Tds

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Querist : Anonymous

Querist : Anonymous (Querist)

09 October 2013 Whether TDS is deductible on freight charges (air or sea) on goods imported(including do charges and other handling and documentation charges)IF
1.Paid to Indian agent of a foreign Shipping line/Air line.
2.Paid to Indian Air line/shipping line.

CA UMESH DULAL

CA UMESH DULAL (Expert)
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09 October 2013 yes
in both cases

Ganeshbabu K

Ganeshbabu K (Expert)
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09 October 2013 TDS applicable except on reimbursement payments to C&F agent which was incurred as a pure agent

Querist : Anonymous

Querist : Anonymous (Querist)

10 October 2013 sir why in both cases....
if such amount is paid to agent of non resident then by applying provision of section 172 (as agent steps into shoes of principal ) section 172 would prevail over the TDS provisions and thereby tds provision should not have applied....

Please through your suggestion.....

Querist : Anonymous

Querist : Anonymous (Querist)

22 October 2013 sir why in both cases.... if such amount is paid to agent of non resident then by applying provision of section 172 (as agent steps into shoes of principal ) section 172 would prevail over the TDS provisions and thereby tds provision should not have applied.... Please through your suggestion.....

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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27 July 2025 Great question! This touches upon some nuanced points in TDS and agency law in India.

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### Context Recap:

* Freight charges (including DO charges, handling, documentation) are paid either:

1. To an **Indian agent of a foreign shipping/airline company**, or
2. To an **Indian shipping/airline company** itself.

* Query: Should TDS be deducted on these payments?

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### General rule on TDS on freight:

* Section **194C** (Contractor payments) or **194J** (Professional fees) may apply depending on nature of service.
* Usually, freight charges paid to Indian shipping/airline companies are subject to TDS.
* For payments to agents, it depends on whether payment is a reimbursement or commission.

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### The question about Section 172:

* **Section 172 of the Indian Contract Act** says:
*When an agent contracts on behalf of the principal, the principal is liable as if he had contracted himself.*
The agent *“steps into the shoes of the principal.”*

* So, if an Indian agent pays a foreign principal's freight charges and the payment is reimbursement, it’s considered payment by the principal (foreign company).

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### Implication for TDS:

* If the **Indian agent is just reimbursing the freight charges as a pure agent**, then technically, the agent isn’t the service provider and TDS should not apply on that reimbursement.

* However, if the payment to the Indian agent includes any commission or fees, then TDS on that commission portion applies.

* Also, if payment is made **directly to the Indian shipping/airline company**, TDS applies.

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### Why some say "TDS applies in both cases":

* Often, the payment to the Indian agent is treated as *income* to the agent (commission/fees + reimbursement).
* If you don’t segregate reimbursement from commission clearly, TDS authorities may demand TDS on full amount.

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### Suggestion:

* **Segregate the reimbursement (pure agent expenses) from commission or fees in the payment to Indian agents.**

* Deduct TDS only on commission/fee portion.

* If payment is directly to Indian shipping/airline company, TDS applies on the full freight amount.

* For payments to foreign principals, if routed through agent as reimbursement, then generally no TDS on that part.

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### In conclusion:

| Payment To | TDS Applicability |
| ---------------------------------------------------- | ------------------------------------------------------- |
| Indian shipping/airline company | Yes, TDS applies on freight charges |
| Indian agent of foreign company (pure reimbursement) | No TDS on reimbursement portion; yes on commission/fees |
| Indian agent (including commission) | TDS on commission/fees portion |

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**Note:** Always check for specific CBDT circulars or notifications on this as interpretations sometimes vary.

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