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2016 (6) TMI 634 - ITAT AMRITSAR

2016 (6) TMI 634 - ITAT AMRITSAR - TMI - Non deduction of tds in respect of shipping expenses - assessee in default - whether Inland haulage charges, Terminal handling charges, Bunker adjustment factor, Cost adjustment factor, etc., i.e., shipping expenses paid by the assessee regarding exports using non-resident shipping call for TDS? - Held that:- In case of shipping of goods at a port in India , seven and a half percent of the carriage charges shall be deemed to be income accruing in India on .....

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esident ship-owners or charterers for carriage of passengers, etc., shipped at a port in India, since the agent acted on behalf of the nonresident ship-owner or charterer, he steps into the shoes of the principal and, accordingly, the provisions of section 172 shall apply and those of sections 194C and 195 will not apply. - Decided in favour of assessee

Non deduction of tax out of dividend by transfer of funds by the assessee to its sister concerns by way of loans and advances - Held .....

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maintain a register wherein details of such concerns, as to which provisions of section 2(22)(e) of the Act apply, may be kept; and that so, that when the payment is made to a non shareholder, it is impossible for the payer company to ascertain whether it will attract the provisions of section 2(22)(e) of the Act or not and it is, therefore, that the law does not expect the payer company to deduct TDS when payment is made to a non-shareholder; that this is the reason why the law expressly provi .....

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ot applicable in the hands of the recipient, due to which, the provisions of sections 201(1) and 201(1A) of the Act cannot be applied - Decided in favour of assessee - ITA No.257(Asr)/2014, ITA No.363(Asr)/2014 - Dated:- 22-3-2016 - SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER For The Asseessee : Sh. Ravish Sud, Advocate For The Department : Sh. Tarsem Lal, DR ORDER PER A.D. JAIN, JM; These are the cross appeals - one by the assessee and the other by the Department again .....

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company to be in contravention of section 194C in respect of Shipping Expenses (including IHC/THC) and had wrongly raised a demand of ₹ 7,189/- and ₹ 4,314/- u/s 201(1) and 201(1A), respectively. 3. That the CIT(A) had wrongly upheld the order of the AO, wherein the latter had erred in holding the assessee company to be in contravention of section 194C in respect of Payment to contractors and had wrongly raised a demand of ₹ 4,682/- and ₹ 3,371/- u/s 201(1) and 201(1A), .....

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cted tax at source in some of such payments, which had been made to the contractors, custom agents, lease rent charges etc., as under: Nature of expenses Amount of payment a. Shipping expenses M/s. Worldwide Container & Shipping Services Rs.1,00,000/- M/s. Venus Clearing ₹ 21,712/- M/s. IAL ₹ 75,762/- M/s. R.K. Shipping ₹ 68,846/- M/s. S.K. Shipping ₹ 46,013/- M/s. LTA Worldwide ₹ 40,101/- b. Payments of Rajkot Branch: i.) Job Work ₹ 91,620/- ii) M/s. Nand .....

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t, but represented other charges which had been paid to the clearing and forwarding agents for their services to clear the goods at the custom port; and that by clearing the goods at the custom port, the clearing and forwarding agents cannot be considered to be the agents of the nonresident ship-owners or charters and they will not step into the shoes of the principal as stated in Circular No.723, dated 19.09.1995. As such, the AO held the assessee to be in default in respect of payments of S .....

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supplemented by CBDT Circular No. 723 dated 19.09.1995, the amounts paid by the assessee company towards Inland haulage charges, Terminal handling charges, Bunker adjustment factor, Cost adjustment factor, etc., i.e., shipping expenses, were not liable for any deduction of tax at source and the authorities below have erred in holding the assessee-company to be in default u/s 201(1)/201(1A) read with section 194C of the Act for failure to deduct tax at source on these amounts. 9. On the other ha .....

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12. Section 172(2) reads as follows: Where such a ship carries…………..goods shipped at a port in India, seven and half percent of the amount paid or payable on account of such carriage to the owner or the charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be deemed to be income accruing in India to the owner or charterer on account of such carriage. 13. Section 172(6) is as follows: A port clearance shall not be g .....

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bove, it is clear that in case of shipping of goods at a port in India , seven and a half percent of the carriage charges shall be deemed to be income accruing in India on account of such carriage; that unless and until the tax assessable u/s 172 is paid or arranged for and the Collector of Customs is satisfied to that effect, the ship shall not be granted port clearance; that the carriage charges, as and envisaged by section 172(2) shall be included in the amount of demurrage charge or handling .....

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7. Further, in ITO vs. Freight Systems (India ) Pvt. Ltd. , 6 SOT 473 (Del.), it has been held that payment of ocean freight and Inland haulage charges cannot be subjected to TDS by virtue of the provisions of section 172 of the Act, which position is clarified by CBDT Circular No.723 dated 19.09.1995. This decision, though cited by the assessee before the ld. CIT(A), it does not find even a mention, much less adjudication, by the ld. CIT(A), in the operative portion of the order. Before us also .....

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- u/s 201(1A) of the Act for non-deduction of TDS on payment of shipping expenses of ₹ 3,52,434/- is cancelled. 18. ITA No.363(Asr)/2014 This is Department s cross appeal for the AY 2006-07, contending that the ld. CIT(A) has erred in deleting the demand of ₹ 25,97,630/- (tax u/s 201(1) ₹ 16,23,502/- + interest u/s 201(1A) ₹ 9,74,101/-) on account of non deduction of tax out of dividend by transfer of funds by the assessee to its sister concerns by way of loans and advanc .....

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by any such company on behalf or for the individual benefit of any such shareholder to the extent to which the company in either case possesses accumulated profits. The AO asked the assessee as to why, as such, it should not be treated as an assessee in default for nondeduction of tax at source out of deemed dividend under the provisions of section 2(22)(e) of the Act, as the partners of the sister concerns were substantial shareholders and had substantial interest. The assessee explained that t .....

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201(1) and u/s 201(1A) of the Act, for the default of non-deduction of tax at source out of deemed dividend on account of transfer of funds to its sister concerns by the assessee company. 20. The ld. CIT(A) deleted the demand. 21. The ld. DR has contended that the ld. CIT(A) has erred in deleting the demand correctly made by the AO on account of non-deduction of tax out of dividend by transfer of funds by the assessee to its sister concerns by way of loans and advances. The ld. counsel for the .....

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tion, actually are the shareholders of the assessee company. As correctly noted by the ld. CIT(A), since none of the assessee s sister concerns are its shareholders, the assessee was not under any obligation to deduct tax at source on the payments made to its sister concerns, which payments had been considered by the AO as deemed income. The provisions of section 194 of the Act are applicable only if the payment of dividend is made to a shareholder, who is resident in India. It has not been show .....

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