ITO 5(1)(1), MUMBAI V. ARYA SHIP CHARTERS P.LTD, MUMBAI

ITA 1677/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3650 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 09-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N. PADMANABAN
• Keywords: Additional evidence; Procedural lapse; Set aside
• Section: 201; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE S HRI G. MANJUNATHA (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 1677/MUM/2017 ASSESSMENT Y EAR: 2016 - 17 THE INCOME TAX OFFICER 5(1)(1), 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 VS. M/S ARYA SHIP CHARTERS PVT. LTD., OFFICE NO. 123A, MITTAL COURT, NARIMAN POINT, MUMBAI - 400021 PAN: AAMCA9436H (APPELLANT) (RESPONDENT) REVENUE BY : SHRI N. PADMANABAN ( D R ) ASSESSEE BY : SHRI RAKESH JOSHI (A R ) DATE OF HEARING: 22 /07 /201 9 DATE OF PRONOUNCEMENT: 30 / 09 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 28.11.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (A PPEALS) - 10 (FOR SHORT THE CIT(A) , MUMBAI, FOR THE ASSESSMENT YEAR 2016 - 17 , WHEREBY THE LD. CIT(A) HAS ALLOWED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED U/S 115VP(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF SHIPPING, SHIP OWNING, SHIP CHARTERING, CREW MANAGEMENT, TRADING OF VESSELS, SHIP BREAKING ETC., PURCHASED TWO SHIPS AND FILED TWO APPLICATIONS BEFORE THE ACIT - RANGE - 5 (1) MUMBAI IN FORM NO. 65 FOR AV AILING TONNAGE TAX SCHEME U/S 115VP OF THE ACT IN RESPECT OF TWO SHIPS NAMELY, DISTYA AKULA AND NU - SHI NALINI. THE ACIT REJECTED THE REQUEST ON THE GROUND THAT THE FORM WAS SUBMITTED BEYOND DUE DATE. IN THE FIRST APPEAL THE LD. CIT(A) CONDONED THE 2 ITA NO. 1677 / MUM/2017 ASSESSMENT YEAR: 2016 - 17 DELAY A ND ALLOWED THE APPEAL OF THE ASSESSEE. THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE SAID FINDINGS OF THE LD. CIT(A). 3 . THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD . CIT (A), BY RAISING THE FOLLOWING EFFECTIVE GROUNDS : - 1. ON TH E FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) FAILED TO RECORD THE CIRCUMSTANCES UNDER WHICH THE ASSESSEE WAS PREVENTED TO FURNISH THE OPINION OF CHARTERED ACCOUNTANT DATED 30.09.2015 BEFORE THE ADDL. CIT. 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED BY NOT RECORDING THE REASONS FOR ADMISSION OF FRESH EVIDENCE/DOCUMENTS SUBMITTED DURING THE APPELLATE PROCEEDINGS FOR THE FIRST TIME. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ER RED IN ACCEPTING THE ADDITIONAL EVIDENCE WITHOUT AFFORDING OPPORTUNITY TO THE DEPARTMENT UNDER RULE 46A OF THE INCOME - TAX ACT. 4. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN RELYING ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF BLUE OCEAN SEA TRANSPORT LTD., AS THERE WAS DELAY FOR FOUR DAYS ONLY AND IN THE ASSESSEE CASE THE DELAY WAS MORE THAN THREE MONTHS. 4. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT AS PER PROVISO TO SUB - SECTION 2 OF SECTION115VP, A COMPANY INCORPORATED AFTER 30 TH DAY OF SEPTEMBER, 2004 BUT BEFORE THE FIRST DAY OF JANUARY 2005 MAY MAKE AN APPLICATION WITHIN THREE MONTHS FROM THE DATE OF ITS INCORPORATION OR THE DATE ON WHICH IT BECOMES A QUALIFYING COMPANY. AS PE R THE DOCUMENTS, PLACED ON RECORD THE APPLICANT BECAME A QUALIFYING COMPANY ON 23 RD APRIL, 2015 I.E. ON THE DATE OF FILING OF APPLICATION FOR REGISTRATION OF FIRST SHIP UNDER MERCHANT SHIPPING ACT, 1958 AND THE APPLICATION FOR EXERCISING OPTION FOR TONNAGE TAX SCHEME WAS REQUIRED TO BE FILED ON OR BEFORE 31 ST JULY 2015. SINCE , THE APPELLANT FAILED TO COMPLY WITH THE EXPRESSED PROVISION OF LAW, THE LD. ACIT HAS RIGHTLY REJECTED THE APPLICATIONS FILED BY THE APPLICANT FOR TONNAGE TAX SCHEME. THE LD. DR FURT HER SUBMITTED THAT SINCE THE LD. CIT (A) HAS ALLOWED THE 3 ITA NO. 1677 / MUM/2017 ASSESSMENT YEAR: 2016 - 17 APPEAL OF THE ASSESSEE IGNORING THE AFORESAID MATERIAL FACTS, THE SAME IS LIABLE TO BE SET ASIDE. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE ASSESSEE PURCHASED THE SHI P NU - SHI NALINI ON 20.04 2015 WITH TONNAGE CAPACITY OF 5,043 TONS DURING THE FINANCIAL YEAR 2015 - 16 . THE APPLICATION FOR REGISTRATION WAS FILED ON 23.04.2015 AND GOT PROVISIONAL CERTIFICATE ON 04.05 2015 AND RECEIVED THE FINAL REGISTRATION CERTIFICATE ON 2 7.10.2015. THE SECOND SHIP DISTY AKULA WAS PURCHASED ON 19.08.2015 WITH NET TONNAGE CAPACITY OF 45,245 / - TONS AND FILED APPLICATION ON 28.08.2015 AND GOT PROVISIONAL CERTIFICATE OF REGISTRATION ON 10.09.2015 AND DID NO T RECEIVE THE FINAL CERTIFICATE. THE L D. COUNSEL FURTHER SUBMITTED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. CIT (A) DIRECTED THE ASSESSEE TO REMOVE SOME DEFECTS IN THE APPLICATIONS. ACCORDINGLY, THE DEFECTS WERE REMOVED . THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE ASSESSEE BECAME OWNER OF A QUALIFYING SHIP ON 27.10.2015 AFTER RECEIVING REGISTRATION CERTIFICATE, THERE IS NO DELAY IN FILING THE APPLICATIONS IN QUESTION. THEREFORE, THE LD. CIT (A) HAS RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL SUBM ISSIONS OF THE PARTIES AND ALSO GONE THROUGH THE ENTIRE MATERIAL ON RECORD IN THE LIGHT OF THE RIVAL CONTENTIONS OF THE PARTIES. THE LD. CIT (A) HAS ALLOWED THE BENEFIT OF TONNAGE TAX UNDER TONNAGE TAX SCHEME AFTER HEARING THE APPLICANT IN THE LIGHT OF THE EVIDENCE ON RECORD AND THE PROVISIONS OF LAW. THE OPERATIVE PART OF THE ORDER PASSED BY THE LD.CIT (A) READS AS UNDER: - 5.1.2. AFTER CAREFUL EXAMINATION OF THE ABOVE FACTS AND SUBMISSIONS MADE BY THE LD. AR, I AM OF THE CONSIDERED OPINION THAT THE BENEF IT OF TONNAGE TAX UNDER TONNAGE TAX SCHEME CANNOT BE DENIED FOR THE FOLLOWING REASONS - FIRSTLY, THE TONNAGE TAX SCHEME IS A BENEFICIAL PROVISION WHICH REQUIRES TO BE INTERPRETED LIBERALLY AND THE PROCEDURAL LAPSES LIKE LATE FILING OF APPLICATION IN FORM NO . 65 BY A FEW DAYS SHOULD NOT BE STRICTLY INTERPRETED AND BENEFIT DENIED. SECONDLY, AS DECIDED BY THE GUJARAT HIGH COURT IN THE CASE OF BLUE OCEAN SEA TRANSPORT LTD. IN ITA N. 714, 715, 716 OF 2012 4 ITA NO. 1677 / MUM/2017 ASSESSMENT YEAR: 2016 - 17 DATED 1/3/2013 THE PROVISION 115VP (2) OF THE ACT WITH REG ARD TO TIME STIPULATION FOR EXERCISING THE OPTION OF TONNAGE TAX SCHEME SHOULD BE TAKEN AS DIRECTORY AND NOT MANDATORY. THIRDLY, AS PER SECTION 40 OF MERCHANT SHIPPING ACT 1958 THERE IS A REQUIREMENT OF THE ISSUE OF PROVISIONAL CERTIFICATE IN THE CASE OF S HIPS BECOMING INDIAN SHIPS ABROAD WHICH IS RELEVANT IN APPELLANTS CASE. IN THE CASE OF APPELLANT SINCE THE VESSELS WERE ACQUIRED OUTSIDE INDIA FURTHER REQUIREMENT OF OBTAINING PROVISIONAL CERTIFICATE AND INTERNATIONAL TONNAGE CERTIFICATE (PERMANENT) WAS A DDITIONAL AND MANDATORY AND THE APPELLANT WAS INITIALLY ADVISED TO FILE APPLICATION UPON RECEIPT OF FINAL REGISTRATION AND NOT ON THE BASIS OF PROVISIONAL CERTIFICATE OF REGISTRATION. HOWEVER, THE APPELLANT WAS SUBSEQUENTLY ADVISED (AS PER OPINION OBTAINED FROM A QUALIFIED CHARTERED ACCOUNT DATED 30/09/2015) TO FILE APPLICATION UNDER TONNAGE TAX SCHEME IMMEDIATELY TO AVOID ANY CONTROVERSY REGARDING THE DATE OF OWNING QUALIFYING SHIP BASED ON DATE OF PROVISIONAL CERTIFICATE OR FINAL CERTIFICATE AND THUS IMME DIATELY IT MADE AN APPLICATION ON 6/10/2015. IM CONVINCED THAT THIS POSITION HAS LED TO CONFUSION IN FILING FORM NO. 65 BEFORE THE ADDITIONAL CIT. THE APPELLANT DESERVES THE CONDONATION OF DELAY. FOURTHLY, AS CONTESTED BY THE LD. AR THAT THE ORDER PASSED BY THE ADDITIONAL CIT BY REJECTING THE REQUEST OF THE APPELLANT WAS BEYOND STIPULATED TIME OF ONE MONTH IS ALSO TO BE TAKEN SERIOUSLY. IT IS TRUE THAT THE APPELLANT HAS FILED ITS APPLICATION IN PRESCRIBED FORM IN FORM NO. 65 ON 6/10/2015. THE ADDITIONAL C IT SHOULD HAVE PASSED HIS ORDERS EITHER BY ACCEPTING OR REJECTING THE REQUEST OF THE APPELLANT ON OR BEFORE 30/11/2015 WHEREAS HE HAS PASSED HIS ORDERS BY REJECTING THE REQUEST OF THE APPELLANT ON 2/2/2016 WHICH IS CLEARLY BEYOND ONE MONTH IN VIOLATION OF THE PROVISIONS OF S. 115VP (4) OF THE ACT. 6 IN VIEW OF THE ABOVE DISCUSSION I CONSIDER IT APPROPRIATE TO CONDONE THE DELAY AND ALLOW THE APPELLANT TO AVAIL BENEFIT UNDER TONNAGE TAX SCHEME WITH REGARD TO APPLICATION FILED IN FORM NO. 65 ON 6.10.2015. I DIRECT THE ADDITIONAL CIT, RANGE - 5(1), MUMBAI ACCORDINGLY. THE GROUND IS ALLOWED . . 7. THE LD. CIT (A) HAS ALLOWED THE APPEAL OF THE APPELLANT MAINLY ON THE GROUND THAT THE TONNAGE TAX SCHEME IS A BENEFICIAL PROVISION WHICH REQUIRES TO 5 ITA NO. 1677 / MUM/2017 ASSESSMENT YEAR: 2016 - 17 BE INTERPRETED LI BERALLY . SECONDLY, THE LD.CIT (A) HAS RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF BLUE OCEAN SEA TRANSPORT LTD. IN ITA NO. 714, 715, 716 OF 2012 DATED 01.03.2013 IN WHICH THE HONBLE HIGH COURT HAS HELD THAT THE PROVISION U/S 1 15VP ( 2) OF THE ACT FOR EXERCISING THE OPTION OF TONNAGE TAX SCHEME SHOULD BE TAKEN AS DIRECTORY AND NOT MANDATORY . THE LD. CIT (A) HAS FURTHER DISCUSSED THE CIRCUMSTANCES UNDER WHICH THE APPLICANT COULD NOT MADE THE APPLICATION WITHIN THE STIPULATED PERIO D, THE LD. COUNSEL HAS FURTHER POINTED OUT THAT THE ACIT HAS PASSED THE ORDER REJECTING THE REQUE ST OF THE APPLICANT BEYOND ONE MONTH IN VIOLATION OF THE PROVISIONS OF SECTION 115VP (4) OF THE ACT. HENCE, IN OUR CONSIDERED OPINION, THE ORDER PASSED BY THE LD. CIT (A) IS WELL REASONED AND IN ACCORDANCE WITH THE PRINCIPLES OF LAW. SO FAR AS THE CONTENTION OF THE REVENUE REGARDING ADMISSION OF ADDITIONAL EVIDENCE IS CONCERNED, WE DO NOT FIND ANY MERIT IN THE SAID GROUND AS THE LD.CIT (A) HAS NOT BASED HIS FIND INGS ON ANY NEW EVIDENCE PRODUCED BY THE APPLICANT DURING THE APPELLATE PROCEEDINGS. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD.CIT (A ). WE ACCORDINGLY UPHOLD THE ORDER PASSED BY THE LD. CIT (A) AND DISMISS THE APPEAL FIL ED BY THE REVENUE. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2016 - 20 17 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2019 . SD/ - SD/ - ( G. MANJUNATHA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 30 / 0 9 / 201 9 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 6 ITA NO. 1677 / MUM/2017 ASSESSMENT YEAR: 2016 - 17 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GU ARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI