914. Whether non-resident assessees engaged in business of carriage by shipping of passengers and goods, etc., shall neither be liable to pay interest under sections 234B and 234C nor entitled to interest under section 244A in respect of their income attributable only to business of such carriage of passengers and goods, etc
Circular No. 730 was issued by the Central Board of Direct Taxes on 14 December 1995. Its subject is 914. Whether non-resident assessees engaged in business of carriage by shipping of passengers and goods, etc., shall neither be liable to pay interest under sections 234B and 234C nor entitled to interest under section 244A in respect of their income attributable only to business of such carriage of passengers and goods, etc.
Holds that a non-resident shipping assessee who opts for regular assessment neither pays interest under sections 234B and 234C nor receives interest under section 244A on income from carriage of passengers and goods. Under section 172, on each voyage from an Indian port by a ship belonging to or chartered by a non-resident, seven and a half per cent of the amount paid or payable for the carriage is taken as income and taxed at the rate applicable to a foreign company, with assessment and payment before port clearance, or on satisfactory arrangements for a return within thirty days of departure and for payment. Section 172(7) lets the owner or charterer claim, before the end of the assessment year, to be assessed on his total income under the other provisions of the Act, in which case the tax paid under section 172(4) is treated as paid in advance. The Board reasons that a payment under section 172(4) is tax on an actual assessment under that section and not advance tax, there being no advance tax liability in the section 172 scheme, so an assessee who exercises the section 172(7) option is not liable to pay advance tax under section 208 on income of the nature referred to in section 172(2), and the interest provisions fall away on both sides.
The question arose, in a regular assessment made under section 143(3) read with section 172(7), whether such an assessee is liable to interest under sections 234B and 234C.
914. Whether non-resident assessees engaged in business of carriage by shipping of passengers and goods, etc., shall neither be liable to pay interest under sections 234B and 234C nor entitled to interest under section 244A in respect of their income attributable only to business of such carriage of passengers and goods, etc.
1. Section 172 of the Income-tax Act, 1961, deals with shipping business of non-residents. The scheme of section 172 is that every time a ship belonging to or chartered by a non-resident makes a voyage from a port in India, carrying passengers, live stock, mail or goods, shipped at the airport, 7½ per cent of the amount paid or payable on account of the carriage of the passengers, etc., is taken as the income and tax levied on such income at the rate applicable to a foreign company. The rate, at present, is 55 per cent.
2. The assessment and the payment is to be made before the ship is granted the port clearance. The exception is that insuitable cases the ship may be allowed to leave, provided satisfactory arrangements are made to ensure that the return is filed within 30 days of the departure of the ship and for payment of taxes.
3. Under section 172(7), the non-resident owner or charterer is allowed to claim before the end of the relevant assessment year that he be assessed on his total income of the previous year and the tax payable on the basis thereof be determined in accordance with other provisions of the Act. When such a claim is made and an assessment is made thereupon, the tax paid under section 172(4) by the non-resident owner or charterer would be treated as a payment in advance of the tax leviable for that assessment year before determining the amount of tax finally due. It may be noted that under section 172(7), the choice is entirely that of the non-resident tax-payer to be assessed under the other provisions of the Act.
4. The payments made under section 172(4) by a non-resident ship owner is a payment of tax on actual assessments under that section and it is not a payment of advance tax within the meaning of the Income-tax Act there being no advance tax liability within the scheme of section 172.
5. The question that arises for consideration in such a regular assessment made under section 143(3), read with the provisions of section 172(7), is whether such an assessee is liable to levy of interest under sections 234B and 234C or not. As the payment of any tax under section 172(4) is not considered to be payment of advance-tax within the meaning of the Income-tax Act, the Board is of the view that the assessee who exercises his option under section 172(7) to get his total income assessed in the normal course, is not liable to pay advance tax under section 208 in respect of income of the nature referred to in sub-section (2) of section 172 of the Income-tax Act.
6. Hence the Board is of the opinion that non-resident assessees engaged in the business of carriage by shipping of passengers and goods, etc., shall neither be liable to pay interest under sections 234B and 234C nor entitled to interest under section 244A of the Income-tax Act, 1961 in respect of their income attributable only to the business of such carriage of passengers and goods, etc.
Circular : No. 730, dated 14-12-1995.
In a regular assessment of a foreign shipping line that has opted under section 172(7), where interest has been charged under section 234B or refund interest claimed.
Source: the Income Tax Department’s own published text — its page for this instrument.
