Appeal details
Counselvise Citation
[2012] 140 COUNSELVISE.COM (IT) 62669 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 3 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-06-2012
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
F
Next Hearing Date
20-06-2012
Assessment Year
2007-2008
Appeal Filed On
16-03-2011
Judgement Text
M/S. VARUN SHIPPING CO. LTD. I.T.A. NO. 2167/M/2011 & C.O. NO.01/M/2012 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO.2167/MUM/2011 ASSESSMENT YEAR : 2007-08 ASST. COMMISSIONER OF INCOME TAX, RG. 5(3), R.NO.573, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 VS. M/S. VARUN SHIPPING CO. LTD. LAXMI BUILDING, BALLARD ESTATE, MUMBAI-400 038 PAN NO: AAACV 1658 C (APPELLANT) (RESPONDENT) C.O. NO. 01/MUM/2012 ASSESSMENT YEAR : 2007-08 M/S. VARUN SHIPPING CO. LTD. LAXMI BUILDING, BALLARD ESTATE, MUMBAI-400 038 PAN NO: AAACV 1658 C VS. ASST. COMMISSIONER OF INCOME TAX, RG. 5(3), R.NO.573, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI M. RAJAN ASSESSEE BY : SHRI JITENDRA JAIN DATE OF HEARING:. 20.06.2012 DATE OF PRONOUNCEMENT: 29-06-2012. O R D E R PER VIVEK VARMA, J.M. : THE APPEAL IS FILED BY THE DEPARTMENT AND CO IS FIL ED BY THE ASSESSEE, AGAINST THE ORDER OF THE CIT(A)-9, MUMBAI DATED 07. 01.2011. M/S. VARUN SHIPPING CO. LTD. I.T.A. NO. 2167/M/2011 & C.O. NO.01/M/2012 PAGE 2 OF 4 2. THE ISSUE IN DISPUTE IS DISALLOWANCE AND APPLICA BILITY OF SECTION 14A OF THE I.T. ACT. 3. THE FACTS ARE THAT THE ASSESSEE IS IN THE BUSINE SS OF SHIPPING ACTIVITY AND IS ASSESSABLE ON PRESUMPTIVE BASIS UNDER CHAPTE R XII-G OF THE INCOME TAX ACT, 1961, COMMONLY KNOWN AS TONNAGE TAX SCHEM E. IN THIS SCHEME TONNAGE INCOME FROM THE QUALIFYING SHIP IS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SUB SECTIONS (2) AND (3) OF SECTION 1 15VG. THUS, THE TONNAGE TAX IS PAID ON RELEVANT SHIPPING INCOME ON PRESUMPT IVE BASIS IGNORING THE ACTUAL PROFIT AND LOSS ACCOUNT. 4. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HA D DECLARED DIVIDEND INCOME AT RS. 98,07,920 AND CLAIMED IT AS EXEMPT U/ S 10(34). THE A.O., IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14A, READ WITH RULE 8D, COMPUTED THE DISALLOWANCE OF RS. 45,71,250, BEING EXPENSES A TTRIBUTABLE TOWARDS EARNING OF THE EXEMPT INCOME. 5. THE ISSUE WAS TAKEN UP BEFORE THE CIT(A), WHO RE DUCED THE DISALLOWANCE TO 5% OF DIVIDEND INCOME AND THEREBY R ESTRICTING THE DISALLOWANCE AT RS. 4,90,396. 6. THE DEPARTMENT HAS FILED THE APPEAL AGAINST THIS ORDER OF THE CIT(A) WHEREAS, THE ASSESSEE HAS COME IN CROSS OBJECTIONS, PLEADING THAT PROVISION OF SECTION 14A ARE NOT APPLICABLE ON PRESUMPTIVE TA X REGIME OF SECTION 115VG, WHERE THE PROFIT AND LOSS ACCOUNT HAS TO BE IGNORED. 7. AT THE TIME OF HEARING, THE AR POINTED OUT THAT THE SIMILAR ISSUE AROSE IN THE ASSESSMENT YEAR 2008-09, WHEREIN THE CO-ORDI NATE BENCH IN THE M/S. VARUN SHIPPING CO. LTD. I.T.A. NO. 2167/M/2011 & C.O. NO.01/M/2012 PAGE 3 OF 4 ASSESSEES OWN CASE IN ITA NO. 5576/MUM/2011, IN PA RA 7, OBSERVED, AS UNDER : 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO 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 SPECIAL PROVISIONS CONTAINED IN CHAPTER XIIG WHICH LAY DOWN TONNAGE TA X SCHEME. AS PER THE PROVISIONS OF SECTION 115VA CONTAINED IN CHAPTE R XIIG, THE INCOME FROM THE BUSINESS OF OPERATING QUALIFYING SHIPS CAN BE COMPUTED AT THE OPTION OF THE ASSESSEE IN ACCORDANCE WITH THE PROVI SIONS OF CHAPTER XIIG AND ONCE THIS OPTION IS EXERCISED BY THE ASSES SEE, THE INCOME SO COMPUTED SHALL BE DEEMED TO BE THE PROFITS AND GAIN S OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION NOTWITHSTANDING ANY THING TO THE CONTRA RY CONTAINED IN SECTION 28 TO 43C. IT, THEREFORE, FOLLOWS THAT WHEN THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPERATING SHIPS IS CO MPUTED AS PER THE SPECIAL PROVISIONS CONTAINED IN CHAPTER XIIG, ONL Y THE EXPENSES INCURRED BY THE ASSESSEE FOR EARNING INCOME OF THE SAID BUSINESS ARE DEEMED TO BE ALLOWED AND NOTHING ELSE. IT, THEREFOR E, 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 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 DISALLOWAN CE U/S 14A ON ACCOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF EXEMPT DIVIDEND ASSESSEE THAT THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF OPERATING SHIPS HAVING BEEN COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XIIG, ONLY THE EXPENSES I NCURRED FOR THE SAID BUSINESS ARE DEEMED TO HAVE BEEN ALLOWED AND NO AD DITION TO SUCH INCOME CAN BE MADE BY WAY OF DISALLOWANCE U/S 14A O N 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 TH E SAID BUSINESS IS FINALLY COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XIIG AND NO SEPARATE DISALLOWANCE ON ACCOUNT OF SUCH EXPENDI TURE U/S 14A CAN BE MADE. WE, THEREFORE, DELETE THE DISALLOWANCE MAD E BY THE AO U/S 14A AND CONFIRMED BY THE LEARNED CIT(APPEALS) AND A LLOW GROUND NO. 1 OF THE ASSESSEES APPEAL. THE AR THEREFORE, SUBMITTED THAT NO DISALLOWANCE IS CALLED FOR IN THE INSTANT CASE AND UNDER INSTANT CIRCUMSTANCES. M/S. VARUN SHIPPING CO. LTD. I.T.A. NO. 2167/M/2011 & C.O. NO.01/M/2012 PAGE 4 OF 4 8. WE HAVE HEARD THE ARGUMENTS FROM BOTH THE SIDES AND HAVE CONSIDERED THE FACTS OF THE CASE. WE FIND THAT THE FACTS TO IDENTICAL AND THE DECISION IN THE SUBSEQUENT YEAR HAS ALREADY DEALT W ITH THE ISSUE IN THE ASSESSEES FAVOUR, WE, THEREFORE, RESPECTFULLY, FOL LOWING THE DECISION, RENDERED BY THE CO-ORDINATE BENCH IN THE ASSESSEES OWN CASE, HOLD THAT PROVISIONS OF SECTION 14A CANNOT BE MADE APPLICABLE ON TONNAGE TAX SCHEME, AS THE PROVISIONS OF CHAPTER XII-G ARE A S EPARATE CODE BY ITSELF. 9. WE, THEREFORE, DISMISS THE APPEAL FILED BY THE D EPARTMENT AND ALLOW THE CROSS OBJECTION FILED BY THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 29/06/ 2012. SD/- SD/- (B.RAMAKOTAIAH) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2012. MUMBAI: 29/06/2012. P/-*
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