ACIT, CHENNAI V. West Asia Maritime Ltd., CHENNAI

ITA 1939/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7527 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 26-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 27-06-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: G BASKAR
• Section: 14A; 115JB; 28

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER I . T.A. NO S . 1938, 1939, 1940 AND 1941 /MDS/201 6 ASSESSMENT YEAR S :20 09 - 1 0 , 10 - 11, 11 - 12 & 2012 - 13 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3 ( 2 ) , CHENNAI 600 034 . VS. M/S. WEST ASIA MARITIME LTD., 6 TH FLOOR, BUHAR I TOWERS, NO. 04, MOORES ROAD, CHENNAI 600 006. [PAN: AA ACW1023E ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI S UPRIYO PAL , J CIT / RESPONDENT BY : SHRI G. BASKAR , A DVOCATE / DATE OF HEARING : 2 6 . 1 2 .201 6 / DATE O F P RONOUNCEMENT : 15 . 0 3 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH E S E FOUR APPEAL S FILED BY THE REVENUE PERTAIN TO SAME ASSESSEE ARE DIRECTED AGAINST CONSOLIDATED ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 11 , CHENNA I DATED 30 . 0 3 .201 6 RELEVANT TO THE ASSESSMENT YEAR S 20 09 - 1 0 , 10 - 11, 11 - 12 AND 2012 - 13 . THE REVENUE HAS RAISED FOLLOWING COMMON GROUNDS IN ALL THE APPEALS: (I) THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER CHAPTER XII C OF THE INCOME TAX ACT, 1961. (II) THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR TONNAGE TAX SCHEME AND FURTHER DISALLOWANCE UNDER SECTION 14A CANNOT BE MADE. I.T.A. NO S . 1938 TO 1941 /M/ 16 2 (III) THE LD. CIT(A) HAS ERRED IN DELE TING THE ADDITION OF 14A FOR THE PURPOSE OF 115JB DISALLOWANCES HOLDING THAT SECTION 14A IS NOT ACCEPTABLE TO SHIPPING COMPANIES. 2. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE COMMON ISSUES RAISED IN THE APPEALS OF TH E REVENUE ARE SQUARELY COVERED AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09 IN I.T.A. NO. 935/MDS/2013 VIDE ORDER DATED 13.06.2014 AND PRAYED THAT THE SAME SHOULD BE FOLLOWED FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. 3. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR TONNAGE TAX SCHEME HAS BEEN DISPUTED BEFORE THE HON BLE HIGH COURT OF MADRAS AND THEREFORE, HE HAS PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE REVERSED FOR ALL THE ASSESSMENT YEARS WITH REGARD TO THE ISSUES RAISED IN THE APPEALS OF THE REVENUE. 4. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO PERUSED THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09 (SUPRA), WHEREIN, IT WAS HELD AS UNDER: 2. THE FIRST ISSUE IN THE APPEAL OF THE R EVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT ASSESSEE IS ENTITLED FOR BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER CHAPTER XII C OF THE ACT. I.T.A. NO S . 1938 TO 1941 /M/ 16 3 3. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE HAS BEEN DECIDED BY THE CO - ORDIN ATE BENCH OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 IN ITA NO.1195/MDS/2010 DATED 1.7.2011 WHEREIN THIRD MEMBER AGREED WITH THE VIEW OF THE ACCOUNTANT MEMBER AND HELD THAT SHIP OPERATED BY THE ASSESSEE M.V.GEM OF ENNORE TRANSP ORTING THERMAL COAL 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 FOR THE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER SECTION XII C OF THE ACT. 4 . WE HAVE PERUSED THE ABOVE ORDER OF THE THIRD MEMBER 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 COAL FROM ONE LOCATION TO ANOTHER LOCATION WITHIN THE COUN TRY IS A QUALIFYING SHIP UNDER SECTION 115VD OF THE INCOME TAX ACT, 1961 AND THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER SECTION XII C OF THE ACT. RESPECTFULLY FOLLOWING THE ORDER OF THE THIRD MEMBER, WE REJECT THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE. 5. THE NEXT GROUND OF APPEAL RAISED BY THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT M ADE DISALLOWANCE UNDER SECTION 14A OF THE ACT. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT HOLDING THAT ONCE ASSESSEE S INCOME IS COMPUTED AS PER TONNAGE TAX SCHEME THEN FURTHER DISALLOWANC E UNDER SECTION 14A CANNOT BE MADE FOLLOWING THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF VARUN SHIPPING CO. LTD. VS. ADDL.CIT (134 ITRD 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 ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE DECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF VARUN SHIPPING CO.LTD. (SUPRA). 7. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHORITIES AND THE DECISION OF THIS TRIBUNAL RELIED ON. THE MUMBAI BENCH OF THIS TRIBUNAL 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 THE ASSESSEE IS MAINLY ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS AND ITS INCOME FROM THE SAID BUSINESS WAS DECLARED AND ASSESSED AS PER THE SPECIAL PROVISIONS CONTAINED IN CHAPTER XIIG WHICH LAY DOWN TONNAGE TAX SCHEME. AS PER THE PROVISIONS OF SECTION 115VA CONTAINED IN CHAPTER I.T.A. NO S . 1938 TO 1941 /M/ 16 4 XIIG, THE INCOME FROM THE BUSINESS OF OPERATING QUALIFYING SHIPS CAN BE COMPUTED AT THE OPTION OF THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XIIG AND ONCE THIS OPTION IS EXERCISED BY THE ASSESSEE, THE INCOME SO COMPUTED SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROF ESSION NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 28 TO 43C. IT, THEREFORE, FOLLOWS THAT WHEN THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPERATING SHIPS IS COMPUTED AS PER THE SPECIAL PROVISIONS CONTAINED IN CHAPTER XIIG, ONLY THE EXPENSES INCURRED BY THE ASSESSEE FOR EARNING INCOME OF THE SAID BUSINESS ARE DEEMED TO BE ALLOWED AND NOTHING ELSE. IT, THEREFORE, CANNOT BE SAID THAT WHEN THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPERATING SHIPS IS COMPUTED AS PER THE SPECIAL PRO VISIONS OF CHAPTER XIIG, ANY EXPENDITURE OTHER THAN THE EXPENDITURE INCURRED FOR THE PURPOSE OF THE SAID BUSINESS HAS BEEN ALLOWED AND CONSEQUENTLY NO ADDITION TO INCOME SO COMPUTED CAN BE MADE BY WAY OF DISALLOWANCE U/S 14A ON ACCOUNT OF EXPENDITURE INCUR RED 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 BUSINESS OF OPERATING SHIPS HAVING BEEN COMPUTED IN ACCORDANC E WITH THE PROVISIONS OF CHAPTER XIIG, ONLY THE EXPENSES INCURRED FOR THE SAID BUSINESS 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 INCURRED 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 WHEN THE INCOME OF THE SAID BUSINESS IS FINALLY COMPUTED IN ACCORDAN CE WITH THE PROVISIONS OF CHAPTER XIIG AND NO SEPARATE DISALLOWANCE ON ACCOUNT OF SUCH EXPENDITURE U/S 14A CAN BE MADE. WE, THEREFORE, DELETE THE DISALLOWANCE MADE BY THE AO U/S 14A AND CONFIRMED BY THE LEARNED CIT(APPEALS) AND ALLOW GROUND NO.1 OF THE ASS ESSEE S APPEAL. 8. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND REJECT THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 4.1 AS CONTENDED BY THE LD. DR THAT AGAINST THE ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2006 - 07, AS HAS BEEN FOLLOWED IN THE ASSESSMENT YEAR 2008 - 09, THE DEPARTMENT HAS FILED AN APPEAL BEFORE THE HON BLE MADRAS, CANNOT BE A GROUND TO TAKE A DIFFERENT VIEW. THUS, R ESPECTFULLY FOLLOWING THE I.T.A. NO S . 1938 TO 1941 /M/ 16 5 DECISION OF TH E COORDINATE BENCHES OF THE TRIBUNAL, WE SUSTAIN THE ORDER OF THE LD. CIT(A) , WHO HAS PASSED A WELL REASONED ORDER BY HOLDING THAT THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER CHAPTER XII C OF THE ACT. FURTHER, WITH REGARD TO ISSUE OF DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D AS WELL AS INCLUSION OF THE SAID DISALLOWANCE TO 115JB OF THE ACT, THE LD. CIT(A) FOLLOWED THE DECISION OF THE TRIBUNAL FOR EARLIER ASSESSMENT YEARS, WHEREIN, THE DECISION OF MUMBAI BENCHES OF TH E TRIBUNAL IN THE CASE OF VARU N SHIPPING CORPORATION LTD. V. ACIT (SUPRA) HAS BEEN FOLLOWED. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND NO REASON TO INTERFERE WITH THE ORDERS OF THE LD. CIT(A) AND ALL THE THREE GROUNDS RAISED IN THE ALL THE APPEALS OF THE REVENUE ARE DISMISSED. 5 . IN THE RESULT, ALL THE APPEAL S FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THE 15 TH MARCH, 201 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 15 . 0 3 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.