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2011 (3) TMI 353 - AT - Income TaxDisallowance u/s. 40(a)(ia) - TDS u/s 194C - Circular No. 723 dated 19-9-1995 - The assessee specifically explained that he is proprietor of chemical manufacturing concern and also exports the material for sale. In the course of the export, the assessee has to pay shipping freight charges to the shipping agent who acts on behalf of the non-resident shipping companies - Similarly, the provisions of section 194C of the IT Act apply to the area of operation of TDS which is confined to payments made to any residents - A special procedure is provided u/s 172 of the IT Act for payment of taxes in case of any ship belonging to or chartered by a non-resident which carries passenger, livestock, material or goods shipped at a port in India. It has nothing to do with the activity carried out by the assessee - The AO has also not made out any case that the assessee has paid any amount to the residents - Therefore, provisions of section 194C of the IT Act have been wrongly applied in the case of the assessee - Appeal is allowed
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