THE ITO, WARD-2, GANDHIDHAM vs. M/S TERAPANTH FOODS LTD., GANDHIDHAM

This appeal is filed by the Revenue against the order dated 27.03.2008 passed by the CIT(A)-II, Rajkot for the Assessment Year 2005-06.

The grounds of appeal raised by the Revenue are as under :-

Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.

The ld. D.R. submitted that the Assessing Officer has categorically made the observation that the amount paid for hiring of ship on time charter basis is chargeable to tax as the assessee had paid rent for sailing the ship in Indian water, which is not an international traffic. The income to non-resident ship owner was accrued in India and therefore, the assessee was liable to make TDS and pay the same to Government account as per the provisions of Section 195 of the Act. The ld. D.R. further submitted that Section 172(1) will not apply to payment for time charter of ships and the provisions of Section 195 are attracting to the payment as the income to the ship owner was accrued to the assessee in India. Thus, the ld. D.R. submitted that the CIT(A) erred in deleting the disallowance made under Section 40(a)(i) of the Act. The ld. D.R. further submitted that as regards weather report to a British Company,

The Ld. A.R. submitted that the assessee has no liability to make deduction of tax under Section 195 of the Act as the assessee made payment for time charter of ships to non residents, and when payment is made for time charter and not for carriage of goods, passengers, live stocks etc. As per provisions of Section 172 of the Act there is no liability to pay tax on such receipts by the non resident recipients. Since, as per the charging Section 172, no liability arises for payment of tax by the non- resident receiving payment for time charter. Section 195 of the Act as well as Section 40 (a)(i), which speak of sums chargeable under the Income Tax Act, for creating liability for deduction of tax and for making disallowance in case of non- deduction would not come into play at all. The ld. A.R. further submitted that the record available with the Department includes all the documents like time charter agreements submitted for obtaining the NOCs under Section 172 of the Act. Thus, the ld. A.R. submitted that the 1st issue raised in ground no.1 of the Revenue’s appeal be dismissed. As regards 2nd issue raised in ground no. 1, the Ld. AR relied upon the order of the CIT(A).

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the CIT(A) has categorically mentioned that Section 195 of the Act would apply only if payment is made which is chargeable under Income Tax Act 1961. The Assessing Officer has not given any reason as to why the chargeability of tax under Section 172 of the Act does not cover time charter of ships for which payment is made to non-resident. The Assessing Officer totally ignored the NOCs issued by Department allowing the ship for sailing in Indian Port as the payment is for time charter. The provisions of Section 172 of the Act has not at all indicated that there is any liability to pay tax on such receipts by the non-resident recipients. In this case, the charter ship for which payment was made to non-resident. As per the charging Section 172, no liability arises for payment of tax by the non- resident receiving payment for time charter. The ld. D.R. could not point out any discrepancy in Assessment Year: 2005-06 Page 4 of 4 the order of CIT(A). Therefore, the 1st issue raised in Revenue’s ground no.1 is dismissed.

As regards the second issue being disallowance of Rs.15,583/- related to weather routing report from the non residents and payment made to them, the CIT(A) has given a categorical finding that income received by the non-resident for giving weather routing report in the form of analysis of data in tabular form/graphical representation is not chargeable to tax under any Section of the Income Tax Act including various sub-sections of Section 9(1) of the Act. There is no need to interfere with the findings of the CIT(A). Hence this issue is also dismissed.

In the result, appeal of the Revenue is dismissed.