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The Tax Publishers CIT v. V.S. Dempo & Co. (P) Ltd. [IT Appeal Nos. 948, 957, 989 & 991 of 2015, dt. 5-2-2016] : 2016 TaxPub(DT) 1042 (Bom-HC) Demurrage paid a resident to a non-resident shipping line in India whether disallowable if no TDS is done due to applicability of section 172? *Facts:* This was a combination of various petitions. It was held in CIT v. Orient (Goa) Private Limited 325 ITR 554 (Bom) that payment by a resident to a non-resident shipping line can be disallowed under section 40(a)(i) no matter if the non-resident is covered under section 172. The decision was not seen eye to eye by another division bench. Thus this larger bench was constituted to decide the case. To recap department gave it a reading in Orient Goa case that the payer was a resident thus cannot be read into the applicability of section 172 at all. Circular 723, dated 19-9-1995 was not see in correct perspective. Held no TDS deduction needs to be done on payment to non-resident shipping line. Section 172 is a code in itself. Once section 172 is applied due to its non-obstante clause neither section 40(a)(i) nor 195 can be applied. Circular 723 also confirms the same which is binding on revenue. There is no dispute in this reading. If section 172 or 44BB are applied then no TDS implication arises. The payout has to be seen from the perspective qua recipient for TDS applicability and not of the paying entity. Circular no. 723 clearly says no TDS under section 195 or 194C is applicable both sections are referred as payout happens either to non-resident shipping line or to their agent in India so scope is even out of section 194C for payout by one resident to the resident agent of the non-resident shipping line. Cases referred to explain section 172 Union of India v. Gosalia Shipping (PVT.) Ltd. reported in (1978) 3 SCC 23 & A.S. Glittres D/5 I/S Garonne And Others v. CIT, reported in (1997) 9 SCC 54 GE India Technology Centre Pvt. Ltd. v. CIT & Anr. reported in (2010) 10 SCC 29 explained for section 195 applicability. Scheme of income tax sections read in and explained.

The Tax Publishers

CIT v. V.S. Dempo & Co. (P) Ltd. [IT Appeal Nos. 948, 957, 989 & 991 of 2015, dt. 5-2-2016] : 2016 TaxPub(DT) 1042 (Bom-HC)

Demurrage paid a resident to a non-resident shipping line in India whether disallowable if no TDS is done due to applicability of section 172?

Facts:

This was a combination of various petitions. It was held in CIT v. Orient (Goa) Private Limited 325 ITR 554 (Bom) that payment by a resident to a non-resident shipping line can be disallowed under section 40(a)(i) no matter if the non-resident is covered under section 172. The decision was not seen eye to eye by another division bench. Thus this larger bench was constituted to decide the case. To recap department gave it a reading in Orient Goa case that the payer was a resident thus cannot be read into the applicability of section 172 at all. Circular 723, dated 19-9-1995 was not see in correct perspective.

Held no TDS deduction needs to be done on payment to non-resident shipping line.

Section 172 is a code in itself. Once section 172 is applied due to its non-obstante clause neither section 40(a)(i) nor 195 can be applied. Circular 723 also confirms the same which is binding on revenue. There is no dispute in this reading. If section 172 or 44BB are applied then no TDS implication arises. The payout has to be seen from the perspective qua recipient for TDS applicability and not of the paying entity.

Circular no. 723 clearly says no TDS under section 195 or 194C is applicable both sections are referred as payout happens either to non-resident shipping line or to their agent in India so scope is even out of section 194C for payout by one resident to the resident agent of the non-resident shipping line.

Cases referred to explain section 172

Union of India v. Gosalia Shipping (PVT.) Ltd. reported in (1978) 3 SCC 23 & A.S. Glittres D/5 I/S Garonne And Others v. CIT, reported in (1997) 9 SCC 54

GE India Technology Centre Pvt. Ltd. v. CIT & Anr. reported in (2010) 10 SCC 29 explained for section 195 applicability.

Scheme of income tax sections read in and explained.