2018 (11) TMI 648 - HC - Income Tax

TDS u/s 195 - freight of paid to non-resident shipping companies or their agents - non deduction of tds - Held that - Now it is stated that the view taken by the Division Bench of this Court in the case of CIT Vs. Orient (Goa) Private Ltd. reported in 2009 (10) TMI 575 - BOMBAY HIGH COURT is expressly held to be not laying down the correct law. It stands overruled by a Larger Bench judgment of this Court comprising of three Judges rendered in the case of Commissioner of Income Tax Vs. V.S. Dempo and Co. P. Ltd 2016 (2) TMI 308 - BOMBAY HIGH COURT . This decision is reported in (2016) . In the light of the Larger Bench judgment of this Court, both sides concede that the Appeal has to be allowed. The view taken up by the Tribunal cannot be sustained. Its order is, therefore, set aside. The question framed is answered in favour of the assessee and against the Revenue

Summary

Issues:
1. Whether the ITAT was justified in holding that freight paid to nonresident shipping companies was liable for deduction of tax at source under section 195 and consequently liable for disallowance under section 40(a)(ia) of the Income Tax Act, 1961?

Analysis:
In the Income Tax Appeal No.271 of 2016, the appellant decided not to press questions II and III, focusing solely on question I. The question revolved around the justification of the ITAT's decision regarding the taxation of freight paid to nonresident shipping companies. The court admitted the appeal on question I for final hearing and disposal.

The Tribunal's order, challenged in this case, was based on several Income Tax Appeals for the Assessment Years 2008-2009 and 2009-2010, which were disposed of in a common order dated 20th November, 2015. The court noted that question I had been answered against the assessee and in favor of the Revenue, citing a Division Bench judgment of the Bombay High Court.

However, the court highlighted that the Division Bench judgment in the case of CIT Vs. Orient (Goa) Private Ltd. was overruled by a Larger Bench judgment in the case of Commissioner of Income Tax Vs. V.S. Dempo and Co. P. Ltd. The court emphasized that the Larger Bench judgment clarified the correct law, leading both parties to agree that the appeal had to be allowed. Consequently, the court set aside the Tribunal's order, ruling in favor of the assessee and against the Revenue on the issue of taxation of freight paid to nonresident shipping companies.

As a result, the court disposed of the appeal, with no order as to costs, as the other questions in the appeal were not pressed by the assessee.