by the CIT(A), emphasizing the need for a correct understanding of the Assessing Officer's order and adherence to legal principles. The decision aimed at ensuring justice by allowing both parties adequate hearing opportunities. The ITAT's decision to set aside the CIT(A)'s order for reassessment underscored the importance of aligning judgments with statutory provisions and relevant legal precedents.

5. Ultimately, the ITAT deemed the Revenue's appeals allowed for statistical purposes, signaling a remand for the CIT(A) to reevaluate the issues concerning Sections 194C and 172, CBDT circulars, and case laws to arrive at a legally sound decision. The ITAT's comprehensive analysis and remand decision aimed at resolving the discrepancies and ensuring a just and legally compliant outcome in the tax dispute.