Freight payments made to shipping agents of Non-Resident/ Non-Resident shipping companies: Applicability of provisions of Tax Deduction at Source
- The Assessee had incurred terminal handling charges amounting to Rs.1.29 Cr without deducting the tax at source.
- The Assessing Officer observed that such payment was made to the resident transport operator/ labour contractors to load the goods on the ships. Accordingly, the Assessee was required to deduct the tax at source under section 194C of the Act.
- Thus, the Assessing Officer disallowed the said claim on account of non-deduction of tax at source.
- The Circular No. 723 dated 19.09.1995 states that where the provisions of Section 172 are to apply, the provisions of Section 194C and 195 relating to tax deduction at source are not applicable.
- The Tribunal considered the said Circular and placed reliance on the decision laid down in the case of Deputy Commissioner of Income Tax v. Hasmukh J. Patel wherein it was concluded that where the provisions of Section 172 would apply, no deduction of tax was required under Section 194C.
- Therefore, the handling charges paid to the non-shipping companies were covered under the provisions of section 172 of the Act. Hence, the Assessee was not liable to deduct the tax at source under the provisions of section 194C/195 of the Act.