18 April 2009
We are paying to a shipping co. the following charges:
Ocean Freight Charges BAF DO Fees CC Fees Inland Haulage Charges Shipping Line Charges
The above charges are separetely mentioned on a single invoice and the party is also charging service tax on the above charges excluding ocean freight.
25 April 2009
We ship our goods by sea and pay Ocean freight to shipping lines in INR. Do we have to deduct TDS from shipping lines? (They refuse so accept it because they say they are exempt from Income Tax in India) .Hirendra Vikani, Rajkot
First of all , the statement of the shipowner that they are exempt from tax is not entirely correct. There is specific provision u/s 172 of the I T Act to assess "shipping business of non-residents". However, there may be cases that income of foreign ship may not be taxable in India on account of Double Taxation Avoidance Agreement with the country of origin of the ship. Read this posting and related circular in this regard.
TDS on freight payment to non resident shipping companies?
There are three provisions which are to be considered for deciding the issue whether the tax is to be deducted at source.
•Section 172 provides for assessment of profit of shipping business of non resident ; •Section 194C : deals with TDS on contract or sub-contract.Freight is one of them. •Section 195 : deals with TDS on any sum paid to non resident. Section 194C is definitely not applicable , because that provision applies only in case of residents . That leaves us Section 172 and section 195 . While section 172 is not related to TDS , the issue becomes simple if the TDS on freight payment to non resident shipping companies has to be made. The answer comes from following Board circular no 723 dated 19/9/1995 which clarifies that TDS should not be made in case of non resident shipping companies as they are being assessed u/s 172
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. 2.Section 172 deals with shipping business of non-residents. Section 172(1) provides the mode of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India. An analysis of the provisions of section 172 would show that these provisions have to be applied to every journey a ship, belonging to or chartered by a non-resident, undertakes from any port in India. Section 172 is a self-contained code for the levy and recovery of the tax, ship-wise, and journey wise, and requires the filing of the return within a maximum time of thirty days from the date of departure of the ship. 3.The provisions of section 172 are to apply, notwithstanding anything contained in other provisions of the Act. Therefore, in such cases, the provisions of sections 194C and 195 relating to tax deduction at source are not applicable. The recovery of tax is to be regulated, for a voyage undertaken from any port in India by a ship under the provisions of section 172. 4.Section 194C deals with work contracts including carriage of goods and passengers by any mode of transport other than railways. This section applies to payments made by a person referred to in clauses (a) to (j) of sub-section (1) to any resident (termed as contractor). It is clear from the section that the area of operation of TDS is confined to payments made to any resident. On the other hand, section 172 operates in the area of computation of profits from shipping business of non-residents. Thus, there is no overlapping in the areas of operation of these sections. 5. There would, however, be cases where payments are made to shipping agents of non-resident ship-owners or charterers for carriage of passengers etc., shipped at a port in India. Since, the agent acts on behalf of the non-resident ship-owner or charterer, he steps into the shoes of the principal. Accordingly, provisions of section 172 shall apply and those of sections 194C and 195 will not apply. Thus the answer is that no deduction of tax is required u/s 195 in case of freight to non resident shipping companies
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