TMI Blog2011 (6) TMI 777X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) on the above issues may be set aside and that of the AO be restored. C.O.No.195/Ahd/2009[Assessee] [1] On facts of the case in law, the Learned C.I.T. (Appeal) -II, Baroda has rightly allowed the claim of expenses of ₹ 88,77,737/- (disallowed by ITO, Ward 2(5) Baroda invoking the provisions of Sec. 40(a)(ia) of the Act). Based on conclusion upon appreciation of the evidence and held the payments made to foreign shipping lines or agents thereof are covered u/s 172 read with circular No. 723 dated 19-9-95 and in view of specific provision of article in D.T.A has provided u/s 90 is not taxable in India, will have an overriding effect over all other provisions when said provisions are evoked and therefore Sec 194C is not applicable. [2] The above payments are made to local resident agents of nonresident shipping companies are received on behalf of nonresident shippers are passed on to the agents u/s 172 in respect of such payments are on behalf of the shipping lines which are excluded and cannot be taken into consideration for the purpose of working out the default of the assessee in not deducting tax u/s 194C of the act. The requirement of TD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. On perusal of the chart and the bills / debit notes produced by the assesse, the AO noticed that the assessee made payments under the following heads: Air/ Sea Freight Charges Cargo Carting Govt. Charges Document Charges CFS/CWC Charges Custom Duty DO Charges THC Charges B L Charges MICT Charges Courier Charges Examination Charges Brokerage Transportation Charges Agency Charges Service Tax 8% 2.1 The assessee further explained that the parties to whom payments were made were either Non resident Parties or were agents of the Non Residents and therefore, the recovery of taxes in such cases would be covered u/s 172 of the Act and not under any provisions of Chapter XVII B of the Act. To a further query by the AO,seeking documentary evidences in support of his explanation that the payee parties were either non-resident parties or were agents of non resident parties, the assesse merely furnished copies of profiles of some of the parties as available on their respective websites. In these circumstances, the AO issued a show cause notice as to why the expenses debited under Logistics Charges and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned payment to Non Resident is chargeable to tax in India. Once there was no liability to deduct tax, the provision of section 40(a)(ia) were not applicable and the amount was allowable as expenditure incurred in connection with the business. It was pointed out that provisions of section 172 would not be applicable in a case where there existed a Double Taxation Agreement between the Government of India and Foreign Nation as provided in Sec. 90 The assessee further did not press disallowance of ₹ 28,88,845/- as detailed on page 11 of the impugned order and restricted its claim only to an amount of ₹ 93,30,202/- paid to the following parties; Sr. No. Name of Party Amount on which we Claim exemption 1 U T World Wide I Pvt. Ltd. 22,97,336/- 2 Evergreen India Pvt. Ltd 68,652/- 3 Meridian Shipping Ag. Pvt. Ltd. 1,31,880/- 4 IIC Container Ind. Ltd. 83,370/- 5 Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 989) 177 ITR St. 72.wherein it is stated in article 9 that Income of an enterprise of a Contracting State from the operation cf ships in international traffic shall be taxable only in that state. i i. Evergreen India P. Ltd.: 100% relief in accordance with PITA Agreement (Certificate Produced): Sr.No. Name of Party Amount Rs. Certificate Ref. 7. Evergreen India P. Ltd 608, Premier Chambers, R C Dutt, Road, Alkapuri, Vadodara 68,652/- Issued by Asst. Director of Income Tax (International Taxation) 1(2) Mumbai dated 12-08-2004. 1 Best team Shipping Co. Ltd useful tools worldwide container liners. 2 Individual company wise investor relation. iii. Merridian Shipping Agency: Sr No. Name of the Agent Name of Non-Resi . Shipping Co s. Head Quarter In Total Amount claimed Merridian Shipping IGNAZIO MESSINA c. Italy 1,31,880/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of agent as agents of non-resident shipping companies. 3 Xerox copy of bill of lading. 4 India has entered into DTAA with Dubai (UAE) (1994) 205 ITR St.49 wherein it is stated in article 8 that Profit derived by an enterprise of a contacting state from the operation by that enterprise of ships in international traffic shall be taxable only in that state. vi. Saturn Shipping Agency PLtd.: Sr.No. Name of the Agent Name of Non-Resi. Shipping Go's. Head Quarter In Total Amount Claimed 12. Saturn Shipping Agency P. Ltd,239, Rupam Bldg, 5th Floor, PD'Mel lo Rd, Fort, Mumbai P. T. Saturn Shipping Indonesia based in Jakarta. Add : 2nd floor Wisma Ganadaria Jalan Gandaria III No. 7-08 Jakarta Selatan 12130 Indonesia Jakarta 3,91,061/- 1 Individual company wise investor relation. 2 Certificates of agent as agents of non-resident shipping companies. 3 Xerox copy of bill of lading. 4 Saturn Shipping Agency Pvt. Ltd., working as an agent as corporate / principal office of P T SA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. Name of Party Amount Rs. Certificate Ref. 16. APL India P Ltd 52,50,0387- Issued by Asst. Commissioner of Income Tax, Circle 1, Karuve Lippedy, Mattanchery, Cochin 5 dt. 12-08-2004. 1 Best team Shipping Co. Ltd use full tools worldwide container liners. 2 Individual company wise investor relation. 3 Certificates of agent as agents of non-resident shipping companies. 4 APL India Pvt. Ltd is acting as an agent of M/s. APL Co. Pvt. Ltd. Singapore collecting all payments of freights / terminal charges on behalf of Principal. The company has collected payments against freight certificates issued by them and (not agent invoice) on behalf of their principals. 5 India has entered into DTAA with USA (1991) 187 ITR St. 102 wherein it is stated in article 8 that Profit derived by an enterprise of a contacting state from the operation of ships or an aircraft in an international traffic shall be taxable only in that state. xi. Hind Freight Services Pvt. Ltd. Sr.No. Name of the Agent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... H Q in Malaysia Malaysia 51,491/- 1 Individual company wise investor relation. 2 Xerox copy of bill of lading 3 Xerox copy of freight certificate issued by agent. 4 India has entered into DTAA with Malaysia (1997) 107 ITR St. 136 wherein it is stated in article 8 that Income of an enterprise of one of the Contracting State derived from the other contracting state from the operation of ships in international traffic may be taxed in that other contracting state, but the tax chargeable in that contracting state on such income shall be reduced by an amount equal to fifty per cent of such tax. 4. In the light of aforesaid submissions, the learned CIT(A) adjudicated the issue in the following terms:- 3.3. I have considered the submissions of the Authorized Representative and the facts of the case. Section 40(a)(ia) refers to the expenditure on any interest, commission etc. payable to a resident on which tax is deductible at source. This section clearly stipulates that the expenditure would be disallowed only in a case where tax was deductible at source and such tax has not been deducted or after deduction has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing agents of non-resident ship-owners or charters 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 . The above circular of the Board is squarely applicable to the facts of the instant case and the issue for determination. In this case wherever payments were not made to non resident shipping companies or their agents the appellant, during the course of appellant proceedings did not press the claim. Hence, payments made for MICT charges courier charges, examination charges, brokerage charges, transportation charges and agency charges amounting to ₹ 17,55,630/- was withdrawn. Further payments made to local parties of ₹ 11,33,215/- was also withdrawn. With regard to the balance disallowance the assessee has brought out at length the facts that the payments are to non resident shipping companies or their agents covered squarely under the provisions of section 172 and the Double Taxation Avoidance Agreements. The payments to these parties h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KASHYAP SHIPING AGENCY 106070 GLOBAL MARINE AGENCIES 1459067 SEVEN SEAS SHIPPING SERVICES 150096 WELGROW INDIA PVT. LTD. 109740 RICHIES CONTAINER PVT. LTD. 472686 PAYMENTS MADE FOR TRANSPORT CHARGES AND OTHER MISCELLANEOUS EXPENSES KANDLA HIGHWAY TPT CO. 25000 UT WORLD WIDE IND. 5400 CARGO CARTING 2654 EXAM CHARGES 160095 TPT 30900 AGENCY CHARGES R.C. GUPTA BROS 72250 HIND FREIGHT SERVICES 8000 GLOBAL MAR. 106000 SEVEN SEAS 191200 ---------------- 2899158 With regard to payments of ₹ 3,91,061/- made to Saturn Ship Agency Pvt. Ltd. there does not exist a Double Taxation Avoidance Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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