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TMI Blog2017 (1) TMI 1573X X X X Extracts X X X X X X X X Extracts X X X X ..... is at best partial compliance of this requirement - the matter deserves to be remitted to the file of Assessing Officer with the direction that as long as the assessee can demonstrate that the payment is made to a nonresident directly or through authorized agents and the payment is in respect of the freight, the Assessing Officer shall not make any disallowance under section 40(a)(ia) on account of such payments. Assessee is not under any obligation to give evidence in respect of actual collection of tax from the non-resident shipping company under section 172 - Decided in favour of assessee for statistical purposes. - I.T.A. No.947/Ahd/2015 - - - Dated:- 20-1-2017 - Pramod Kumar AM And Rajpal Yadav JM For The Appellant : S.N. Sopa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, was not swayed by these submissions. He upheld the action of the Assessing Officer and observed as follows :- 4.3 I have considered the facts of the case, the AO's observations and the submission made by the appellant. Based upon the provisions of section 172 and clarification issued by the CBDT vide Circular No.723 dated 19.09.1995, the appellant's claim that if payments are made to various shipping companies who are non-resident or to the agents of nonresident shipping companies for export for product, then, provisions of section 194C and 195 are not applicable, is correct. The appellant has claimed accordingly that it was under no obligation to deduct TDS for such payments and hence, no disallowance u/s 40(a)(ia) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de it clear that the provisions of sec.194C and 195 relating to tax deduction at source will not apply to the payments made to non-resident shipping companies only if their income is assessed u/s.172 of the Act. Hence, in our view, the assessee has to show that the shipping companies to whom payments were made are not only non-residents, but also he has to show they were assessed u/s 172 of the Act. Only if the assessee is able to prove the above facts, then he will be relieved of from the liability to deduct tax at source from the payments made to them towards freight and insurance charges. In this connection, we may state that the legal position will not change if the payments to the non-resident shipping companies are made through their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowed as a deduction in the computation of its income. Accordingly, the action of the AO is upheld and this ground of appeal is dismissed. 3. The assessee is aggrieved and is in further appeal before us. 4. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 5. We find that the CBDT vide circular no.723 has inter alia observed as follows :- Tax deduction at source from payment made to foreign shipping companies Non-Residents, TDS Section 194C, Section 195, Section 172 1. Representations have been received regarding the scope of sections 172, 194C and 195 of the Income-tax Act, 1961, in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar from the section that the area of operation of TDS is confined to payments made to any resident . On the other hand, section 172 operates in the area of computation of profits from shipping business of non-residents. Thus, there is no overlapping in the areas of operation of these sections. 5. There would, however, be cases where payments are made to shipping agents of non-resident ship-owners or charterers for carriage of passengers etc., shipped at a port in India. 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 sections 194C and 195 will not apply. 6. In view of the above Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, is owned or chartered by non-resident or entity which is where provisions of section 172 are applicable, the provisions of section 195 or 194C cannot be invoked. Upon our careful perusal of the aforesaid Board Circular, we are unable to find any reference to suggest that this relaxation is contingent upon the assessee being able to produce evidence of assessment under section 172 in respect of such non-resident. To that extent, therefore, we are unable to approve the stand of the CIT(A). We are of the considered view that as long as the assessee can demonstrate that the payment is made in respect of freight to non-resident shipping companies, the assessee does not have any tax withholding obligation under section 195 or section 194C. How ..... X X X X Extracts X X X X X X X X Extracts X X X X
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