ADIT (IT)(1)1, MUMBAI V. DAMPSKIBSSELSKABET AF 1912 AKTIESELSKABET, MUMBAI

ITA 1812/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100983 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Department
• Bench Allotted: L
• Next Hearing Date: 11-06-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 15-03-2012
• Court: TRIBUNAL
• Department Lawyers: VIVEK A PERUMPURNA
• Keywords: Reopening of assessment; Double taxation relief; Reason to believe; Reassessment proceedings
• Section: 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL L , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO . 1812 / MUM/20 1 2 ( / ASSESSMENT YEAR : 200 3 - 20 0 4 ) ADIT(IT)(1), MUMBAI - 400038 VS. M/S DAMPSKIBSSELSKABET AF 1912 AKTIESELSKABET, C/O MAERSK INDIA PVT. LTD.EMPIRE INDUSTRIES COMPLEX, 414, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI - 400013 ./ ./ PAN/GIR NO. : A A BCD 9829 J ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI VIVEK A. PERUMPURNA /ASSESSEE BY : SHRI PORUS KAKA & DIVESH CHAWLA / DATE OF HEARING : 01 /0 7 / 2015 / DATE OF PRONOUNCEMENT 09/09 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) , MUMBAI , DATED 29 - 9 - 2011 FOR THE ASSESSMENT YEAR 200 3 - 04 , IN THE MA TTER OF ORDER PASSED U/S.143(3) R.W.S.147 OF THE ACT, DATED 27 - 1 - 2011, WHEREIN THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE REASSESSM ENT PROCEEDINGS ARE NOT VALID AS IT COULD NO T BE SAID THAT THERE WAS ESCAPEMENT OF INCOME, WHEREAS, WHAT IS ONLY REQUIRED AT THE TIME OF REOPENING THE PROCEEDINGS IS TO HAVE REASON TO BELIEVE THAT INCOME HAD ESCAPED AND THIS REASON TO BELIEVE WAS VERY MU CH THERE AT THE TIME OF REOPENING OF ASSESSMENT. 2. THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. ITA NO. 1812 /1 2 2 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. BRIEF HISTORY OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY AND A RESIDENT OF DENMARK AND IS ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC. M/S AKTIESELSKABET DAMPSKIBSSELSKABET SVENDBORG (HEREINAFTER REFERRED TO AS 'SVENDBORG') ANOTHER DANISH SH IPPING COMPANY MERGED WITH THE ASSESSEE IN 2003 AND THE ASSESSEE WAS RENAMED AS M/ S A. P. MOLLER MAERSK A/S (APMM). IT FILED ITS RETURN OF INCOME FOR THE YEAR UNDER APPEAL ON 30TH MARCH 2005, DECLARING THE INCOME EARNED FROM THE OPERATION OF SHIPS IN INTER NATIONAL TRAFFIC AT 'NIL'. IN THE RETURN OF INCOME, THE AMOUNT OF NET FREIGHT INCOME WAS DISCLOSED AT RS.5,75,90,46,869/ - , WHICH WAS CLAIMED AS EXEMPT UNDER ARTICLE 9 OF THE INDIA-DENMARK DOUBLE TAXATION AVOIDANCE AGREEMENT (HEREINAFTER REFERRED TO AS THE DTAA). PURSUANT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) (HEREINAFTER REFERRED TO AS 'CIT(A)) DATED 25TH JANUARY 2007 FOR AY 2003 - 04 IN THE CASE OF THE FIRM A. P. MOLLER (HEREINAFTER REFERRED TO AS 'FAPM'), REASSESSMENT PROCEEDIN G S WERE INITIA TED IN THE CASE OF THE ASSESSEE UNDER SECTION 147 R.W.S. 150 OF ACT VIDE NOTICE DATED 2 7 TH FEBRUARY 2008. THE REASSESSMENT PROCEEDINGS WERE CONCLUDED VIDE ORDER DATED 8TH APRIL 2008 WHEREIN BENEFIT OF ARTICLE 9 OF THE DTAA WAS DULY GRANTED TO THE ASSESSEE IT WAS HELD THAT UNDER ARTICLE 9 OF THE DTAA THE FREIGHT INCOME RETURNED BY THE ASSESSEE IS TAXABLE ONLY IN DENMARK AND NOT IN INDIA . 3. THE RE ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT HAD BEEN AGAIN INITIATED BY THE AO ON THE ASSESSEE VIDE NOTI CE DATED 30TH MARCH 2010. IN RESPONSE TO THIS NOTICE, THE ASSESSEE FILED A RETURN OF ITA NO. 1812 /1 2 3 INCOME ON 30 TH APRIL 2010 REPORTING 'NIL' INCOME. UPON ITS REQUEST, THE AO ALSO PROVIDED THE ASSESSEE WITH THE COPY OF REASONS RECORDED FOR INITIATING PROCEEDINGS UNDER SE CTION 147 OF THE ACT VIDE HIS LETTER DATED 4TH AUGUST 2010. THE RELEVANT EXTRACT OF THE REASONS RECORDED BY THE AO IS REPRODUCED AS UNDER. 'THE ASSESSEE - COMPANY HAS SHOWN 50% OF NET FREIGHT COLLECTION OF RS.11,51,80,93,737/ - AS AGAINST NET FREIGHT COLLECT ION OF RS.11,65,90,77,014 SHOWN BY M/ S A. P. MOLLER. THUS, THERE IS A DIFFERENCE OF RS. 14,09,83,277/ - IN THE NET RECEIPTS OF FREIGHTS SHOWN BY THE ASSESSEE AND M/ S A. P. MOLLER. THUS, THE NET FREIGHT COLLECTION TO THE TUNE OF RS. 14,09,83,277/ - HAS NOT BE EN DISCLOSED IN THE RETURN OF INCOME BY THE ASSESSEE - COMPANY. THE ASSESSEE HAS FAILED TO FURNISH FULL AND COMPLETE PARTICULARS OF THIS FREIGHT INCOME. FURTHER IT IS SEEN THAT THE ASSESSEE HAS CLAIMED RS. 61,14,14,544/ - AS FREIGHT RECEIVED' ON BEHALF OF OTH ER SHIPPING COMPANIES AND REDUCED IT FROM THE GROSS FREIGHT. HOWEVER FREIGHT RECEIVED ON BEHALF OF OTHER SHIPPING COMPANIES WOULD BE LIABLE FOR TAXATION U/ S 44B AND TREATY BENEFIT WOULD NOT BE AVAILABLE TO SUCH RECEIPTS.' 4 BY THE IMPUGNED ORDER THE CIT (A) HELD THE ORDER OF REASSESSMENT INVALID, AFTER OBSERVING AS UNDER : - 5. DECISION - I HAVE CAREFULLY EXAMINED THE FACTS REPRODUCED BEFORE ME AND GIVEN THOUGHTFUL CONSIDERATION TO THE ARGUMENTS OF THE ARS OF THE APPELLANT. THE RELEVANT ASSESSMENT YEAR IS AY 2003 - 04. THE PERIOD OF FOUR YEARS FROM THE END OF THIS ASSESSMENT YEAR ENDS ON 31ST MARCH 2008. THE REASSESSMENT NOTICE IN ASSESSEE WAS ISSUED ON 30TH MARCH 2010 I.E. AFTER FOUR YEARS BUT WITHIN SIX YEARS OF THE END OF THE ASSESSMENT YEAR. 5. 1 AFTER G OIN G THROUGH THE FINDINGS OF THE AO , THERE IS NO DOUBT THAT THE INCOME AS REPORTED BY FAPM IN ITS RETURN OF INCOME FOR AY 2003 - 04 SHOULD HAVE BEEN EQUALLY DISTRIBUTED BETWEEN THE TWO ENTITIES I.E. SVENDBORG AND THE APPELLANT. HOWEVER, THE APPELLANT WHILE F ILING ITS RETURN OF INCOME FOR AY 2003 - 04 DISCLOSED A SMALLER FREIGHT INCOME TO THE EXTENT OF RS. 7,04,91,6381 - (50% OF RS. 14,09,83,869/ - ). 5.2 IT IS FURTHER OBSERVED THAT THE APPELLANT HAS NOT PROVIDED ANY EXPLANATION IN ITS RETURN OF INCOME ABOUT THE DIFFERENCE OF FREIGHT RECEIPTS BETWEEN THE TWO RETURNS. TO THIS EXTENT THE OBSERVATION OF THE AO ABOUT THE DISCREPANCY AS RECORDED IN HIS REASONS IS FOUND TO BE CORRECT. HOWEVER, IT IS ALSO EQUALLY IMPORTANT TO NOTE THAT THE APPELLANT WAS GRANTED THE BENEF IT OF ARTICLE 9 OF THE DTAA IN THE ORIGINAL ASSESSMENT PROCEEDINGS ON ITS ENTIRE SHIPPING INCOME. UNDERSTANDABLY, THEREFORE, IF THE BENEFIT OF ARTICLE 9 WAS AVAILABLE TO ITA NO. 1812 /1 2 4 THE APPELLANT ON ITS ENTIRE FREIGHT RECEIPTS, IT IS DIFFICULT TO ENVISAGE A SITUATION WHEREIN SUCH RELIEF CAN BE DENIED JUST BECAUSE THE AMOUNT OF INCOME DISCLOSED IS A LITTLE LESS THAN WHAT WAS ORIGINALLY STATED. ACCORDINGLY, ONE OF THE IMPORTANT CONDITIONS OF INVOKING PROVISIONS OF SECTION 147 THAT THERE SHOULD BE ESCAPEMENT OF INCOME CAN NOT BE ACCEPTED TO HAVE BEEN SATISFIED. ACCORDINGLY, THOUGH THERE IS DISCREPANCY IN THE INCOME RETURNED BY THE APPELLANT, THE SAME DOES NOT LEAD TO ANY ESCAPEMENT OF INCOME. THE REASSESSMENT PROCEEDINGS INITIATED BY THE AO THEREFORE CANNOT BE HELD TO BE VA LID. THE APPELLANT ACCORDINGLY SUCCEEDS ON GROUNDS OF APPEAL NOS. 1 TO 1(B). GROUND NOS. 1(C) TO 2(B) ARE HENCE RENDERED ACADEMIC AND ARE NOT ADJUDICATED UPON. I MAY HOWEVER ADD THAT THE AO HAS CONSIST ENTLY HELD THAT THE IMPUGNED SHI PPING INC OME TO BE ELIG IBLE FOR RELIEF UNDER THE DTAA.} ' 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT IN THE ORIGINAL ASSESSMENT FRAMED U/S.143(3) THE ENTIRE INCOME OF THE ASSESSEE FROM OPERATION OF SHI PS IN INTERNATIONAL TRAFFIC WAS HELD TO BE TAXABLE IN DENMARK AND NOT IN INDIA UNDER ARTICLE 9 OF THE TREATY. THEREAFTER THE ASSESSMENT WAS REOPENED AFTER MORE THAN 4 YEARS ON THE PLEA THAT THE INCOME HAS NOT BEEN EQUALLY DISTRIBUTED BETWEEN THE ASSESSEE A ND SEVENDBORG. FIRST OF ALL, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND CORRECTLY ITS INCOME SO FILED. FURTHERMORE, EVEN AFTER EQUALLY DISTRIBUTED THE SAME, SINCE THE ENTIRE INCOME WAS NOT LIABLE TO BE TAX ED IN INDIA UNDER ARTIC LE 9 OF THE DTAA, THERE WAS NO ESCAPEMENT OF INCOME SO AS TO ATTRACT PROVISIONS OF SECTION 147. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR HOLDING THE RE - ASSESSMENT AS VALID. 6. FURTHERMORE, WE FOUND THAT THE TRIBUNAL IN THE CASE OF DAMPSKIBSSELSKABET , ITA NO.2083 - 2085/MUM/2009, VIDE ORDER DATED 11 - 6 - 2010 ON THE VERY SIMILAR ISSUE HELD THAT AN ASSESSEE RESIDENT OF ITA NO. 1812 /1 2 5 DENMARK HAVING INCOME FROM OPERATION OF SHIPS IN INTERNATIONAL TRAFFIC , IS NOT LIABLE TO TAX IN INDIA IN VIEW OF THE P ROVISIONS OF ARTICLE 9(1) OF DTAA. 7. IN ASSESSEES OWN CASE THE AO IN THE SUBSEQUENT ASSESSMENT YEARS 2004 - 05 & 2005 - 06 WHILE FRAMING ASSESSMENT U/S.143(3) OF THE ACT HELD THAT THE ENTIRE FREIGHT INCOME EARNED BY THE ASSESSEE FROM OPERATION OF SHIPS IN I NTERNATIONAL TRAFFIC IS TAXABLE IN DENMARK AND NOT IN INDIA UNDER ARTICLE 9 OF THE TREATY. SINCE FREIGHT INCOME IS ADMITTEDLY NOT TAXABLE IN INDIA, THUS, THERE CANNOT BE ANY INCOME ESCAPING ASSESSMENT. THEREFORE, THE REASONS RECORDED FOR REOPENING OF ASSES SMENT FOR THE YEAR UNDER CONSIDERATION IS ERRONEOUS AND BAD IN LAW. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). 8 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 09/09 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 09/09 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//