| COURT: | ITAT Cochin |
| CORAM: | Chandra Poojari (AM), N.R.S. Ganesan (JM) |
| SECTION(S): | 195, 40(a)(i), Article 8 |
| GENRE: | Domestic Tax, International Tax |
| CATCH WORDS: | charter hire, royalty |
| COUNSEL: | K. P. Paulson |
| DATE: | October 21, 2014 (Date of pronouncement) |
| DATE: | October 24, 2014 (Date of publication) |
| AY: | 2006-07 |
| FILE: | Click here to download the file in pdf format |
| CITATION: | |
| charter hire payment is not assessable as royalty, there is no obligation to deduct TDS and no disallowance u/s 40(a)(i) can be made | |
It is very clear that the payments made by the assessee company were in the nature of simple payments for chartering ships on hire for doing the business outside India. Therefore, the payments do not satisfy the test laid down in s.9 of the IT Act, 1961. When s. 9 is not satisfied, there cannot be a case that income is deemed to accrue or arise in India as a result of hire payments made by the assessee-company to foreign ships. The liability under s.195 is cast on the assessee only when the payment is made to a non-resident, which is chargeable under the provisions of the IT Act. Here, the payments made by the assessee do not fall under s.9 and the payments do not take the character of any sum chargeable to tax under this Act. Therefore, s.195 does not come into operation. When s.195 does not apply to the present case, there is no violation of that section and consequently invoking of s.40(a)(i) does not arise. (ACIT vs Kinship Services (India) Pvt Ltd (2010) 128 TTJ 108, Kanchangaga Sea Foods Ltd vs CIT (2004) 136 Taxman 8 (P), Poompuhar Shippinbg Corportion Ltd vs ITO(2013) 38 taxmann.com 150 (Mad) referred)
AOs need to be well trained as to interpret sections and their utility with the help of case laws, that kind of training only can help the AOs not committing irrational errors as the AO committed in the case under reference.
when the three citations given above can help AOs to reorganize their thinking process, Else poor AO being ignorant of proper interpreting methods falls into meaningless traps with chances of penalties are also levied on them by higher judiciary, after he is under a double edged weapon called IT Act 1961