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TMI Blog2024 (1) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... s a fact that once the hired Vessel left the Porbandar Port and reached Durban South Africa, the charterer handed back the vessel to the owners who, in turn, raised these damages on the buyer i.e. the assessee before us. Thereafter, only upon arbitration and negotiation, the assessee was required to pay USD 4,50,000/- within 14 days from the date of settlement. It was further found from the settlement deed that the payments were reimbursements in nature and other damages raised are capital in nature CIT(A) declined to consider the same as income to the ship owner within the purview and scope of the provision of Section 5(2) of the Act and the direction passed by the Ld. AO to deduct tax at source on such payments in terms of the provision of Section 195(2) of the Act was found to be wrong, which, in our considered opinion also found to be just and proper for the reason as discussed hereinabove. We, therefore, confirm the order passed by the Ld. CIT(A). Decided against revenue. - SHRI WASEEM AHMED, ACCOUNTANT MEMBER Ms. MADHUMITA ROY, JUDICIAL MEMBER For the Appellant : Shri Hemanshu Shah, A.R. For the Respondent : Shri Ashok Kumar Suthar, Sr. DR ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble is to be ascertained. There is no DTAA between Indian and Marshal Island and remitter has not provided TRC and other details provided in rule 37BB, therefore provision of section 206AA is applicable and TDS@20% is to be deducted under section 195 of the Act 5. Thus, according to him, the lump sum consideration paid by the assessee does not fall within income /receipt as defined in Section 172 of the Act. According to him, it is an income in the hands of the remitter falls under Section 5(2) of the Act and hence applying under Section 195 of the Act, particularly, when there is no DTAA between India and Marshal Islands and remitter has not provided TRC. TDS @ 20% was directed under Section 195 of the Act. Against which, the assessee preferred appeal before the First Appellate Authority. 6. Before the First Appellate Authority, the assessee submitted as follows: 1. Order u/s. 195(2) of IT Act dtd. 03-10-2017 was passed by ld. DCIT, International Taxation-1, Ahmedabad. Ld. DCIT, International Taxation). Ahmedabad has observed the following That Marshal Island based company Titan Shipping Limited has received lump sum consideration towards its claim of damage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas of operation of these sections. 5. There would, however, be cases where payments are made to shipping agents of non-resident ship-owners or characters for carriage of passengers etc., shipped at a port in India. Since the agent acts on behalf of the non-resident ship owner or character, he steps into the shoes of the principal. Accordingly, provisions of section 172 shall apply and those sections 194C and 195 will not apply. Perusal of the above circular clearly support the view that section 172 will be applicable and sections 1940 and 195 of IT Act will not be applicable. 32 As per section 172 of the IT Act, TDS will be @7.5% of the proposed amount. The section 172 of the IT Act provides as under: Shipping business of non-residents. 25 172. 26 (1) The provisions of this section shall, morwithstanding anything contained in the other provisions of the Act apply for the purpose of the 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 27[***] (2) Where such a ship carries passengers, livestock mail or goods shipped at a po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied that the tax assessable under this section has been duly paid or that satisfactory arrangements have been made for the payment thereof. (7) Nothing in this section shall be deemed to prevent the owner or charterer of a ship from claiming before the expiry of the assessment year relevant to the previous year in which the date of departure of the ship from the Indian port falls, that an assessment be made of his total income of the previous year and the tax payable on the basis thereof be determined accordance with the other provisions of this Act, and if he so claims, any payment made under this section in respect of the passengers, livestock, mail or goods shipped at Indian ports during that previous year shall be treated as a payment in advance of the tax leviable for that assessment year, and the difference between the sum so paid and the amount of tax found payable by him on such assessment shall be paid by him or refunded to hi, as the case may be. 33(8) For the purposes of this section, the amount referred to in subsection (2) shall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature.] As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not have been disallowed by invoking provision of section 40(a)(ia) - Held yes [Para 7] [In favour of assessee] The copy of the said decision is enclosed as Annexure-E1. As submitted hereinabove, it is submitted that our main contention is that there is no withholding tax at all as submitted in Ground No.3 However, alternately, without prejudice, it is submitted that withholding tar at most can be @ 7.5% amounting to USD 33,750 as mentioned in details of the above referred Ground No.3. 7. The Ld. CIT(A) quashed the order passed by the Ld. AO under Section 195 of the Act. Hence, the instant appeal before us. 8. The crux of the argument of the assessee is this that as the agent acts on behalf of the non-resident owner or character, he steps into the shoes of the principal and accordingly provision of Section 172 of the Act only will be applicable and not the provision of Section 194C or 195 of the Act. In support of the same, he relied upon the Circular No. 723 issued by CBDT dated 19.09.1995. Further that, as per Section 172 of the Act, TDS will be @ 7.5% of the proposed amount. In fact, the assessee objected that such remittance as damage charges is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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