ACIT, CHENNAI V. M/s. West Asia Maritime Ltd., CHENNAI

ITA 2436/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7825 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 22-08-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVASJCIT
• Assessee Lawyers: G BASKAR
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.2436/MDS./2016 / ASSESSMENT YEAR : 2008-09 THE ACIT , CORPORATE CIRCLE 3(2), CHENNAI -34. VS. M/S.WEST ASIA MARITIME LTD ., 6 TH FLOOR, BUHARI TOWERS, 4,MOORES ROAD, CHENNAI-6 [PAN AAACW 1023 E ] ( / APPELLANT) ( /RESPONDENT) ./ I.T.A.NO.2449/MDS./2016 / ASSESSMENT YEAR :2008-09 M/S.WEST ASIA MARITIME LTD ., 6 TH FLOOR, BUHARI TOWERS, 4,MOORES ROAD, CHENNAI-6 VS. THE ACIT , CORPORATE CIRCLE 3(2), CHENNAI -34. [PAN AAACW 1023 E ] ( / APPELLANT) ( /RESPONDENT) ASSESSEE BY : MR.G.BASKAR,ADVOCATE REVENUE BY : MR.SHIVA SRINIVAS,JCIT, D.R / DATE OF HEARING : 23 - 11 - 201 6 / DATE OF PRONOUNCEMENT : 30 - 12 - 2016 ITA NOS.2436, 2449 /MDS./2016 :- 2 -: / O R D E R PER G.PAVAN KUMAR, JUDICIAL MEMBER THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COM MISSIONER OF INCOME-TAX (APPEALS)-11,CHENNAI IN ITA NO.183/2015- 16/CIT(A)- 11 PERTAINING TO THE ASSESSMENT YEAR 2008-09 PASSED U/S.143(3) R.W.S. 147 OF THE OF THE ACT. SINCE ISSUES INVOLV ED IN THESE CROSS APPEALS ARE COMMON IN NATURE, THESE APPEALS ARE CLU BBED TOGETHER, HEARD TOGETHER, DISPOSED OFF BY THIS COMM ON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS I N ITS APPEAL FOR OUR ADJUDICATION. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 11 IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF TH E CASE IN SO FAR AS THE ISSUE RELATING TO THE FOLLOWING GROUNDS. 2.0. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) 11 HAS ERRED BY UPHOLDING THE ASSESSING OFFICERS ACTION I N RESPECT OF ADDITION OF INTEREST INCOME OF RS.3,21,28,181 WITHO UT APPRECIATING THE FACT THAT THE SAID INCOME HAS ALRE ADY BEEN OFFERED TO TAX BY THE APPELLANT. 2.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) 11 HAS FAILED TO APPRECIATE THE FACT THAT UPHOLDING THE SA ID ADDITION OF INTEREST INCOME OF RS.3,21,28,181 AMOUNTS TO DOUBLE TAXATION OF THE SAME INCOME IN THE HANDS OF THE APPELLANT. 2.2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) 11 HAS WRONGLY RELIED ON TO THE SUPREME COURT DECISION IN THE CASE OF ITA NOS.2436, 2449 /MDS./2016 :- 3 -: TUTICORIN ALKHALI CHEMICALS & FERTILIZERS LTD., WHI LE CONFIRMING THE ADDITION OF INTEREST INCOME OF RS.3,21,28,181 M ADE BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT THA T THE SAID INTEREST INCOME BEING REVENUE IN NATURE HAS ALREADY BEEN DULY OFFERED .TO TAX. 2.3. THE ACTION OF THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) 11 IN RELYING THE ABOVE SUPREME COURT DEC ISION IS TOTALLY OPPOSED TO THE FACTS OF THE APPELLANTS CAS E AND FURTHER THE SAID INTEREST INCOME EARNED BY THE APPELLANT WA S REVENUE IN NATURE AS THE APPELLANT HAS STARTED THE BUSINESS MO RE THAN 15 YEARS AND HENCE, BY NO STRETCH OF IMAGINATION THE S AID INTEREST INCOME COULD BE TREATED AS PRE-OPERATIVE INCOME. 2.4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) 11 HAS FAILED TO APPRECIATE THE FACT THAT THE SAID INTERES T INCOME OF RS. 3,21,28,181 RECEIVED FROM ITS SUBSIDIARY COMPANIES HAS DULY BEEN OFFERED TO INCOME TAX UNDER THE HEAD BUSINESS INCOME AND IT WAS DULY DEDUCTED FROM THE LOSS ON TREASURY OPERATIONS IN RESPECT OF TRANSACTIONS WITH SUBSIDIARY COMPANIES. 3 THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, MODI FY OR ALTER ANY GROUND OF APPEAL AT THE TIME OR BEFORE HEARING OF T HE APPEAL. 4 FOR THE REASONS STATED ABOVE AND FOR SUCH OTHER R EASONS THAT MAY BE ADDUCED AT THE TIME OF HEARING, YOUR APPELLANT P RAYS TO DELETE OF ADDITION OF INTEREST INCOME OF RS.3,21,28 ,181 CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 11 AND RENDER JUSTICE IN ACCORDANCE WITH LAW. 3. THE BRIEF FACTS OF THE ISSUE RELATED TO GROUND NO.2 ARE THAT THE ASSESSEE COMPANY HAD EARNED AN INTEREST INCOME OF ` 10,55,48,369/- AND OFFERED TO INCOME TAX PURPOSE UN DER THE HEAD INCOME FROM OTHER SOURCES AT ` 7,34,10,188/- AND THE BALANCE WAS BROUGHT TO TAX BY THE AO RELYING ON THE DECISION OF ITA NOS.2436, 2449 /MDS./2016 :- 4 -: APEX COURT IN THE CASE OF TUTICORIN ALKALI CHEMICAL S AND FERTILIZERS LTD. REPORTED IN 227 ITR 172(SC). THE AO, ALONG WITH OTHER ADDITIONS COMPLETED THE ASSESSMENT U/S.143(3 ) R.W.S147 OF THE ACT VIDE ORDER DATED 30.03.2015. AGGRIEVED BY T HE ORDER OF THE AO, THE ASSESSEE HAS FILED AN APPEAL BEFORE THE LD.CIT(A). 4. IN THE APPELLATE PROCEEDINGS, LD.CIT(A) CONFIRM ED THE ACTION OF THE AO BY OBSERVING THAT THE INCOME HAS NOT BEEN OFFERED TO TAX BY THE ASSESSEE AND HENCE, CIT(A) UP HELD THE ADDITION MADE BY THE AO ON THIS ISSUE. AGAINST THI S, THE ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE US, LD.A.R ARGUED THAT THE INTEREST INCO ME OF RS. ` 3,21,28,181 RECEIVED FROM ITS SUBSIDIARY COMPANIES HAD DULY BEEN OFFERED TO INCOME TAX UNDER THE HEAD BUSINESS INCOME AND IT WAS DULY DEDUCTED FROM THE LOSS ON TREASURY OPERATIONS IN RESPECT OF TRANSACTIONS WITH SUBSIDIARY COMPANIES. ACCORDING TO LD.A.R, ADDITION OF INTEREST INCOME OF ` 3,21,28,181 AMOUNTS TO DOUBLE TAXATION OF THE SAME INCOME IN THE HANDS OF THE ASSESSEE. FURTHER, LD.A.R DREW OUR ATTENTION THAT THE CIT(A) HAS WRONGLY RELIED ON TO THE SUPREME COURT DECISION IN THE CASE OF TUTICORIN ITA NOS.2436, 2449 /MDS./2016 :- 5 -: ALKHALI CHEMICALS & FERTILIZERS LTD., WHILE CONFIRM ING THE ADDITION OF INTEREST INCOME OF ` 3,21,28,181/- MADE BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT THAT THE SAID INTEREST INCOME BEING REVENUE IN NATURE HAS ALREADY BEEN DULY OFFER ED TO TAX. HENCE, LD.A.R PLEADED THAT THIS INTEREST INCOME COU LD NOT BE TREATED AS PRE-OPERATIVE INCOME AND THEREFORE, PRAY ED THAT THE ADDITION OF INTEREST INCOME MAY BE DELETED. 6. PER CONTRA, LD.D.R RELIED ON THE ORDER OF LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL ON RECORD AND JUDICIAL DECISION CITED. THE ONLY CR UX OF THE ISSUE IS THAT THE AO MADE AN ADDITION OF INTEREST INCOME OF ` 3,21,28,181/- IN WHICH THE ASSESSEE HAS CLAIMED SET OFF OF THIS I NCOME PORTION WITH THE LOSS ON TREASURY OPERATIONS IN RESPECT OF TRANSACTIONS WITH SUBSIDIARY COMPANIES AND ALSO ASSESSEE DREW OUR ATT ENTION TO THE PAGE-7 OF PAPER BOOK RELATED TO P&L A/C WHEREIN THE ASSESSEE HAS OFFERED ` 10,55,48,369/- AND THE BALANCE WAS TRANSFERRED TO P&L A/C AND THE ASSESSEE CLAIMED AS DEDUCTION. WE F IND THAT THE ASSESSEE HAS MAINTAINED THE ACCOUNTING SYSTEM PROPE RLY AND THE AO HAS NOT GIVEN ANY FINDINGS IN THE ASSESSMENT ORD ER NOR THE LD.CIT(A) HAS BROUGHT ON RECORD ABOUT THE GROSS INC OME OFFERED ITA NOS.2436, 2449 /MDS./2016 :- 6 -: BY THE ASSESSEE. CONSIDERING THE APPARENT FACTS FR OM MATERIAL ON RECORD, WE ARE OF THE OPINION THAT THE MATTER HAS TO BE EXAMINED BY THE AO AND THEREFORE, WE SET ASIDE THE ORDER OF LD.CIT(A) AND REMIT THE ISSUE IN DISPUTE TO FILE OF AO TO CONSIDE R AFRESH FOR LIMITED PURPOSE OF THIS SPECIFIC ISSUE ONLY. REVENUE APPEAL 8. THE REVENUE HAS CHALLENGED THE ACTION OF LD.CIT (A) THA THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF TONNAGE TAX SCHEME UNDER CHAPTER XIIC OF THE ACT IN RESPECT OF VESSE L M.V.GEM OF ENNORE IN WHICH THE ASSESSEE COMPANY OWNS 20% OF SH ARE. 9. THE LD.D.R SUBMITTED THAT THE LD.CIT(A) ERRED I N NOT CONSIDERING THE FACTS WHOLLY THAT THE MAIN ACTIVIT Y OF THE SHIP M.V.GEM OF ENNORE TRANSPORTED THE THERMAL COAL FROM ONE LOCATION TO ANOTHER LOCATION WITHIN THE COUNTRY AND ALL THE PORTS WHICH ARE CONNECTED BY SHIP M.V.GEM OF ENNORE ARE L OCATED WITHIN THE SAME COUNTRY AND ARE WELL CONNECTED BY R AIL/ROAD. HE FURTHER SUBMITTED THAT THE SHIP IS NOT A QUALIFIED SHIP FOR THE PURPOSE OF COMPUTATION OF TONNAGE INCOME AS PER PRO VISIONS OF THE SECTION 115VS(I) OF THE ACT. FURTHER, LD.D.R SU BMITTED THAT THE DEPARTMENT CHALLENGED THE DECISION OF CO-ORDINATE B ENCH OF ITA NOS.2436, 2449 /MDS./2016 :- 7 -: CHENNAI TRIBUNAL FOR ASSESSMENT YEAR 2008-09 IN ASS ESSEE'S OWN CASE IN ITA NO.935/MDS./2013, BY PREFERRING AN APP EAL IN MADRAS HIGH COURT IN TAX CASE APPEAL NO.977 OF 2014 AND T HE CASE IS PENDING BEFORE THE JURISDICTIONAL HIGH COURT. HENCE , LD.D.R PRAYED THAT THE ORDER OF LD.CIT(A) MIGHT BE SET ASI DE. 10. ON THE OTHER HAND, LD.A.R PLACED RELIANCE ON T HE ORDER OF LD.CIT(A) AND TRIBUNAL JUDGEMENT IN ASSESSEE'S OWN CASE IN ITA NO.935/MDS./2013 VIDE ORDER DATED 13.06.2014. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL ON RECORD AND JUDICIAL DECISION CITED. RE SPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE FOR A.Y 2008-09 VIDE ORDER DATED 13TH JUNE, 2014 WHEREI N HELD THAT:- 3. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSU E HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL I N ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO.1195/MDS/2010 DATED 1.7.2011 WHEREIN THIRD MEMBE R AGREED WITH THE VIEW OF THE ACCOUNTANT MEMBER AND HELD THA T SHIP OPERATED BY THE ASSESSEE M.V.GEM OF ENNORE TRANSPOR TING 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 MEM BER AND FIND THAT THE ISSUE IS DECIDED IN FAVOUR OF THE ASS ESSEE HOLDING ITA NOS.2436, 2449 /MDS./2016 :- 8 -: THAT SHIP OPERATED BY THE ASSESSEE M.V.GEM OF ENNOR E TRANSPORTING THERMAL COAL FROM ONE LOCATION TO ANOT HER LOCATION WITHIN THE COUNTRY IS A QUALIFYING SHIP UNDER SECTI ON 115VD OF THE INCOME TAX ACT, 1961 AND THE ASSESSEE IS ENTITLED F OR THE BENEFIT OF TONNAGE TAX SCHEME PROVIDED UNDER SECTION XII C OF THE ACT. RESPECTFULLY FOLLOWING THE ORDER OF THE THIRD MEMBE R, WE REJECT THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE. HENCE, THE CIT(A) HAS RIGHTLY FOLLOWED THE DECISION OF THE TRIBUNAL CITED SUPRA WHEREIN THE JUDGMENT OF THE CHENNAI TRI BUNAL IN ITA NO.1195/MDS/2010 DATED 1.7.2011 IS RELIED UPON. AS A RESULT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A). THEREFORE WE HEREBY CONFIRM THE ORDER OF THE LD. LD. CIT (A). HE NCE THE APPEAL OF THE REVENUE STANDS DISMISSED. 12 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF REVENUE IS D ISMISSED. ORDER PRONOUNCED ON 30 TH DECEMBER, 2016, AT CHENNAI. SD/ - SD/ - ( SANJAY ARORA ) / ACCOUNTANT MEMBER ( G.PAVAN KUMAR ) / JUDICIAL MEMBER / CHENNAI / DATED: 30 TH DECEMBER, 2016 K S SUNDARAM ' #$ %$ / COPY TO: 1 . &' / APPELLANT 3. ( () / CIT(A) 5. $+, ' - / DR 2. '.&' / RESPONDENT 4. ( / CIT 6. ,/ 0 / GF