TMI Blog2011 (3) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... vnesh Saini, J 1. The departmental appeal as well as the Cross Objection by the assessee are directed against the order of the learned CIT(A)-VI, Baroda dated 22nd April, 2009 for assessment year 2006-07. 2. The revenue has preferred the appeal on the following grounds: "1. On the facts and in the circumstances of the case and in law the CIT(A) has erred in law in directing to allow deduction of Rs.8,72,188/- after verification of proofs which amount was disallowable u/s. 40(a)(ia) of the I. T. Act, 1961. 2. The CIT(A) has also erred in not giving a clear cut finding as required under section 251(1)(a) of the IT Act." 3. The assessee has filed the Cross Objections on the following grounds: "1. The learned AO as well as the CIT(A) erred in fact and in law holding that disallowance is required to be made u/s. 40(a) (ia) of the Act from the payments made to foreign shipping companies or their agents despite the fact that Circular No. 723 dated 19-9-1995 clearly provided that provisions of section 194C as well as provisions of section 195 are not applicable to payments made to shipping agents of non-residents and therefore no disallowance invoking provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies. The learned CIT(A) accordingly directed to provide proof of the taxes paid by the shipping company and the AO was asked to verify the same. The appeal of the assessee was allowed subject to verification. 5. The learned DR relied upon the order of the AO. 6. On the other hand, the learned Counsel for the assessee reiterated the submissions made before the authorities below and referred to the reply filed before the learned CIT(A) (PB -5) and also relied upon the CBDT Circular No. 723 dated 19-9-1995 (PB - 7 and 8). 7. On consideration of the rival submissions, we are of the view that the authorities below have not appreciated the facts and the provisions of law while deciding the above issue and their orders are not sustainable under the law. 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. What the assessee had paid was nothing but "reimbursement" of freight charges for which necessary memos were issued by the shipping agent M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 shipowners 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. Circular No. 723, dated 19-9-1995." 8. The provisions of section 172 of the IT Act is also reproduced as under: 172. (1) The provisions of this section shall, notwithstanding anything contained in the other provisions of this 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 [***]. (2) Where such a ship carries passengers, livestock, mail or goods shipped at a port in India, [seven and a half] per cent of the amount paid or payable on account of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve 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 in 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 him, as the case may be. [(8) For the purposes of this section, the amount referred to in sub-section (2) shall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature.]" 9. The AO invoked the provisions of section 40(a)(ia) of the IT Act for non-deduction of TDS as required u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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