DCIT Vs Expeditors International [I] Pvt. Ltd. (ITAT Delhi)
Briefly stated, the facts of the case are that the assessee company is engaged in supply chain management, logistics and freight forwarding, which is related to movement of goods and cargo within India or outside by road, rail, air or ship. The activities of the assessee involves packing, loading/unloading, trucking, containerization, custom clearance and other handling functions at both ends, besides moving the goods by air or sea, where goods cross the international borders. The assessee is an Indian arm of a multinational company Expeditors International.
Assessing Officer came to know that the assessee is making payments to Indian subsidiaries of foreign shipping companies and on such payments, no TDS u/s 194C of the Act has been deducted.
The assessee claimed that provisions of section 194C of the Act do not apply to it, but furnished details of payments without TDS. Assessee submitted that it has made payments to agents of foreign shipping companies, therefore, these payments are covered u/s 172 of the Act, and are fully exempt from TDS deduction.
ITAT held that CBDT Circular No. 723 dated 19.09.1995clearly states that provisions of section 172 applies to payments made to agents of foreign shipping companies and therefore, provisions of section 194C of the Act do not apply.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the Revenue is preferred against the order of the ld. CIT(A) – 30, New Delhi dated 12.12.2019 pertaining to Assessment Year 2012-13.
2. The grievances of the Revenue read as under:
“1. The Ld. CIT (A) erred in holding that the agents of Foreign Shipping Companies to whom payments are made by the Assessee are covered by the provisions of section 172 rw Clause 5 of Circular No. 723 and therefore Assessee is not liable to deduct tax on the same. However, the agents/companies in reference are registered in India therefore they are resident tax entities, even if they are subsidiaries. Hence, their income is taxable in India under Income-tax Act, 1961.
2. Most of the shipping companies claim DTA benefit as per the standard procedure, herein the right of taxation is given to state of residence of shipping and airlines companies. Since, 194C is quite clear wherever a contractor makes payment for work to a resident than section 194C will get attracted. As the subsidiaries of foreign shipping and airlines companies are resident of India, TDS should have been deducted on payments made to these residents.
3. Ld. CIT (A) has erred in holding that the Assessee was not liable to deduct tax for payments made to the subsidiaries/agents of the Foreign Shipping Companies, where LTDC u/s. 197 was issued in the name of main/principal company and not in the name of subsidiary/agent company registered/resident in India.
4. The appellant craves leave to add, alter or amend any of the grounds of the appeal at the time of hearing”
3. The representatives of both the sides were heard at length, the case records carefully perused.
4. Briefly stated, the facts of the case are that the assessee company is engaged in supply chain management, logistics and freight forwarding, which is related to movement of goods and cargo within India or outside by road, rail, air or ship. The activities of the assessee involves packing, loading/unloading, trucking, containerization, custom clearance and other handling functions at both ends, besides moving the goods by air or sea, where goods cross the international borders. The assessee is an Indian arm of a multinational company Expeditors International.
5. During the course of assessment proceedings u/s 201/201(1A) of the Income-tax Act, 1961 [hereinafter referred to as ‘The Act’], the Assessing Officer came to know that the assessee is making payments to Indian subsidiaries of foreign shipping companies and on such payments, no TDS u/s 194C of the Act has been deducted.
6. The assessee was asked to explain as to why the assessee should not be deemed to be an assessee in default u/s 201/201(1A) of the Act.
7. The assessee claimed that provisions of section 194C of the Act do not apply to it, but furnished details of payments without TDS.
8. The contention of the assessee did not find any favour with the Assessing Officer who, taking a leaf out of the proceedings of F.Y. 2009-10 and 2010-11, treated the assessee to be an assessee in default and quantified the total default as under:
