No TDS applicable Payments to Shipping Agents of Non-Resident: Gujarat HC [Read Order]

The High Court of Gujarat held that no Tax Deducted at Source (TDS) is applicable on export freight to shipping agents of the non-resident.

The respondent-assessee, Summit India Water Treatment filed its return of income for the assessment year 2013-­14. The Principal Commissioner of Income Tax invoked the power of revision under Section 263 of the Act, 1961 on the ground that without deducting TDS on the export freight, the assessee company had paid export freight to Inter Ocean Shipping and Logistic Services. Being aggrieved by the order passed by the PCIT under Section 263 of the Act, 1961, the assessee went before the Tribunal.

The tribunal while relying on the Central Board of Direct Taxes (CBDT) Circular No.723 dated 19th September 1995, held that where payment is made to the shipping agents of the non­resident, shipowner or charter, the agent steps into the shoe of the Principal i.e. shipping company and according to the provisions under Section 172 of the Act, 1961 which provides for shipping business in respect of the non­ residents would be applicable and the provisions of Section 194C or 195 which provides for TDS shall not be applicable.

“The PCIT failed to consider during the course of assessment proceedings that the assessee had furnished the relevant materials in respect of export freight payment and it is also not controverted by the PCIT, and therefore, on the basis of indisputable finding brought on record by the respondent-assessee during the course of assessment proceedings under Section 263 of the Act, 1961, it cannot be said that the assessment order is erroneous or prejudicial to the interest of the Revenue in any manner,” the tribunal observed.

The two-judge bench consisting of Justice J .B. Pardiwala and Justice Bhargav D. Karia, upheld the decision of the tribunal and stated, “in view of the facts emerging from the record and the finding of facts arrived by the Tribunal, none of the questions can be termed as substantial questions of law from the impugned order passed by the Tribunal. The appeal, therefore, fails and is accordingly dismissed.”