DCIT Corporate Circle 2(1) , CHENNAI V. East Coast Terminal Operations & Port Services Limited , CHENNAI

ITA 1637/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6205 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 23-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN MARY BA
• Assessee Lawyers: G BASKAR
• Section: 14A; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI , # , ' ( BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ./ ITA NO.1637/MDS/2017 '# # /ASSESSMENT YEAR: 2013-14 THE DY. COMMISSIONER OF INCOME- TAX, CORPORATE CIRCLE 2(1), CHENNAI-600 034. VS. M/S.EAST COAST TERMINAL OPERATIONS & PORT SERVICES- LTD., NO.4, BUHARI TOWERS, MOORES ROAD, EGMORE, CHENNAI-600 006. [PAN: AAACE 4812 D ] ( * /APPELLANT) ( + ,* /RESPONDENT) ASSESSEE BY : MR.G. BASKAR, ADV. DEPARTMENT BY : MS.ANN MARY BABY, JCIT . /DATE OF HEARING : 12.09.2017 . /DATE OF PRONOUNCEMENT : 13.09.2017 / O R D E R PER BENCH : ITA NO.1637/MDS/2017 IS AN APPEAL FILED BY THE REV ENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-6 , CHENNAI, IN ITA NO.60/CIT(A)-6/2016-17 DATED 18.04.2017 FOR THE AY 2013-14. ITA NO.1637/MDS/2017 :- 2 -: 2. MS.ANN MARY BABY, JCIT, REPRESENTED ON BEHALF OF THE REVENUE AND MR.G. BASKAR, ADV., REPRESENTED ON BEHALF OF THE AS SESSEE. 3. GROUND NO.1 IS GENERAL IN NATURE. 4. IN REGARD TO GROUND NOS.2.1 TO 2.5 WERE AGAINST THE ACTION OF THE LD.CIT(A) IN HOLDING THAT THE SHIP M.V.GEM OF ENNOR E WAS QUALIFYING SHIP ACCORDING TO SEC.115VD OF THE ACT AND WAS ENTITLED TO THE BENEFIT OF TONNAGE TAX SCHEME. IT WAS SUBMITTED BY THE LD.AR THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE IMMEDIATELY PREC EDING AY IN ITA NO.2900/MDS/2016 DATED 30.03.2017 FOR THE AY 2012-1 3 WHEREIN PARA NO.4 IT HAS BEEN HELD AS FOLLOWS: 4. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE AL SO PERUSED THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT V. WEST ASIA MARITIME LTD. (SUPRA) FOR THE ASSESSMENT YEAR 2008-09 (SUPRA), WHEREIN, IT WAS HELD AS UNDER: 2. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE I S THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT ASSESSEE IS ENTI TLED FOR BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER CHAPTER XII C OF THE ACT. 3. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSU E HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OW N CASE FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO.1195/MDS/2010 DATED 1.7.2011 WHERE IN THIRD MEMBER AGREED WITH THE VIEW OF THE ACCOUNTANT MEMBER AND HELD THA T SHIP OPERATED BY THE ASSESSEE M.V.GEM OF ENNORE TRANSPORTING THERMAL COA L FROM ONE LOCATION TO ANOTHER LOCATION WITHIN THE COUNTRY IS A QUALIFYING SHIP UNDER SECTION 115VD OF THE INCOME TAX ACT, 1961 AND THE ASSESSEE IS ENTITLED F OR THE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER SECTION XII C OF THE ACT. 4. WE HAVE PERUSED THE ABOVE ORDER OF THE THIRD ME MBER AND FIND THAT THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE HOLDING THAT SHIP OPERATED BY THE ASSESSEE M.V.GEM OF ENNORE TRANSPORTING THERMAL COA L FROM ONE LOCATION TO ANOTHER LOCATION WITHIN THE COUNTRY IS A QUALIFYING SHIP UNDER SECTION 115VD OF THE INCOME TAX ACT, 1961 AND THE ASSESSEE IS ENTITLED F OR THE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER SECTION XII C OF THE ACT. RES PECTFULLY FOLLOWING THE ORDER OF THE THIRD MEMBER, WE REJECT THE GROUNDS RAISED BY T HE REVENUE ON THIS ISSUE. ITA NO.1637/MDS/2017 :- 3 -: 5. THE NEXT GROUND OF APPEAL RAISED BY THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DISALLOWA NCE UNDER SECTION 14A OF THE ACT. THE ASSESSING OFFICER WHILE COMPLETING THE ASSE SSMENT MADE DISALLOWANCE UNDER SECTION 14A OF THE ACT. ON APPEAL, THE COMMISS IONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE MADE UNDER SECTIO N 14A OF THE ACT HOLDING THAT ONCE ASSESSEES INCOME IS COMPUTED AS PER TONNAGE T AX SCHEME THEN FURTHER DISALLOWANCE UNDER SECTION 14A CANNOT BE MADE FOLLO WING THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF VARUN S HIPPING CO. LTD. VS. ADDL.CIT (134 ITD 339). THE REVENUE IS IN APPEAL BEFORE US. 6. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE COUNSEL FOR THE ASSESSEE RELIES ON THE ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE DECISION OF THE MUMBAI BENCH O F THIS TRIBUNAL IN THE CASE OF VARUN SHIPPING CO.LTD. (SUPRA). 7. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES AND THE DECISION OF THIS TRIBUNAL RELIED ON. THE MUMBAI BENCH OF THIS T RIBUNAL CONSIDERED THIS ISSUE IN THE IN THE CASE OF VARUN SHIPPING CO. LTD. (SUPRA) AND DELETED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT OBSERVING AS UNDER:- 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT TH E ASSESSEE IS MAINLY ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS AND I TS INCOME FROM THE SAID BUSINESS WAS DECLARED AND ASSESSED AS PER THE SPECI AL PROVISIONS CONTAINED IN CHAPTER XIIG WHICH LAY DOWN TONNAGE TAX SCHEME. AS PER THE PROVISIONS OF SECTION 115VA CONTAINED IN CHAPTER XIIG, THE INC OME FROM THE BUSINESS OF OPERATING QUALIFYING SHIPS CAN BE COMPUTED AT TH E OPTION OF THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XIIG A ND ONCE THIS OPTION IS EXERCISED BY THE ASSESSEE, THE INCOME SO COMPUTED S HALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE T O TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION NOTWI THSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 28 TO 43C. IT, TH EREFORE, FOLLOWS THAT WHEN THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPE RATING SHIPS IS COMPUTED AS PER THE SPECIAL PROVISIONS CONTAINED IN CHAPTER XIIG, ONLY THE EXPENSES INCURRED BY THE ASSESSEE FOR EARNING INCOM E OF THE SAID BUSINESS ARE DEEMED TO BE ALLOWED AND NOTHING ELSE. IT, THER EFORE, CANNOT BE SAID THAT WHEN THE INCOME OF THE ASSESSEE FROM THE BUSIN ESS OF OPERATING SHIPS IS COMPUTED AS PER THE SPECIAL PROVISIONS OF CHAPT ER XIIG, ANY EXPENDITURE OTHER THAN THE EXPENDITURE INCURRED FOR THE PURPOSE OF THE SAID BUSINESS HAS BEEN ALLOWED AND CONSEQUENTLY NO ADDITION TO IN COME SO COMPUTED CAN BE MADE BY WAY OF DISALLOWANCE U/S 14A ON ACCOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF EXEMPT DIVIDEND INCOME. WE, THEREFORE, FIND MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE INCOME OF THE ASSESSEE FROM THE B USINESS OF OPERATING SHIPS HAVING BEEN COMPUTED IN ACCORDANCE WITH THE P ROVISIONS OF CHAPTER XIIG, ONLY THE EXPENSES INCURRED FOR THE SAID BUSIN ESS ARE DEEMED TO HAVE BEEN ALLOWED AND NO ADDITION TO SUCH INCOME CAN BE MADE BY WAY OF DISALLOWANCE U/S 14A ON ACCOUNT OF ANY EXPENDITURE I NCURRED IN RELATION TO EARNING OF EXEMPT DIVIDEND INCOME. IN OUR OPINION, IF AT ALL THE ASSESSEE HAS CLAIMED ANY SUCH EXPENDITURE IN COMPUTATION OF PROFIT OF BUSINESS OF SHIPPING, THE SAME ARE TO BE TAKEN AS DISALLOWED WH EN THE INCOME OF THE SAID BUSINESS IS FINALLY COMPUTED IN ACCORDANCE WIT H THE PROVISIONS OF CHAPTER XIIG AND NO SEPARATE DISALLOWANCE ON ACCOUN T OF SUCH EXPENDITURE U/S 14A CAN BE MADE. WE, THEREFORE, DELETE THE DISAL LOWANCE MADE BY THE AO U/S 14A AND CONFIRMED BY THE LEARNED CIT(APPEALS) A ND ALLOW GROUND NO.1 OF THE ASSESSEES APPEAL. 8. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE U PHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE A ND REJECT THE GROUNDS OF APPEAL RAISED BY THE REVENUE. ITA NO.1637/MDS/2017 :- 4 -: 5. AS CONTENDED BY THE LD. DR THAT AGAINST THE ORDE R OF THE TRIBUNAL, THE DEPARTMENT HAS FILED AN APPEAL BEFORE THE HONBLE MADRAS, CANN OT BE A GROUND TO TAKE A DIFFERENT VIEW. THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDINATE BENCHES OF THE TRIBUNAL, WE SUSTAIN THE ORDER OF THE LD. CIT(A), HOLDING THAT T HE ASSESSEE IS ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER CHAPTER XII C OF THE ACT. 5. THE LD.DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO -ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE IMMEDIA TELY PRECEDING AYS, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE REFERRED TO SUP RA, THE FINDINGS OF THE LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. 7. IN REGARD TO GROUND NO.3, IT WAS A SUBMISSION TH AT THE ISSUE WAS AGAINST THE ACTION OF THE LD.CIT(A) IN DELETING THE DISALLOWANCE MADE U/S.14A OF THE ACT. IT WAS SUBMITTED BY THE LD.AR THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE REFERRED TO SUPRA FOR TH E IMMEDIATELY PRECEDING ASSESSMENT YEARS WHEREIN PARA NO.6 WHICH HAS BEEN HELD AS FOLLOWS: 6. FURTHER, WITH REGARD TO ISSUE OF DISALLOWANCE U NDER SECTION 14A READ WITH RULE 8D, THE LD. CIT(A) FOLLOWED THE DECISION OF THE MUMBAI B ENCHES OF THE TRIBUNAL IN THE CASE OF VARUN SHIPPING CORPORATION LTD. V. ACIT (SUPRA) AND DELETED THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT AS THE ASSESSEE IS ELIGIBLE FOR TONNAGE TAX. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND NO REASON TO INTERFERE W ITH THE ORDERS OF THE LD. CIT(A) AND BOTH THE GROUNDS RAISED IN THE APPEAL OF THE REVENUE ARE DISMISSED. 8. THE LD.DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO. ITA NO.1637/MDS/2017 :- 5 -: 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO -ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE REFERRED TO SUP RA, THE FINDINGS OF THE LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 13 , 2017, AT CHENNAI. SD/- SD/- ( ) ( SANJAY ARORA ) /ACCOUNTANT MEMBER ( # ) (GEORGE MATHAN) ' /JUDICIAL MEMBER /CHENNAI, 2 /DATED: SEPTEMBER 13 , 2017. TLN . +'34 54 /COPY TO: 1. * /APPELLANT 4. 6 /CIT 2. +,* /RESPONDENT 5. 4 +'' /DR 3. 6 ( ) /CIT(A) 6. # /GF