2% TDS demand issued against CHA, No Proof Filed for Exemption: Madras grants Final Opportunity [Read Order]

The Madras High Court has granted a final opportunity to assessee, Customs House Agent (CHA), to substantiate its claim that it was not liable to deduct tax at source (TDS) on certain reimbursements.

TheIncome Tax Department tireated reimbursable expenses of ₹4.06 crore incurred on behalf of importers such as customs duty and charges paid to the Customs Freight Station as income of the petitioner for AY 2016-17, and demanded TDS at 2% under Sections 201/201A of the Income Tax Act, 1961.

The assessee argued that such expenses were mere pass-through costs without profit element and that tax was already paid on its commission income.

The Assessing Officer, however, disallowed the claim, and the revisional authority upheld the levy, citing lack of documentary evidence for exemption. Challenging these orders, the petitioner contended before the High Court that it had filed necessary documents and had been compliant with tax laws since 2002 without objections being raised.

Justice Krishnan Ramasamy observed that though the petitioner claimed exemption from TDS, no adequate supporting documents were produced before the authorities.

However, to meet the ends of justice, the Court set aside the impugned orders and remanded the matter back to the Assessing Officer, directing the petitioner to file all relevant documents within two weeks.

The AO has been instructed to provide a personal hearing with seven days’ notice and pass a fresh order on merits in accordance with law.

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