INCOME TAX ACT, 1961

Section 195 Section 172

Tax deduction at source - Under section 195 or 172 - Foreign remittance towards demurrage charges to non-resident -

Assessee made foreign remittance towards demurrage charges to the non-resident. AO held assessee had not produced the supporting documents indicating that the payment had been offered to tax under section 172 by the shipping company. Therefore, assessee was treated as assessee-in-default under section 201(1) for non-deduction of tax at source under section 195. Held: As per various judicial pronouncements, provisions of section 195 are not applicable to the reimbursement of demurrage charges paid to the non-resident shipping company on behalf of the assessee. Further, it is clearly clarified by the CBDT vide Circular No. 723 dated 19-9-1995 that as long as the ship in respect of which freight payment is made is owned or chartered by non-resident the provision of section 172 are applicable and the provision of section 195 or 194C cannot be involved. In view of the facts, treating assessee as assessee-in-default could not be held as justified.

REFERRED : CIT v. V.S. Dempo & Co. Pvt. Ltd. (2016) 381 ITR 303 (Bom-HC) : 2016 TaxPub(DT) 1042 (Bom-HC), CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. [Tax Appeal No. 315 of 2013] : 2013 TaxPub(DT) 2222 (Guj-HC), Deepak Fertilizers & Petrochemicals Corporation Limited v. Pr. CIT (Central) (2019) 112 Taxman.com 315 (Mum-Trib) : 2020 TaxPub(DT) 66 (Mum-Trib) and Steelco Gujarat Limited v. Asstt. CIT (2018) 92 Taxman.com 27 (Ahmd) : 2018 TaxPub(DT) 1835 (Ahd-Trib).

FAVOUR : In favour of assessee.

A.Y. : 2016-17

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