The bench comprising of Accountant Member P.M. Jagtap and Judicial Member S.S. Viswanethra Ravi, while following CBDT circular No. 723 dated 19.09.1995, held that TDS provisions under Section 194C and 195 of the Income Tax Act, 1961 are not applicable in case of foreign shipping companies since it comes under the purview of section 172.
In instant appeal ground raised by revenue regarding the deletion of addition made by AO by way of disallowance made u/s 40(a)(ia) of the Act on account of payments made to foreign shipping lines without deduction of tax at source.
During the year total amount of Rs. 28,76,896/- was paid by the assessee company on account of ocean freight to the different shipping lines without deduction of tax at source and the AO disallowed the same u/s 40(a)(ia) of the Act for non-deduction of tax at source.
Aggrieved assessee carried the matter before the first appellate authority and after considering the submission made by the assessee as well as the material available on record, the Ld. CIT (A) deleted the said disallowance.
While invoking the section of 172 CBDT circular No. 723 dated 19.09.1995 has its application in the case of Foreign Shipping Companies notwithstanding anything contained in the other provisions of the Act and therefore, the provision of Section 194C and 195 relating to tax deduction at source are not applicable in such cases.
Since the issue relating to the disallowance u/s 40(a)(ia) thus is squarely covered by the CBDT Circular No. 723, the bench found no infirmity in the impugned order of the Ld. CIT(A) and uphold the same.
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