TDS on Port Charges
This query is : Resolved
03 May 2011
Dear Members,
Need clarification wrt the following issue: -
Our Company had imported a lift from Dubai. Our Agent have charges us various charges under following heads: -
1).Port CFS Charges
2).Container transfer charges
3).Empty container unloading charges
4).Calcutta port tax
5).Container handling cargo examination charges
6).Forwarding agency charges
7).D O fees
8).Carrier DO fees.
All the bills have been raised by some companies. Some bills have been raised in the name of agent and in some bills our company name has been mentioned along with Agent name. Agent has made payment on behalf of us.Then should we deduct TDS on above or not.
Further agent has given us a copy of circular no - 723 which I think not applicable for the charges mentioned above.
Need your opinion on above.
Thanking you
Need clarification wrt the following issue: -
Our Company had imported a lift from Dubai. Our Agent have charges us various charges under following heads: -
1).Port CFS Charges
2).Container transfer charges
3).Empty container unloading charges
4).Calcutta port tax
5).Container handling cargo examination charges
6).Forwarding agency charges
7).D O fees
8).Carrier DO fees.
All the bills have been raised by some companies. Some bills have been raised in the name of agent and in some bills our company name has been mentioned along with Agent name. Agent has made payment on behalf of us.Then should we deduct TDS on above or not.
Further agent has given us a copy of circular no - 723 which I think not applicable for the charges mentioned above.
Need your opinion on above.
Thanking you
03 May 2011
In ITO vs. Dr. Willamer Schwable India (P) Ltd. [3 SOT 71 (Del.)], the Tribunal has held that reimbursement of actual expenses where no profit element is involved, is not liable for the TDS.
The Apex Court in case of Birla Cement Works vs. CBDT [248 ITR 216] has held that the word ‘work’ in section 194C has to be understood in a limited sense and would extend only to the service contracts specifically included in the section by way of Explanation III. The aforesaid decision, has been followed by the Bombay High Court in East India Hotels Ltd. vs. CBDT [179 Taxman 17].
Recently, following the aforesaid decisions the Mumbai Tribunal in ACIT vs. P.P. Overseas vide ITA No. 733/Mum/2010 dated February 18, 2011 has held that:
"The contract between the assessee and
C & F Agent is a service contract which has not been specifically included in Explanation III below section 194C. In this view of the matter, the provisions of section 194C are not applicable to the payments to the C & F agents. If that is so, there was no obligation on the part of the assessee to deduct tax from the payments made to C & F agents".
CA MANOJ GUPTA
JODHPUR
09828510543
The Apex Court in case of Birla Cement Works vs. CBDT [248 ITR 216] has held that the word ‘work’ in section 194C has to be understood in a limited sense and would extend only to the service contracts specifically included in the section by way of Explanation III. The aforesaid decision, has been followed by the Bombay High Court in East India Hotels Ltd. vs. CBDT [179 Taxman 17].
Recently, following the aforesaid decisions the Mumbai Tribunal in ACIT vs. P.P. Overseas vide ITA No. 733/Mum/2010 dated February 18, 2011 has held that:
"The contract between the assessee and
C & F Agent is a service contract which has not been specifically included in Explanation III below section 194C. In this view of the matter, the provisions of section 194C are not applicable to the payments to the C & F agents. If that is so, there was no obligation on the part of the assessee to deduct tax from the payments made to C & F agents".
CA MANOJ GUPTA
JODHPUR
09828510543
04 May 2011
Dear Manoj Ji,
Thanks for the reply.
Also, if you can provide me the case law of P P Overseas then it would of great help.
Thanking you.
Thanks for the reply.
Also, if you can provide me the case law of P P Overseas then it would of great help.
Thanking you.
06 May 2011
Dear Manoj Ji,
Plz look into the same.
Thanking you
Plz look into the same.
Thanking you
27 July 2025
Here's a detailed explanation regarding **TDS on Port Charges** and related expenses when paid through an agent:
---
### 1. **Nature of charges**
From your list, charges like:
* Port CFS Charges
* Container Transfer Charges
* Empty Container Unloading Charges
* Calcutta Port Tax
* Container Handling Cargo Examination Charges
* D O Fees, Carrier DO Fees
These are mostly **service-related charges** connected to cargo handling, customs, and transportation logistics at the port.
---
### 2. **Who is liable to deduct TDS?**
* If these charges are billed **directly to your company** by the service provider, your company is liable to deduct TDS as per applicable provisions.
* If the **agent has paid these charges on your behalf** and raised a bill to you (reimbursement or service charges), then:
* The agent's invoice to you may include reimbursement of expenses and/or their own service charges.
* TDS deduction is applicable **only on the agent's service charges**, not on the reimbursed expenses paid by the agent to third parties, provided the agent submits original bills of such payments (acts as a pure agent).
* For reimbursed expenses, TDS is generally **not applicable**.
---
### 3. **Relevant TDS sections**
* For service charges: TDS is typically deducted under **Section 194C (Contractor)** or **Section 194J (Professional/Technical Services)** depending on the nature of service.
* For port and handling charges, TDS under **Section 194C** is commonly applied at **1% or 2%** depending on the payee.
* If the agent is acting as a pure agent and providing supporting bills, then TDS deduction on those expenses is **not required**.
---
### 4. **Regarding Circular No. 723**
* Circular No. 723 dated 07.07.1994 by CBDT provides clarity on tax deduction on expenses reimbursed to agents acting as pure agents.
* It states that when an agent acts as a **pure agent** and incurs expenses on behalf of the principal (your company), the principal is not liable to deduct TDS on such reimbursements.
* TDS is to be deducted only on the agent’s actual commission or service charges.
---
### 5. **Case Law - P P Overseas**
* The **P P Overseas** case is a well-known ruling on the issue of whether TDS should be deducted on reimbursements to agents.
* The ruling emphasized that TDS deduction is **not applicable on amounts reimbursed by an agent to third parties** (like port charges, customs, etc.) provided the agent furnishes original bills.
* TDS is applicable only on the **agency commission or service charges**.
---
### **Summary**
| Payment Type | TDS Applicability | Section |
| -------------------------------------------------------------------- | -------------------------------------------- | ----------- |
| Agent's reimbursement of port/handling charges (with original bills) | No TDS | N/A |
| Agent's commission/service charges | Yes, TDS to be deducted | 194C / 194J |
| Direct bills raised to company by service providers | Yes, TDS applicable as per nature of service | 194C / 194J |
---
If you want, I can help draft an example calculation or help you identify TDS rates for specific charges. Also, I can try to find the exact P P Overseas case text or references if needed. Would that help?
---
### 1. **Nature of charges**
From your list, charges like:
* Port CFS Charges
* Container Transfer Charges
* Empty Container Unloading Charges
* Calcutta Port Tax
* Container Handling Cargo Examination Charges
* D O Fees, Carrier DO Fees
These are mostly **service-related charges** connected to cargo handling, customs, and transportation logistics at the port.
---
### 2. **Who is liable to deduct TDS?**
* If these charges are billed **directly to your company** by the service provider, your company is liable to deduct TDS as per applicable provisions.
* If the **agent has paid these charges on your behalf** and raised a bill to you (reimbursement or service charges), then:
* The agent's invoice to you may include reimbursement of expenses and/or their own service charges.
* TDS deduction is applicable **only on the agent's service charges**, not on the reimbursed expenses paid by the agent to third parties, provided the agent submits original bills of such payments (acts as a pure agent).
* For reimbursed expenses, TDS is generally **not applicable**.
---
### 3. **Relevant TDS sections**
* For service charges: TDS is typically deducted under **Section 194C (Contractor)** or **Section 194J (Professional/Technical Services)** depending on the nature of service.
* For port and handling charges, TDS under **Section 194C** is commonly applied at **1% or 2%** depending on the payee.
* If the agent is acting as a pure agent and providing supporting bills, then TDS deduction on those expenses is **not required**.
---
### 4. **Regarding Circular No. 723**
* Circular No. 723 dated 07.07.1994 by CBDT provides clarity on tax deduction on expenses reimbursed to agents acting as pure agents.
* It states that when an agent acts as a **pure agent** and incurs expenses on behalf of the principal (your company), the principal is not liable to deduct TDS on such reimbursements.
* TDS is to be deducted only on the agent’s actual commission or service charges.
---
### 5. **Case Law - P P Overseas**
* The **P P Overseas** case is a well-known ruling on the issue of whether TDS should be deducted on reimbursements to agents.
* The ruling emphasized that TDS deduction is **not applicable on amounts reimbursed by an agent to third parties** (like port charges, customs, etc.) provided the agent furnishes original bills.
* TDS is applicable only on the **agency commission or service charges**.
---
### **Summary**
| Payment Type | TDS Applicability | Section |
| -------------------------------------------------------------------- | -------------------------------------------- | ----------- |
| Agent's reimbursement of port/handling charges (with original bills) | No TDS | N/A |
| Agent's commission/service charges | Yes, TDS to be deducted | 194C / 194J |
| Direct bills raised to company by service providers | Yes, TDS applicable as per nature of service | 194C / 194J |
---
If you want, I can help draft an example calculation or help you identify TDS rates for specific charges. Also, I can try to find the exact P P Overseas case text or references if needed. Would that help?
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