The ACIT, Circle, GANDHIDHAM V. M/s. Jaisu Shipping Co. Pvt. Ltd., Adipur-Kutch

ITA 226/RJT/2012

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1590 (ITAT-RAJKOT)
• Duration Of Justice: 6 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Corroborative evidences

Judgement Text

ACIT-GANDHIDHAM V. JAISU SHIPPING COMPANY P. LTD. I.T.A.NO. 226/RJT/2012/A.Y. 07-08 PAGE 1 OF 5 INCOM TAX APPELLATE TRIBUNAL-RAJKOT-BENCH-RAJKOT BEFORE C .M. GARG, JUDICIAL MEMBER AND O. P. MEENA, ACCOUNTANT MEMBER I.T.A NO. 226/RJT/2012 ASSESSMENT YEAR: 2007-08 APPELLANT V. RESPONDENT ASSISTANT COMMISSIONER OF INCOME TAX, GANDHIDHAM CIRCLE- GANDHIDHAM-KUTCH M/S. JAISU SHIPPING COMPANY (P) LTD. 8- SINDU SOCIETY, ADIPUR PAN:AAACJ 6998H ASSESSEE BY NONE REVENUE BY SHRI PRAV EE N VERMA, SR. D.R. DATE OF HEARING 22.11.2018 DATE OF PRONOUNCEMENT 2 6 .11.2018 ORDER PER O. P. MEENA, AM 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XX, AHMEDABAD DATED 07.02. 2012 PERTAINING TO ASSESSMENT YEAR 200 7-08. 2. GROUND NO. 1 STATES THAT THE CIT (A) HAS ERRED IN R ESTRICTING ADDITION TO RS.2,56,843 OUT OF RS.1,01,94,234 MADE BY THE AO ON ACCOUNT OF MISCELLANEOUS RECEIPTS. 3. THE AO FOUND THAT THE ASSESSEE HAS CREDITED MISCELL ANEOUS RECEIPTS OF RS. 1,01,94,234 AND INTEREST OF RS. 19, 06,309 ON WHICH THE ASSESSEE HAS AVAILED THE BENEFIT UNDER THE TONNAGE TAX SCHEME. THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THESE RECEIPTS BE TAXED UNDER OTHER THAN THE SPECIAL PROVISION OF SHI PPING COMPANIES. IT WAS EXPLAINED THAT THE RECEIPTS OF RS.76,25,792 WERE ON ACCOUNT OF BILLS RAISED TO COCHIN PORT TRUST AND THESE BILL S WERE RAISED LIKE ACIT-GANDHIDHAM V. JAISU SHIPPING COMPANY P. LTD. I.T.A.NO. 226/RJT/2012/A.Y. 07-08 PAGE 2 OF 5 ANY OTHER NORMAL DREDGING ACTIVITY AND AS PER TERMS OF DREDGING IS CONSIDERED AS CORE ACTIVITY AND RECEIPTS OF RS.12,8 7,500 RAISED TO MORMGUAOA PORT TRUST FOR REMOVING OF UNDERWATER OBS TRUCTION. THEREFORE, IT WAS CONTENDED THAT SAME SHOULD BE CON SIDERED AS NOT FALLING UNDER THE DEFINITION OF CORE ACTIVITY. FURT HER, THE RECEIPTS OF RS.1,62,589 IS RECEIPTS FROM TRANSPORTATION RECEIPT S. HOWEVER, THE AO OBSERVED THAT THE ASSESSEE FAILED TO ESTABLISH T HAT HOW MISCELLANEOUS RECEIPTS FOR TRANSPORTATION OF FO AND OR LDO BY TRUCKS ARE COVERED UNDER SECTION 115V-I(2) OF THE ACT I.E. CORE ACTIVITIES OF TONNAGE TAX COMPANY. HENCE, THE AO HAS TAXED THE MI SCELLANEOUS RECEIPTS OF RS.1,01,94,234 AND RS.1,62,589 TRANSPO RTATION RECEIPTS AS PER NORMAL PROVISIONS OF THE ACT. 4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFOR E THE LD. CIT (A). HOWEVER, CIT (A) AFTER CONSIDERING THE DETAILS AND SUPPORTING EVIDENCE FILED BY THE ASSESSEE AND EXPLANATION OFF ERED FOUND THAT AN AMOUNT OF RS. 76,25,798 INCLUDED IN MISCELLANEOU S RECEIPTS OF RS. 1,01,94,234 WAS RECEIVED TOWARDS ESCALATION OF DIES EL AND LABOUR CHARGES, AS PER THE AGREEMENT WITH COCHIN PORT TRUS T. THESE RECEIPTS ARE DIRECTLY RELATABLE TO THE ACTIVITY OF THE APPEL LANT OF DREDGING, WHICH ACTIVITY WAS HELD TO BE ELIGIBLE FOR CLAIMING BENEFIT UNDER THE TONNAGE SCHEME BY THE CIT (A) IN A.Y. 2006-07 IN HIS ORDER DTD. 31.03.2010. THUS, THE ACTUAL MISCELLANEOUS RECEIPTS WORK OUTS TO RS. 25,68,436 [ 1,01,94,234- 76,25,798]. THEREFORE, FOL LOWING SAID ORDER, THE CIT (A) HAS ESTIMATED 10% OF MISCELLANEOUS RECE IPTS AS TAXABLE NET PROFIT . ACCORDINGLY, ADDITION OF RS. 2,56,843 WAS CONFIRMED AND BALANCE ADDITION WAS DELETED. ACIT-GANDHIDHAM V. JAISU SHIPPING COMPANY P. LTD. I.T.A.NO. 226/RJT/2012/A.Y. 07-08 PAGE 3 OF 5 5. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. SR. D.R. RELIED ON THE ORDER OF THE AO. THE LD. SR. D.R. SUBMITTED THAT RECEIPTS OF CHARTER HIRE AND BU NKER QUALIFY UNDER THE DEFINITION OF CORE ACTIVITY BUT MISCELLANEOUS R ECEIPTS CANNOT BE TREATED AS PART OF CORE ACTIVITY. THEREFORE, CIT (A ) WAS NOT JUSTIFIED IN ESTIMATING INCOME AND REDUCING THE SAME. 6. THERE WAS NONE PRESENT FOR AND ON BEHALF OF THE ASS ESSEE. 7. WE HAVE HEARD THE LD. SR. D.R. AND PERUSED THE RELE VANT MATERIAL ON RECORD. ON GOING THROUGH THE DETAILS OF RECEIPTS OF RS. 76,25,798 MENTIONED AT PAGE NO. 7 OF APPELLATE ORDE R, WE FIND THAT THESE RECEIPTS ARE RELATING TO FILING AREA BY DREDG ING AND PUMPING OF OIL ACTIVITIES AND FUEL ESCALATION AND LABOUR ESCAL ATION AS PER AGREEMENT ENTERED IN TO WITH COCHIN PORT TRUST. THE REFORE, WE ARE OF THE VIEW THAT THE CIT (A) HAS RIGHTLY TREATED TH E SAME AS RELATED TO CORE ACTIVITIES OF SHIPPING. WITH REGARD TO BALA NCE MISCELLANEOUS RECEIPTS OF RS. 25,68,436, WE ARE OF THE VIEW THE E NTIRE MISCELLANEOUS RECEIPTS CANNOT BE TREATED AS INCOME OF THE ASSESSE E AS THE DEDUCTION ON ACCOUNT OF EXPENSES HAS TO BE AND THEREFORE, CO NSIDERING THE NET PROFIT RATE OF THE ASSESSEE WHICH WAS AT 5.87% IN A.Y. 2005-06, THE CIT (A) WAS QUITE JUSTIFIED BY TAKING 10% OF NET PR OFIT OF SUCH MISCELLANEOUS RECEIPTS. IN VIEW OF THIS MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT (A), ACCORDINGLY, SAM E IS UPHELD. THIS GROUND OF REVENUE IS THEREFORE, DISMISSED. 8. GROUND NO. 2 RELATES TO RESTRICTING ADDITION TO RS. 16,258 OUT OF RS. 1,62,589. ACIT-GANDHIDHAM V. JAISU SHIPPING COMPANY P. LTD. I.T.A.NO. 226/RJT/2012/A.Y. 07-08 PAGE 4 OF 5 9. WE HAVE HEARD THE LD. SR. D.R. AND FIND THAT CIT (A ) HAS CONSIDERED 10% OF SUCH TRANSPORTATION RECEIPT AS TA XABLE INCOME ON THE BASIS OF FINDING GIVEN IN RESPECT OF MISCELLANE OUS RECEIPTS AS DISCUSSED IN GROUND NO. 1 ABOVE. THEREFORE, FOR TH E REASONS GIVEN IN RESPECT OF GROUND NO. 1 ABOVE, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF CIT (A), ACCORDINGLY, SAME IS UPHELD. THER EFORE, THIS GROUNDS OF APPEAL IS DISMISSED. 10. GROUND NO. 3 RELATES DELETING ADDITION OF RS.19,06, 309 ADDITION MADE ON ACCOUNT OF INTEREST INCOME. 11. FACTS APROPOS OF THIS GROUND ARE THAT THE ASSESSEE IS ENGAGED IN SHIPPING BUSINESS. THE ASSESSEE HAS CREDITED INTERE ST INCOME OF RS. 19,06,309 FROM FIXED DEPOSITS. THE AO ASKED AS TO W HY THIS SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCE. IT WAS EXPLAINED THAT THE ASSESSEE HAS TO KEEP FDR FOR GETTING BANK GUARA NTEE FOR VARIOUS DREDGING CONTRACTS AND THEREFORE, EARNING INTEREST INCOME ON FIXED DEPOSITS IS NORMAL BUSINESS INCOME. HOWEVER, THE AO WAS NOT SATISFIED WITH EXPLANATION AND PLACING RELIANCE IN THE CASE OF PANDIAN CHEMICALS LTD. V. CIT [2003] 262 ITR 278 (SC) : 129 TAXMAN 539 (SC) TREATED THE SAME AS INCOME FROM OTHER SOURCE AND AS SESSED ACCORDINGLY. 12. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFOR E THE LD. CIT (A). THE CIT (A) OBSERVED THAT THE ASSESSEE HAS CRE DITED INTEREST INCOME AND ALSO DEBITED INTEREST EXPENSES IN PROFIT & LOSS ACCOUNT AND THEREFORE, NET INTEREST INCOME IS NEGATIVE. HE ALSO OBSERVED THAT SIMILAR ISSUE WAS ALLOWED IN A.Y. 2005-06 BY THE CI T (A). THE CIT (A) OBSERVED THAT THE ASSESSEE HAS RECEIVED INTEREST IN COME OF RS. ACIT-GANDHIDHAM V. JAISU SHIPPING COMPANY P. LTD. I.T.A.NO. 226/RJT/2012/A.Y. 07-08 PAGE 5 OF 5 19,06,309 AND INCURRED INTEREST EXPENSES OF RS. 2,2 0,33,986 RESULTING INTO NETTING OF INTEREST EXPENDITURE. FURTHER, THE CIT (A) FOLLOWED THE ORDER OF CIT (A) IN A.Y. 2005-06 IN WHICH IT WA S HELD THAT THERE IS DIRECT NEXUS BETWEEN INTEREST INCOME AND INTEREST E XPENSES. THEREFORE, NETTING OF INTEREST INCOME HAS TO BE DI SALLOWED. IN VIEW OF THIS, THE DISALLOWANCE MADE BY THE AO WAS DELETE D. 13. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. SR. D.R. RELIED ON THE ORDER OF T HE AO. 14. WE HAVE HEARD THE LD. SR. D.R. AND FIND THAT THERE IS DIRECT NEXUS BETWEEN EARNING OF INTEREST INCOME AND INTER EST EXPENSES WHICH WERE INCURRED ON MOBILIZATION OF FUNDS AND PO RT CHARGES. THEREFORE, CIT (A) HAS RIGHTLY ALLOWED NETTING OF I NTEREST INCOME WITH EXPENDITURE AND THE INTEREST INCOME IS BEING NEGATI VE, NO ADDITION IS REQUIRED TO BE MADE ON THIS ACCOUNT. IN VIEW OF THE SE FACTS, THIS GROUND OF APPEAL REVENUE IS DISMISSED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. 16. THE ORDER PRONOUNCED IN THE OPEN COURT ON 26.11.201 8. SD/- SD/- ( C.M. GARG) (O. P. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT: DATED: 2 6 NOVEMBER 2018 /OPM COPY OF ORDER SENT TO - ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. B Y ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, RAJKOT