Customs House Agent bound to pay TDS On Payment to CFS Agents: ITAT [Read Order]

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the Customs House Agent bound to pay TDS under section 194C of the Income Tax Act, 1961 on payment to CFS Agents.

The assessee firm is a Custom House Agent, filed its return of income for the assessment year 2010-11 on 02.11.2010 admitting total income of Rs.12,56,176/-. During the course of the assessment proceedings, the AO noticed that the assessee has paid CFS charges of Rs.62,91,518/- at Madras Port & Tuticorin Port to 18 parties including M/s Shipping Agencies Pvt. Ltd. The assessee has deducted TDS under section 194C in respect of payment made towards CFS charges at Tuticorin Port. However, has not deducted TDS on payment made towards CFS charges at Chennai Port.

The assessee claimed that payments made at Chennai Port, are not covered under section 194C of the Act, because there is no agreement between the assessee and the recipients.

The Tribunal bench consists of Shri V. Durga Rao, Judicial Member and Shri G. Manjunatha, Accountant Member held that “the contention of the assessee that payment made by the assessee is outside the scope of section 194C of the Act, is devoid of merits, because as per provisions of section 194C of the Act, which is the responsibility of the person who makes payment and thus, when the assessee has made the payment on behalf of its customers to CFS agents, then the assessee shall deduct TDS on said payments.”

“As per the provisions of Sec.194C of the Act, any person responsible for making payment for any services needs to deduct TDS on such payment at the prescribed rate. From the plain reading of Sec.194C of the Act, it is abundantly clear that the person who makes payment is required to deduct TDS on such payment, whether the person makes the payment for himself or on behalf of the third party. In this case, the assessee is a Custom House Agent has made payment to CFS Agents on behalf of its customers and claimed that payment is in the nature of reimbursement of expenses and thus, outside the scope of Sec.194C of the Act. We do not find merits in the arguments of the assessee, because as per Sec.194C of the Act, it is abundantly clear that a person, who makes payment is required to deduct TDS and thus, we are of the considered view that there is no merit in the arguments of the assessee that payments made to CFS Agents, is outside the scope of Sec.194C of the Act,” the Tribunal said.

To Read the full text of the Order CLICK HERE

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