19 September 2013
A firm avails the services of a Clearing & Forwarding agent for exporting goods. The Bill raised by the C & F Agent includes FREIGHT CHARGES paid to the carrier alongwith his c & f agency charges. It's known that C& F charges paid attract TDS u/s. 194C.
Qt. Whether TDS is required to be deducted on the amount of Freight paid to the carrier by the C & F agent on our behalf ???
19 September 2013
No tds required if he claimed these re-imbursements expences ,, . . . Amount paid should be on actuals and production of original bill paid by him and he should claim these bills in a seperate invoice
28 July 2025
Certainly. Let’s break down your query and then elaborate with reference to **Section 172 of the Income Tax Act**.
---
### 🔎 **Your Case Summary:**
* A **partnership firm** is availing services of a **Clearing & Forwarding (C\&F) agent** for export of goods. * The **C\&F agent’s invoice includes:**
1. **Freight charges** paid by him to the shipping line or transporter (on your behalf), and 2. His own **C\&F service charges**.
---
### 🔖 **TDS Applicability under Section 194C (Contract Payments):**
* **C\&F Charges (agency charges):** ✅ **TDS under Section 194C** is clearly applicable, since this is a contract for service. * **Freight Charges Paid by C\&F Agent:**
* If these are **reimbursements** of amounts actually paid by the C\&F agent to the carrier on your behalf — and * If they are supported by **original freight bills/invoices** issued in the name of your firm or clearly identified — ➤ then, **TDS is not applicable** on the freight portion.
However, if the C\&F agent **does not provide a break-up** and raises a **composite invoice**, then **TDS will apply on the full amount** (including freight), since it becomes a consolidated contractual payment.
---
### 📘 **Now, What About Section 172?**
Section 172 deals with **Shipping Business of Non-Residents** (not domestic transactions). Here’s what it states:
> **Section 172** provides for the levy and recovery of tax in case of **foreign shipping companies** or **non-resident ship owners** carrying goods or passengers from Indian ports.
#### 🔹 When does Section 172 apply?
* If the freight is paid to a **non-resident shipping company**, **Section 172** overrides the normal TDS provisions (including Section 194C). * In such cases, **TDS is not required** under 194C; instead, **tax is levied directly under Section 172**, typically **before the ship leaves the port**.
#### 🔹 When does it NOT apply?
* If the freight is paid to:
* A **resident** transporter or shipping company * A C\&F agent who is a resident and who in turn pays freight to resident carriers Then, **Section 172 is not applicable**, and **Section 194C** rules take over.
---
### ✅ **Conclusion:**
| Component | TDS Applicability | Remarks | | ---------------------------------------- | ------------------------------------------------------------ | ------------------------------------------------------------------------------------- | | C\&F Charges | **Yes** (u/s 194C) | Standard contract payment | | Freight (paid by C\&F agent) | ❌ **No**, if reimbursed **on actuals** with supporting bills | Bills should be separate and ideally in your name | | Freight to non-resident shipping company | ❌ No TDS u/s 194C✅ Tax applicable u/s 172 | Section 172 is a **self-contained provision** for taxing non-resident shipping income |
---
### 📌 Recommendation:
Ask your C\&F agent to:
* Issue **separate invoices** for:
* Freight (as reimbursement, with original bills attached), and * His agency fees. * If he issues a **combined invoice**, TDS should be deducted on the **entire amount**.
Let me know if you'd like a sample format or a case law reference on this.
CAclubindia
