ACIT, Circle - 1(1), Panaji V. M/s Damodar Mangalji & Co. Ltd, Panaji

ITA 131/PAN/2013

• Counselvise Citation: 13124114 RSA 2013
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 07-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NISHANT K
• Assessee Lawyers: R SRINIWASAN
• Keywords: Recovery proceedings; Double taxation relief; Revenue expenditure; Capital expenditure
• Section: 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 131/PNJ/2013 : (ASST. YEAR : 2008 - 09) ASST. COMMISSIONER OF INCOME TAX, CIRCLE (1), PANAJI, GOA. (APPELLANT) VS. M/S. DAMODAR MANGALJI & CO. LTD., 1 ST FLOOR, DAMODAR NIWAS, M.G. ROAD, PANAJI, GOA (RESPONDENT) PAN : AAACB6880G APPELLANT BY : NISHANT K., DR RESPONDENT BY : R. SRINIWASAN, ADV. DATE OF HEARING : 26/08/2013 DATE OF PRONOUNCEMENT : 25 / 10 /2013 O R D E R PER P.K. BANSAL : 1. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DT. 15.3.2013 FOR A.Y. 2008 - 09 BY RAISING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1) THE ORDER NO. IN ITA NO. 223 /PNJ/10 - 11 DATED: 15/03/2013 IN THE ABOVE CASE IS OPPOSED TO LAW AND FACTS OF THE CASE. 2) LEARNED CIT(A) HAS FAILED TO APPRECIATE THE EFFORT S OF THE ASSESSING OFFICER TO CONSIDER THE AFFORESTATION EXPENSES AS CAPITAL EXPENDITURE. THE EXPENDITURE OF RS.2,14,21,820/ - AS COMPENSATION FOR AFFORESTATION CHARGES HAS GIVEN THE ASSESSEE AN ENDURING BENEFIT FOR MANY YEARS SO IT IS CAPITAL IN NATURE. 3) LEARNED CIT (A) HAS FAILED TO APPRECIATE THE EFFORTS OF THE ASSESSING OFFICER TO ADD BACK THE DEMURRAGE EXPENSES ON WHICH ASSESSEE HAS NOT DEDUCTED THE TDS. ASSESSEE OUGHT TO HAVE DEDUCTED TDS ON A PAYMENT OF RS.7,096/ - TO A SHIPPER BASED OUT OF HONK KONG WITH WHOM OUR COUNTRY DOES NOT HAVE A DTAA. 2 ITA NO. 131/PNJ/2013 (ASST. YEAR : 2008 - 09) 4) FOR THIS AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF LEARNED CIT (A) BE CANCELLED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. GROUND NOS. 1 AND 4 ARE GENERAL IN NATURE AND DOES NOT REQUIRE ADJUDICATION. 3. GROUND NO. 2 RELATES TO THE DELETION OF THE ADDITION OF RS. 2,14,21,820/ - AS DISALLOWED BY THE AO AS IN THE OPINION OF THE AO ENDURING BENEFIT HAD ARISEN AND THE EXPENDITURE W AS CAPITAL IN NATURE. THE FACTS RELATING TO THIS GROUND ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE OF RS. 2,14,21,820/ - ON ACCOUNT OF AFFORESTATION EXPENSES. THE PAYMENTS WERE MADE TO DY. CONSER VATOR OF FORESTS, MARGAO, GOA WITH RESPECT TO NPV CHARGES CONNECTED TO THE MINES AND WERE IN FAVOUR OF COMPENSATORY AFFORESTATION FUND, GOA. WHEN QUESTIONED, THE ASSESSEE EXPLAINED THAT THE ASSESSEE IS ENGAGED IN MINING BUSINESS. THE PAYMENT IS MADE UNDER THE FOREST CONVERSATION ACT TO DY. CONSERVATOR OF FORESTS, SOUTH GOA DIVISION, GOVERNMENT OF INDIA, MARGAO, GOA. IT IS A STATUTORY PAYMENT UNDER THE LAW FOR USE OF FOREST LAND FOR MINING PURPOSES . THE GOVERNMENT HAS DEVISED A FORMULA FOR ARRI VING AT THE AMOUNT PAYABLE BY USER OF FOREST LAND FOR MINING PURPOSES. THE CONSERVATOR OF FOREST HAD ISSUED TWO LETTERS DT. 20.3.2006 AND 12.10.2007 TO THE ASSESSEE DIRECTING TO PAY THE NET PRESENT VALUE IN RESPECT OF EACH MINING LEASE TO THE GOVERNMENT. THE DEPARTMENT WANTED PAYMENT TO BE MADE OTHERWISE THE MINING OPERATION WOULD HAVE BEEN STOPPED. THE ASSESSEE, THEREFORE, MADE THE ENTIRE PAYMENT DURING F.Y 2007 - 08 WHICH WAS CLAIMED AS EXPENDITURE. THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVE LY FOR THE PURPOSE OF THE BUSINESS AND THE EXPENDITURE ACCRUED DURING THE YEAR AND ARE OF REVENUE NATURE. THE AO DID NOT AGREE WITH THE ASSESSEE AND HELD THAT BY INCURRING THE AFORESAID LUMPSUM EXPENDITURE WHICH IS OF NON - RECURRING NATURE, THE ASSESSEE HA S GOT ENDURING 3 ITA NO. 131/PNJ/2013 (ASST. YEAR : 2008 - 09) BENEFIT OF CAPITAL NATURE IN THE FORM OF PERMISSION TO PERFORM MINING IN THE SAID LAND PROPERTY SPREAD OVER A LONG PERIOD CONSIDERABLY LONGER THAN THE FINANCIAL YEAR UNDER CONSIDERATION. THE ENDURING BENEFIT IS IN THE NATURE OF CONVERSION O F THE LAND USE WHICH ALLOWS THE ASSESSEE TO USE THE LAND FOR THE PURPOSE OF MINING ACTIVITY. THIS EXPENDITURE IS ACTUALLY IN THE NATURE OF ACQUIRING OR IMPROVING A FIXED ASSET AND BENEFIT ON THIS ACCOUNT IS NORMALLY AVAILABLE TO THE ASSESSEE FOR SEVERAL S UBSEQUENT YEARS. IN THIS REGARD, THE AO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF R.B. SETH MOOLCHAND SUGANDHCHAND VS. CIT, 86 ITR 647 ; ENTERPRISING ENTERPRISES VS. CIT, 268 ITR 95 (MAD) AND CIT VS. TATA HONEYWELL LTD. , 93 ITR 507. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) TOOK THE VIEW THAT THE CASE IS DULY COVERED BY THE DECISION OF THIS TRIBUNAL PASSED U/S 263 IN THE CASE OF DR. PRAFULLA R. HEDE VS. CIT IN ITA NO. 135/PNJ/2011 AND DELETED THE ADDITION B Y OBSERVING AS UNDER : 6.5 THUS, THE HONBLE ITAT NOT ONLY SET ASIDE THE ORDER OF THE CIT, PASSED U/S 263 ON THE ISSUE THAT THE ORDER PASSED BY THE A.O WAS NOT ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF REVENUE, BUT THEY ALSO DISCUSSED THE MERITS OF TH E ISSUE OF AFFORESTATION EXPENSES AT LENGTH, BEFORE DECIDING THAT THE CLAIM OF EXPENDITURE IN QUESTION WAS IN THE NATURE OF REVENUE EXPENDITURE. 6.6 FACTS OF THE INSTANT CASE IS EXACTLY SIMILAR AND THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT, THE A.O IS DIRECTED TO ALLOW THE EXPENDITURE OF RS.2,14,21,820/ - CLAIMED AS AFFORESTATION EXPENSES AS REVENUE EXPENDITURE AND DELETE THE ADDITION MADE. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 3.1 BEFORE US, THE ASSESSEE ALSO RELIED ON T HE ORDER OF THIS TRIBUNAL IN THE CASE OF DR. P RAFULLA R. HEDE VS. CIT ( SUPRA ). 3.2 ON THE OTHER HAND, THE LD. DR VEHEMENTLY CONTENDED THAT THE CIT( A) HAS NOT GIVEN ANY FINDING ON MERIT. THE DECISION OF THIS TRIBUNAL RELATES TO THE QUESTION WHETHER THE ASSESSMENT ORDER COULD BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE U/S 263. IT IS A SETTLED LAW THAT THE ORDER 4 ITA NO. 131/PNJ/2013 (ASST. YEAR : 2008 - 09) CANNOT BE ERRON EOUS IF AO HAS TAKEN ONE OF THE POSSIBLE VIEWS UNTIL AND UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT THE AO HAS DISALLOWED THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE PLEA THAT THE EXPENDITURE IS A CAPITAL EXPENDITURE AND THE BENEFIT OF THE EXPENDITURE HAS TO ACCRUE OVER A NUMBER OF YEARS AND THEREFORE HAS TO BE TREATED AS A CAPITAL EXPENDITURE. THE AO ALSO TOOK THE VIEW THAT THE WHOLE EXPENDITUR E DID NOT ACCRUE DURING THE YEAR. WE NOTED THAT THE CIT(A) DELETED THE DISALLOWANCE MERELY RELYING ON THE ORDER OF THIS TRIBUNAL WHICH WAS PASSED IN RESPECT OF AN APPEAL FILED BEFORE THIS TRIBUNAL U/S 263 OF THE INCOME TAX ACT. THE QUESTION BEFORE THE TR IBUNAL WAS WHETHER THE ORDER PASSED BY CIT(A) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE TRIBUNAL SET ASIDE THE ORDER OF CIT(A) MADE U/S 263 HOLDING THAT THE ORDER PASSED BY THE AO COULD NOT BE HELD TO BE ERRONEOUS ORDER AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE RELYING ON THE DECISION IN MALABAR INDUSTRIAL CO. LTD. VS. CIT, 243 ITR 83 (SC). THE CIT(A) INSTEAD OF GIVING ANY FINDING ON THE MERIT OF THE CASE HAS SIMPLY RELIED ON THE ORDER OF ITAT BY REFERRING TO THE QUESTION ABOUT THE VALIDITY OF THE ORDER PASSED U/S 263. IN AN APPEAL AGAINST ORDER PASSED U/S 263 WHEN THE ORDER HAS BEEN SET ASIDE BY THE CIT(A) AND SENT BACK TO THE AO FOR PASSING IT AFRESH IN ACCORDANCE WITH LAW, THE TRIBUNAL DOES NOT HAVE ANY JURISDICTION TO EXAMIN E THE CASE ON MERIT. WE HAVE ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL PASSED U/S 263 ON WHICH THE CIT(A) HAS RELIED. IN OUR OPINION, THAT ORDER WILL NOT BE APPLICABLE IN THIS CASE. THE CIT(A) WAS BOUND TO GIVE A CLEAR - CUT FINDING WHETHER THE EXPENDIT URE INCURRED BY THE ASSESSEE IS A CAPITAL EXPENDITURE OR WHETHER IT IS A REVENUE EXPENDITURE AND WHETHER THE EXPENDITURE HAS ACCRUED DURING THE YEAR OR NOT. THE ORDER PASSED BY THE CIT( A), IN OUR OPINION, IS CRYPTIC AND HAS NOT DEALT WITH THE ISSUE INVOLVED. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF CIT(A) WITH THE DIRECTION 5 ITA NO. 131/PNJ/2013 (ASST. YEAR : 2008 - 09) THAT THE CIT(A) SHOULD RE - DECIDE THIS ISSUE ON MERIT WHETHER THE EXPENDI TURE INCURRED BY THE ASSESSEE IS A CAPITAL EXPENDITURE OR WHETHER IT IS A REVENUE EXPENDITURE AND I F IT IS A REVENUE EXPENDITURE, WHETHER THE EXPENDITURE HAS ACCRUED DURING THE YEAR OR NOT AFTER GIVING PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE. TH US, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 4. GROUND NO. 3 RELATES TO NON - DEDUCTION OF TDS ON PAYMENT OF RS. 7,096/ - TO A SHIPPER BASED OUT OF HONG KONG AS DEMURRAGE CHARGES. SINCE THE ASSESSEE FAILED TO DEDUCT TDS, THE AO DISALLOWED THE SAME U/ S 40(A)(I). WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) DELETED THE DISALLOWANCE. 4.1 AFTER HEARING THE RIVAL SUBMISSIONS, WE NOTED THAT THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE DECISION OF THE HON'BLE JURISDICTION HIGH COURT IN THE CASE OF CIT VS. ORIENT GOA CO. (P) LTD., 325 ITR 554 IN WHICH THE HON'BLE BOMBAY HIGH COURT HAS HELD AS UNDER : 7. WE HAVE GIVEN ANXIOUS CONSIDERATION TO THE SUBMISSION OF THE LEARNED SENIOR COUNSEL. ON READING OF THE ENTIRE JUDGMENT OF THE LEARNED SINGLE BENCH , IT IS NOT POSSIBLE FOR US TO COUNTENANCE THE SUBMISSION OF THE LEARNED SENIOR ADVOCATE THAT THE RATIO OF THE JUDGMENT IS APPLICABLE TO THE FACTS OF THE CASE ON HAND. IN OUR VIEW, THIS JUDGMENT DOES NOT HELP THE PRESENT RESPONDENT, I.E., THE ASSESSEE. A NOTHER JUDGMENT RELIED ON BY THE LEARNED SENIOR ADVOCATE MR. USGAONKAR FOR THE RESPONDENT - ASSESSEE IS IN THE MATTER OF CBDT V. CHOWGULE & CO. LTD. [1991] 192 ITR 40 (KAR.). THERE THE LEARNED DIVISION BENCH OBSERVED THAT 'THE QUESTION FOR CONSIDERATION IS W HETHER DEMURRAGE PAYABLE TO A NON - RESIDENT OWNER OR CHARTERER OF A SHIP FOR THE DELAY IN LOADING THE ORE SOLD TO THE FOREIGNER IS LIABLE TO BE TAXED UNDER THE PROVISIONS OF THE INCOME - TAX ACT'. WE HAVE SEEN THE FACTS OBTAINING IN THAT CASE. IN OUR VIEW, TH E FACTS ARE DISTINGUISHABLE. THE RATIO OF THIS JUDGMENT ALSO DOES NOT HELP THE PRESENT ASSESSEE, I.E., THE RESPONDENT IN THIS APPEAL. WE HAVE NOTICED THE VARIOUS DATES IN THE CITED JUDGMENT. WE HAVE ALSO CONSIDERED THE DEFINITION OF WORD 'DEMURRAGE' TO WHI CH OUR ATTENTION WAS INVITED BY LEARNED SENIOR ADVOCATE SHRI USGAONKAR. LEARNED SENIOR ADVOCATE ALSO INVITED OUR ATTENTION TO DICTIONARY MEANING OF THE WORD 'DEMURRAGE' (BLACK'S LAW DICTIONARY). 8. SECTION 172 OF THE ACT 1961 IS CAREFULLY CONSIDERED BY U S. CHAPTER XV TITLES AS 'LIABILITY IN SPECIAL CASES'. WE HAVE NO CONCERN WITH SECTIONS, STARTING FROM SECTION 159, TILL SECTION 171 FROM THIS CHAPTER XV. SECTION 172 COMES UNDER SUB - TITLE 'H. - PROFITS OF 6 ITA NO. 131/PNJ/2013 (ASST. YEAR : 2008 - 09) NON - RESIDENTS FROM OCCASIONAL SHIPPING BUSINESS'. TIT LE OF SECTION 172 IS 'SHIPPING BUSINESS OF NON - RESIDENTS.' FOR BRINGING A CASE UNDER CHAPTER XV - H OF THE ACT 1961, ONE HAS TO ESTABLISH A CASE OF PROFITS OF NON - RESIDENTS FROM OCCASIONAL SHIPPING BUSINESS. 'NON - RESIDENT' IS DEFINED UNDER SECTION 2(30), AS A PERSON WHO IS NOT A 'RESIDENT' AND FOR THE PURPOSE OF SECTIONS 92, 93 AND 168, INCLUDES A PERSON WHO IS NOT ORDINARILY RESIDENT WITHIN THE MEANING OF CLAUSE (6) OF SECTION 6. THE RESPONDENT - ASSESSEE IS A COMPANY, INCORPORATED UNDER THE PROVISIONS OF IND IAN COMPANIES ACT, 1956, IS FAIRLY AN ADMITTED POSITION. THE ASSESSEE CANNOT BE SAID TO BE NON - RESIDENT. WE HAVE ALSO TAKEN NOTICE OF SECTION 6, I.E., 'RESIDENCE IN INDIA'. IN SHORT, RESPONDENT - ASSESSEE CANNOT BE SAID TO BE NON - RESIDENT. THE PRESENT APPEAL PERTAINS TO THE RESPONDENT - ASSESSEE. IN OUR VIEW, IN THE FACTS OF THE PRESENT CASE, THE RESPONDENT - ASSESSEE CANNOT LAY FINGERS ON SECTION 172, SINCE WE ARE NOT DEALING WITH PROFITS OF NON - RESIDENTS. THE OTHER ASPECT IS THAT SUCH PROFITS OF NON - RESIDENTS S HOULD BE FROM OCCASIONAL SHIPPING BUSINESS. IT IS NOT THE CASE THAT THE RESPONDENT - ASSESSEE HAS EARNED SOME PROFIT FROM OCCASIONAL SHIPPING AND IS A NON - RESIDENT. IN OUR VIEW, SECTION 172 DOES NOT HAVE APPLICATION IN RELATION TO THE RESPONDENT - ASSESSEE AND IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE COMPANY FROM JAPAN VIZ., MITSUI & CO. LTD., JAPAN, RECIPIENT OF DEMURRAGE AMOUNT IS NOT BEFORE US. IN OTHER WORDS, WE ARE NOT EXAMINING THE TAX LIABILITY OF THE FOREIGN COMPANY, I.E., MITSUI & CO. LT D., JAPAN. ON OUR QUERY TO THE LEARNED SENIOR ADVOCATE SHRI USGAONKAR AS TO MATERIAL ON RECORD FOR OCCASIONAL SHIPPING, PART OF PARA 3 FROM THE JUDGMENT OF THE LEARNED COMMISSIONER OF INCOME - TAX HAS BEEN POINTED OUT TO US. HIS OBSERVATIONS ARE IN VERY FEW LINES. WE MAY REPRODUCE THE SAID PORTION HEREIN BELOW. ' 3. WE HAVE HEARD THE RIVAL SUBMISSIONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. ASSESSEE CLAIMED DEDUCTION OF RS. 1,08,53,980 BEING THE AMOUNT OF DEMURRAGE PAYABLE TO MITSUI CO. LTD., JAPAN. THE AS SESSING OFFICER OPINED THAT SINCE THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE, AS SUCH THE CASE OF THE ASSESSEE FALLS WITHIN THE MISCHIEF OF SECTION 40(A)( I) OF THE INCOME - TAX ACT, 1961'. PROVISIONS OF SECTION 172 ARE TO APPLY NOTWITHSTANDING ANYTHING CONTA INED IN THE OTHER PROVISIONS OF THE ACT. THEREFORE, IN SUCH CASES, THE PROVISIONS OF SECTIONS 194C AND 195 RELATING TO TAX DEDUCTION AT SOURCE, ARE NOT APPLICABLE. THE RECOVERY OF TAX IS TO BE REGULATED FOR VOYAGE UNDERTAKEN FROM ANY PORT IN INDIA BY A SHI P, UNDER THE PROVISIONS OF SECTION 172. IN THIS VIEW, THESE OBSERVATIONS OF THE LEARNED VICE PRESIDENT OF INCOME - TAX APPELLATE TRIBUNAL HAVE NO CONCERN WITH THE FACTUAL ASPECT THAT IT IS A CASE OF OCCASIONAL SHIPPING, PLEADED OR RAISED BY ASSESSEE. THERE I S NO DISPUTE ABOUT INTERPRETATION OF SECTION 172 OR SECTION 195. CRUCIAL POINT IS AS TO HOW SECTION 172 APPLIES TO THE FACTS OF THE PRESENT CASE WHEREIN THE RESPONDENT - ASSESSEE IS AN INDIAN COMPANY, INCORPORATED UNDER THE PROVISIONS OF INDIAN COMPANIES ACT , 1956. IN OUR VIEW, THE LEARNED VICE PRESIDENT OF THE ITAT HAS RECORDED A PERVERSE OBSERVATION/FINDING IN PARA 3 REGARDING APPLICATION OF SECTIONS 44B AND 172 OF THE 1961 ACT. 9. WE MAY NOTICE THAT THE JUDGMENT OF THE LEARNED APPELLATE TRIBUNAL IS UNREASONED AND CRYPTIC ONE. THIS JUDGMENT RUNS IN AROUND 20 TO 25 LINES. WE ARE NOT OBLIVIOUS OF THE FACT, THAT NOT THE FORM, BUT SUBSTANCE IS MATERIAL. THE LEARNED APPELLATE TRIBUNAL SEEMS TO HAVE REFERRED TO THE CIRCULAR OF CBDT NO. 723, DATED 19 - 9 - 1995. 10. WE HAVE CONSIDERED THE SUBMISSION OF THE LEARNED COUNSEL APPEARING FOR THE PARTIES PERTAINING TO THE CIRCULAR NO. 723, DATED 19 - 9 - 1995 BY CBDT (ANNEXURE 'C'). 7 ITA NO. 131/PNJ/2013 (ASST. YEAR : 2008 - 09) SECTION 119 EMPOWERS THE CENTRAL BOARD OF DIRECT TAXES TO GIVE INSTRUCTIONS TO SUBORDINATE AUTHORITIES. WE HAVE CONSIDERED SECTION 119 OF THE ACT 1961. WE HAVE ALSO PERUSED THE CIRCULAR ANNEXURE C. THIS CIRCULAR SEEMS TO HAVE BEEN ISSUED BY THE CBDT, CLARIFYING THE SCOPE OF SECTIONS 172, 194C AND 195 OF THE ACT 1961. ADVOCATE ON BEHALF OF THE R EVENUE POINTS OUT FROM PARA 4 OF THE CIRCULAR AND SUBMITS THAT SECTION 172 OPERATES IN THE AREA OF COMPUTATION OF PROFITS FROM SHIPPING BUSINESS OF NON - RESIDENTS AND THERE IS NO OVERLAPPING IN THE AREAS OF OPERATION OF THESE SECTIONS. LEARNED SENIOR ADVOCA TE SHRI USGAONKAR, APPEARING ON BEHALF OF THE RESPONDENT - ASSESSEE, ALSO DREW OUR ATTENTION TO THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE MATTER OF COMMISSIONER OF SALES TAX V. INDRA INDUSTRIES [2001] 248 ITR 338. IT IS A THREE BENCH JUDGMENT OF THE H ON'BLE SUPREME COURT. IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT THAT THE CIRCULARS ISSUED BY COMMISSIONER OF SALES TAX NOT BINDING ON ASSESSEE OR COURT, HOWEVER, BINDING ON THE DEPARTMENT. IN THE CASE ON HAND, IN OUR VIEW, LEARNED COMMISSIONER OF INCOM E - TAX (APPEALS) AND THE LEARNED APPELLATE TRIBUNAL HAVE WRONGLY INTERPRETED THE CIRCULAR DATED 19 - 9 - 1995 ISSUED BY THE CBDT. THIS CIRCULAR, IN OUR OPINION, CANNOT BE CONSIDERED IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, IN AID TO THE RESPONDENT - AS SESSEE. THE LEARNED ASSESSING OFFICER, IN FACT, HAS PASSED A LEGAL, PROPER AND REASONED ORDER, HOLDING THAT THE PROVISIONS LAID DOWN UNDER SECTION 40(A)( I) OF THE 1961 ACT APPLY TO THE CASE ON HAND. 11. WE MAY NOTICE HERE THE JUDGMENT OF THE HON'BLE SUP REME COURT IN THE MATTER OF UNION OF INDIA V. GOSALIA SHIPPING (P.) LTD. [1978] 113 ITR 307. THIS JUDGMENT SEEMS TO BE THE BASIC JUDGMENT WHICH IS BEING REFERRED TO BY THE LEARNED SINGLE BENCH OF THE KARNATAKA HIGH COURT. IN THAT CASE, GOSALIA SHIPPING (P. ) LTD., A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE INDIAN COMPANIES ACT, 1956 INDULGED AT THE RELEVANT TIME IN BUSINESS OF CLEARING AND FORWARDING AND AS STEAMSHIP AGENTS. GOSALIA SHIPPING (P.) LTD., HAD ACTED AS THE SHIPPING AGENT OF 'ALUMINIUM CO MPANY OF CANADA LIMITED' WHICH WAS A NON - RESIDENT COMPANY. THAT NON - RESIDENT COMPANY HAD CHARTERED A SHIP 'M.V. SPARTO' BELONGING TO A NON - RESIDENT COMPANY CALLED SPARTO COMPANIA NAVIERA OF PANAMA. THE SAID SHIP CALLED AT THE PORT OF BETUL, GOA ON 1 - 3 - 1970 . ON 20 - 3 - 1970, THE SHIP HAD LEFT FOR CANADA. THE SHIP WAS ALLOWED TO LEAVE PORT OF BETUL ON THE BASIS OF GUARANTEE BOND, EXECUTED BY THE RESPONDENT IN FAVOUR OF THE PRESIDENT OF INDIA. ON 15 - 4 - 1970, THE FIRST INCOME - TAX OFFICER, MARGAO, GOA ISSUED A DEMAN D NOTICE TO THE RESPONDENT GOSALIA SHIPPING (P.) LTD. FOR PAYMENT OF RS. 51,000 AND ODD AMOUNT, BY WAY OF INCOME - TAX. WE HAVE NOTICED ALL THESE FACTS ONLY TO SAY THAT IN THE CASE ON HAND, THERE ARE NO PLEADINGS OR MATERIAL BROUGHT ON RECORD TO SHOW THAT TH E CASE IS GOVERNED BY OCCASIONAL SHIPPING WITHIN THE MEANING OF SECTION 172 OF THE ACT, 1961 AND SAID SECTION APPLIES. 12. HAVING CONSIDERED THE SUBMISSIONS OF THE LEARNED COUNSEL APPEARING FOR THE PARTIES, IN OUR VIEW, THE FACTS OF THE PRESENT CASE, ARE GOVERNED BY SECTION 40(A)(I ) OF THE ACT 1961. ORDER PASSED BY THE ASSESSING OFFICER, IN OUR VIEW, IS LEGAL, PROPER AND IN ACCORDANCE WITH THE SCHEME OF ACT 1961. IN VIEW OF WHICH WE HAVE TAKEN IN THE MATTER, THE APPEAL DESERVES TO BE ALLOWED BY QUASHING AND SETTING ASIDE THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) DATED 28 - 8 - 2002 AND THE ORDER PASSED BY THE INCOME - TAX APPELLATE TRIBUNAL, PANAJI DATED 2 - 12 - 2004. THE SAME ARE, ACCORDINGLY, QUASHED AND SET ASIDE AND THE ORDER PASSED BY THE ASSESSING OFFICER STANDS UPHELD. APPEAL IS, ACCORDINGLY, ALLOWED AND DISPOSED OF WITH NO ORDER AS TO COSTS. 8 ITA NO. 131/PNJ/2013 (ASST. YEAR : 2008 - 09) RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE ORDER OF THE AO. THUS, THIS GROUND IS ALLOWED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 6. ORDER PRONOUNCED IN THE OPEN COURT ON 2 5 / 10 /2013. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 2 5 /10/ 2013 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT, PANAJI (4) CIT(A), PANAJI (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER SR. P RIVATE S ECRETARY ITAT, PANAJI, GOA