M/s. Poompuhar Shipping Corporation Ltd., CHENNAI V. ADIT, CHENNAI

ITA 148/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61245 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 23-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: R VIJAYARAGHAVAN; ARVIND P DATAR
• Keywords: Reopening of assessment; Double taxation relief; Non-deduction of tax
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.145 TO 148/MDS/2012 (ASSESSMENT YEARS: 2002-03, 2003-04, 2004-05 & 2006 -07) M/S. POOMPUHAR SHIPPING CORPORATION LTD., M/S.SUBBARAYA AIYAR PADMANABHAN & RAMAMANI, ADVOCATES NEW NO.75A OLD NO.105A, DR.RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI-4. PAN:AAACP4383J VS. THE ASSISTANT DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION, CHENNAI . (APPELLANT) (RESPONDENT) APPELLANT BY : MR. ARVIND P.DATAR, SR. ADVOC ATE & MR. R.VIJAYARAGHAVAN, ADVOCATE RESPONDENT BY : DR. S.MO HARANA, CIT DR DATE OF HEARING : 8 TH MAY, 2012 DATE OF PRONOUNCEMENT : 29 TH JUNE, 2012 O R D E R PER BENCH: THE PRESENT SET OF APPEALS I.E. ITA NOS.145 TO 148/MDS/2012 RELEVANT TO THE ASSESSMENT YEARS 2002 -03, 2003-04, 2004-05 & 2006-07 RESPECTIVELY ARE FILED B Y THE ASSESSEE AGAINST THE ORDER OF CIT(A)-IV, CHENNAI DA TED 01.11.2011. 2. THE ASSESSEE IS A STATE GOVERNMENT UNDERTAKING ESTABLISHED EXCLUSIVELY TO TRANSPORT COAL FROM VARI OUS PORTS IN ITA NOS.145 TO 148/MDS/201 2 2 INDIA REQUIRED FOR VARIOUS THERMAL STATIONS OF TNE B (NOW KNOWN AS TAMIL NADU GENERATION & DISTRIBUTION COMPA NY LTD.) . THE ASSESSEE IS HAVING ITS OWN VESSELS FOR TRANSPORTATION OF COAL. APART FROM ITS OWN VES SELS, THE ASSESSEE IS ALSO HIRING VESSELS FROM INDIAN AND FOR EIGN SHIPPING COMPANIES. 3. FOR THE ASSESSMENT YEAR 2002-03 TO 2004-05 THE ASSESSING OFFICER REOPENED THE ASSESSMENT UNDER SEC TION 147 AND ISSUED NOTICE UNDER SECTION 148 DATED 16.03 .2005 . THE ASSESSEE VIDE LETTER DATED 25.04.2005 SOUGHT RE ASONS FOR REOPENING THE ASSESSMENT. THE ASSESSING OFFICER VID E LETTER DATED 1.12.2010 GAVE FOLLOWING REASONS FOR THE REO PENING OF THE ASSESSMENT:- THE REASON FOR REOPENING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 IS GIVEN AS UNDER: TDS WAS NOT MADE UNDER THE HEAD DRY DOCKING EXPENSES TO THE TUNE OF ` . 796.77 AND NEEDS TO BE DISALLOWED U/S.40(A)(IA) OF THE IT ACT. ALSO THE ASSESSEE DID NOT DEDUCT TAX ON CHARTER HIRE PAYMENTS TO FOREIGN SHIPPING COMPANY TO THE ITA NOS.145 TO 148/MDS/201 2 3 TUNE OF ` 4962.72 LAKHS. THE SAME WAS NOT DISALLOWED U/S.40(A)(IA) OF IT ACT, 1961. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 27.12.2007 FOR THE ASSESSMENT YEAR 2002-03 RAISED D EMAND OF ` 14,24,22,361/- INCLUDING INTEREST UNDER SECTION 23 4B. SIMILARLY, FOR THE ASSESSMENT YEAR 2003-04 AND 2004 -05, DEMAND TO THE TUNE OF ` 6,81,31,783/- AND ` 4,56,65,387/- RESPECTIVELY WERE RAISED BY THE ASSESSING OFFICER O N IDENTICAL GROUNDS. THE ASSESSEE MADE PAYMENTS TOWARDS HIRE CH ARGES FOR FOREIGN SHIPPING COMPANIES BELONG TO VARIOUS NO N- RESIDENT. ALLEGEDLY TAX WAS NOT DEDUCTED AT SOURCE ON PAYMENT OF THE HIRE CHARGES MADE TO NON-RESIDENT FO REIGN SHIPPING COMPANIES. SINCE THE FOREIGN SHIPPING COMP ANIES HAD NOT FILED THEIR RETURNS OF INCOME AND HAD NOT P AID TAX ON THE INCOME RECEIVED BY THEM VIZ. HIRE CHARGES, THE ASSESSEE WAS TREATED AS AGENT OF THE SAID FOREIGN SHIPPING C OMPANIES UNDER THE PROVISIONS OF SECTION 163(2) OF THE ACT. THE ASSESSING OFFICER TREATED THE ASSESSEE AS REPRESEN TATIVE ASSESSEE UNDER SECTION 160(1)(I) OF THE ACT. ITA NOS.145 TO 148/MDS/201 2 4 THE ASSESSEE IN RESPONSE TO NOTICE UNDER SECTION 1 48 FILED SEPARATE RETURNS FOR EACH OF THE SHIPPING COM PANIES UNDER PROTEST DECLARING NIL INCOME. 4. THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFF ICER THAT :- I) ASSESSEE HAD NO BUSINESS CONNECTION WITH THE FO REIGN SHIPPING COMPANY; II) TIME CHARTER PAYMENTS PAID BY THE ASSESSEE TO F OREIGN SHIPPING COMPANIES IS NOT TAXABLE IN INDIA; & III) TIME CHARTER PAYMENTS DO NOT PARTAKE THE CHARA CTER OF ROYALTY. THE ASSESSING OFFICER, DISREGARDING THE SUBMISSIONS MADE BY THE ASSESSEE, HELD THAT SINCE THE TRANSPORTATION AC TIVITY WAS PERFORMED BY FOREIGN SHIPPING COMPANIES IN INDIAN COASTAL WATERS, THEREFORE INCOME ARISES IN INDIA OR DEEMED TO ARISE/ACCRUE IN INDIA AS PER THE PROVISIONS OF SEC TION 9 OF THE ACT. THE ASSESSING OFFICER FURTHER HELD THAT THE IN COME OF THE FOREIGN COMPANIES WOULD BE CHARGEABLE IN INDIA FOR THE REASON THAT FOREIGN VESSELS WERE BEING PUT TO USE B Y THE ITA NOS.145 TO 148/MDS/201 2 5 ASSESSEE FOR TRANSPORTATION OF COAL BETWEEN INDIAN PORTS FOR WHICH PAYMENT WAS MADE BY THE ASSESSEE AND FINALLY, THE ASSESSING OFFICER WHILE MAKING ADDITIONS HELD THAT SINCE THE ASSESSEE HAD NOT DEDUCTED WITHHOLDING TAX ON HIRE C HARGES PAID TO FOREIGN SHIPPING COMPANIES, THE ASSESSEE HA S BEEN TREATED AS REPRESENTATIVE ASSESSEE UNDER SECTION 163 OF THE ACT. 5. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFF ICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). TH E CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER AND DISMI SSED THE APPEALS OF THE ASSESSEE FOR ALL THE RELEVANT ASSES SMENT YEARS. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL IMPUGNING THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEARS 2002-03, 2003-04, 2004-05 & 2006-07. SINCE SI MILAR ISSUES WERE INVOLVED IN THESE APPEALS, THEY ARE TAK EN UP TOGETHER AND DECIDED BY THIS COMMON ORDER. 6. THE COMMON GROUNDS OF APPEALS BEFORE THE TRIBUNA L IN ALL THE APPEALS ARE AS FOLLOWS:- ITA NOS.145 TO 148/MDS/201 2 6 1. THE ORDER OF THE CIT(A) IS CONTRARY TO LAW, FA CTS AND CIRCUMSTANCES OF THE CASE. 2. IN TERMS OF SECTION 163(2) READ WITH SECTION 149(3) THE NOTICE U/S.148 OUGHT TO HAVE BEEN GIVEN BEFORE EXPIRY OF TWO YEARS FROM THE END OF ASSESSMENT YEAR WHEREAS IN THE INSTANT CASE, THE NOTICE REACHED THE APPELLANT ONLY ON 4.4.2005 AND HENCE ISSUANCE OF NOTICE U/S.148 IS BARRED BY TIME. 3. THE CIT(A) ERRED IN HOLDING THAT THE REOPENING OF ASSESSMENT U/S.147 TO TREAT THE ASSESSEE COMPANY AS REPRESENTATIVE ASSESSEE OF FSC IS VALID. 4. THE CIT(A) ERRED IN HOLDING THAT THE CHARTER HIRE CHARGES PAID TO FSC WOULD CONSTITUTE ROYALTY UNDER EXPLANATION 2 TO SECTION 9(1)(IV)(A) AND HENC E TAXABLE IN INDIA. 5. THE CIT(A) ERRED IN HOLDING THAT ASSESSEE COMPANY WAS RIGHTLY TREATED AS REPRESENTATIVE ASSESSEE U/S.163 OF THE ACT SINCE IT DID NOT DEDUCT OR WITHHELD TAX ON HIRE CHARGES PAID TO FOREIGN SHIPPING COMPANIES. 6. THE CIT(A) FAILED TO APPRECIATE THAT IN THE PRESENT CASE THE CHARTER HIRE PAYMENTS WERE ADDED U/S.201(1) FOR FAILURE TO DEDUCT TAX U/S.195 AND HENCE THERE IS NO INCOME WHICH ESCAPED TAX. 7. THE CIT(A) FAILED TO APPRECIATE THAT THE TRANSACTION/RELATIONSHIP OF THE ASSESSEE COMPANY WITH FSC DOES NOT FULFILL ANY OF THE CONDITIONS STIPULATED IN SEC.163(1) OF THE ACT AND HENCE THE ASSESSEE CANNOT BY ANY STRETCH OF IMAGINATION BE TREATED AS AN AGENT OF NON-RESIDENT. 8. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE TRANSACTIONS BETWEEN THE ASSESSEE COMPANY AND THE SHIP OWNER WERE ON THE BASIS OF PRINCIPAL AND NOT ON PRINCIPAL TO AGENT BASIS. 9. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT ASSESSEE HAD AVAILED THE SERVICES OF FOREIGN SHIPPING COMPANIES ONLY WHEN IT DID NOT GET THE INDIAN SHIP TO TRANSPORT ITS GOODS. HENCE THERE IS NO ITA NOS.145 TO 148/MDS/201 2 7 CONTINUITY BETWEEN THE BUSINESS OF THE NON-RESIDENT AND THE BUSINESS IN INDIA SO AS TO CONSTITUTE BUSINESS CONNECTION. 10. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE CHARTER HIRE CHARGES PAID TO NON-RESIDENTS ARE NOT LIABLE TO TAX IN INDIA AND HENCE NOT LIABLE TO TAX DEDUCTION AT SOURCE. 11. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT PROVISIONS OF SECTION 163 DOES NOT ENVISAGE THAT NON-COMPLIANCE OF WITHHOLDING TAX OBLIGATIONS DOES GIVE RISE TO RELATIONSHIP ENVISAGED U/S.163. 12. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSING OFFICER HAS TREATED THE ASSESSEE COMPANY AS AN ASSESSEE IN DEFAULT U/S.201(1) FOR NON-DEDUCTION OF TAX U/S.195 AND HENCE TREATING THE ASSESSEE AS AN AGENT U/S.163 OF THE ACT WOULD AMOUNT TO DOUBLE TAXATION. 7. MR. R.VIJAYARAGHAVAN, COUNSEL APPEARING ON BEHAL F OF THE ASSESSEE SUBMITTED THAT ASSESSEE HIRE SHIPS FRO M FOREIGN SHIPPING COMPANIES FOR TRANSPORTATION OF COAL. AN A GREEMENT BETWEEN THE ASSESSEE AND THE SHIP OWNER IS THAT OF TIME CHARTER AGREEMENT, ACCORDING TO WHICH SHIP IS LEASE D WITH CREW. THE ASSESSEE IS ONLY GETTING SHIP FOR TRANSPO RTATION AND IT HAS NO CONTROL OVER THE CREW OF THE SHIP. HE SUB MITTED THAT WHERE THE CHARACTER OF THE AGREEMENT IS TIME CHARTE R, THEN THE SAID AGREEMENT IS OUTSIDE THE PURVIEW OF SECTION 9( 1)(IV)(A). THE CONSIDERATION PAID BY THE ASSESSEE IS NOT FOR T HE USE OF ITA NOS.145 TO 148/MDS/201 2 8 THE SHIP BUT FOR THE SERVICES HIRED BY THE ASSESSEE FOR TRANSPORTATION OF COAL. HE CONTENDED THAT THE AUTHO RITIES BELOW HAVE ERRED IN COMING TO THE CONCLUSION THAT A GREEMENT IS BARE CHARTER AGREEMENT. IN ORDER TO SUPPORT HI S CONTENTION, THE COUNSEL FOR THE ASSESSEE POINTED OU T THAT MAIN FEATURES OF TIME CHARTER AGREEMENT ARE I) THE POSSESSION OF THE SHIP IS ALWAYS UNDER THE C ONTROL OF ITS OWNER; II) SHIP IS BEING USED BY OWNER TO TRANSPORT THE GO ODS OF THE ASSESSEE; HE FURTHER SUBMITTED THAT OECD MODEL DOES NOT APPL Y TO TIME CHARTER AGREEMENT. IT ONLY APPLIES TO BARE BOAT . AN AMENDMENT TO SECTION 9(1)(VI) EXPLANATION 2(IV)(A) WAS BROUGHT OUT ONLY TO BRING IT IN LINE WITH OECD MODE L. THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT TIME CHART ER DOES NOT INVOLVE PAYMENT OF ROYALTY. THE PAYMENT IS ON LY FOR THE SERVICES PROVIDED BY THE SHIPPING COMPANY. TO DISTI NGUISH BETWEEN THE EXPRESSION USED AND/OR RIGHT TO USE , HE RELIED ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT I N THE ITA NOS.145 TO 148/MDS/201 2 9 CASE OF STATE OF TAMIL NADU VS. ESSAR SHIPPING LTD. , REPORTED AS 47 VST (2009) (MAD). 8. WITH REGARD TO GROUNDS OF APPEAL NO. 5,7,8,9 AND 11, THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DEPARTM ENT CANNOT TAKE INCONSISTENT PLEAS AND ONCE IT HAS INVO KED THE PROVISIONS OF SECTION 201, THE DEPARTMENT CANNOT IN VOKE PROVISIONS OF SECTION 163 OF THE ACT AS WELL. IF TH E DEPARTMENT HAS CONSIDERED THE ASSESSEE AS REPRESENTATIVE ASSE SSEE, THEN THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SO URCE. 9. WITH REGARD TO SUBMISSIONS ON GROUND NO.2, THE C OUNSEL SUBMITTED THAT NOTICE ISSUED FOR REOPENING OF ASSES SMENT IS BARRED BY LIMITATION. HE SUBMITTED THAT THE DEPART MENT MAY HAVE SENT NOTICE WITHIN TIME BUT IT HAD REACHED THE ASSESSEE AFTER EXPIRY OF THE LIMITATION AS PROVIDED UNDER TH E PROVISIONS OF THE ACT. TO SUPPORT HIS CONTENTION, HE RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. REPORTED AS 320 ITR 561(SC). ITA NOS.145 TO 148/MDS/201 2 10 10. ON THE OTHER HAND, THE D.R. APPEARING ON BEHALF OF THE REVENUE SUBMITTED THAT THE ISSUE WITH REGARD TO NAT URE OF PAYMENT AND DEDUCTIBILITY OF TAX AT SOURCE HAS ALRE ADY BEEN SETTLED IN ASSESSEES OWN CASE BY THE TRIBUNAL RELE VANT TO THE ASSESSMENT YEAR 2002-03 TO 2004-05 REPORTED AS 109 ITD 226(CHENNAI). HE SUBMITTED THAT AS PER THE CHARTER AGREEMENT, THE ASSESSEE HAD CONTROL OVER THE SHIP A S WELL AS CREW. HE REFERRED TO PAGE 8 - PARA 7 (H) OF THE O RDER PASSED BY THE CIT(A) THE RELEVANT EXTRACT OF PARA 7(H) IS REPRODUCED HEREIN BELOW:- H. SINCE THE ASSESSEE HAS NOT DEDUCTED OR WITHHELD TAX ON HIRE CHARGES PAID TO FOREIGN SHIPPI NG COMPANIES, THE ASSESSEE WAS RIGHTLY TREATED AS REPRESENTATIVE ASSESSEE UNDER SECTION 163 OF THE I.T. ACT. THESE TIME CHARTER AGREEMENTS ENTERED INT O BY THE ASSESSEE COMPANY WITH VARIOUS FOREIGN COMPANIES ARE OF IN A STANDARD TIME CHARTER GOVERNMENT FORM WHICH IS APPROVED BY THE NEW YORK PRODUCTS EXCHANGE. ON PERUSAL OF THESE AGREEMENTS, IT CAN BE SEEN THAT THE NATURE OF PAYMENTS OF FOREIGN COMPANIES IS ONLY FOR HIRING OF SHIPS AND IT IS SIMILAR TO HIRING OF A CAR ALONG WI TH A CHAUFFEUR. THE CLAUSES IN THE TIME CHARTER AGREEMENTS CAN BE GONE THROUGH AS MENTIONED BY THE ASSESSING OFFICER. CLAUSE 77 OF THE TIME CHARTE R AGREEMENT SAYS THAT THE CAPTAIN OF THE SHIP WHO IS APPOINTED BY THE OWNER OF THE SHIP SHALL BE UNDER THE ORDERS AND OF THE CHARACTERS AS REGARDS EMPLOYMENT AND AGENCY. CLAUSE 145 SAYS THAT THE ITA NOS.145 TO 148/MDS/201 2 11 VESSEL HAS TO WORK NIGHT AND DAY, IF REQUIRED BY TH E CHARACTERS AND ALL THE CRANES SHOULD BE AT THE DISPOSAL OF CHARACTERS DURING LOADING AND DISCHARGING THE STEAMER. CLAUSE 18 SAYS THAT THE VESSEL SHOULD BE PLACED AT THE DISPOSAL OF CHARTER TILL DISPOSAL OF GOODS. ALL THESE CLAUSES SHOW THAT THE ASSESSEE COMPANY HAS GOT CONTROL OVER THE SHIP OWNER/CAPITAL AS FAR AS TRANSPORTATION AND DELIVERY OF ITS GOODS. HENCE, THERE IS PRINCIPAL TO AGENT RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND THE SHIP OWNER BUT NOT PRINCIPAL TO PRINCIPAL RELATIONSHIP AS CLAIMED BY THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. THE DR SUBMITTED THAT THE AUTHORITIES BELOW HAD PAS SED A WELL REASONED AND DETAILED ORDER TREATING THE ASSE SSEE AS REPRESENTATIVE ASSESSEE UNDER THE PROVISIONS OF S ECTION 163 OF THE ACT. THE DR FURTHER SUBMITTED THAT THE CIT( A) HAS RIGHTLY HELD THAT THE HIRE CHARGES PAID BY THE ASSE SSEE PARTAKE THE CHARACTER OF ROYALTY AND IS THUS LIABL E TO THE TAXED IN VIEW OF THE AMENDMENT TO EXPLANATION 2(4) OF SEC TION 9(1)(VI) OF THE ACT. THE DR RELIED ON THE ORDER O F THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF WEST ASIA MARI TIME LTD., VS. ITO IN ITA NOS. 2376 & 2377/MDS/2005 DECIDED O N 19.05.2006 WHEREIN SHIP IS HELD TO BE AN EQUIPM ENT AND ITA NOS.145 TO 148/MDS/201 2 12 HIRE CHARGES PAID FOR ITS USE ARE TREATED AS ROYAL TY UNDER THE PROVISIONS OF SECTION 9(I)(VI) OF THE ACT. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS MADE BY THE PARTIES AND HAVE ALSO GONE THROUGH THE JUDGEMENTS RELIED ON BY THE RESPECTIVE PARTIES. THE FIRST SUBMISSION OF THE ASSESSEE IS THAT HIRE CHARGES PAID TO FOREIGN SHIPP ING COMPANIES DO NOT PARTAKE CHARACTER OF ROYALTY AND T HUS ARE NOT COVERED BY THE PROVISIONS OF SECTION 9(1)(VI) O F THE ACT. A PERUSAL OF THE RECORD SHOWS THAT AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND FOREIGN SHIPPING COMPANIES IS IN THE NATURE OF TIME CHARTER AGREEMENT. THE HONBLE M ADRAS HIGH COURT IN THE CASE OF ESSAR SHIPPING LTD. HAS R EFERRED TO LAW OF CARRIAGE BY SEA BY B.C.MITRA, ACCORDING T O WHICH A TIME CHARTER IS ONE IN WHICH THE OWNERSHIP AND ALSO POSSESSION OF THE SHIP REMAIN IN THE ORIGINAL OWNER , WHOSE REMUNERATION OR HIRE IS GENERALLY CALCULATED AT A M ONTHLY RATE ON THE TONNAGE OF SHIP WHILE A VOYAGE CHARTER IS A CONTRACT TO CARRY SPECIFIED GOODS ON A DEFINED VOYAGE ON A REMUNERATION OR FREIGHT USUALLY CALCULATED ACCORDI NG TO THE ITA NOS.145 TO 148/MDS/201 2 13 QUANTITY OF CARGO CARRIED. THE CONSISTENT VIEW OF THE COURTS IN INDIA IS THAT UNDER THE TIME CHARTER THE OWNERS PROVIDE SERVICES FOR THE CHARTERER WITH THEIR SHIP, THEIR O FFICERS AND A CREW FOR AN AGREED PERIOD OF TIME. AS PER THE REFER ENCE CONTAINED IN VENKATARAMAIYAS LAW LEXICON WITH LEG AL MAXIMS VARIOUS TERMS ARE DEFINED. ACCORDING TO WHI CH THE MODERN FORM OF TIME CHARTERPARTY PARTY IS, IN ESSE NCE, ONE UNDER WHICH THE SHIPOWNER AGREES WITH THE TIME-CHAR TERER THAT, DURING A CERTAIN NAMED PERIOD, THE SHIPOWNER WILL RENDER SERVICE AS A CARRIER BY HIS SERVANTS AND CREW TO CA RRY THE GOODS WHICH ARE PUT ON BOARD HIS SHIP BY THE TIME-C HARTERER. CERTAIN PHRASES SURVIVING IN THE PRINTED FORM NOW U SED ARE ONLY PERTINENT TO THE OLDER FORM OF DEMISE CHARTER- PARTY. THOSE PHRASES ARE, AS IN THE PRESENT CASE, THE OWNERS AGR EE TO LET THE STEAMER, AND THE CHARTERERS AGREED TO HIRE THE STEAMER. THERE IS NO LETTING OR HIRING OF THE STEAMER, OR ANYTHING OF THE SORT, HERE. THEN, AT THE END OF THE PERIOD, IT WAS SOLEMNLY PROVIDED THAT THE VESSEL SHOULD BE REDELIVERED BY THE TIME CHARTERERS TO THE SHIPOWNERS. REDELIVERY IS ONLY A PERTINENT EXPRESSION IF THERE HAS BEEN A DELIVERY OR HANDING OVER BY THE ITA NOS.145 TO 148/MDS/201 2 14 SHIPOWNERS, TO THE CHARTERERS. THERE NEVER HAS BEEN ANYTHING OF THAT SORT HERE. THE SHIP HAS AT ALL TIMES BEEN I N THE POSSESSION OF THE SHIPOWNERS AND THEY SIMPLY UNDERT OOK TO DO SERVICES WITH THEIR CREW IN CARRYING THE GOODS O F THE CHARACTERS. 12. THUS, IT CAN BE SAID THAT IN CASE OF TIME CHART ER AGREEMENT WHICH IS NOT CHARTERED BY DEVICE NEITHER LEGAL OWNERSHIP NOR BENEFICIAL OWNERSHIP OR EQUITABLE OWN ERSHIP IS GIVEN IN THE HANDS OF THE CHARTERER. THE CHARTERER HAS ONLY CONTRACTUAL RIGHT TO HIS SERVICES OF SHIP. A CHARTE RPARTY CREATES NO RIGHT OF PROPERTY IN A SHIP NOR HAD ANY INTEREST IN THE SHIP EXCEPT THAT IT IS A VEHICLE WITH WHICH THE SHIP OWN ER IS TO DO THE AGREED WORK. 13. FROM THE PERUSAL OF DOCUMENTS ON RECORD, WE HA VE OBSERVED THAT NOTICE UNDER SECTION 148 OF THE ACT W AS ISSUED TO THE ASSESSEE BEING THE REPRESENTATIVE ASSESSEE OF THE FOREIGN SHIPPING COMPANIES. THE ASSESSEE/REPRESENT ATIVE ASSESSEE HAD FILED THE RETURNS OF INCOME ON BEHAL F OF THE FOREIGN SHIPPING COMPANIES UNDER PROTEST DECLARING NIL INCOME. THE SPECIAL PROVISIONS WITH REGARD TO TAXAT ION OF ITA NOS.145 TO 148/MDS/201 2 15 SHIPPING COMPANIES IS UNDER SECTION 172 OF THE ACT. ACCORDING TO WHICH THE FOLLOWING CONDITIONS HAVE TO BE SATISFIED:- I) THE ASSESSEE IS A NON-RESIDENT; II) THE ASSESSEE OWNS A SHIP OR SHIP CHARTERED BY A NON-RESIDENT; III) SHIP CARRIES PASSENGERS , LIVESTOCK, MAIL OR GOODS SHIPPED AT A PORT IN INDIA; & IV) NON-RESIDENT MAY (OR MAY NOT) HAVE AN AGENT/ REPRESENTATIVE IN INDIA. IF ALL THE ABOVE CONDITIONS ARE SATISFIED 7.5% OF T HE AMOUNT PAID OR PAYABLE ON ACCOUNT OF SUCH CARRIAGE TO THE NON- RESIDENT SHALL BE DEEMED TO BE THE INCOME OF THE NON- RESIDENT. THE SAID INCOME SHALL BE TAXABLE IN THE S AME YEAR IN WHICH SUCH PAYMENT IS MADE. IN THE PRESENT CASE, THE ASSESSEE HAS PAID HIRE CHARGES FOR THE SERVICES REN DERED BY THE FOREIGN SHIPPING COMPANIES. THE SAID HIRE CHARG ES PAID BY THE ASSESSEE TO FOREIGN SHIPPING COMPANIES IS IN COME IN THE HANDS OF FOREIGN SHIPPING COMPANIES FOR THE SER VICES RENDERED IN INDIA. THE ASSESSEE HAS NOT PLACED ON R ECORD ANY ITA NOS.145 TO 148/MDS/201 2 16 DOCUMENT TO SHOW THAT FOREIGN SHIPPING COMPANIES WE RE EXEMPTED BY DTAA FROM PAYMENT OF TAX. AS PER THE PROVISIONS OF SECTION 195 OF THE INCOME TAX ACT, IT WAS THE DUTY OF THE ASSESSEE TO DEDUCT TAX AT SOURCE BEFORE MAKING PAYMENT TO THE FOREIGN SHIPPING COMPANIES/(NON-RESI DENT). NON-COMPLIANCE OF THE PROVISIONS OF SECTION 195 OF THE ACT RESULTS IN THE INITIATION OF PROCEEDINGS UNDER SECT ION 201 OF THE ACT. THUS, THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE. 14. WE FIND THAT IN THE INSTANT CASE, THE ASSESSEE WAS USING THE SERVICES OF FOREIGN SHIPPING COMPANIES FO R TRANSPORTATION OF COAL FROM ONE PORT TO ANOTHER ON HIRE BASIS. THE ASSESSEE WAS PAYING HIRE CHARGES FOR PROVIDING SUCH SERVICES BY THE FOREIGN SHIPPING COMPANIES. IN OUR CONSIDERED OPINION, THE PAYMENT MADE BY THE ASSESSEE TO THE F OREIGN SHIPPING COMPANY DO NOT PARTAKE THE CHARACTER OF R OYALTY. THE PAYMENT WAS MADE FOR THE USE OF SHIP BY ITS OWNER IN RENDERING SERVICE TO THE ASSESSEE. THEREFORE, THE PAYMENT MADE IN THE PRESENT CASE WOULD NOT CONSTITUTE ROYA LTY FOR THE USE OF INDUSTRIAL OR COMMERCIAL OR SCIENTIFIC EQUIP MENTS. THUS, THE PROVISIONS OF SECTION 9(1)(VI) OF THE ACT ARE N OT ATTRACTED. ITA NOS.145 TO 148/MDS/201 2 17 15. ALTHOUGH THE ASSESSEE CANNOT BE TREATED AS REPRESENTATIVE ASSESSEE, UNDER THE PROVISIONS OF SECTION 193 OF THE ACT, HOWEVER, THE ASSESSEE IS LIABLE TO DEDU CT TAX ON THE PAYMENTS MADE TO FOREIGN SHIPPING COMPANIES UND ER THE PROVISIONS OF SECTION 195 OF THE ACT. IN THE INSTAN T CASE, THE ASSESSEE IS LIABLE TO DEDUCT TAX ON THE HIRE CHARGE S PAID TO FOREIGN SHIPPING COMPANIES. THE COUNSEL FOR THE AS SESSEE SUBMITTED THAT PROCEEDINGS HAS BEEN INITIATED AGAIN ST THE ASSESSEE UNDER THE PROVISIONS OF SECTION 201 OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE. AGAINST WHICH THE A SSESSEE HAS APPROACHED THE HONBLE MADRAS HIGH COURT. THE H ONBLE MADRAS HIGH COURT HAS GRANTED STAY IN THE MATTER RE LEVANT TO THE ASSESSMENT YEAR 2002-03 TO 2004-05. THE ASSESSEE IS ASSAILING THE ORDER OF THE CIT(A) O N THE GROUND THAT THE ASSESSEE CANNOT BE CONSIDERED AS A SSESSEE REPRESENTATIVE UNDER THE PROVISIONS OF SECTION 16 3. AT THE SAME TIME, THE ASSESSEE IS ALSO NOT COMPLYING WITH THE PROVISIONS OF SECTION 195 AGAINST WHICH THE DEPART MENT HAS ALREADY INITIATED PROCEEDINGS UNDER THE PROVISIONS OF SECTION 201 OF THE ACT. THE ASSESSEE CANNOT BE ALLOWED TO TAKE ITA NOS.145 TO 148/MDS/201 2 18 BENEFIT OF BOTH THE PROVISIONS OF THE ACT TO GET AW AY FROM THE TAX LIABILITY. THE ASSESSEE CANNOT ESCAPE FROM LIA BILITY OF TAXATION BY CHALLENGING THE PROVISIONS OF ACT IN DI FFERENT FORUMS. WE REMIT THE MATTER BACK TO THE ASSESSING O FFICER TO INITIATE PROCEEDINGS AGAINST THE ASSESSEE UNDER ONE OF THE PROVISIONS OF THE ACT IN THE LIGHT OF THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PREMIER T YRES LTD. REPORTED AS 134 ITR 17 AFTER DISPOSAL OF THE MATTE R SUBJUDICE BEFORE THE HONBLE MADRAS HIGH COURT. 16. AS REGARDS SUBMISSIONS OF THE COUNSEL FOR THE A SSESSEE WITH RESPECT TO NOTICE UNDER SECTION 148 BEING BARR ED BY LIMITATION IS CONCERNED, NOTICE WAS DESPATCHED TO T HE ASSESSEE ON 16.03.2005 WHICH WAS ALLEGED TO HAVE BE EN RECEIVED BY THE ASSESSEE AFTER THE EXPIRY OF THE PE RIOD OF LIMITATION OF THE TWO YEARS. THE D.R. HAS PLACED RE LIANCE ON THE JUDGEMENTS OF R.K.UPADHYAYA VS. SHANABAHI P.PAT EL, REPORTED AS 163 ITR 163(SC) AND VIT VS. SHEO KUMARI DEBI REPORTED AS 157 ITR 13 (PAT) AND M/S. JAI HANUMAN T RADING CO.P.LTD., VS. CIT 110 ITR 36 (P& H) WHEREIN IT HA S BEEN ITA NOS.145 TO 148/MDS/201 2 19 HELD THAT NOTICE ISSUED WITHIN THE TIME LIMIT BUT S ERVED AFTER EXPIRY OF THE TIME LIMITATION CANNOT BE HELD TO BE INVALID. IN VIEW OF THE AFORESAID JUDGEMENTS, THIS GROUND OF TH E ASSESSEE IS DISMISSED. 17. THE ASSESSEE HAS ALSO ASSAILED THE ORDER OF THE CIT(A) ON THE GROUND OF REOPENING OF ASSESSMENT UNDER SECT ION 147 OF THE ACT. THE ASSESSING OFFICER HAD GIVEN REASONS FOR REOPENING THE ASSESSMENT WHICH ARE REPRODUCED IN PA RA 3 ABOVE. IT IS A WELL SETTLED LAW THAT FOR REOPENING , THE ASSESSING OFFICER MUST HAVE REASONS TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. IN OUR CONSIDERED OPINION, IN THE INSTANT CASE, THE ASSESSING OFFICER HAD VALID REASONS FOR R EOPENING THE ASSESSMENT, AS THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. PRIMA-FACIE IT IS NOT THE CHANG E OF OPINION WHICH HAS RESULTED IN THE REOPENING OF ASS ESSMENT BUT THE BELIEF THAT THE INCOME HAS ESCAPED ASSESSME NT WARRANTING INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT. WE UPHOLD THE FINDING OF CIT(A) ON THIS GROUND AS WELL. ITA NOS.145 TO 148/MDS/201 2 20 18. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY , TH E 29 TH DAY OF JUNE, 2012 AT CHENNAI. SD/- SD/- ( ABRAHAM P.GEORGE ) ( VIKAS AWASTHY ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 29 TH JUNE, 2012. SOMU COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F .