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TMI Blog2020 (1) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 263 and disallowed demurrage expenses debited by the appellant. Being aggrieved by the order passed by the Pr. CIT, your appellant submits the following grounds of appeal for your sympathetic consideration: Ground No. 1: On the facts and in the circumstances of the case and in law the learned Pr. CIT erred in invoking provisions of section 195 of the Income-tax Act, 1961 (the Act') for disallowing demurrage expenses debited to the extent of Rs. 4,94,33,000/- for non-deduction of TDS. The learned Pr CIT erred in facts and in law that such payment is covered as business income under section 44B of the Act. The learned Pr.CIT failed to appreciate that section 172 of the Act provides adequate measures for computation, assessment and recovery of taxes, thereby, there is no warrant to take recourse to section 40(a)(i) of the Act. On the facts and in the circumstances of the case and in law, the learned Pr. CIT erred in not considering the full member bench ruling of Hon'ble Bombay High Court in case of V.S.Dempo & Co. Pvt. Ltd reported in 387 ITR 354. Ground No.2: Without prejudice to the above ground, on the facts and in the circumstances of the case and in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich enacts the special provisions for computing profits and gains of shipping business in case of non-residents, therefore, there was no warrant for applying the provision of Chapter XVII for collection and recovery of the tax and its deduction at source u/s Sec.195 of the Act. In support of his aforesaid contention that no obligation was cast upon the assessee to deduct tax at source in respect of the demurrage charges paid to the foreign supplier, support was drawn by the assessee from the judgment of the 'Full bench' of the Hon'ble High Court of Bombay in the case of CIT, Panaji Vs. V.S. Dempo & Co. Pvt. Ltd. (ITA No. 989 of 2015), dated 05.02.2016. Further, it was submitted by the assessee that the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. M/s Orient Goa Pvt. Ltd. (2010) 325 ITR 554 (Bom) relied upon by the revisional authority had been 'set aside' by the aforesaid 'Full bench' of the Hon'ble High Court in case of V.S. Dempo & Co. Pvt. Ltd. (supra). However, the Pr. CIT was not persuaded to subscribe to the contentions advanced by the assessee. It was observed by the Pr. CIT, that as the 'Division Bench' of the Hon'ble High Court of Bombay in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mported by it. It was submitted by the ld. A.R, that the payment of the demurrage charges by the assessee to its raw material supplier was in the nature of a reimbursement of the charges forming part of the 'ocean freight', which the foreign supplier had to bear on account of delayed discharge of material that was imported by the assessee. It was averred by the ld. A.R, that as the 'demurrage charges' as per sub-section (8) of Sec.172 were to be included for the purpose of levy and recovery of tax in the case of any ship belonging to or chartered by a non-resident which carries passengers, livestock, mail or goods shipped at a port in India as envisaged in sub-section (1) of Sec.172 of the Act, therefore, no obligation was cast upon the assessee for deduction of tax at source under Sec.195 at the time of payment of such charges. Further, it was averred by the ld. A.R, that the view of the Hon'ble High Court of Bombay in CIT Vs. Orient (Goa) Pvt. Ltd. (2010) 325 ITR 554, that for the purpose of invoking the provisions of Sec.172 the status of the person making the expenditure has to be as that of a non-resident was reversed by the 'Full Bench' of the Hon'ble High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 554 (Bom), had rightly concluded, that as it was obligatory on the part of a resident assessee/Indian company to deduct tax at source at the time of making of payment towards demurrage charges to a non-resident shipping company, therefore, the failure on the part of the assessee to deduct tax at source u/s 195 at the time of making of said payment of Rs. 4,94,33,000/- was liable to be disallowed under Sec.40(a)(i) of the Act. 6. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Admittedly, as the assessee had delayed discharge of raw material imported by it, therefore, the non-resident shipping company had imposed certain demurrage charges on the raw material supplier, which was subsequently reimbursed by the assessee. Our indulgence in the present appeal, has been sought, to adjudicate as to whether any obligation was cast upon the assessee to deduct tax at source at the time of payment of the amount towards demurrage charges, or not. As is discernible from the order of the Pr. CIT, it was observed by him, that it was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and recovered, in the case of any ship belonging to or chartered by a non-resident and operated from India, therefore, there was no warrant in applying the provisions of Chapter XVII for collection and recovery of the tax and its deduction at source under Sec. 195 of the Act. It was observed by the Hon'ble High Court, that as the income of the non-resident shipping company was to be brought to tax under Sec.44B and consequently under Sec.172 of the Act, therefore, no obligation was cast upon the respondent assessee/Indian company to deduct tax at source at the time of making of payment towards demurrage charges. On the basis of its aforesaid observations the 'Full bench' of the Hon'ble High Court of Bombay in the case of V.S. Dempo Co. Pvt. Ltd. (supra) had reversed the view earlier taken by the 'Division bench' of the High Court in the case of Orient Goa Pvt. Ltd. (supra). To sum up, the 'Full Bench' of the Hon'ble High Court of Bombay in the case of CIT Vs. V.S. Dempo & Co. Pvt. Ltd. (ITA No.989 of 2015), dated 05.02.2016, had concluded, that no obligation to deduct tax at source was cast on the resident assessee/Indian company at the time of making of a payment to a non-resident ..... X X X X Extracts X X X X X X X X Extracts X X X X
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