Case Law Details
Shri Suresh Khatri Vs ITO (ITAT Lucknow)
Ground Nos. 1 to 3 of the appeal relate to the disallowance of Rs.6,42,437/- for non deduction of tax at source u/s 40(a)(ia) of the Act on payment of ocean freight, made to non-resident shipping companies. The assessee is a proprietary concern and engaged in the business of manufacturing of leather and cotton items. During the year under consideration, the assessee had exported goods and made payment of Rs.6,42,437/- towards shipping expenses in the nature of freight. The Assessing Officer observed that the payments, made by the assessee, come within the purview of section 194C of the I.T. Act and accordingly the assessee was liable to deduct tax at source on these payments. The Assessing Officer disallowed Rs.6,42,437/- on the ground that the assessee failed to deduct TDS on payments made on account of freight as per the provisions of section 40(a)(ia) of the Act. Being aggrieved with the action of Assessing Officer, the assessee carried the matter in appeal before the CIT(A) who has also sustained the disallowance. Now the assessee is in appeal before us.
During the course of hearing, the learned Counsel for the assessee relied on CBDT Circular No. 723 dated 19/09/1995, placed at page 5 of the paper book, and submitted that the disallowance cannot be made in view of this Circular. Circular No. 723 is reproduced below:
Circular: No. 723, dated 19-9-1995
1. Representations have been received regarding the scope of sections 172, 194C and 195 of the Income-tax Act, 1961, in connection with tax deduction at source from payments made to the foreign shipping companies or their agents.
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