Applicability of TDS & rate on freight paid

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sameer (Querist)
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15 March 2009 Will appreaciate if any of the Experts can educate me on the Whether TDs needs to be deducted on Freight paid to Korean(flag) shipping Company for loading of cargo done in India.
If TDS is to be deducted then at what rate ?

Rajesh Kumar

Rajesh Kumar (Expert)
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15 March 2009 TDS is not required to be deducted on this freight paid. In fact, non resident shipping companies are assessed for tax under Section 172 of the IT Act and that section is a complete code in itself. The board has clarified in Circular No, 723 dated 19.09.1995 that in such cases TDS is not required to be deducted.
Even if such payment is made to a resident agent of the shipping company, no tax is required to be deducted.

sameer

sameer (Querist)
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15 March 2009 As per the ARTICLE 9 - Shipping transport - 1. Profits derived by an enterprise of a Contracting State from the operation of ships in international traffic shall be taxable only in that State.
2. Notwithstanding the provisions of paragraph (1) of this article, profits derived from the operation of ships in international traffic may be taxed in the Contracting State in which such operation is carried on; but the tax so charged shall not exceed 50 per cent of the tax otherwise imposed by the internal law of that State.

So please let us know at what rate tax has to be deducted in view of Sec 195 of IT act

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sameer

sameer (Querist)
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15 March 2009 Sir Pls go thru the following Sec of IT Act and will appreciate your views on whether TDS needs to be deducted?

42[Special provision for computing profits and gains of shipping business in the case of non-residents.

4344B. (1) Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of ships, a sum equal to seven and a half per cent of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head Profits and gains of business or profession.

(2) The amounts referred to in sub-section (1) shall be the following, namely :

(i) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the carriage of passengers, livestock, mail or goods shipped at any port in India; and

(ii) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India.]

44[Explanation.For the purposes of this sub-section, the amount referred to in clause (i) or clause (ii) shall include the amount paid or payable or received or deemed to be received, as the case may be, by way of demurrage charges or handling charges or any other amount of similar nature.]