Commissioner of Income Tax v Kanchanganga Sea Foods Ltd

Holding

Charter hire payments made in kind, by allowing a non-resident foreign owner to take fish caught from Indian waters out of the country, constitute income accruing or arising in India and the Indian charterer is obliged to deduct tax at source under section 195.

Facts

Kanchanganga Sea Foods had entered into charter agreements with a foreign company under which the foreign owner provided fishing vessels and was paid in fish caught from Indian territorial waters. The assessee did not deduct tax at source, arguing that no income accrued in India to the non-resident.

Reasoning

The Supreme Court held that the situs of accrual was in India because the fish were appropriated to the foreign owner within Indian territorial waters. The charter consideration, whether in cash or kind, represented income from a source in India and was therefore subject to TDS under section 195. The Court emphasised the indivisible link between the charter activity and Indian source income.