9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (5) TMI 1359 - AT - Income TaxTDS u/s 195 - disallowance u/s 40(a)(i) - overriding effect of section 172 - freight paid to non-resident shipping companies - Held that - any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of this Act not being income chargeable under the head Salaries , would have to deduct the tax thereon at the rates in force. - While considering levy and recovery of tax in case of business carried on with aid of any ship belonging to or chartered by a non-resident which carries passengers etc. shipped at a port in India, then, tax must be computed and recovered in relation to such business of non-resident as per section 172 of the Act. - there is no warrant in applying the provisions in chapter XVII for collection and recovery of the tax and its deduction at source vide section 195. Vide Finance Act, 2008, w.e.f. 1.4.2008 sub-Section (6) has been inserted in Section 195 which requires the payer to furnish information relating to payment of any sum in such form and manner as may be prescribed by the Board. This provision is brought into force only from 1.4.2008. It will not apply for the period with which we are concerned in these cases before us We find that on the issue of the expenditure on so called commission and disallowance u/s 40(a)(i) of the Act, the Tribunal considered the decision in G.E. India Technology Centre Pvt. Ltd., CIT vs R.D. Agrawal & Co. (1964 (10) TMI 9 - SUPREME Court), Orient Goa Pvt. Ltd. (2009 (10) TMI 575 - Bombay High Court ), CST vs Indra Industries (2000 (1) TMI 44 - SUPREME Court), etc. and thereafter set-aside the matter to the file of the Assessing Officer for proper factual as well as legal determination. Both the parties before us agreed that on identical lines, the issue may be restored to the file of the ld. Assessing Officer. We may add here that ld. Assessing Officer is directed to consider Circular No.7/2009 (F.No.500/135/2007-FTD-I) dated 22/10/2009, wherein, earlier Circular No.23 dated 23/07/1969, No.163 Dated 29/05/1975 and Circular No.786 dated 07/02/2010 were withdrawn. The assessee be given opportunity to substantiate its claim. Thus, this ground is allowed for statistical purpose.
Issues Involved:
1. Deduction of tax at source on freight payments to non-resident shipping companies. 2. Deduction of tax at source on commission payments to overseas agents. Detailed Analysis: Issue 1: Deduction of tax at source on freight payments to non-resident shipping companies The first issue pertains to whether freight payments of ?1,12,80,096/- made to non-resident shipping companies or their agents are liable for deduction of tax at source under section 195 of the Income Tax Act, 1961, and consequently, whether such payments are disallowable under section 40(a)(i) of the Act. During the hearing, the counsel for the assessee argued that this issue is covered in favor of the assessee by the decision of the Hon'ble jurisdictional High Court in the case of CIT vs V.S. Dempo & Co. Ltd., Sesa Goa Ltd. vs CIT (2016) 381 ITR 303 (Bom.)(FB). Conversely, the Revenue's representative contended that the issue is covered against the assessee by the Tribunal's decision for Assessment Year 2008-09 and 2009-10. The Tribunal noted that in the assessee's own case for the earlier years, it was held that section 40(a)(i) applies to the said payments as the assessee had neither deducted tax at source nor obtained a certificate for non-deduction under section 195(2). However, the Hon'ble jurisdictional High Court's Full Bench in CIT vs V.S. Dempo and Co. Pvt. Ltd. and Sesa Goa Ltd. vs CIT overruled the decision in CIT vs Orient (Goa) (P.) Ltd., concluding that section 172, which deals with the shipping business of non-residents, applies notwithstanding anything contained in other provisions of the Act for the purpose of levy and recovery of tax. Therefore, the Tribunal decided this ground in favor of the assessee, following the Full Bench decision. Issue 2: Deduction of tax at source on commission payments to overseas agents The second issue concerns the disallowance of commission payments amounting to ?87,30,042/- made to overseas agents under section 40(a)(ia) due to non-deduction of tax at source under section 195. The Tribunal referred to its earlier decision, which held that a payment to a non-resident would not be subject to tax deduction at source unless the corresponding receipt bears an element of income taxable in India. The Tribunal highlighted that the nature and scope of services rendered by the non-resident agents must be examined to determine whether any part of the commission income accrues or arises in India. The Tribunal noted that there was no examination of the activities carried out by the non-resident agents, and thus, the matter required proper factual and legal determination. The Tribunal set aside the matter to the file of the Assessing Officer for a detailed examination, directing the Assessing Officer to consider Circular No. 7/2009, which withdrew earlier Circulars No. 23, 163, and 786. Both parties agreed to this course of action. Conclusion: The appeals were partly allowed for statistical purposes, with the Tribunal directing the Assessing Officer to re-examine the issues in light of the detailed guidelines provided. The Tribunal's order was pronounced in the open court on 21/04/2017.
|
