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Learn about a legal ruling on tax assessment for a freight company engaged in regular shipping business. Details on jurisdiction and DTAA implications.
A literal reading of sec. 195A implies that the income should be increased at the rates in force for the financial years and not the rates at which the tax is to be withheld by the assessee. The Hon’ble Apex Court in the case of GE India Technology (cited Supra) has held that the meaning and effect has to be given to the expression used in the section and while interpreting a section, one has to give weightage to every word used in that section.
In the case of Hyderabad Industries Ltd. (supra) also ITAT, Hyderabad Bench held the similar view. In the present case, the AO has failed to bring any material on record on the basis of which it could be concluded that commission paid to foreign agents is chargeable to tax in India. Unless the income is chargeable to tax in India, then tax is not required to be deducted u/s 195(1). From the facts and materials available on record, no definite conclusion can be made that the commission paid to foreign agents is chargeable to tax in India. Therefore, the disallowance made u/s 40(a)(i) is not sustainable. Hence, there is no reason to interfere with the finding of the CIT(A) on this issue. The grounds raised by the revenue are rejected.
The undisputed fact in the present case remained that the tax on the entire income received by the assessee was required to be deducted at appropriate rates by the respective payers u/s 195(2) of the Act. Had the payer made the deduction of tax at the appropriate rate, the net tax payable by the assessee would have been Nil. Thus there was no liability to pay advance tax by the assessee.
In the instant case of the assessee, the legal position is clear in as much as not having made the application under section 197 r.w.s. 195 of the Act to the Assessing Officer for lower or no deduction of tax, he was statutorily duty bound to have deducted tax at the specified rate on the ‘sum’ i.e. the sale consideration, before making payment to the seller who was an NRI.
Where the assessee has written off the value of assets in the books of assessee as obsolete, can it still be include the value of said machinery in the block of assets and claim depreciation thereon. In the decision of the Hon’ble Delhi High Court in the case of M/s Bharat Aluminium Co., Ltd., the Court held that in order to be entitled to claim depreciation asset has to be owned by the assessee and it has to be used for the purpose of business or profession, but the expression used for the purpose of business, would apply for block of assets and not any specific building, machinery, plant or furniture in the said block of assets, as the individual assets loose identity after becoming inseparable part of block of assets.
In the above ruling, fees paid to a resident of Canada as consideration for analysis of samples and ores conducted from technical lab was held as fees for technical services u/s.9(1)(vii) and Article 12 of the India-Canada Treaty. No arguments were made on the aspect of ‘make available’ requirement present in the definition of ‘fees for technical services’ under Article 12 of the Treaty and the AAR also did not consider this. Thus, the decision relied on by the learned Departmental Representative is distinguishable.
It is an admitted position that the air freight is paid to the agents on the actual basis and that the bills and air freight documents have been directly issued by the foreign airlines. The agents, while accepting payments for air freight components, have acted merely as agents of the respective airlines and have not received the air freight payments in their own right. In copies of airway bills, the name of these agents is shown as ‘Issuing carrier’s agent, further the agent’s code is given as ‘Agent’s IATA code’. There is thus enough material to demonstrate that the persons having received money for the air freight have received the same in their capacity as ‘issuing carrier’s agent’, i.e., agent of the airline concerned. The air freight payment is thus made to the foreign airlines, though through the agents. Therefore, the payments cannot be said to have been made to a resident company. Accordingly, the provisions of section 194C do not come into play.
Explore the ITAT Bangalore judgment on global e-business operations vs. DDCIT. Learn about tax implications and obligations for reimbursement payments.
Section 195 of the Act clearly states that any person responsible for paying to a non resident any interest or any other sum chargeable under the provisions of this Act shall at the time of credit of such income will income tax thereon at the rate inforce at the time of payment or credit. Therefore, the first test to be applied for deduction of TDS is to see whether income in the hands of payee is taxable in India or not.
