Yang Ming (UK) Ltd., GANDHIDHAM V. The Income Tax Officer, (Intl. Taxn.), GANDHIDHAM

CO 21/RJT/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 8066 (ITAT-RAJKOT)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 01-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-11-2012
• Assessment Year: 2010-2011
• Appeal Filed On: 13-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J C RANPURA
• Assessee Lawyers: AVINASH KUMAR
• Keywords: Recovery proceedings; Double taxation relief
• Section: 90; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVAST AVA, AM ITA NO. 61/RAJ/2012 ( ASSESSMENT YEAR 2010-2011) INCOME-TAX OFFICER V. M/S MARINE CONTAINERS SERVICES (INDIA) INTERNATIONAL TAXATION PV T. LTD. PLOT NO.20A, SECTOR 8 (AGENT OF M/S YANG MING (UK ) LTD. GANDHIDHAM, KUTCH 106, MANI CHAMBER, PLOT NO.84, SEC-8, GANDHIDHAM PAN: AAACY1664M CO NO.21/RJT/2012 IN ITA NO. 61/RAJ/2012 M/S MARINE CONTAINERS SERVICES V. INCOME-TA X OFFICER INDIA) PVT. LTD. INTERNATIONAL TAXATION APPELLANT BY: SHRI AVINASH KUMAR RESPONDENT BY: SHRI J.C.RANPURA DATE OF HEARING: 1.11.2012 DATE OF PRONOUNCEMENT: 1.11.2012 / / / / ORDER . .. . . . . . , , , , / T. K. SHARMA, J. M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 30.11.2011 OF CIT(A) GANDHINAGAR FOR THE ASSESSMENT YEAR 2010-11. THE ASSESSEE ALSO FILED CROSS-OBJECTION THERETO. FOR THE SAKE OF CONVENIENCE THESE WERE HEA RD TOGETHER AND ARE BEING DISPOSED BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 61/RAJ/2012 (BY REVENUE) 2. GROUNDS TAKEN IN THIS APPEAL READ AS UNDER: '(I) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 2 THE ORDER OF THE AO IS NULL AND VOID. (II) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE BENEFIT OF DTAA BETWEEN INDIA AND SINGAPORE TO T HE ASSESSEE. (III) ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. IT IS, THEREF ORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE CANCELLED AND TH AT OF AO MAY BE RESTORED TO THE ABOVE EXTENT. (IV) THE APPELLANT CRAVES LEAVE TO ADD/ALTER/MODIFY /DELETE ANY OF THE GROUND OF APPEAL AT THE TIME OF HEARING. 3. FACTS OF THE CASE, IN BRIEF, IN SO FAR AS THEY A RE RELEVANT FOR DISPOSAL OF THE PRESENT APPEAL ARE THAT THE RESPONDENT-COMPA NY, NAMELY, M/S MARINE CONTAINERS SERVICES (INDIA) PVT. LTD., ACTS AS AGENT FOR THE FREIGHT BENEFICIARY, NAMELY, M/S YANG MING (UK) LTD. IN THE ASSESSMENT YEAR UNDER APPEAL ALSO, IT ACTED AS AGENT OF THE SAID FR EIGHT BENEFICIARY. THE FREIGHT BENEFICIARY, I.E., M/S YANG MING (UK) LTD, IS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF GOODS BY SEA. THE PRI NCIPAL COMPANY, I.E., FREIGHT BENEFICIARY, IS REGISTERED IN UK AND RESIDE NT OF UK. IN THE YEAR UNDER APPEAL, THE PRINCIPAL COMPANY OPERATED 45 VOY AGES ARRIVING AT MUNDRA PORT. THE RESPONDENT-COMPANY, ACTING AS AGEN T OF THE FREIGHT BENEFICIARY, FILED VOYAGE RETURNS IN RESPECT OF THE AFORESAID 45 VOYAGES BEFORE THE ASSESSING OFFICER AT GANDHIDHAM AS REQUI RED BY SECTION 172(3) OF THE INCOME-TAX ACT. INSTEAD OF PASSING 45 ORDERS U/S 172(4) SEPARATELY TO DISPOSE OF EACH OF THE AFORESAID 45 VOYAGE RETUR NS FILED BY THE RESPONDENT U/S 172(3) BEFORE HIM, THE ASSESSING OFF ICER PASSED, FOR THE SAKE OF CONVENIENCE, A COMPOSITE ORDER U/S 172(4) O N 6.12.2010 DISPOSING OF ALL THE 45 VOYAGE RETURNS FILED BY THE RESPONDEN T-COMPANY FOR THE ASSESSMENT YEAR UNDER APPEAL AS THE FACTUAL MATRIX AND THE ISSUES IN ALL OF ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 3 THEM WERE IDENTICAL. HE HAS WORKED OUT TAXABLE INCO ME IN RESPECT OF EACH VOYAGE COVERED BY EACH RETURN FILED BY THE RESPONDE NT-COMPANY U/S 172(3) SEPARATELY IN THE ORDER PASSED BY HIM U/S 172(4). P ERUSAL OF ASSESSMENT ORDER SHOWS THAT THE AO HAS ASSESSED THE TAXABLE IN COME U/S 172(4) IN RESPECT OF ALL THE 45 VOYAGES AT RS.68,15,515/-, BE ING 7.5% OF TOTAL AMOUNT OF FREIGHT (RS.9,08,73,535/-). THE BENEFIT O F DTAA BETWEEN INDIA AND UK, AS CLAIMED BY THE RESPONDENT-COMPANY, WAS D ENIED BY THE AO ON THE GROUND THAT THE FREIGHT BENEFICIARY WAS ONLY A SLOT CHARTERER AND NOT OWNER OR CHARTERER OF THE SHIP. 4. AGGRIEVED BY THE COMPOSITE ORDER PASSED BY THE A O U/S 172(4), THE RESPONDENT-COMPANY FILED APPEAL BEFORE THE CIT(A). THE LD. CIT(A) HAS QUASHED THE COMPOSITE ORDER PASSED BY THE AO U/S 17 2(4) WITH THE FOLLOWING, AMONGST OTHERS, OBSERVATIONS: .I HAVE PERUSED THE SUBMISSION MADE BY THE APPELL ANT AND AM OF THE OPINION THAT THE APPELLANT IS IN REGULAR SHIPPI NG BUSINESS AND NOT IN OCCASIONAL SHIPPING BUSINESS. I HAVE CONSIDERED THE JUDGMENTS CITED. ONCE A PERSON CLAIMS THAT IT IS NOT ENGAGED IN OCCASIONAL SHIPPING BUSINESS AND WANTS TO GO OUT OF THE AMBIT OF SECTION 172; THE RECOURSE IS PROVIDED IN SECTION 172 (7) ONLY AN D FOR THAT IT HAS TO OPT FOR FILLING RETURN U/S 139 (1). SINCE, THE APPELLANT HAS OPTED FOR THE OPTION TO BE ASSESSED U/S 172(7) BY FILING RETU RN OF INCOME U/S 139(1) AND ALSO THE FACT THAT THEY ARE FILING RETURN OF INCOME FOR THE PAST MANY YEARS, IT IS ESTABLISHED THAT THE APPELLANT IS IN ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 4 REGULAR SHIPPING BUSINESS AND LIABLE TO BE ASSESSED UNDER OTHER PROVISIONS OF THE ACT INCLUDING 44B; AND NOT U/S 17 2(4). IT IS ALSO APPLYING TO ITS REGULAR JURISDICTION FOR NOC AFTER GIVING ALL RELEVANT DETAILS. THE FACT WAS BROUGHT TO THE NOTICE OF TH E AO ALSO (REFER PAGE 8 PARAGRAPH 11 OF THE ORDER). THERE WAS 45 V OYAGES AT MUNDRA PORT ITSELF AS PER THE ORDER OF THE AO DUR ING THE YEAR IN RESPECT OF SLOT CHARTERING (AS PER AO)/POOL ARRANG EMENT (AS PER APPELLANT) ALONE. THUS, THE ORDER PASSED U/S 172(4 ) BY THE INCOME TAX OFFICER IS NULL AND VOID AS ASSESSEES CLAIM T HAT IT IS NOT ENGAGED IN OCCASIONAL SHIPPING BUSINESS IS BACKED B Y ITS TAKING THE ALTERNATE RECOURSE PROVIDED IN SECTION 172(7) ITSEL F. THUS, THE COMBINED ORDER PASSED U/S 172(4) BY THE INCOME TAX OFFICER IS NULL AND VOID AS ASSESSEE'S CLAIM THAT I T IS NOT ENGAGED IN OCCASIONAL SHIPPING BUSINESS IS BACKED BY ITS TAKIN G THE ALTERNATE RECOURSE PROVIDED IN SECTION 172(7) ITSELF. IT IS L IABLE TO BE ASSESSED ON THE BASIS OF RETURN FILED U/S 139(1) FOR ITS ENT IRE INCOME. ONE MORE ISSUE IS THE AOS REASONING THAT THE APPEL LANT IS NOT OWNER/CHARTER OF THE VESSELS. ONCE THE AO SAYS THA T THE APPELLANT IS NOT OWNER/CHARTER OF THE VESSEL; THEN HE COULD N OT HAVE TAKEN RECOURSE TO SECTION 172 ITSELF AS THE SECTION APPL IED TO OWNER/CHARTER ONLY. THE SUBSECTION (1) READS AS UN DER : 172. (1) THE PROVISIONS OF THIS SECTION SHALL, NOT WITHSTANDING ANYTHING CONTAINED IN THE OTHER PROVISIONS OF THIS ACT, APPLY ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 5 FOR THE PURPOSE OF THE LEVY AND RECOVERY OF TAX IN THE CASE OF ANY SHIP, BELONGING TO OR CHARTERED BY A NON-RESIDE NT, WHICH CARRIES PASSENGERS, LIVESTOCK, MAIN OR GOODS SHIPPE D AT A PORT IN INDIA HOWEVER, THIS SUB-ISSUE IS NOT ADJUDICATED SINCE I HAVE ALREADY HELD EARLIER THAT THE ORDER PASSED BY THE AO U/S 172(4) IS NULL AND VOID AND THIS ISSUE BECOMES ACADEMIC. FURTHER, THE SLOT CHARTERER NOT BEING CHARTERER REQUIRES TO BE DELETED, WHICH IS NO T REQUIRED IN THIS CASE, IN VIEW OF THE EARLIER FINDING. 5. AGGRIEVED BY THE ORDER PASSED BY THE CIT(A), THE DEPARTMENT IS NOW IN APPEAL BEFORE THIS TRIBUNAL. 6. AS REGARDS THE ISSUES TAKEN BY THE DEPARTMENT IN ITS GROUNDS OF APPEAL, THE LD. DR SUBMITTED THAT THE LD. CIT(A) HA S BROUGHT NO FOUNDATIONAL FACT ON RECORD TO SUPPORT HIS VIEW THA T THE RESPONDENT- COMPANY HAS ALREADY FILED ITS RETURN OF INCOME U/S 139(1) AND THEREFORE THE LD. CIT(A) WAS NOT JUSTIFIED IN INVOKING THE PR OVISIONS OF SECTION 172(7) FOR QUASHING THE ORDER PASSED BY THE AO U/S 172(4). HE SUBMITTED THAT THE LD. CIT(A) OUGHT TO HAVE CONFIRMED THE ACTION OF TH E AO UNLESS THERE WAS MATERIAL ON RECORD TO INDICATE THAT THE RESPONDENT- COMPANY HAD EXERCISED ITS OPTION IN TERMS OF SECTION 172(7). ACCORDING TO HIM, THE LD. CIT(A) OUGHT TO HAVE VERIFIED AS TO WHETHER THE RESPONDENT -COMPANY HAD INCLUDED THE INCOME FROM 40 VOYAGES WHICH WAS TAXED BY THE A O IN THE ORDER UNDER APPEAL, IN ITS RETURN OF INCOME FILED U/ 139(1). HE URGED THAT THE ORDER ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 6 PASSED BY THE CIT(A) SHOULD THEREFORE BE VACATED OR ALTERNATIVELY THE AO BE GIVEN THE OPTION TO VERIFY THE FACTS AND THEREAF TER TAX THE INCOME FROM 40 VOYAGES IN ACCORDANCE WITH LAW. 7. IN REPLY, THE LD. LD. AUTHORIZED REPRESENTATIVE FOR THE RESPONDENT- COMPANY SUPPORTED THE ORDER PASSED BY THE CIT(A). H IS SUBMISSIONS WERE THREE-FOLD: ONE, THE APPELLANT AND THE FREIGHT BENE FICIARY ARE ENGAGED IN REGULAR SHIPPING BUSINESS AND NOT IN OCCASIONAL SHI PPING BUSINESS AND THEREFORE THE PROVISIONS OF SECTION 172 ARE INAPPLI CABLE TO THEM. IN THIS CONNECTION, HE REFERRED TO THE FINDING RECORDED BY THE CIT(A) AND SUBMITTED THAT THE DEPARTMENT HAS PLACED NO MATERIA L ON RECORD TO REBUT THE FINDING RECORDED BY THE CIT(A) IN THIS BEHALF. TWO, THE FACT THAT THE FREIGHT BENEFICIARY WAS ENGAGED IN REGULAR SHIPPING BUSINESS WAS ALSO APPARENT FROM THE FACT THAT THE RESPONDENT HAS REGU LARLY, AS OBSERVED BY THE CIT(A), BEEN FILING ITS RETURN OF INCOME ON BEH ALF OF THE FREIGHT BENEFICIARY AT MUMBAI. IN SUPPORT OF HIS SUBMISSION S, HE FILED A COPY OF ACKNOWLEDGMENT OF RETURN, WHICH SHOWS THAT THE RESP ONDENT HAD FILED RETURN OF INCOME IN ITR-VI BEFORE THE ADIT (INT.TAX )(2) AT MUMBAI ON 30.9.2010. THREE, THE INCOME-TAX ACT DOES NOT STIPU LATE MULTIPLE ASSESSMENTS AGAINST THE SAME ASSESSEE SIMULTANEOUSL Y U/S 172(4) AND ALSO UNDER THE NORMAL PROVISIONS OF THE SAID ACT. HE CON TENDED THAT THE LD. CIT(A) HAS THEREFORE RIGHTLY QUASHED THE ORDER PASS ED BY THE AO U/S 172(4). 8. WE SHALL NOW TURN TO THE ISSUES RAISED IN THE GR OUNDS OF APPEAL TAKEN BY THE DEPARTMENT. THE ISSUE BEFORE US IS NOT ABOUT THE ASSESSABILITY ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 7 OR DETERMINATION OF INCOME FROM THE AFORESAID 45 VO YAGES BUT ABOUT THE PROCEDURE TO BE ADOPTED FOR ASSESSMENT OF INCOME FR OM THOSE VOYAGES. THE ASSESSING OFFICER HAS INVOKED SECTION 172(4) TO TAX THE INCOME IN A SUMMARY MANNER FROM 45 VOYAGES OPERATED BY THE FREI GHT BENEFICIARY IN THE YEAR UNDER APPEAL ON THE BASIS OF THE RETURNS F ILED U/S 172(3) BEFORE HIM. THE RESPONDENT-COMPANY, ON THE OTHER HAND, CLA IMS THAT THE PROCEDURE OUTLINED IN SECTION 172(4) IS NOT APPLICA BLE TO IT AS IT HAS ALREADY FILED ITS RETURN OF INCOME U/S 139(1) BEFORE THE EX PIRY OF THE ASSESSMENT YEAR UNDER APPEAL AND THEREFORE IT OUGHT TO HAVE BE EN ASSESSED IN RESPECT OF INCOME FROM 45 VOYAGES UNDER THE NORMAL PROVISIO NS OF THE I-T ACT IN VIEW OF THE PROVISIONS OF SECTION 172(7). 9. ON APPEAL BY THE ASSESSEE, THE LD. CIT(A) HAS QU ASHED THE ORDER PASSED BY THE AO U/S 172(4) FOR FOUR PRINCIPAL REAS ONS. ONE, THE SHIPPING BUSINESS BEING CARRIED ON BY THE FREIGHT BENEFICIAR Y IS NOT OCCASIONAL SHIPPING BUSINESS BUT REGULAR SHIPPING BUSINESS AND HENCE THE INCOME THERE-FROM IS LIABLE TO BE ASSESSED UNDER THE NORMA L PROVISIONS OF THE I-T ACT AND NOT U/S 172(4) THEREOF. TWO, THE RESPONDENT -COMPANY IS FILING ITS RETURN OF INCOME U/S 139 AND IS BEING ASSESSED AS S UCH IN RESPECT OF INCOME FROM SHIPPING BUSINESS AND HENCE THE PROVISI ONS OF SECTION 172(4) ARE INAPPLICABLE TO IT. THREE, THE RESPONDENT-COMPA NY HAS ALREADY FILED ITS RETURN OF INCOME U/S 139 AT MUMBAI AND THUS EXERCIS ED ITS OPTION IN TERMS OF SECTION 172(7) FOR BEING ASSESSED UNDER THE NORM AL PROVISIONS OF THE I-T ACT. FOUR, THE I-T ACT DOES NOT CONTEMPLATE MULTIPL E ASSESSMENTS IN THE ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 8 CASE OF THE SAME PERSON AND/OR IN RESPECT OF THE SA ME INCOME IN THE HANDS OF THE SAME PERSON. 10. BEFORE PROCEEDING FURTHER, IT IS CONSIDERED USE FUL TO REFER TO THE SCHEME OF TAXATION U/S 172, WHICH FALLS UNDER CHAPT ER XV OF THE INCOME- TAX ACT 1961. CHAPTER XV DEALS WITH LIABILITY IN S PECIAL CASES. PART H OF CHAPTER XV CONTAINS ONLY ONE SECTION, I.E., SECTION 172. IT DEALS WITH PROFITS OF NON-RESIDENTS FROM OCCASIONAL SHIPPING BUSINESS. IT THEREFORE FOLLOWS THAT THE PERSONS COVERED BY SECTION 172 ARE ONLY THOSE WHO ARE IN OCCASIONAL SHIPPING BUSINESS AND NOT IN THE REGULAR SHIPPING BUSINESS. THOSE WHO ARE IN THE REGULAR SHIPPING BUSINESS ARE CLEARLY OUTSIDE THE SCOPE OF SECTION 172. THEY ARE COVERED BY SECTION 4 4B WHICH CONTAINS SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF SHIPPING BUSINESS IN THE CASE OF NON-RESIDENTS. WHILE SECTION 172 SEEKS TO TAX PROFITS OF NON- RESIDENTS FROM OCCASIONAL SHIPPING BUSINESS, SECTIO N 44B SEEKS TO TAX THEIR PROFITS FROM REGULAR SHIPPING BUSINESS. SUB-SECTION (1) SECTION 172 EMPOWERS THE ASSESSING OFFICER TO LEVY AND RECOVER TAX IN THE CASE OF ANY SHIP BELONGING TO OR CHARTERED BY A NON-RESIDENT IN A SUMMARY MANNER NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PRO VISIONS OF THE I-T ACT. SUB-SECTION (2) OF SECTION 172 CONTAINS SUMMARY PRO CEDURE FOR COMPUTING THE INCOME OF NON-RESIDENTS FROM SUCH SHIPS @ 7.5% OF THE AMOUNT PAID OR PAYABLE ON CARRIAGE OF PASSENGERS, LIVESTOCK, MA IL OR GOODS TO THE OWNER OR CHARTERER OF SUCH SHIPS OR TO ANY PERSON ON HIS BEHALF. SUB-SECTION (3) OF SECTION 172 REQUIRES THE MASTER OF THE SHIP TO PREP ARE AND FURNISH, BEFORE THE DEPARTURE OF ANY SUCH SHIP, TO THE ASSESSING OF FICER A RETURN OF THE FULL ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 9 AMOUNT PAID OR PAYABLE TO THE OWNER OR CHARTERER OR ANY PERSON ON HIS BEHALF ON CARRIAGE OF ALL PASSENGERS, LIVESTOCK, MA IL OR GOODS SHIPPED AT THAT PORT SINCE THE LAST ARRIVAL OF THE SHIP THEREA T. SUB-SECTION (4) REQUIRES THE AO TO ASSESS INCOME REFERRED TO IN SUB-SECTION (2) AND DETERMINE THE SUM PAYABLE THEREON. THE PROCEDURE OF ASSESSMENT CO NTEMPLATED BY SUB- SECTIONS (2) AND (4) IS SUMMARY IN NATURE IN THAT I T NEITHER ALLOWS THE NON- RESIDENTS TO CLAIM ANY DEDUCTION INCLUDING THE BENE FITS OTHERWISE ADMISSIBLE UNDER THE DOUBLE TAXATION AVOIDANCE AGRE EMENTS NOR REQUIRES THE AO TO FOLLOW ANY ELABORATE PROCEDURE FOR MAKING THE ASSESSMENT. THE AO HAS TO SIMPLY ASSESS THE INCOME AT THE RATE OF 7 .5% OF THE FREIGHT PAID OR PAYABLE TO THE OWNER OR CHARTERER OF THE SHIP OR ANY PERSON ON HIS BEHALF. AND THAT IS THE END OF THE MATTER AS FAR AS ASSESSMENT OF INCOME FROM SUCH SHIPS IS CONCERNED. SUB-SECTION (7) OF SE CTION 172 CONFERS A RIGHT ON THE OWNER OR CHARTERER OF A SHIP TO CLAIM BEFORE THE AO BEFORE THE EXPIRY OF THE RELEVANT ASSESSMENT YEAR THAT AN ASSE SSMENT BE MADE OF HIS TOTAL INCOME IN ACCORDANCE WITH THE NORMAL PROVISIO NS OF THE I-T ACT, AND IF HE SO CLAIMS, ANY PAYMENT MADE BY HIM U/S 172 SHALL BE TREATED AS PAYMENT IN ADVANCE OF THE TAX LEVIABLE FOR THAT ASS ESSMENT YEAR, AND THE DIFFERENCE BETWEEN THE SUM SO PAID AND THE AMOUNT O F TAX FOUND PAYABLE BY HIM ON SUCH ASSESSMENT SHALL BE PAID BY HIM OR R EFUNDED TO HIM, AS THE CASE MAY BE. 11. THE SCHEME OF TAXATION U/S 172 HAS BEEN EXPLAIN ED BY THE HONBLE JURISDICTIONAL HIGH COURT IN ARABIAN EXPRESS LINE L TD. OF UNITED KINGDOM V. UNION OF INDIA, 120 CTR (GUJ.) 377 AS UNDER: ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 10 IT IS TO BE NOTED THAT SECTION 172 OF THE INC OME-TAX ACT OCCURS IN CHAPTER XV WHICH PROVIDES FOR LIABILITY I N VARIOUS SPECIAL CASES. THE SUB-HEADING OF SECTION 172 IS 'PROFITS O F NON-RESIDENTS FROM OCCASIONAL SHIPPING BUSINESS'. THIS SECTION PR OVIDES THAT THE PROFITS MADE BY NON-RESIDENTS FROM OCCASIONAL SHIPP ING SHALL BE TAXED BY ADOPTING THE SUMMARY METHOD OF ASSESSMENT BY HOLDING THAT 7 PER CENT. OF THE AMOUNT PAID OR PAYABLE ON ACCOUNT OF SUCH CARRIAGE TO THE OWNER OR THE CHARTERER IS DEEM ED TO BE INCOME ACCRUING IN INDIA TO THE OWNER OR CHARTERER ON ACCO UNT OF SUCH CARRIAGE. IT ALSO PROVIDES THAT BEFORE DEPARTURE OF THE SHIP, THE MASTER OF THE SHIP HAS TO FURNISH TO THE ASSESSING OFFICER A RETURN OF THE FULL AMOUNT PAID OR PAYABLE TO THE OWNER OR CHA RTERER ON ACCOUNT OF THE CARRIAGE OF ALL PASSENGERS SHIPPED A T THAT PORT SINCE THE LAST ARRIVAL OF THE SHIP THEREAT. SUB-SECTION ( 3) PROVIDES THAT IF THE MASTER IS UNABLE TO DO SO, HE HAS TO MAKE SATIS FACTORY ARRANGEMENT FOR THE FILING OF THE RETURN AND PAYMEN T OF THE TAX BY ANY OTHER PERSON ON HIS BEHALF. SUB-SECTION (6) PRO VIDES THAT A PORT CLEARANCE CERTIFICATE SHALL NOT BE GRANTED TO THE S HIP UNTIL THE COLLECTOR OF CUSTOMS IS SATISFIED THAT THE TAX ASSE SSABLE UNDER THIS SECTION HAS BEEN DULY PAID OR THAT SATISFACTORY ARR ANGEMENTS HAVE BEEN MADE FOR THE PAYMENT THEREOF. IN OUR VIEW, THE AFORESAID PROCEDURE OF ASSESSING THE INCOME OF A NON-RESIDENT INDIAN BECAUSE OF HIS OCCASIONAL ACTIVITY IN SHIPPING BUSINESS IN INDIA WOULD NOT BE APPLICABLE IN A CASE WHERE THERE IS A CONVENTION BE TWEEN THE ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 11 GOVERNMENT OF INDIA AND THE FOREIGN COUNTRIES AS PR OVIDED UNDER SECTION 90 OF THE INCOME-TAX ACT. IN THE CASE OF SU CH AGREEMENT, SECTION 90 WOULD HAVE OVERRIDING EFFECT. 12. IT IS THUS QUITE EVIDENT THAT THE SUMMARY PROC EDURE CONTEMPLATED BY SECTION 172 WOULD NOT BE APPLICABLE TO (I) ASSES S THE PROFITS OF NON- RESIDENTS FROM REGULAR SHIPPING BUSINESS; (II) THE CASES COVERED BY SUB- SECTION (7) OF SECTION 172, I.E., WHERE THE OWNER O R CHARTERER CLAIMS THAT HIS TOTAL INCOME SHOULD BE ASSESSED IN ACCORDANCE W ITH THE NORMAL PROVISIONS OF THE INCOME-TAX ACT; AND (III) CASES W HERE THERE IS A CONVENTION BETWEEN THE GOVERNMENT OF INDIA AND THE FOREIGN COUNTRIES AS PROVIDED UNDER SECTION 90 OF THE INCOME-TAX ACT. TH E SUMMARY PROCEDURE OF ASSESSMENT CONTEMPLATED BY SECTION 172 CANNOT BE MIXED UP WITH A REGULAR ASSESSMENT ESPECIALLY WHEN OPTION IS EXERCI SED BY THE OWNER OR CHARTERER OF THE SHIP U/S 172(7). BY THE SAME ANALO GY, THERE CANNOT BE MULTIPLE ASSESSMENTS OF PROFITS FROM THE SAME VOYAG ES, I.E., ONE U/S 172(4) ON THE BASIS OF RETURNS FILED U/S 172(3) AND THE OTHER UNDER THE NORMAL PROVISIONS OF THE INCOME-TAX ACT ON THE BASI S OF THE RETURN FILED U/S 139. 13. LOOKING TO THE MAGNITUDE OF THE VOYAGES UNDERTA KEN BY THE FREIGHT BENEFICIARY AND THE FACT THAT THE RESPONDENT-COMPAN Y HAS BEEN, AS OBSERVED BY THE LD. CIT(A), REGULARLY FILING ITS RE TURN OF INCOME AT MUMBAI AND BEING ASSESSED TO TAX AT MUMBAI, THE FINDING OF THE CIT(A) THAT THE FREIGHT BENEFICIARY IS NOT ENGAGED IN OCCASIONAL SH IPPING BUSINESS BUT IN REGULAR SHIPPING BUSINESS AND HENCE WOULD BE OUTSID E THE SCOPE OF SECTION ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 12 172 CANNOT BE SAID TO BE UNTENABLE ON FACTS AND IN LAW. HIS FINDING IN THIS BEHALF IS THEREFORE CONFIRMED. SIMILARLY, THE DEPAR TMENT HAS NOT PLACED ANY MATERIAL ON RECORD TO REBUT THE FINDING RECORDED BY THE CIT(A) THAT THE RESPONDENT-COMPANY HAS ALREADY FILED ITS RETURN OF INCOME AT MUMBAI. THAT BEING THE POSITION, THE PROVISIONS OF SECTION 172(7 ) WOULD APPLY TO THE RESPONDENT-COMPANY. BESIDES, AS RIGHTLY OBSERVED BY THE CIT(A), THE INCOME-TAX ACT DOES NOT PERMIT MULTIPLE ASSESSMENTS IN THE HANDS OF THE SAME TAXABLE ENTITY AND THAT TOO IN RESPECT OF INCO ME FROM THE SAME BUSINESS. ON THESE FACTS, WE ARE UNABLE TO DISTURB THE FINDING RECORDED BY THE CIT(A). THE ORDER OF THE CIT(A) THAT THE RESPON DENT-COMPANY IS LIABLE TO BE ASSESSED ON THE BASIS OF RETURN FILED U/S 139 (1) FOR ITS ENTIRE INCOME IS THEREFORE CONFIRMED. HIS FURTHER ORDER QUASHING THE ORDER PASSED BY THE AO U/S 172(4) IS ALSO RESULTANTLY CONFIRMED. 14. AS STATED EARLIER, THE HONBLE JURISDICTIONAL H IGH COURT HAS HELD IN ARABIAN EXPRESS LINE LTD. OF UNITED KINGDOM V. UNIO N OF INDIA, 120 CTR (GUJ.) 377 THAT THE PROCEDURE CONTEMPLATED BY SECTI ON 172 FOR ASSESSING THE INCOME OF A NON-RESIDENT INDIAN BECAUSE OF HIS OCCASIONAL ACTIVITY IN SHIPPING BUSINESS IN INDIA WOULD NOT BE APPLICABLE IN A CASE WHERE THERE IS A CONVENTION BETWEEN THE GOVERNMENT OF INDIA AND TH E FOREIGN COUNTRIES AS PROVIDED UNDER SECTION 90 OF THE INCOME-TAX ACT . THE REASON FOR SUCH A VIEW IS OBVIOUS. SECTION 172(2)/(4) PROVIDES FOR SU MMARY ASSESSMENT @ 7.5% OF THE FREIGHT PAID OR PAYABLE. BY THE VERY NA TURE OF ASSESSMENT CONTEMPLATED BY SECTION 172, IT IS NOT POSSIBLE TO DEAL WITH THE CASES COVERED BY DOUBLE TAXATION AVOIDANCE AGREEMENT. IN THE MATTERS BEFORE ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 13 US, THE AO HAS REJECTED THE CLAIM OF THE RESPONDENT -COMPANY THAT ITS CASE FALLS UNDER DTAA. SUCH AN EXAMINATION, IN OUR VIEW, CANNOT BE UNDERTAKEN IN THE PROCEEDINGS U/S 172 AS THE AO HAS NO DISCRET ION U/S 172(2)/(4) EXCEPT TO COMPUTE THE INCOME @ 7.5% OF FREIGHT PAID OR PAYABLE. IT IS PERHAPS FOR THIS REASON THAT SECTION 172(7) GIVES A N OPTION TO THE OWNERS/CHARTERERS OF SHIPS TO SEEK ASSESSMENT OF TH EIR INCOME IN ACCORDANCE WITH THE NORMAL PROVISIONS OF THE INCOME -TAX ACT. ONCE A RETURN IS FILED BY A NON-RESIDENT U/S 139 CLAIMING THE BENEFIT OF DTAA, HIS ASSESSMENT WOULD NEED TO BE COMPLETED UNDER THE NOR MAL PROVISIONS OF THE INCOME-TAX ACT. THE LD. DR VEHEMENTLY CONTENTED THAT THE JURISDICTIONAL ASSESSING OFFICER SHOULD BE DIRECTED TO VERIFY THE POSITION AND TAX THE INCOME OF THE FREIGHT BENEFICIARY (REPRESEN TED BY THE RESPONDENT- COMPANY) FROM THE BUSINESS OF HANDLING CARGO TRANSP ORTATION (INCLUDING SLOT CHARTERING BUSINESS) AS PER NORMAL PROVISIONS OF THE ACT. IT IS THE CASE OF THE RESPONDENT-COMPANY THAT ITS INCOME INCLUDING THE INCOME FROM 45 VOYAGES COVERED BY THE IMPUGNED ORDER PASSED BY THE AO U/S 172(4) SHOULD BE TAXED IN ACCORDANCE WITH THE NORMAL PROVI SIONS OF THE INCOME- TAX ACT ON THE BASIS OF THE RETURN FILED BY IT U/S 139 AT MUMBAI. PERUSAL OF THE ORDER PASSED BY THE CIT(A) SHOWS THAT HE HAS TA KEN A VIEW THAT THE CASE OF THE RESPONDENT FALLS U/S 172(7) AND NOT U/S 172(4). THE RESPONDENT-COMPANY HAS ALSO ACCEPTED THE LIABILITY TO BE DEALT WITH U/S 172(7). THE JURISDICTIONAL AO MAY THEREFORE VERIFY THE POSITION AND TAKE SUCH ACTION AS MAY BE WARRANTED IN LAW IN TERMS OF SECTION 172(7) TO ENSURE THAT THE INCOME OF THE ASSESSEE FROM THE AFO RESAID 45 VOYAGES DOES NOT ESCAPE ASSESSMENT AS PER THE NORMAL PROVIS IONS OF THE I-T ACT. ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 14 15. IN VIEW OF THE FOREGOING, THE APPEAL FILED BY T HE REVENUE IS DISMISSED SUBJECT TO THE OBSERVATIONS MADE ABOVE. CO NO.21/RJT/2012 16. GROUND TAKEN BY THE ASSESSEE IN THE CROSS-OBJEC TION ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN NOT GIVING ANY FINDING THAT THE RESPONDENT COMPANY IS NOT THE OWNER/CHARTERER OF THE VESSELS, EVEN WHEN THE RESPONDENT COMPANY HAD PLACED BEFORE THE LD. CIT(A) , CERTIFICATES ISSUED BY THE ASSISTANT DIRECTOR [INTERNATIONAL TAX ATION], MUMBAI, AFTER EXAMINING THE CHARTERING AGREEMENTS AND THE P OOLING LINE AGREEMENTS ENTERED BY IT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN NOT GIVING ANY FINDING IN RESPECT O F THE FOLLOWING GROUNDS OF APPEAL RAISED BEFORE HIM:- 2.1 THE LD. A.O. FAILED TO APPRECIATE ARTICLE 9 OF INDIA UK TAX TREATY FOR POOL ARRANGEMENT AND ERRONEOUSLY CON SIDERED THE SAID ARRANGEMENTS AS SLOT CHARTERING ARRANGEMEN T. THE FREIGHT INCOME EARNED BY THE TAX PAYER ON ACCOUNT O F TRANSPORTATION OF CARGO IN THE INTERNATIONAL TRAFFI C BY SHIPS OPERATED UNDER POOR ARRANGEMENTS WOULD NOT BE TAXAB LE IN INDIA UNDER ARTICLE 9 OF THE DT AA BETWEEN INDIA AN D UK. THE RELEVANT PORTION OF ARTICLE 9 IS REPRODUCED AS UNDER:- ARTICLE 9 :- SHIPPING 1. INCOME OF AN ENTERPRISE OF A CONTRACTING STATE F ROM THE OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC SHALL BE TAXABLE ONLY IN THAT STATE. 5. THE PROVISIONS OF THIS ARTICLE SHALL APPLY ALSO TO INCOME DERIVED FROM PARTICIPATION IN A POOL. A JOINT BUSINESS OR AN INTERNATIONAL OPERATING AGENCY. 2.2 THE LD. A.O. HAS IGNORED THE RECENT JUDGEMEN T PRONOUNCED BY ITAT, MUMBAI IN CASE OF DOLT V. BALAJI SHIPPING (2009) 121 ITD 61 (MUM) WHEREIN IT WAS HELD THAT THE FREIGHT INCOM E EARNED BY THE RESPONDENT ON ACCOUNT OF TRANSPORTATION OF CARGO IN THE INTERNATIONAL TRAFFIC BY SHIPS OPERATED BY OTHER EN TERPRISES EVEN UNDER SLOT CHARTERING ARRANGEMENT WOULD BE TAXABLE ONLY IN THE STATE OF RESIDENCE AND CONSEQUENTLY, SUCH INCOME WO ULD BE EXEMPT FROM TAXATION UNDER THE INDIAN INCOME TAX LAW. ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 15 2.3 THE LD. A.O. FAILED TO TAKE COGNIZANCE OF THE DOCUMENTS FILED FOR THE POOL AGREEMENT BY AND BETWEEN M/S YANG MING {UK} LTD. AND ORIENT OVERSEAS CONTAINER LINE LTD. [OOCL] , THE POOLING PARTNER OF M/S YANG MING {UK} LTD. FOR THE CPX SERV ICE, FOR WHICH, THE PORT OF MUNDRA IS A PORT OF CALL WHILE MAKING A N OBSERVATION IN THE LETTER DATED 22-10-2010:- 'YOUR COMPANY CANNOT BE TREATED AS SHIPPING BUSINESS AS SLOT CHARTERED VESSEL CANNOT A VAIL OF THE BENEFITS OF DTAA BETWEEN INDIA AND UK AND HENCE, FR EIGHT INCOME EARNED SHOULD BE TAXABLE IN INDIA.' 2.4 THE LD. A.O. FAILED TO APPRECIATE THAT THE POOL ING AGREEMENT WOULD CLEARLY PROVE TO THE AO THAT THE PRINCIPAL I. E. RESPONDENT COMPANY HAS A WELL DEFINED SERVICE OPERATING OUT OF THE PORT OF MUNDRA IN PARTNERSHIP WITH ITS POOLING PARTNER OOC L AND THAT THERE IS EVERY REASON FOR THE RATIONAL INTERPRETATI ON THAT THE VOYAGES OF THE RESPONDENT COMPANY IN PURSUIT OF THE POOLING AGREEMENT IS IN THE REGULAR COURSE OF CARRYING OUT REGULAR SHIPPING OPERATIONS AND NOT AS A SLOT ARRANGEMENT. 2.5 THE LD.AO FAILED TO APPRECIATE THAT THE RESPON DENT COMPANY HAS OBTAINED 100% DIT RELIEF CERTIFICATE AN D HENCE, THE EARNINGS MADE UNDER THE SAID VESSELS ARE RIGHTFULLY COVERED UNDER THE SAID DIT CERTIFICATE AND EXEMPT FROM TAX. INSPI TE OF DIT RELIEF CERTIFICATE CERTAIN VESSELS ARE NOT CONSIDERED FOR RELIEF. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD AO HAS ERRED IN TREATING THE APPELLANT AS AGENT OF MIS YANG MING {UK} LTD WITHOUT GIVING NOTICE U/S 163 OF THE IT ACT. 4. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEN D AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEF ORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 17. AT THE TIME OF HEARING OF THE CROSS-OBJECTION, THE LD.COUNSEL DID NOT PRESS THE CROSS-OBJECTION FILED BY THE ASSESSEE. T HEREFORE, WE DISMISS IT AS NOT PRESSED. ITA NO. 61/RAJ/2012 CO-21/R/2012 ( ASSESSMENT YEAR 2010-2011) 16 18. IN THE RESULT, THE APPEAL OF THE REVENUE AS W ELL AS THE CROSS- OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 1.11.2012 SD SD (D. K. SRIVASTAVA) (T. K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT: 1.11.2012 SRL COPY OF ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, RAJKOT 6. GUARD FILE BY ORDER TRUE COPY SENIOR PR IVATE SECRETARY, ITAT, RAJKOT BENCH